Demobilization

by Benedict Crowell; Robert Forrest Wilson

MEDICAL SUPPLIES

The armistice turned what had been an insufficient quantity of medical supplies for the expanding, fighting American Army into an enormous surplus for the demobilizing Army and the future permanent military establishment. The total purchases by the Medical Corps had reached a value of nearly $250,000,000. Of these purchases, supplies to the value of about $11,000,000 had been procured in Europe, principally in France. The supplies on hand on the day of the armistice and delivered on contract afterwards were worth $110,000,000.

With the warehouses filled with hospital equipment, medicines, ambulances, and the other articles which the military surgeons used, the war industry producing these things was terminated expeditiously after the armistice. In the United States over 1,400 contracts and purchase orders, calling for the production of supplies worth $60,000,000, were terminated at a net cancellation cost of $3,000,000. Deliveries after the armistice from American factories gave to the Medical Corps supplies worth $32,000,000. In France and England the contract cancellations saved $3,500,000. These cancellations terminated, among other things, a project which would in time have delivered to the A. E. F. twenty-nine complete ambulance trains, each with sixteen coaches. Nineteen such trains had been delivered to the A. E. F. before the armistice.

In the general bulk sale of A. E. F. property to the French Government went American medical supplies worth $34,000,000. The Medical Corps turned over to the American Red Cross in France supplies worth $9,000,000 for use in the relief of the stricken populations of Europe. To other governments the A. E. F. sold medical supplies worth $6,000,000. The rest of the medical supplies in Europe were returned to the United States. In this country the surplus medical supplies were distributed in various ways—to the Public Health Service, into the army reserves, and (by sale) to the public.

CHAPTER XV
QUARTERMASTER SUPPLIES

The quartermaster does not loom large against the heroic background of war. The Army’s victualer and clothier collects few croix de guerre, and his interest in the Congressional Medal of Honor is impersonal. So long as his work is going well, you hear little about him; but let him once supply some tainted beef to the troops in the field or fail to deliver on time the Army’s winter underwear, and then the country takes notice of the quartermaster.

God nowadays is on the side of the army with the best business organization, as even Napoleon himself might admit if he were to look over the cash balances of the late war. By that token the Quartermaster Service was the chief factor in the victory, because that organization became approximately the business office of the Army. For purely the creature comforts—food, clothing, and shelter—the Army spent far more money than it did for its weapons and ammunition; but the activities of the army quartermasters embraced a much wider range of supplies than these. Theorize as you will about the evolution of the Army’s purchasing offices during the war until they were brought together into a single centralized purchasing agency, the fact remains that the ultimate purchasing agency was essentially the Quartermaster Service, magnified and expanded in power. General George W. Goethals was Quartermaster General when the General Staff Division of Purchase, Storage, and Traffic (which unified all army buying and brought order into the supply situation) was built around his personality and ability, and thereafter his chief assistant bore the title of “Quartermaster General, Director of Purchase and Storage.” The new Division retained all the duties of buying quartermaster supplies and assumed also the duty of buying all other supplies except the strictly technical ones. And even these were purchased by the older supply bureaus under the complete supervision of the Division of Purchase, Storage, and Traffic.

When we approach the subject of the demobilization of the war industry which produced quartermaster supplies, we confront what was, measured in tons and in dollars and cents, the greatest business undertaking of the war. These pages have been filled by the story of the spectacular contest of American industrial genius with the inanimate resources which it fabricated into airplanes, artillery, and ammunition; but what filled the freight trains and the holds of the transatlantic cargo transports and the fleets of roaring trucks on the roads of France was not arms and the machinery of destruction to the degree that it was eatables and wearables, tentage, stoves and ranges, pots and pans—quartermaster supplies. There was the main weight and bulk; into them went the most money.

The war business of the Director of Purchase was represented by nearly 16,000 contracts. The total face value of these contracts came to nearly $8,000,000,000. They represented all food procured by the Army during the war and afterwards, all forage for the Army’s animals, all clothing, all textile supplies of every sort, all shoes, harness, and other leather goods, all animals purchased, all motor vehicles, all wagons of every sort, all carts hand-drawn, engineering supplies of many kinds, all coal, oil, gasoline, paints, hospital equipment, medical and surgical supplies, hardware of all sorts, tools, tentage and other camp equipment, rope, office supplies, and many less conspicuous things. Several of these classes, it will be noted, consisted of munitions formerly procured by the separate technical supply bureaus, but the mass of them were the traditional quartermaster supplies.

To get a comprehensive and clear-cut picture of the demobilization of this branch of war industry, let us start in France and follow back the home-bound expedition after it had closed up its business abroad.

In the first place, the A. E. F. became a heavy purchaser of quartermaster supplies abroad. The purchasing office of the expedition became a great business organization. It bought supplies in almost every accessible country of Europe, and its agents even went to Africa and made purchases in Algeria and Morocco. These supplies were bought, not because America could not furnish them, but for the familiar sake of saving the use of the precious ocean tonnage. And a great deal of tonnage was saved by these foreign purchases. The Quartermaster Corps with the A. E. F. purchased 400,000 tons of miscellaneous supplies, but chiefly food and clothing, at the cost of $150,000,000. In addition, many horses were procured in Europe. The greatest tonnage saving of all, however, was brought about by the arrangement which permitted the A. E. F. to purchase coal at the Welsh mines. The cross-Channel fleet freighted more than 1,000,000 tons of coal from England. This not only relieved the transatlantic fleet of the necessity of lifting that amount of cargo, but it also permitted the employment in the Channel of vessels not well adapted to the transoceanic convoying. It is a moderate estimate that the American quartermaster purchases abroad saved the transatlantic shipment of 1,500,000 tons of cargo, a lading that would fill 300 large ships.

Naturally the armistice found France, principally, and the other nations of western Europe to a slighter extent, liberally sprinkled with A. E. F. contracts for the production of quartermaster supplies. Sixty-six French factories, for instance, were working exclusively for the Americans in producing bread, biscuits, macaroni, and candy. The question immediately arose as to the best method of stopping all European production for the A. E. F. The expedition’s warehouses and depots were crammed to their capacities, and additional supplies were on the ocean in transports bound for France. A month, even a week, earlier it had not seemed possible that the industries of America and Europe put together, could produce an oversupply of these munitions, for the A. E. F. was looking forward to a strength of 4,500,000 men in 1919. But with the sudden armistice the expedition found itself with a stock of supplies on hand which it could not possibly consume.

For that reason its European war industry was terminated abruptly. There was little of the tapering-off of production that was characteristic of the demobilization in the United States. The military authorities were not nearly so considerate of the welfare of their foreign contractors as they were of those at home. The American business abroad was so small, compared with the whole war industry of the countries of the Allies, that the outright abrogation of the American contracts could not cause a general industrial slump. But there were other considerations. The War Department could make use of much of the domestic post-armistice production, either as war reserves or as goods for sale. In Europe every pound of quartermaster supplies produced after the armistice was likely to prove a dead loss to the United States. Such supplies were not needed for military reserves, of which there was an abundance already within the United States. They could not be sold advantageously abroad, because there was no market for them, with the Allied armies dumping their enormous surpluses on that same market. They could not be shipped in reasonable time to the United States for sale, because of the lack of ocean tonnage. Consequently, whereas it was the policy within the United States to terminate war industry gradually, the keynote of our industrial demobilization abroad was outright cancellation. It was cheaper to pay cancellation indemnities than to accept the supplies that would otherwise have been produced; and this was the general policy adopted in terminating all our foreign contracts, with such exceptions, notably in some of the airplane and artillery contracts, as are noted elsewhere in this volume.

To investigate claims and negotiate settlements with the European contractors the A. E. F. created its Board of Contracts and Adjustments, which for several months served as the liquidating agency for the war business. Later the unsettled cases were turned over for final disposal by the United States Liquidation Commission.

The termination of the foreign production for the A. E. F. was not nearly so puzzling a problem as the disposition of the excess military stores with the expedition. We had shipped from the United States to the A. E. F. over 6,000,000 tons of military supplies, and those shipments now crowded the warehouses in the American areas. After the armistice the first step looking to the disposition of these stocks was a rough, but fairly comprehensive, inventory of all military property stored in our bases and depots. This inventory gave basis for an estimate of a surplus valued at $1,500,000,000 over and above what the diminishing forces abroad could possibly use. Nearly half these excess stores were quartermaster supplies, therefore goods more or less perishable. Long before the American cargo ships could transport these supplies back to America they would have lost value to the amount of untold millions of dollars. The Government faced an enormous loss. Whatever was to be done about it had to be done quickly. The one way out was to sell the surplus in Europe, but it was a grave question whether that could be done successfully at all.

In the first place, all our army supplies had been placed in France without the payment of any import duties. So long as these supplies were being consumed by the American soldiers, well and good; but, when it was proposed to sell them to private purchasers outside the A. E. F., the French Government insisted upon its right to collect import taxes upon such supplies as were to be sold. When the United States was not ready to concede this point, then the French Government offered the alternative of permitting the United States to sell its surplus in France without payment of import duties, provided the sales were made exclusively to the French Government itself. The United States felt obliged to accept this condition.

Thus, in selling our surplus in France we were limited to a single customer; and when you can sell your product to only one buyer you must prepare to accept the buyer’s scale of prices. Of course, the inhibition upon sales did not apply to sales to other foreign governments; for in that event the American goods were regarded as being in France in bond, and it was not incumbent upon the United States to pay the French import duties upon them. On the other hand, a physical reason operated against the sale of stores to European countries outside France—the run-down and almost wrecked condition of the French railroads. The delivery of locomotives and cars by the Germans under the armistice terms virtually rehabilitated the rolling stock of the French railways, but the trackage had deteriorated during the war, and the incursions of military conscription had left the operating personnel poor in quality and deficient in quantity. It was next to impossible to ship anything out of France. During the early months after the armistice America sold surplus supplies to various countries of Europe outside France—particularly to Belgium and the liberated nations of southeastern Europe—to the value of many millions; but, up to August 1, 1919, it had been able to deliver less than one-fifth of these supplies.

Another advantage accruing to France as the principal buyer of the American surplus was that the A. E. F. was making what amounted to a forced sale. If anything was evident in the attitude of the French people after the armistice, it was that they earnestly desired to speed their departing military guests out of France. The American troops no less ardently wished to go, and it was the policy of the American Government to repatriate them as rapidly as the shipping could be provided. The disposal of the supplies was a secondary consideration. If the Americans had attempted to hold out for favorable markets and good prices for their surpluses in piecemeal sales, they would have had to keep from 20,000 to 30,000 troops in France for several years to guard the unsold stocks. The alternative of hiring civilian guards was out of the question, from the standpoint of expense alone. There was nothing else to do except sell out quickly for the best prices obtainable under the circumstances.

These obvious advantages to the French in striking a bargain price for the bulk of the American surplus property in France was largely counterbalanced by the fact that, of the American quartermaster stores for sale, nearly half consisted of food supplies, and the highest-quality food then in Europe. There was no oversupply of food in Europe, but the very contrary. England had surplus army property estimated to be worth more than $3,000,000,000; France herself had almost as much to dispose of; and Italy was to be a heavy seller; but the food stocks in all these Allied surpluses were not enough to satisfy the hunger of the undernourished or actually famine-stricken populations of Europe. The much-desired food was used by the American authorities to induce the French not only to pay good prices for materials they did not need, and of which indeed they had surpluses of their own, but also to accept responsibility for such liabilities as the American stores of unstable and dangerous ammunition and our accumulations of junk.

Such were some of the conditions surrounding the bulk sale of A. E. F. surplus property to the French Government in the summer of 1919. This sale, as we have said, was consummated by the United States Liquidation Commission, the activities of which are to be discussed in greater detail farther on. Meanwhile a sporadic and piecemeal sale of A. E. F. property in Europe had been going on under the direction of the General Sales Agent and General Sales Board of the A. E. F. The General Sales Agent took up his work on January 1, 1919. He was assisted by the General Sales Board, which was made up of representatives of all the army organizations that had anything to sell. Under this organization the sales of surplus materials reached a total of approximately $175,000,000 by the end of July, 1919, just before the general bulk sale was closed. Of these receipts the sales of quartermaster supplies accounted for $122,000,000. The supplies were sold almost exclusively to governments and relief and welfare commissions. The sales to commercial firms and individuals were insignificant.

Almost as soon as the armistice was signed the needy nations of Europe opened negotiations for the purchase of excess quartermaster supplies of the A. E. F., particularly food. Semi-starvation was chronic in most of the newly liberated countries of southeastern Europe. The Poles were still fighting and needed supplies for their soldiers. Belgium and northern France were impoverished by the German occupation. Austria was in the grip of actual famine, and the hungry mobs were rioting in Vienna. In fact, some of the first surplus A. E. F. food to be sold was shipped into Austria. It was a situation which demanded scientific study, since, no matter how much the American officials individually might sympathize with the European civilians, their first duty was to safeguard the interests of the taxpayers of the United States; and that meant to discover what ones of the needy were willing and able to pay the best prices. Consequently the General Sales Board of the A. E. F. created its information bureau, which investigated the conditions throughout Europe and reported to the Board. These investigations enabled the A. E. F. to distribute its surpluses intelligently.

Before the general sales organization took hold, the Quartermaster Corps itself in France had been disposing of surplus stores during the first weeks of the armistice. Many of these early sales were made to Mr. Herbert Hoover for the Belgian Relief Commission. When, in January, 1919, Congress appropriated $100,000,000 for the relief of starving Europe, Mr. Hoover, who had the spending of the money, was urged to make use of the excess A. E. F. supplies as much as possible. The largest single sale of A. E. F. surplus food was made to the Belgian Relief Commission. About $30,000,000 changed hands in the transaction, and the food sold included such items as 60,000,000 pounds of army issue bacon, 122,000,000 pounds of flour, 6,000,000 pounds of rice, and 600,000,000 cans of evaporated milk. All this time, too, the General Sales Board was selling directly to the Belgian Government; and the Relief Commission coöperated with the Army to make sure that Belgium, through these two channels of supply, did not receive an undue portion of the army stores. There was always danger that Belgian speculators might acquire stocks of such surplus products as fats and soap and sell them into Germany at famine prices. Twice this coöperation was able to checkmate the plans of cold-blooded profiteers. Next to making advantageous sales, the chief concern of the General Sales Board was to distribute its products fairly among the countries in direst need.

The Government of Portugal bought a large number of American army shoes. Czecho-Slovakia took 10,000 army overcoats, much other clothing, and several hundred tons of food supplies. The Polish Relief Corporation bought quartermaster supplies to the value of $1,500,000. Roumania took a consignment of food and clothing at $7,150,000. Portugal took a shipload of potatoes f. o. b. Ireland. These nations, Serbia, Esthonia, and several others, were constantly in the market for American supplies. Esthonia bought 3,000 tons of army bacon. The French Government, too, was a large purchaser during this piecemeal selling, on one occasion buying American suspenders to the value of $22,000, as well as large quantities of food and clothing.

For the most part the United States accepted debentures rather than cash in payment for these supplies. It was obviously impossible to secure cash, for the small nations did not have any, and even France was skipping the interest payments on her five-billion-dollar debt to the United States. The American Government accepted treasury notes or other official securities at par, payable in three to five years with interest at 5 per cent. And, although such credits would have been heavily discounted in commercial centers, nevertheless America did not try to cover by charging high prices for the surplus stores or by exacting profits of any sort. The greater part of our supplies were sold at the cost of manufacture in the United States plus the cost of transportation to Europe, and plus nothing else. Consequently the sales proved to be a great stroke of advertising for the fair name of the United States.

Trainload after trainload of supplies sold in this fashion left the American depots during the spring and early summer of 1919; but still, when the bulk sale to France went through, these shipments had seemed to make scarcely any impression upon the mass of the surplus, so great had been the reserves created in France by American industry. The utilization value of the surplus army property in France was estimated at $1,000,000,000. Of this quantity, quartermaster stocks (not including animals) were valued at $670,000,000. Of this surplus an amount worth $87,000,000 (consisting principally of new clothing) was returned to the United States, and the rest, except what had been disposed of by individual sale, was turned over to the French Government, the final delivery being made on November 15, 1919.

None of these sales included the used supplies repaired and restored in the army salvage shops in France. Salvage was a new note amid the age-old wastefulness of war. After the great battles of the Civil War the countryside was littered with the débris of warfare. The bodies of men and animals were buried, and the soldiers did what they could to clean up by burning the refuse they could collect; but for the most part the disposition of muskets, sabers, cannon, harness, and clothing was left to the souvenir hunter and to the slow action of the elements. After our battles in the World War far more materials were left abandoned on the field than after any conflict of the Civil War, but these materials were picked up and reclaimed for such value as the Army could still get out of them. And the Army found that it could make valuable use of salvaged materials, and particularly of salvaged clothing. The savings wrought by salvage ran close to $150,000,000 in cash value, besides representing a great economy in the use of shipping space in the ocean transports.

Whereas, before the armistice, many of the recovered supplies went into the army stores for reissue, in 1919, when the A. E. F. was rapidly dwindling in size, the salvaged articles were sold, and principally to the French. All through France one could see peasants of both sexes wearing articles once of American army issue. Paris might dictate women’s styles to America; but Paris, Kentucky, where dwelt some of the seamstresses doing home work for the great army shirt factory at Jeffersonville, Indiana, had something to say about what French women wore. The French peasant woman wearing an American army shirt, with a bit of ribbon for a collar, was a common enough sight in some of the former American areas. Another familiar makeshift was the skirt made of an ex-army blanket. Even the dumps, on which were thrown materials of which the salvage shops could make no use, were carefully sorted over by the peasants, who sometimes trudged for miles with their carts in order to avail themselves of these opportunities.

Extensive commercial sales of salvaged materials were also made. Crushed tin cans sold by the ton as metal scrap. Rags went to the French paper makers and waste wool to the English textile mills. Grease, damaged oats, damaged flour, and worn rubber tires also went by sale. The Polish Army bought reclaimed American harness by weight. A large number of outer uniforms, having shrunk in sterilization so as to be too small for reissue, were dyed black and sold to the Belgian Relief Commission for wear by destitute civilians. Germans paid record prices for grease and other kitchen waste products. The salvage sales in 1919 brought in more than $4,000,000.

The horses and mules used by the A. E. F. were not included in the bulk sale of property to the French Government. The disposition of them (for few, if any, A. E. F. animals were returned to the United States) was a separate transaction, conducted almost entirely by the Remount Service of the A. E. F., a branch of the Quartermaster Corps. The A. E. F. acquired in all some 243,000 animals at a cost of $82,500,000. More than two-thirds of them were purchased abroad by the Americans. The mules numbered 61,000, and of these approximately half came from the United States, the rest principally from southern France and Spain. About 64,000 animals died in the service, and the rest were sold in Europe either to various governments or to civilians, the recovery from these sales being slightly more than $33,000,000. Thus the net war cost of the animals used by our forces in Europe was approximately $50,000,000.

With Americans the horse is (or is supposed to be) a single-purpose animal, used exclusively for his power of motivity, whether that power be exerted for speed or for pulling a load. To many Europeans he also possesses gastronomic value, and this fact enabled the Remount Service to get good prices for condemned horses from the expeditionary corrals. About 11,000 horses, broken down by service, were sold by the A. E. F. to French and German butchers, at an average price of $50 a head.

Because of the dearth of farm animals in France, the French Government offered no objection to the sale of the surplus horses and mules directly to private buyers. The chief condition made was that the animals must first be offered (at auction) to farmers whose horses had been requisitioned during the war. If these men would not offer satisfactory prices, then anyone was to be allowed to bid. Then the French Government arranged to take over 15,000 A. E. F. animals and dispose of them for the expedition. The prices obtained from the French Government under this arrangement were so much below what the A. E. F. was obtaining from its auctions that the United States Liquidation Commission sought and received authority to dispose of all the animals at auction. Because of the high taxes and auctioneers’ commissions, even the auction sale was not satisfactory; and the Remount Service asked permission to sell animals at private sale. This permission was never formally granted, but nevertheless the Remount Service went ahead and sold thousands of animals directly to buyers. The average price received from the French Government was $77.58 a head, whereas from the auction and direct sales to private purchasers the average price received was $201.65.

The French Government itself, by direct purchases from the A. E. F., took 50,000 animals at an average price of $190.21 a head. Thousands of surplus animals at good prices went to the governments of Belgium, Poland, Czecho-Slovakia, and Bavaria. To civilians in France and Germany went 85,000 A. E. F. animals. Approximately the last of the original 243,000 had been sold when the final troops of the A. E. F. departed for the United States in the late summer of 1919.

Although we sent to France some of the finest mules in America (and, therefore, in the world), there was at first some difficulty in disposing of them to the French buyers. The farmers of southern France knew the mule and justly valued it, and during the early months of the demobilization a constant stream of American army mules went into that region for sale. Finally the southern French mule market became glutted, and then it became necessary to “sell” the mule to the farmers in the American areas in northern France. The French peasants did not hold the mule’s clouded ancestry against him, but what their thriftiness did object to was his dearth of hope of posterity. However, after a few of the peasants had bought and worked the army mules, the good qualities of the animal became widely advertised, and thousands of them thereafter were bought at good prices.

After the armistice the first step in the liquidation of the quartermaster war business and of the other enterprises conducted by the Director of Purchase in the United States was to terminate the industry and to settle with the contractors, of whom, as is indicated above, there were approximately 15,900—parties to agreements which committed the United States to purchase supplies to the value of more than $7,800,000,000. A large part of these were quartermaster supplies, but they also included motor vehicles and engineering, medical, signal corps, and general supplies, the procurement of which, under the reorganization of the War Department, was placed in the hands of the Director of Purchase.

Photo by Signal Corps

A. E. F. SUPPLY TRAIN ON WAY TO RATION DUMP

Photo by Signal Corps

A. E. F. FLOUR ON WAY TO STARVING AUSTRIA

The immediate result of the armistice was to silence the activity in these thousands of factories. The Director of Purchase sent broadcast by telegraph a general request to suspend all production while the War Department could estimate its position. After a few days the mills were permitted to resume production. Subsequently about 5,000 of the contracts were allowed to go through to completion. The remaining 11,000 were terminated either abruptly, as with those under which no production had started, or by graduation, when that was advantageous either to the Government or to the industrial situation.

Photo by Signal Corps

A. E. F. HORSES TO BE SOLD

Photo from Quartermaster Department

STORAGE WAREHOUSES AT JEFFERSONVILLE DEPOT

Like the Ordnance Department and the Air Service, the Quartermaster Corps decentralized the supervision of its war industry into manufacturing districts—thirteen of them—which were called zones. When most of the purchasing activities of the War Department were brought together under the Director of Purchase, these zones came along with the transferred organization, as did also seven procurement divisions taken over from the other supply bureaus. During the demobilization, claims boards were established in all the zones and procurement divisions. These twenty primary boards were subsidiary to the general Purchase Claims Board, which in turn was responsible to the War Department Claims Board through the representative of the latter attached to the Purchase Claims Board. This was the organization which settled the vast war business conducted under the Director of Purchase.

The general policies, the application of which to the termination of the ordnance contracts we have already described, were followed in closing out the industry which manufactured our quartermaster supplies. The Government paid no prospective profits, but stood all the legitimate expenses which the manufacturer had incurred looking to future production of finished supplies.

But it was not all termination and no buying for the Director of Purchase after the armistice. There was still an enormous army in the field and camps which had to be sustained; and, while great surpluses existed in some branches of supply, in others, such as immediately perishable supplies, the stocks on hand were sufficient for only a few weeks ahead. The purchases between the date of the armistice and January 24, 1920, by which date the demobilization of troops was about complete, came to $611,000,000, of which food purchases accounted for $420,000,000.

One national inheritance from the war experience in buying quartermaster supplies has been the creation at Chicago of a permanent subsistence school to which the Army sends officers and enlisted men for training as inspectors and buyers of food supplies. Another is the creation within the War Department of a division which studies the sources and supplies of the raw materials used by war industry and also determines the priority of access to these materials by the various consuming branches of the War Department. When the war came, the United States was sadly lacking in the very knowledge which these studies will develop. During the war the development of raw materials and the determination of priorities were administered by the Council of National Defense and, later and more successfully, by the War Industries Board, which became perhaps the most powerful and important of all the emergency war organizations. The War Department is thus retaining a nucleus around which another such organization might be built in a future emergency.

No outline of the demobilization of the quartermaster war enterprises portrays an adequate picture of what happened unless it tells something about the termination of the Government’s wool business. To protect its war interests the Government requisitioned all the raw wool in the United States in 1917 and 1918. Uncle Sam himself became the wool trade, the sole dealer, the sole market. Although the Navy and several other government branches used wool, the control over the commodity was exercised by the War Department through its Wool Administrator at Boston, who reported to the Quartermaster General in Washington.

On the first day of the armistice the Government had on its hands, or was obligated to accept delivery of, about 525,000,000 pounds of wool, a quantity which may be visualized by comparing it with the total annual American production of wool, which is less than 300,000,000 pounds. About one-fifth of this quantity was Australasian wool which had been purchased by the Foreign Mission of the War Industries Board. About 100,000 bales (33,000,000 pounds) of the Australasian wool had been shipped to the United States. We were left, therefore, with a binding contract to accept 200,000 bales from the Antipodes, this to come piling in on top of an accumulation which comprised a huge surplus over and above the normal national consumption. By some clever business jockeying (the British having various American contracts which they also wished to terminate) the British Government was induced to cancel the unfulfilled portion of the wool contract.

Even with this deduction, the Wool Administrator had, in the late autumn of 1918, about 460,000,000 pounds of wool to dispose of. The normal textile industry had never before been called upon to absorb such a visible supply, and there was some question if it would be able to do so. The manufacturers naturally began at once to urge the Government to dump its wool on the market. The 700,000 American wool growers, on the other hand, who had been receiving a high and stable price for wool (the price adopted on July 30, 1917) urged the Government to stay in the business for another year at least and take the 1919 clip at the war price.

The decision in Washington was to sell the wool and get out of the wool business at once. This was displeasing to the farmers; but, to prevent any drastic slump in wool prices, the War Department decided to sell its wool in auction sales, in which the Government itself would set minimum prices below which no wool would be sold. This action guaranteed that the growers would get a fair price for the 1919 clip.

Within approximately a month after the armistice the wool auctions began—first at Boston, where in three days (December 18, 19, and 20, 1918) the buyers bid in over 10,000,000 pounds of wool, out of 17,000,000 pounds offered for sale. The unsold offerings, of course, were lots for which no buyers bid up to the minimum fixed prices. Although prices were fixed, only in a sense were they sustained artificially. For each sort of wool the Government fixed a minimum price which equaled what it would cost to import the same quantity and grade of wool and deliver it to the American market. Thus the world prices actually prevailed, except that the huge American surplus was artificially kept from being a depressing factor in the world price. To sustain prices higher than these would have attracted large importations and thus injured the growers. To allow prices to go lower than the importation prices would also have worked injury to the wool growers of the United States.

As a further concession to the farmers, the Government announced that it would stay out of the wool market when the 1919 American clip began reaching the market in quantities sufficient to supply the mills. In accordance with this promise, the government wool sales ceased on July 1, 1919, and did not resume again until the following November.

When the auctions suspended on July 1, more than 316,000,000 pounds of the Government’s wool had been sold. Auctions had been held twice a month in Boston and once a month in Philadelphia, and three sales had been conducted at Portland, Oregon, for the benefit of the western woolen mills. Upon the resumption of the sales in November the wool continued to sell well, with the result that by the end of 1919 the sales had disposed of 365,000,000 pounds, and the success of the complete liquidation was assured. The sale of this wool was a triumph of merchandizing. The wool trade had never known such sales before, not even in England, the world center of wool, nor had the American trade ever before absorbed such a quantity of wool in such a short time.

Like the storied mill which ground salt until it swamped the ship of the thieving merchant, the mill producing quartermaster supplies before the armistice was hard to stop afterwards, and its output embarrassed the War Department for want of space in which to store the excess supplies. As long as the home Army and the A. E. F. were expanding in size and the convoys grew in size and frequency, there was no critical backing-up of supplies. Immediately after the armistice, however, the order came to ship no more freight to France, except food and other necessaries specifically requested. At the time of the armistice there were 600,000 tons of supplies on the docks in this country and 400,000 other tons moving toward the seaboard. Since the mills kept right on producing more, the flood of new materials inundated the supply service in this country. In December, 1918, the Storage Service was operating 65,000,000 square feet of warehouse space in the United States. A year later it was occupying nearly 400,000,000 square feet, three-fourths of which was leased. A large quantity of this space was open storage, unprotected from the elements. These figures are exclusive of the quantities of warehousing and open storage occupied by the various technical bureaus, such as the Ordnance Department, the Air Service, and the Signal Corps. The operation of the general storage facilities was the charge of the Director of Storage, one of the chief functionaries of the Division of Purchase, Storage, and Traffic.

An even greater problem than storage was the disposition of the enormous surpluses of goods which accumulated after the armistice. The first concern of the War Department in approaching this question was the military future of the United States. In 1914 much was made of the thoroughness of German military preparation, which had been such that, when the fatal hour struck and the conscripts by hundreds of thousands left their homes and poured into the German barracks, for every man there was waiting ready a uniform, shoes, a helmet, underclothing, and everything needed to prepare him immediately for service in the field. What Germany had been able to accomplish by premeditated, long, and expensive effort, the United States now derives as a by-product of the war Germany forced it to fight. America, too, is now prepared in these minute details. Before any of the surplus quartermaster stocks were set aside for sale or other disposition, a complete and balanced selection of uniforms, overcoats, underclothing, socks, caps, shoes, and other nonperishable articles in the individual equipment of troops, in quantities sufficient to outfit an army of approximately 1,000,000 men, was set aside and placed in indefinite storage. In addition, stores of such supplies were retained for the future consumption of the regular standing Army, of the National Guard, and of the Reserve Officers’ Training Corps.

The war construction provided for the War Department three enormous interior reserve depots located respectively at Schenectady, New York, New Cumberland, Pennsylvania, and Columbus, Ohio. In these many of the reserve quartermaster supplies are stored. These installations are all of permanent and spacious construction. The warehouses are nearly all one story high, built of hollow tile and concrete, and divided into sections by fire walls. For additional storage the War Department is also using numerous wooden warehouses built at the retained cantonments. These buildings, though well constructed, are not fireproof and have to be guarded carefully to prevent their destruction.

It was found further that various branches of the Government could make good use of supplies originally procured for the Army. Many of the army hospitals were turned over to the Public Health Service, and with the hospitals the War Department delivered large quantities of medical supplies. Incidentally it may be noted here that the Army has retained and stored sufficient field medical equipment for an army of 1,000,000 men. Large lots of such general supplies as hardware, tools, rope, brushes, and office furniture went to the Bureau of Public Roads, the Interior Department, the Panama Canal, and other federal agencies.

Then, several foreign governments were allowed to purchase from our excess supplies. Clothing, textiles, medical equipment, and other supplies, all to the value of $20,000,000, went to various Russian societies. The French Government took machine tools and other machinery originally built for the Engineers, to the value of $25,000,000. Belgium bought a large quantity of construction materials.

In selling surplus materials to consumers in the United States, the preference went to charitable and welfare organizations. Hospital equipment, for instance, was offered first to state and municipal hospitals, free clinics, and similar institutions. Prices for medical supplies were fixed far below the prevailing market prices; and yet the Government had manufactured this equipment at such low cost that the financial recovery from the sales represented practically every penny which the War Department had put into the supplies. General supplies were offered first to welfare organizations, the Young Men’s Christian Association, the Boy Scouts, hospitals, sanitariums, and relief societies.

After that came the public. Private dealers were permitted to bid on lots of supplies. Regular days were set apart for the sale of various classes of commodities: Monday, textiles and leather goods; Tuesday, raw materials, machinery, and engineering supplies; Wednesday, general supplies; Thursday, medical supplies and motor vehicles; Friday, clothing; and Saturday, food supplies. These bidding sales were widely advertised, in advance, and bids could be submitted either to the War Department in Washington or to any of the zone, or district, supply offices. The private consumer could buy army food, clothing, textiles, tools, and other commodities of household utility either by parcel post (through the coöperation of the Post Office Department) or at any of the Army’s retail stores, a great chain of which was set up throughout the country.

By sales and transfers the Army, at the end of the first year of effort, had disposed of supplies originally procured under the administration of the Director of Purchase to the value of $357,000,000. The transfers and sales brought back to the War Department more than seventy-seven cents of every dollar originally expended in the production of these goods. The story of the ingenuity displayed by the Government’s officers in selling these and other surplus supplies (particularly the surpluses in the hands of the Ordnance Department and the Air Service after the armistice) is left for another chapter.

Before dropping the subject of the demobilization of the quartermaster war business, however, we should not overlook the disposition of the horses and mules acquired by the Army, but not shipped to France. The Remount Service purchased about 308,000 animals during the war. It started the war with about 90,000 animals on hand. The war losses amounted to 33,000 animals. Approximately 68,000 were shipped to France. Thus, at the time of the armistice the Remount Service had in its stables and corrals nearly 300,000 horses and mules. About 215,000 of these were declared surplus and sold, and the rest were retained for the permanent Army.

The decision of the Remount Service to sell 200,000 animals on the market as rapidly as the market could absorb them was roundly criticized by horsemen, who pointed out that normally the American market had never absorbed more than 60,000 horses and mules in a year. The result would be, the critics declared, that the Government would get fair prices for the first 50,000 or 60,000 animals offered, and after that the surplus animals would be a drag on the market, not only forcing the Government to stand a great financial loss, but so depressing prices that dealers everywhere would suffer. On the other hand, it was costing the Government a dollar a day to feed and care for each of these animals. By retarding the sales the Government might be able to get better prices, but the gain would be more than absorbed by the cost of maintaining the establishment in the meantime.

And so it worked out. The market, indeed, proved itself to be able to absorb the surplus animals, and prices even grew better as the sales progressed. The average price paid was $111 a head, or about 57 per cent of the original average cost of $192. On the other hand, the Government escaped paying heavy maintenance charges.

All the animals were sold at public auctions, 189 of which were held at thirty-nine different places. Great crowds of buyers attended the sales, most of which were held at camps where the animals were quartered. The local post exchanges sold sandwiches and other refreshments to the buyers. Although the Government guaranteed no animals, all of them were carefully examined for blemishes and defects before the sales, and their demerits were noted in the lists read by the auctioneers. The Government could not afford to gain a David Harum reputation as a horse trader, for it had too many animals to sell. If dissatisfaction arose from the earlier sales, it would adversely affect the later ones. Only five complaints from buyers were made after the sales. These were referred to the Purchase Claims Board for settlement.

The Government invested $74,000,000 in animals bought in America during the war. Its net loss on animals sold was $22,000,000, and on animals that died, $6,000,000. The best of the animals on hand after the armistice were retained for use by the permanent Army.

CHAPTER XVI
BUILDINGS AND LANDS

One of the major industrial activities conducted in the United States during the war was the construction of buildings for the Army. The Army’s physical plant, as it existed on the day war was declared, was entirely inadequate for the forces to be mobilized—so inadequate as to be of almost no use at all. Even the old headquarters of the War Department in Washington, which formerly had housed practically all the administrative offices, were none too large to accommodate merely the office staffs of the Secretary of War and his principal assistants, so great was the expansion of the central administration; and as for the tens of thousands of officers, clerks, stenographers, messengers, and other personnel employed by the great producing and operating bureaus, they occupied literally miles of flimsy, unsightly “war buildings,” which spread out like a defacing rash over the fair open spaces of the capital city.

An even greater expansion of plant was to be observed throughout the country. The plant set up for the Army mobilized against Germany was a practically new creation, specialized for exactly the sort of war in which we were engaged. It was a war in which land transportation had to be linked to ocean transportation, and therefore the plant included vast facilities for the embarkation of troops and a string of mighty export terminals, or bases, strung out along the coast in order to make difficult any blockade of our overseas supply line. It was a war essentially industrial in type, with unusual emphasis laid upon the development of special industrial products, such as powder and explosives; and therefore the plant included dozens of new mills and factories, several of them industrial centers so large as to be virtually small cities in themselves, with housing and modern municipal conveniences for their employees. It was a war in which new and hitherto unknown forms of combat had sprung into existence, and therefore the plant included equipped fields for the training of soldiers in such arts as flying and the employment of poisons as weapons. Above all, it was a war which called upon the ultimate resources of American man power; and, as it turned out, the plant had to be adequate to house, school, amuse, care for, and maintain at least two million men, with all that that implies in barracks, drill grounds, parks for vehicles, water and sewer systems, lighting systems, roads, hospitals, and (in the maintenance line) depots and warehouses for supplies.

It was all fresh creation, new construction. The building industry of the United States—and it is one of the largest and strongest of our industries—had never before been called upon to provide such expansion in an equal time. It follows that the entire building industry must have been engaged in the construction enterprise, that every available man who could drive a nail or lay a brick must have been employed upon government work. If he was not, he should have been; for those in charge of the construction, unable to secure sufficient labor from the entire building industry of the United States, sent ships to Porto Rico and the Bahamas and brought back thousands of workmen to help out. The Construction Division, the war-begotten organization which was in charge of this activity, with 427,000 men on its contractors’ pay rolls at the peak of its industriousness, yielded only to the United States Railroad Administration the title of greatest employer of war labor. It engaged in 581 separate construction projects, which called for an expenditure of over $1,100,000,000; and it completed most of them.

Miles of docks, hundreds of acres of covered storage, hundreds of power plants and complete water systems, thousands of miles of roads, railroads, water mains, and sewer lines—the list grows monotonous simply because of the size of its items, which are not to be visualized by stating them in terms of acres and miles. The activity was at its height at the signing of the armistice, when it became incumbent upon the Construction Division to terminate the work.

Four hundred and fifty army construction projects were under way on the day of the armistice. One hundred and thirty-one stood completed. The incomplete projects included some of the largest and costliest ones. But the salvage value of buildings is small unless they can be sold to purchasers able to make use of them as and where they stand. Few war buildings were adapted to civilian use. They were highly specialized for a purely war use, and they were not often located where they could be of economic benefit to the country. A large part of their cost represented the evanescent element of labor, a value entirely destroyed when buildings are wrecked for the sake of salvaging their materials. The war plant, even incomplete, represented an immense investment, but one which would be almost altogether lost if the plant were to be knocked down for salvage. Therefore it was of advantage to the Government to carry on a surprisingly large amount of war construction after the armistice for the sake of getting the use-value from its investment by occupying these installations with the permanent Army.

But there were other reasons for continuing work. Among the largest and costliest of the construction projects were those which provided the ocean terminal bases at Boston, Brooklyn, Philadelphia, Norfolk, Charleston, and New Orleans. These installations were all of durable, fireproof construction; and, with their piers, their great warehouses equipped with labor-saving machinery, trackage, and the like, they were the last word of modern constructional science in developments of this sort. In appropriating the money for these port works, Congress had stipulated that after the war they should be used in the development of American foreign trade. Consequently the Construction Division went ahead after the armistice and finished up these buildings.

The port works alone were enough to account for a large portion of the money expended on construction after the armistice, but in addition other great unfinished projects were carried through. As we have shown, the storage problem became acute only after the armistice, when the wasteful field consumption of supplies ceased and the materials coming from the war factories banked up in this country. Every warehouse and depot project incomplete on the day of the armistice was pressed to completion thereafter in order to provide shelter for valuable and perishable materials. This was another great branch of post-armistice construction. Add to these the continued construction of hospitals (which had to be prepared to receive the thousands of wounded men in France on the day of the armistice), and it becomes evident why thousands of the war builders were kept on the job after the war itself had come to an end.

The fate of every incomplete army construction project on the day of the armistice was submitted to the Operations Division of the General Staff, which looked at the percentage of completion, noted whether the Government owned the ground on which the construction was going forward, studied the availability of the building for commercial use, and determined whether it was needed in the military plans, and then recommended that the construction be abandoned, curtailed, or completed. In general, the projects abandoned were those providing additional facilities for the assembling and training of troops and those providing plants for the production of destructive munitions, such as toxic gas, powder, and loaded shell. Of the 450 projects incomplete on the day of the armistice, 182 were abandoned and 268 carried through.

The completion of so large a quantity of the war construction after the armistice enabled the Construction Division to go through the demobilization of its industry without accumulating large stores of surplus materials. Although in form, at any rate, the Division dealt directly only with contractors who took the various jobs, actually the Division itself procured the lumber, cement, brick, structural steel, roofing, hardware, and the like, for the builders. The demand of the war construction upon the supplies of building materials was so great that nothing less than a centralized stimulation and control of the entire market could have procured the materials in the quantities needed. The Construction Division’s Procurement Division located the supplies and then arranged each building contractor’s deals for them, even stipulating the producers, quantities, and the prices which must be paid for materials. This last was important, because the war builders worked under a sharply safeguarded cost-plus contract form, and therefore the Government was keenly interested in what the materials cost. In addition to procuring supplies for the contractors, the Procurement Division also purchased equipment for the war buildings—heating, ventilating, and power plants, fire extinguishers, refrigeration equipment, boilers, engines, and machinery of many sorts. Its purchases ran at the rate of $2,000,000 a day in the early autumn of 1918.

After the armistice and after the temporary suspension of effort requested in order to give the Construction Division time in which to take stock of its position, the production of building materials and supplies of which the Government would be able to make no use was rapidly terminated. The Procurement Division was made up of experts in all branches of building construction, and therefore this Division was made over after the armistice into the Construction Division Claims Board for liquidating its war business under the direction of the War Department Claims Board. In six months practically all the terminated contracts had been finally settled by this organization, at an average cancellation cost of 5 per cent of the face value of the contracts.

The termination of supply contracts and of contracts with constructors of buildings not needed by the War Department after the armistice, left the Construction Division with large quantities of supplies on its hands. But these were by no means surplus supplies. The completion of a large quantity of war construction after the armistice saved the Construction Division from having to solve the problem of disposing of much surplus. Supplies accumulated for the terminated jobs were simply diverted to those ordered completed and thus utilized.

But although the Division had no large quantity of building supplies to sell, it was charged, after the armistice, with the duty of disposing of the facilities at the 182 construction projects which were terminated. Many of these projects were large ones, those in this category being for the most part training camps for troops. There was a camp shortage in 1918, and the Construction Division was doing everything in its power to overcome it. We were sending men overseas at the rate of 300,000 a month; and, since it was desirable to give every overseas soldier at least six months’ training, that implied camp accommodations for 1,800,000 men in the United States. The actual accommodations provided were for less than 1,370,000 troops. In 1918, after the augmented rate of embarkation became a fact, new training camp projects were consequently inaugurated at frequent intervals. Only a few days before the armistice the Construction Division began the construction of an enormous new camp which was to specialize in the training of infantry. All the national guard camps (sixteen of them) and most of the special-purpose camps, whether completely built or not, were condemned after the armistice for salvage. Most of these were veritable cities, some of them large enough to accommodate 40,000 men each, comfortably—with the adverb accented, for the comfort was based on such substantial (and costly) installations as water and sanitation systems, electric lighting, pavements, sidewalks, and even stores, theatres, and gymnasiums. It was the task of the Construction Division to dispose of these cities to such members of the public as cared to buy.

A city, however, is something more than an accumulation of buildings and other tangible facilities. Quite as much as upon foundations of rock, a city rests upon logic—the logic of its location. Naturally the Government built its camps upon cheap land, therefore upon land not in demand by the population, therefore upon land not so located as to make it a logical place for a city. And so, although it was thought at first that perhaps some of these camps might prove to be the nuclei of permanent civilian communities, that notion soon had to be abandoned for the reason that few civilian movements arose to occupy permanently the former war buildings. An attempt was made, and still is being made, to use the former Nitro Powder Plant as a permanent civilian industrial city, and one or two training camps in the South have been held together by their purchasers with the idea of establishing communities on their sites. The others, however, in which the Government had sunk hundreds of millions of dollars, were sold out to the wreckers, who bought them for the sake of salvaging the building materials.

Now, there is nothing quite so second-hand as second-hand building materials. Boards are full of nail holes and sometimes covered with faded paint or disfiguring marks. Bricks are soiled, chipped, and worn, and conglomerated with stonelike mortar. Hardware and metallic fixtures are corroded and rusty. Such materials are not only wreckage and junk, but not even valuable junk. The chief cost in the construction of a training camp was the labor which laid the brick, installed the underground piping, smoothed, squared, and nailed up the lumber, and soldered the joints in the plumbing. All that labor value was lost when camps were salvaged for their materials.

Yet this was not the only loss which the Government was forced to sustain. Practically all the camps were originally located on leased ground; and this fact implied that in razing the camps the Government was bound to restore the land to its original condition, or, in lieu of that, to pay to the owners the costs of restoration. These questions of property damage greatly complicated the demobilization of the training camps, because the amounts of damage were so hard to ascertain. Concrete roads had been laid across what were originally pastures; fertile corn lands were crisscrossed with clay ridges thrown up above the water and sewer trenches. On the other hand, some of the camp improvements had drained former swamps and reclaimed them for cultivation, and such benefits would offset damages in other places. It was out of the question for the Government to attempt to settle these thousands of cases individually, because of the time it would take; and therefore it was stipulated that the purchasers of the camps must assume all liabilities for property damage and hold the Government harmless from claims that might later be pressed in the Court of Claims. Naturally the purchasers made allowances for these damages in their bids, and wide allowances, too, since the extent of the damages was largely conjecture. This consideration further depressed the prices paid by the purchasers.

The result was that the salvage of abandoned army camps brought back to the Government only a small fraction of the money put into them. Actually in scores of instances it would have been cheaper for the Government to abandon the improvements to the landowners in return for quit-claims for the property damage. Public policy, however, prohibited such a short-cut method. Some of the leased sites had been donated to the Government before the armistice at the nominal rental of $1.00 a year or some other slight sum; but afterwards the chambers of commerce and other civic agencies which had made these concessions, for the sake of securing camps near their communities, refused to renew the arrangements, and the War Department was forced to pay regular rentals. Here was a consideration to force the sale of the camps on any terms possible. The chief lesson learned from the war construction enterprise was that the Government should buy and not lease a site when the value of the improvements is to exceed the value of the site itself. Only by holding such property for permanent use or gradual sale can the Government get value received for its investment.

In general, the salvage recovery from camps and other installations sold after the armistice amounted to about 15 per cent of the money invested in the original building materials. All labor values were lost. All wastage of materials in construction and demolition was loss. Many materials such as cement and concrete, road material, roofing, wood-stave piping, sewer piping, and so on, were a complete loss. The attention of the reader is invited to some typical shrinkages in value.

Project	Original Cost	Salvage Recovery
Camp Beauregard	$4,300,000	$43,000
Camp Bowie	3,400,000	110,000
Camp Hancock	6,000,000	75,000
Camp Logan	3,300,000	137,000
Camp Wadsworth	4,000,000	95,000
Camp Wheeler	3,200,000	144,000

Note, however, that in disposing of these camps, the Government retained practically all the storage and hospital facilities.

During the year following the armistice the Construction Division disposed of fourteen national guard camps, three embarkation camps, sixteen special and regular training camps, four flying fields, four hospitals, and many small groups of buildings. For these the Government received about $4,215,000. In addition, parts of many other camps were sold; also construction materials of practically every sort.

The most spectacular accomplishment of the Construction Division before the armistice was the building of the cantonments, the primary training camps which housed the soldiers summoned into the military service by the Selective Service Law. These were much more substantial installations than the national guard camps, the salvaging of six of which was noted in the tabular statement above. The national guard camps provided only tentage for the shelter of troops, whereas the cantonments housed their inhabitants in stanch wooden barrack buildings. A cantonment cost from two to three times as much as a national guard camp. Yet, on three months’ notice, at the beginning of which not even the sites had yet been selected and acquired, the Construction Division prepared sixteen cantonments ready to receive the first inductives called to the colors.

The cantonments originally were all built upon leased ground. It was evident that, if the Government were forced to vacate the ground to the owners, the cantonments, salvaged for their building materials, would bring no greater recovery percentage of their cost than did the tentage camps. The Government’s loss, in such an event, on each cantonment would be twice or three times what it proved to be on the national guard camps. Before the end of the war was in sight the Construction Division had anticipated demobilization by presenting a plan to the Secretary of War for the purchase of the sites of the cantonments. Purchase would accomplish several desirable ends. As long as the cantonments were in use it would save the payment of rents. After the war was over, if the cantonments were retained by the Army, it would give the cantonments their full use-value, which was every penny they had cost. If, on the other hand, the decision was to dispose of them after the advent of peace, then ownership of the sites would permit the Government (1) to market the materials gradually and avoid beating down prices by glutting the market; or (2) to sell buildings intact, with the land on which they stood; or (3) to sell entire cantonments as they stood, together with title to the lands. Any one of these methods of disposition would bring a far greater salvage return than the forced sale of the materials and the payment of property damages.

In March, 1919, the Assistant Secretary of War directed that the leased sites of fourteen of the cantonments—namely, Camps Custer, Devens, Dix, Dodge, Gordon, Grant, Lee, Jackson, Meade, Pike, Sherman, Taylor, Travis, and Upton—be acquired by purchase. The investment in these cantonments was approximately $155,000,000. By continuing to use the cantonments, the War Department could get full value received for the money expended. By salvaging them after the manner of disposing of the national guard camps, the Government might recover $4,000,000 at the outside estimate. By selling the materials gradually or the buildings intact with lands, the recovery could be expected to run as high as $48,000,000. The business logic of the proposition was irresistible.

The purchase of this vast quantity of land was undertaken by the Construction Division. After the commanding officers at the cantonments had indicated what boundaries should be included, the Division sent out its field forces—on April 21, 1919. First to go to work were engineers and surveyors to fix accurate boundaries and secure complete metes-and-bounds descriptions of the properties. Contracts were drawn with various responsible title companies to make search of the land titles and to guarantee them with title insurance. Next followed acquisition officers who closed sale contracts with the private owners. The sale contracts were finally signed in behalf of the Government by competent officers. With the acquisition officers traveled disbursing officers of the Finance Service who stood ready to pay spot cash for the lands the moment the sale contracts were signed. So rapidly was this work carried on that in two months the Government had acquired ownership to more than half the area on which the fourteen cantonments stood. A year later about 55,000 acres had passed in fee simple to the United States at a price of $6,762,000. Considerable property was yet unacquired; but, although it had been estimated that the sites would cost ultimately $9,657,000, the indications then were that the Government would secure them for not more than $8,115,000.

It was found to be impossible, however, to secure all the property so simply and easily. Some owners would not sell at reasonable prices; other owners could not be found; still others were under legal disabilities which prevented them from selling. In such instances the recourse of the Government was condemnation of the lands. Proceedings were instituted eventually to condemn some 22,000 acres for government use. The condemnation proceedings were conducted by the Department of Justice, which found this work to be one of great magnitude.

One of the interesting war developments in the United States was the change in the attitude of the War Department toward real estate. Before the war the various bureaus and other agencies of the War Department acquired their own real estate by lease or purchase as they needed it and as they could secure authority to procure it. The war itself resulted in an intense demand for real estate by the War Department as sites for its war buildings or as quarters to be occupied under lease. Real estate, therefore, came to be regarded as a commodity in the supply of the Army; just as much a commodity as food or ammunition. And, as the procurement of other commodities was eventually administered and controlled by a centralized agency, so the centralized procurement of real estate was placed in the hands of a new organization called the Real Estate Service.

The Real Estate Service acted as the Army’s real estate agent. The various bureaus still originated the projects for the acquisition of property, and then the Real Estate Service acquired the property as agent for the bureaus. The Service was composed of experts who saw to it that deeds and leases were correctly drawn and that the Government made good bargains.

The armistice, if anything, meant increased effort for the Real Estate Service, since the problem of the storage of surplus supplies was to be solved only by the acquisition of space. It was also necessary to dispense with high-priced locations, essential as they had been during the actual hostilities, and to substitute more economical facilities. Many of the War Department’s war factories had been built on leased sites, and it was necessary to purchase these sites wherever it was expedient for the Department to retain the factory as a preparedness asset or where it was good business to buy the land in order to sell the factory advantageously.

Although few obstacles had been thrown in the way of the War Department in purchasing property, it was discovered after the armistice that, because of existing and obsolete laws, it was most difficult to sell any. Up to the declaration of war the law which controlled this function provided that war department lands useless for military purposes should be sold by the Secretary of the Interior. When this law was enacted (1884) most of the lands occupied by the Army had come from the public domain, and it was logical to turn them back to that source when the War Department was through with them. In May, 1917, Congress authorized the War Department itself to sell national guard target ranges. In July, 1918, Congress authorized the President to sell, through the head of any Executive Department, lands acquired after the declaration of war against Germany to be the sites of war factories. In July, 1919, Congress authorized the sale under identical conditions of lands acquired for storage purposes. These, however, were the only exceptions granted to the original rule. In fact, when the War Department went about the purchase of the fourteen cantonment sites for the possible purpose of selling these lands later and thus getting better prices for the buildings on them, it did so with the knowledge that it would take a special act of Congress to authorize such a sale.

Congress, without warning, attached a rider to the appropriation bill which was approved on July 11, 1919, forbidding the expenditure of any more money at all in the purchase of real estate by the Army except at the national guard camps or at the cantonments in use before November 11, 1918, and also except where the purchase of sites of industrial plants was necessary to protect the Government’s interests. The Secretary of War ruled that the fourteen cantonments then being purchased were exempt from this inhibition, but the law abruptly put an end to projects of the Real Estate Service to buy some 300,000 acres at a cost of $8,000,000. At that time the Service was buying 115,000 acres of land at Columbus, Georgia, to serve as an infantry school of arms, 120,000 acres at Fayetteville, North Carolina, to be an artillery range, and several other large acreages for various military purposes. The project to acquire Camp Humphreys, the Engineers’ camp in Virginia near the city of Washington, about 4,000 acres, was allowed to go through.

Photo from Construction Division

WEST INDIAN LABORERS EMBARKING FOR HOME

Photo from Construction Division

VIEW OF CAMP SHERMAN

On the first day of the armistice the War Department was a party to leases obligating it to pay $13,000,000 in rentals annually. By the end of December, 1919, the Real Estate Service had made a large net reduction in the number of leases, and the annual rent bill had dropped to approximately $5,000,000, although in that interval the Service had acquired by lease hundreds of millions of square feet of new storage space.

Photo from Quartermaster Department

IN AN ARMY RETAIL STORE

Photo from Quartermaster Department

CUSTOMERS AT OPENING OF ARMY RETAIL STORE

CHAPTER XVII
SELLING THE SURPLUS

In our earlier chapters, frequent and more or less extended references have been made to the disposition of surplus property acquired by the various branches of the Army during the World War. In so far as these references have been to surpluses with the American Expeditionary Forces, we have aimed to make the statements complete; but the references to sales of the surplus military property accumulated within the United States have been only incidental, inserted merely to make plain to the reader the extent of the tasks of the various production bureaus after the armistice. This may have seemed haphazard and confusing treatment of what was one of the most interesting and important phases of the demobilization of war industry. We are therefore taking occasion in this chapter to consider this phase—the disposal of the domestic surpluses of war materials—as a whole and in such detail as may be expedient.

That same tendency toward centralization which succeeded in placing under one direction the procurement of all war supplies and, after the armistice, the liquidation of the Government’s business engagements, also brought about a unified control of the sale of the surplus materials. Shortly after the armistice there was set up in the Division of Purchase, Storage, and Traffic a Sales Branch under an officer called the Director of Sales. Just as, after the formation of the “overhead” business organization known as the Division of Purchase, Storage, and Traffic, the various production bureaus still continued to procure most of their own supplies, but now under the control and authority of the Director of Purchase, Storage, and Traffic, so after the armistice these same bureaus sold and otherwise disposed of the surpluses they had acquired, but under the supervision of the Director of Sales. With the exception of a few sales made directly with various foreign governments and companies (property valued at $63,450,000 going in these transactions), the Sales Branch itself engaged in no selling, but merely directed the selling activities of the operating bureaus.

It is impossible here even to give an estimate of the value of the surplus materials left on the hands of the War Department after the termination of the war industry, for the reason that the War Department itself has never been able to arrive at an estimate. The subject has been so vast, so intricate, and so complicated by the changing of personnel and the evolution of organization, that it has seemed to be a hopeless task to attempt an inventory of the surplus property sold and for sale. We can, however, gain some idea of the quantities of it. It is estimated that the armistice found the Army with a surplus of war supplies on hand of a value of $2,000,000,000. This investment represented goods actually produced by American industry up to November 11, 1918, in the maintenance of a force of 4,000,000 men and in anticipation of a force of nearly 5,000,000 in 1919. But this, mind you, was surplus within the United States. On the same date—the day of the armistice—the A. E. F., through importations from the United States and through its own foreign purchases, had built up a surplus of supplies worth $1,330,000,000 over and above what it would return to the war reserves at home and outside of what it would consume while resting on European soil during demobilization. Thus we have the figure $3,330,000,000 as representing the value of the surplus supplies, munitions, on hand when the active fighting ceased.

But this is only the beginning of the complete inventory; this was merely the surplus existing on November 11, 1918. War industry, under the policy of terminating it by graduating a declining production, still had weeks and months to go on producing goods, for most of which there was no war use. This dwindling manufacture by thousands of factories with millions of employees added to the surpluses materials worth many hundreds of millions. And still the tale is not told. War industry had been fostered by huge federal investments in buildings and machinery. These facilities, too, existed as surplus when the industry ended. This great accumulation was largely augmented by the machinery and other manufacturing facilities taken over by the Government in the settlement with the war contractors. The Government had purchased heavily of raw materials of various sorts, quantities of which remained as surplus after the armistice. In liquidating the war industry it added further to its stores of raw materials and took over, besides, a great mass of semi-finished materials in all stages of completion. When upon this heap we pile a great part of all the war building construction, and on that the additional surpluses automatically created when polity in Congress and in the executive offices made cut after cut in the size of the permanent Army, then we are approximating the total of the surplus.

This was all wealth, the true substance of the nation, its resources fabricated by its labor for the special purposes of war; and, with the war over, with little or no demand or use for these special materials, they could be disposed of only at a shocking sacrifice. Again, we cannot estimate the extent of the shrinkage, but we can indicate it. Up to March 1, 1920, the War Department had disposed of surplus property which had cost it $2,600,000,000. For this it had received $1,633,000,000. The recovery, therefore, was 64 per cent of the cost; the loss, 36 per cent. The shrinkage in values is one of the wastes which any nation must contemplate and accept when it sets forth to wage war on the modern scale. The nation can get value received for the cost of its munitions only by using them in war.

The largest of American companies, the United States Steel Corporation, in 1918, its busiest year, did a gross business of $1,745,000,000. The value of the surplus munitions produced before the armistice was nearly twice as great as that. The Steel Corporation, however, produced only a few dozen or few score sorts of products. The sorts of goods and materials to be disposed of by the Sales Branch were in number about 250,000, and this range embraced goods known in many branches of trade. The Steel Corporation and other great companies usually sell to a relatively small group of customers, who take the products in wholesale quantities. The market which the Sales Branch entered consisted of the entire United States, with 110,000,000 possible buyers; for part of the problem was to dispose of surplus materials by retail sale to the public. All in all, this may be regarded as the greatest merchandizing enterprise ever undertaken in America.

The 250,000 catalogue items in the sales list were divided roughly into seven commodity groups, as follows: (1) railway and building materials and contractors’ equipment; (2) manufacturing plants and plant sites; (3) machine tools; (4) vehicles and airplanes, including spare engines and parts; (5) quartermaster stores; (6) ordnance and technical equipment, including office equipment; and (7) raw materials, scrap metal, and waste materials.

It was recognized at the outset that to throw on the market vast quantities of supplies and materials in all these seven categories was to court disaster to the industrial situation. Business and industry immediately after the armistice were in a ticklish position. They faced the complete transition from the war to the peace basis, an uncharted region through which it seemed likely that they could go safely only under the wisest of guidance. If, in addition to its inevitable troubles of reconstruction, industry were to have to face cutthroat competition with the surpluses of the very goods its own mills had created during the war, it was evident that the difficulties of the transition might be doubled.

To safeguard business as much as possible and still dispose of the surplus materials, the War Department adopted certain general principles or policies. The first of these was that the general Government, through its several departments and in the public work which the departments were doing, should utilize all the surplus war materials they could absorb. The second and more important was to sell all general commodities to the public through the medium of the industries which had produced these commodities and thus to avoid disastrous breaks in market prices—even, sometimes, to sustain prices.

There was widespread disapproval of this latter policy. The public for months had been stung and irritated by prices which many regarded as the exactions of profiteers; and now at last, with huge stocks of supplies on hand which had to be sold or lost, the people anticipated a dumping which would smash down prices and bring about the discomfiture of those who had seemingly victimized them. But this was not to be. The Government adopted the view that it was better to have the high (but normally declining) prices and to keep the wheels of industry turning than to risk a collapse of prices that might bring with it general unemployment and business stagnation.

Later on, when it had become evident that business was making a safe passage through the reconstruction period, large stocks of clothing and food supplies were sold directly to consumers at prices considerably below the market averages.

Particularly in raw materials the policy of sale through, or in coöperation with, the industry affected by the sale worked as the Government had expected it to work. The War Department found itself after the armistice with a surplus of 125,000,000 board feet of soft lumber over and above what it would need in completing the various unterminated construction projects. This was lumber enough to build 5,000 houses. To have dumped this on the market would have paralyzed a large part of the lumbering industry until the market had absorbed the army lumber. Accordingly the War Department entered into a contract with the authorized representatives of the lumber industry whereby it was agreed that the lumber should be marketed gradually and at prices fixed by agreement between the Government and the industry. Under this arrangement the surplus was all sold without disturbance to the industry and at prices which brought a good return to the Government.

In the spring of 1919 the Government had on hand a surplus of something more than 100,000,000 pounds of copper. The copper industry was in a serious plight. The producers had on hand a surplus of 1,000,000,000 pounds, but still they were keeping the mines, smelters, and refineries running to prevent unemployment and in the expectation that the resumption of normal business would soon create a demand for copper. Any dumping of the war department surplus most certainly would have closed the mines. Instead of that, the Government sold the entire surplus back to the producers. The industry continued in operation, and the Government received an average of seventeen cents a pound for its copper, a fair recovery.

The War Department’s surplus of 161,000,000 pounds of sulphur was sold through the industry. At the armistice the Government had on hand some 600,000 tons of nitrate of soda imported from Chile for the powder factories. About half of this was retained as a war reserve. The Department of Agriculture disposed of 125,000 tons of it to farmers for use as fertilizer. About 142,000 tons was sold for the War Department at market prices by the nitrate importers who had supplied the commodity to the Government in the first place. A stock of 59,000 tons of nitrate in Chile, the property of the American Government, was brought to the United States and sold by the importers on the same terms. Approximately 730,000 bales of cotton linters in the war department surplus are being used by the commercial powder industry on such terms as will return to the Government from one-third to one-half the original cost of the linters. A surplus of 66,000,000 pounds of ammonium nitrate was sold at prices which reimbursed the War Department to the extent of about one-third its war-time cost.

It should be borne in mind that all these sales were actually consummated by the production bureaus in whose hands the supplies remained as surplus after the armistice, the Sales Branch merely coördinating the sales and approving the terms. It will be impracticable here to go into the details of the salvage and sales activities of all the bureaus, but enough can be told to illustrate the ingenuity and business enterprise employed in disposing of the great war surpluses. As the occasion demanded, the government salesmen had to be merchants, barterers, auctioneers, and even partners with commercial organizations.

The production bureaus were organized for their salvage operations precisely as they had been for manufacturing the supplies and, later, for liquidating the business arrangements with the contractors. Those which had created manufacturing districts before the armistice, afterwards established district salvage boards to take over and dispose of the surpluses accumulated by the district claims boards in their settlements with the contractors. These district salvage boards, in turn, were subsidiary to the main bureau salvage boards, which, in turn, reported to the Sales Branch of the Division of Purchase, Storage, and Traffic. The surpluses of ordnance materials, for instance, were handled by the Ordnance Salvage Board through its district salvage boards, and the same system obtained in the Air Service and under the Director of Purchase. The other bureaus disposed of their surpluses through central salvage boards in Washington.

Perhaps the chief challenge to the ingenuity of the government salesman was that offered by the ordnance surpluses, for these were probably the most highly specialized of all military supplies; yet it was often the task of the Ordnance Salvage Board to find civilian needs to which these supplies could be adapted. Great commercial successes have sometimes been scored by those able to develop new uses, and therefore new markets, for the goods they manufactured. In like fashion the ordnance salvers, by taking thought, could sometimes convert what had been regarded as junk into merchandise for which there was a brisk demand at good prices.

These activities took the salesmen far afield. They disposed of lumber to the Panama Canal operators, sold nitrate to the Government of Holland, converted the great ammonium nitrate plant at Perryville into a hospital operated by the Public Health Service for the benefit of disabled ex-service men, transferred tin to the Navy Department, and demonstrated to the Department of Agriculture that the containers in which it had been intended to ship trench mortar shell could serve equally well as containers of dehydrated vegetables. They disposed of rope to the Department of Agriculture. They sold a thousand revolvers to the police force of Washington. To the federal road-builders they turned over trucks and smokeless powder and trinitrotoluol to be used as blasting explosive.

One of the largest single undertakings in ordnance salvage was the disposal of manufacturing plants either built outright or equipped with machinery by the Government. There were some 300 of these, and the Government’s investment in them was practically $525,000,000. The array included cannon and gun-carriage plants, shell-loading plants, powder works, chemical and acid plants, toluol plants, small-arms factories, ammunition factories, nitrate-fixation plants, and numerous shell-making plants. In the liquidation of the ordnance industry large additional quantities of ordnance production machinery, both new and used, fell into the hands of the Government. All of it, beyond the selections retained in the military reserves, had to be sold. During the first year after the armistice the sales of ordnance plants and machinery brought in a return of over $70,000,000. (Manufacturing facilities worth double that amount had either been stored or installed at the various arsenals, or else had been turned over to other departments of the Government.) In the spring of 1920 half the vast accumulation of ordnance plants and machinery had been disposed of.

The most spectacular sale accomplished in this branch of ordnance salvage was that of the smokeless powder plant at Nitro, West Virginia. This plant was a self-contained town, with three square miles of land in its site, with houses for 20,000 people, theatres, schools, churches, stores, electric lights, paved streets, gas, a telephone system, water, and other modern improvements. The Director of Sales himself conducted the negotiations whereby the entire establishment was sold en bloc to a development corporation, which planned to resell the establishment piecemeal to manufacturers and thus create a permanent industrial city at Nitro. The corporation paid a flat price to the Government for the Nitro plant and in addition admitted the Government as a partner in the profits. Several companies have already occupied factory buildings there. The Ordnance Salvage Board maintained representatives at Nitro to approve the resales as they were made.

The Ordnance Department took over from the producers after the armistice large quantities of steel in process of being made into artillery shell. A great deal of this steel consisted of finished and semi-finished parts for shell. No matter how much labor had been expended on these shell parts, their only value commercially was as melting stock. The users of steel evidently expected to be able to pick up the Government’s surplus stock of it after the armistice for a song: the highest bids for the first offerings of it on the market were only about $12 a ton. The ordnance salvers cannily decided not to sell at such prices and, except for some trifling, but advantageous, sales, did nothing about it until the summer of 1919. By that time the commercial revival began to make itself felt in the demand for steel, the prices of which were further enhanced by an impending strike in the steel industry. Then it was that the wisdom of holding on to the steel stocks became evident. The sale of shell steel was handled directly by the Ordnance Salvage Board, which, after the prices rose, dealt only with heavy purchasers. The average price paid to the Government for this steel was about $30 a ton. The Salvage Board handled about 1,000,000 tons of it.

There were also large surpluses of nonferrous metals,—copper, zinc, lead, tin, antimony, and nickel,—the stocks including nearly 20,000 ounces of platinum, which sold, it may be noted, for an average price of $105 an ounce—just about what it had cost. The copper, as we have seen, went back to the producers at a fair price. The Board sold 65,000,000 pounds of zinc at an average of eight cents a pound. The surplus of brass amounted to 135,000,000 pounds, and this has been selling at good prices. During the year following the armistice the salvers disposed of nonferrous metals worth $40,000,000.

The salvers had to use their ingenuity in order to dispose of the surplus cupro-nickel advantageously. Cupro-nickel is an alloy of copper and nickel which is used in making jackets for small-arms bullets, but the metal has no commercial use. The Government was able to secure not a single bid for any of its large surplus of cupro-nickel. The alloy is too tough for ordinary metal-working machinery. The ordnance salvers first proposed that this metal be used at the Mint in making five-cent pieces, but the surplus of it was so large that it would have taken many years to consume it all in this use. The experimenters then took hold and found that, by melting cupro-nickel and further alloying it with zinc, they could produce German silver, a commodity for which there is extensive industrial use. This fact was demonstrated to the market, and the first result was a bid for 5,000,000 pounds of cupro-nickel at a favorable price.

An even more conspicuous example of resourcefulness on the part of the ordnance salvage forces was the sale of the so-called cartridge cloth. The Ordnance Department was an extensive war consumer of textiles of many kinds. Silk, cotton, wool, felt, and linen are used in numerous forms in the production of ordnance supplies. The quantities acquired during the war may be estimated from the fact that the surpluses left after the armistice brought on sale close to $25,000,000. In the surplus of textile goods was a considerable yardage of what was called cartridge cloth; and it must be said that at the outset none of the excess ordnance supplies seemed to be so hopeless as a salvaging proposition, so certain to account for a large loss of investment, as this stock of cartridge cloth.

The cartridge cloth was used during the war to make bags to be filled with the smokeless powder used as the propelling charges for guns of the larger calibers. The cloth was made of silk, for the reason that silk alone among fabrics burns perfectly and leaves no ash to smut the barrel of a gun. Cotton, in contrast, or any other fabric, is likely to leave charred pieces of itself smouldering in the breech of a gun after a shot; and these smouldering pieces may touch off the new powder charge prematurely and kill or maim the men serving the gun. Moreover, silk alone does not cause a flash at the muzzle of the gun when the shot is fired. Such flashes at night betray the gun’s position to the enemy.

But though cartridge cloth was made of pure silk, what a silk it was! Naturally, to keep down its cost, it was woven of the cheapest silk materials possible to obtain. It was made of what were practically the by-products of silk-weaving—noils and waste silk. Noils are cut cocoons, immature cocoons, and combings from the outsides of cocoons. The woof of cartridge cloth was made from silk noils and the warp from waste silk. All raw silk is filled with a natural gum, which in commercial processes is boiled out before the silk is woven. Since this gum did not impair the fabric for use in guns (the gum gave perfect combustion and left no ash), it was left in the raw material in order to keep down the cost of the fabric. In order to facilitate the manufacture of cloth from noils, the noils were carded, combed, and spun in oil, oil not being objectionable in the cloth. The result was a greasy, dark colored, rough cloth, looking like oily gunny sacking, a fabric about as unalluring as any that could be imagined. And it cost the Government on the average seventy-two cents a yard. At the time of the armistice the Ordnance Department had on hand about 22,000,000 yards of it. Most of this quantity was set aside as a war reserve. The rest was offered for sale. The best offer for it was twelve and one-half cents a yard. The Government, therefore, faced a considerable loss.

The ordnance salvers were not content to swallow this loss. The Salvage Board obtained $20,000 with which to experiment with the silk. An expert silk maker in the Sales Branch then tried boiling out the gum and oil and otherwise processing the fabric, after which he bleached, dyed, printed, and napped it. The result was a beautiful fabric, suitable for outer garments for both men and women, and for millinery, drapery, and upholstery. Beautiful color effects were obtained with it by certain silk-finishing companies. With this demonstration before the trade, the Salvage Board again asked for bids, and this time received a number of them, offering prices ranging from thirty-one cents a yard to forty. This still was not enough for the salvage salesmen, who went out and negotiated a contract with two companies—the Bush Terminal Company of New York and the McLane Silk Company of Turners Falls, Massachusetts—which netted the Government eighty-five and a half cents a yard, plus half the profits received from the sale of the fabric. A considerable quantity of the silk was sold under this arrangement.

The expenses of the Ordnance Salvage Board were less than 6 per cent of the money received from sales and transfers. This sales cost compares favorably with similar costs in the mercantile world.

The fact that a large part of the money spent by the Air Service during the war was represented after the armistice by finished airplanes and airplane engines precluded any considerable recoupment of the war expenditures from sales of surplus materials afterwards, since, at present, planes and engines have small commercial utility. Aviation engines are too light and too powerful for ordinary tasks, and no real market for airplanes has yet existed in the United States. Consequently, the sales of air service surplus were virtually limited to commodities having commercial use, such as tires, photographic equipment, linen fabric, fur used in making aviators’ clothing, and the like. Some of these surplus commodities, however, went at good prices. One New York concern bought 372,500 Chinese dogskins for approximately $700,000. Nearly 5,000,000 board feet of surplus mahogany, used in making propellers, sold for $150 a thousand feet. Great quantities of small tools from the airplane factories, millions of yards of cotton fabric, and nearly 4,000,000 pounds of long-staple cotton sold at good prices. The Government realized $700,000 from the sale of 20,000,000 feet of spruce, fir, and other soft woods used in the manufacture of airplanes. One large sale of airplanes and engines was recorded. For $380,000 the Nebraska Aircraft Corporation of Lincoln, Nebraska, bought 280 Standard J-1 training planes without engines and 280 Hispano-Suiza engines to drive them.

To sell its surplus in the United States the Air Service set up field disposal agencies at Boston, New York, Buffalo, Chicago, Detroit, and Dayton. The property declared surplus was valued at approximately $115,000,000. Up to the present (July, 1921) goods to the value of $97,000,000 have been sold from this surplus, and there is an unsold residue valued at $18,000,000. The average recovery has been 62 per cent of the cost.

The disposition of the property acquired by the United States Spruce Production Corporation in the forests of the Pacific Northwest was delayed by the congressional investigation of the affairs of that official organization. The cost value of all salvageable property was calculated at approximately $19,000,000, of which $7,000,000 represented the cost of three railroads for hauling logs. The rest of the investment was represented by sawmills, roads, hotels and barracks for woodsmen, hoisting engines, drying kilns, and nearly 100,000 other items, among which were 22,000,000 feet of lumber produced and on hand. The lumber of commercial grades was promptly sold, and the Air Service arranged to take over the 3,088,000 feet of airplane lumber stock, for a consideration of approximately $1,000,000. The sale of the remaining property has gone on slowly, and the recovery has been low in ratio to the original cost.

The sale of surplus engineering materials brought to the Government the unusually high average recoupment of 87 per cent of the cost of manufacturing the supplies. The reason is that the largest and most valuable part of the surplus consisted of railroad construction materials and rolling stock. The railroads of the world, and particularly those of Europe, had been neglected during the war, and their rejuvenation had become a necessity even paramount to that of reconstructing general industry. Such governments as those of France and Poland were glad of the chance to secure American locomotives, cars, and cranes at the cost of their manufacture. The largest single sale of engineer supplies was made to the French Government, which paid approximately $63,000,000 for 485 freight locomotives and nearly 20,000 freight cars. By the spring of 1920 surplus engineering supplies which had cost $128,000,000 had been sold for about $110,000,000. Large quantities of excavating machinery and other contractors’ equipment were transferred to the Bureau of Public Roads.

Surplus chemical warfare materials, on the other hand, proved to have low salvage value. After the armistice the Chemical Warfare Service found itself with some 1,000 carloads of surplus materials on its hands. These materials had cost $11,000,000. Of the surplus, obsolete gas masks and other accumulations valuable to no one and therefore unsalable, accounted for $2,000,000. The rest consisted principally of raw materials and machinery. Certain of its raw chemicals the Service was able to dispose of to the artificial dye industry at a profit. The outside gas-making plants attached to the Edgewood Arsenal were sold by auction to manufacturers of chemicals.

Though the sales of surplus factories, machinery, raw materials, and scrap and junk were of intense interest and concern to industry and business generally, the great masses of people in this country knew little or nothing about them. The wage earners, the millions drawing salaries of moderate range, were not beneficiaries—not immediate beneficiaries, at any rate—of the bargains the Government was offering. The trade journals were filled with advertising and reading matter about the sales of the war surpluses, but the newspapers seldom had anything to say about them. No doubt there were hundreds of thousands of Americans who, immediately after the armistice, reading about the excess stores which were overflowing the Government’s enormous warehouses, expected to benefit personally and at once by the situation. It was the opportunity of a lifetime to pick up a new stock of kitchen utensils for a song, or a lawn mower, or a new Dodge car at a knock-down price, or, at least, new supplies of underclothing and other garments, or of food at figures which would make the corner grocer squirm. But as the weeks and months went by and none of these opportunities ever presented themselves, it became obvious to any thinking person that the Government itself must be in league with the profiteers and must be holding out its stocks in order to let the gouging go on without hindrance.

Those who jumped to such a conclusion were not aware of the restrictions which their own representatives, the men in Congress, had thrown about the sale of government property. Just as the law forbade (with certain exceptions and qualifications already noted in this volume) the government executives to buy supplies except from the best bidder in a competition for the business, so it forbade them to sell supplies except to the best bidder. The buyers therefore had to compete with each other for the surplus stocks, either in auction sales or by sealed bids submitted after goods had been duly described and advertised. And since the Government had its own sales expenses to consider and therefore could not hold auctions to dispose of single cans of tomatoes or advertise for bids for individual hams, the ultimate consumer, unless he were prepared to purchase by the carload, was as much out of it as if the supplies were stored on the moon.

Not until July 29, 1919, did Congress come to the relief of the ultimate consumer by passing an act authorizing the War Department to sell food, clothing, and household supplies at retail. Within ten days the Surplus Property Division (of the Division of Purchase, Storage, and Traffic, which had charge of all food, clothing, and general supplies) inaugurated a plan of direct selling by parcel post. Price lists and order blanks were sent to the 58,000 post offices of the United States, and the postmasters were instructed to receive orders and cash and send consolidated requisitions and payments to the Surplus Property Division. This plan was not a success, thanks principally to the postmasters’ unfamiliarity with such work; and a few weeks later it was abandoned altogether in favor of the army retail stores. Through these stores the masses of consumers at last came into direct touch with the surplus war supplies.

The store system was established on September 25, 1919. At the stores a consumer might buy food and other supplies over the counter in such quantities as he chose; or, if he lived too far away to visit the store, he might order from it goods to be delivered by parcel post, postage prepaid and goods insured at government expense. At first the Army established twenty-five stores, and these did so well that additional stores and branches were added, until by the late winter of 1919–1920 there were seventy-seven places where consumers might go and buy, at reduced prices, the goods which their tax payments and bond purchases had enabled the Government to procure. The stores were operated under the supervision of the fourteen zone supply officers.

In selling directly to the consumer, the War Department adopted the policy of pricing goods at four-fifths of the prevalent retail market prices. Since the cost of living had begun to decline in late 1919 and the early part of 1920, this policy meant a loss to the Government, which had paid war prices for the supplies; but it was not a large loss. On the average, the retail sales brought back nearly 80 per cent of the original cost of the goods sold. The sales expenses came to about 10 per cent of the money received.

The War Department did everything in its power to make the stores attractive to the public. It stocked them with a wide range of articles and advertised them heavily. A press bureau was established in Washington, and the newspapers devoted acres of space to the publicity. In spite of the propaganda, however, the response of the public was not so unrestrained as the outcry against the costs of necessaries might have led one to expect. (To be sure, the Government, naturally, could not set up its stores in the high-rent districts—the districts most convenient to the retail customers.) The army retail stores did business at the rate of approximately $5,000,000 a month—not much for 110,000,000 potential customers. As the sales went on it became evident that, although the protest against high prices was practically universal, only the thrifty minority was willing to step across the line of convenience and custom in order to secure lower ones. The rest preferred to grumble and follow their lines of least resistance.

Yet it is probably true that the retail stores benefited all, since the continued sale of great quantities of surplus military supplies at reduced prices doubtless had an effect in bringing down commercial prices. Although only some 350 items in the Army’s supply list were applicable to retail selling, this range, after all, was considerable. In the subsistence list it ran from Apples, Evaporated, to Vinegar, and in general supplies from Arctics, Cloth Top, to Whips, Artillery. The Surplus Property Division even sold a few motorcycles at the stores.

Far overshadowing the retail sales in quantities of goods moved were the sales to jobbers, dealers, and speculators, by informal bids on advertised lists of supplies. The sales headquarters in Washington and the zone offices became busy markets for months after the armistice as the War Department got rid of the surplus supplies procured by the Director of Purchase. As stated, there were regular commodity days—textiles were sold on Mondays, raw materials on Tuesdays, and so on. At the Monday sales the Surplus Property Division had taken in, by February 20, 1920, nearly $66,000,000 paid for clothing and equipage alone. These sales benefited the general public in that they usually resulted in the goods being sold at retail by salvage companies or by regular mercantile houses at reduced prices.

The fluctuations of markets sometimes made it possible for the Government to sell surplus to bidders at a profit. For instance, a ton or more of camphor, acquired originally for the Medical Department, brought a profit of 84 per cent, due to a post-armistice increase in the price of camphor. Medical supplies generally, although they were sold principally to public institutions, brought a 99-per-cent recovery of their war cost. General supplies—including hardware, kitchen utensils, brushes and brooms, rope, paper, office furniture, musical instruments, and athletic goods—sold at prices which brought back to the Government more than 72 per cent of their war cost.

Apparently useless supplies—useless to civilians, that is—were purchased by bidders who had found unique uses for them. The nonbreakable eyepieces of gas masks were found to manufacture well into motorists’ goggles. The anti-dim paste used to keep the gas-mask eyepieces from fogging from the wearers’ breath had a practical use upon the windshields of automobiles during rainstorms. Trench fans were bought and used as aprons for cannery workers.

Surplus leather was sold in auctions held in Philadelphia, Chicago, San Francisco, Boston, and elsewhere; and the cash recoveries generally were large, ranging from 71 per cent to 100 per cent of the war cost, and even, in instances, returning a profit. Harness did not sell well, because much of it was made of russet leather, which does not attract the commercial buyer, or else because the harnesses were of special designs not used by teamsters.

The demands of other departments of the Government for surplus army motor trucks were so great that only a few were sold as surplus, and those few were neither new nor in good condition. Automobile tires, however, were placed on sale in the retail stores.

The total sale of surplus materials acquired by the Division of Purchase, Storage, and Traffic amounted to $357,000,000 between the date of the armistice and January 31, 1920. The recovery was 77.57 per cent of the original cost.

CHAPTER XVIII
THE FOREIGN LIQUIDATION

Although as these words are written it is more than two and a half years since the armistice of November 11, 1918, was signed, it is still impossible to give a clean-cut and definitive statement of the accomplishments of the industrial demobilization. It may never be possible to do so. Although in the main it was possible to terminate the war contracts with supplementary agreements fixing the Government’s liability to the penny, the consolidation of these agreements would not give the full cost of the termination. A few claimants are stubborn and insist upon the ultimate legal redress guaranteed them by the terms of their contracts. The administration in Washington has changed, and some few of the claims once settled—as it was believed, finally—are being reopened. And then, on the credit side of the war ledger there is the same indefiniteness. Surpluses of war supplies are indeterminate—expanding or contracting as policies change, as the military establishment finds need of materials once declared surplus, as war reserves deteriorate. Thus it is impossible to draw a line and say that all transactions on the one side should be entered in the war account and all on the other in the account of the permanent Army.

But in one important branch of our war industry there was a complete, definite liquidation. The red line was drawn and the balance struck. This was the branch in which the Allies and other foreign nations were participants, as either buyers or sellers. The promptness with which this transaction was consummated, and the completeness of it—down to the last dollar due, down to the last pound of materials exchanged—mark it as one of the outstanding accomplishments in the whole industrial record of the war. Its benefits to the countries affected are not to be read entirely in the footings of the columns of debits and offsets: rather, they are political and economic—the prestige of the United States enhanced, international good will sustained, irritation and ill feeling, which might easily have been aroused among the late Allies and their associates in the settlement of their business arrangements, avoided.

It is evident that these war transactions fell into two classes: one class in which the Allies dealt (through the American Government) with American industry for the production of supplies; the other in which the United States was the customer, and the industries of the Allies (and to a slight extent the industries of certain neutral nations) the source of supply. And, as the business of terminating the arrangements was thus a double-barreled proposition, the War Department found it convenient to attack it with two agencies: the so-called Cuthell Board (which, officially speaking, was the “Special Representative of the Secretary of War” and his assistants) and the United States Liquidation Commission.

Mr. Chester W. Cuthell was the Special Representative of the Secretary of War. His Board consisted of lawyers and accountants whom he chose and appointed. The duties of Mr. Cuthell and his Board were to terminate and settle up the war business of the Allies in the United States under those arrangements in which the War Department had been a participant, whether as agent, producer, or partner. The Board was therefore essentially the agency for liquidating the international business on this side of the Atlantic. The United States Liquidation Commission, on the other hand, was the agency created to liquidate America’s war industry abroad; and this was much the greater of the two tasks. The United States Liquidation Commission was charged, also, with an added duty: that of disposing of all American surplus military property on foreign soil.

We must think of both these activities in international demobilization as going on simultaneously, as they did. The two agencies were created almost at the same time: Mr. Cuthell was appointed on January 22, 1919, and the United States Liquidation Commission was created on the following February 11. Also it was necessary that they both work in the closest contact and coöperation with each other, since the arrangements of both would have to come together in the final settlements, the American claims against the Allies, as substantiated by the Board, going to offset the Allied claims against us, as acknowledged by the Liquidation Commission. This liaison and harmony existed. The coöperation, too, extended to the adoption of certain broad policies which were to be followed by both in liquidating the business. One of these, and perhaps the most important one, was that, in the negotiations that were to follow, no nation should expect to profit at the expense of any of the others. The settlements should be made on the basis of actual cost. A second policy was that international agreements and understandings, even though they had never been committed formally to writing, were to have the binding force of formal contracts. In other words, the business would be settled as among partners and friends, no one of whom wished to take advantage of the others.

Upon both liquidating agencies bore the need for haste in terminating the business. Armies were demobilizing, personnel familiar with the subjects in negotiation melting away. If the discussions were to be long protracted they would take on the aspect of contentions, with evidence and affidavits to be secured, inventories and audits taken, hearings conducted, examination and cross-examination of witnesses, causes perhaps finally going into international tribunals or before commissions of arbitration. Nothing but ill feeling could result from such an outcome. The international business relations had become enormously intricate during the war. It was obviously an impractical thing to go into details, as a creditor might attack the schedules of a bankrupt corporation. Such procedure would drag along for years. It was to the advantage of every party to the transactions, the parties being sovereign nations having regard for their international contacts, to give and take in rough bargaining, accepting estimates and lump sums rather than insisting upon items and particulars, and finally to agree to totals which at the best would be only approximations. The important thing was to get the business over with justice done to all.

That was the spirit in which both boards worked.

Mr. Cuthell, upon his appointment, found in the Division of Purchase, Storage, and Traffic a consolidated and condensed record of every claim held by the War Department against the governments associated with us in the war. This showed him the field. He discovered, however, that none of the war missions maintained by the Allies in the United States was vested with power to adjust and settle these claims, many of which were disputed. Therefore, while his hastily gathered force of experts was preparing the claims for presentation, Mr. Cuthell himself (in April, 1919) was sent to Europe to ask the foreign governments concerned to create liquidating agencies competent to deal with the United States and, further, to retain in their respective services, until the liquidation should be effected, the officers familiar with the American transactions.

It should be noted here that this was a wide departure from international precedent. Ordinarily, financial claims between nations are settled by the slow and cumbersome processes of diplomatic interchange, or else by arbitration. To have allowed the war claims to go into this channel would possibly have meant the end of the amity between the Allies and the United States. Our liquidation agencies proposed direct dealing through business plenipotentiaries, with restrictions even less exacting than would be drawn by two private corporations.

In Paris Mr. Cuthell found representatives of Italy prepared to discuss the American claims against Italy. Soon after the conferences started, however, President Wilson made public at the Peace Conference his attitude toward the Italian occupation of the Adriatic port of Fiume; and the Italian delegation, including those ready to negotiate a business settlement with us, withdrew from Paris.

Mr. Cuthell thereupon went to London to negotiate with the British. The British Government appointed and empowered a special commission, headed by Lord Inverforth, then the British Minister of Munitions, and including several eminent representatives of the British Government, among them Mr. W. T. Layton, a man of unusual ability and the one who took the actual lead for the British in the subsequent negotiations, to deal with the American claims. Meanwhile Mr. Cuthell’s principal assistants had arrived from the United States, bringing with them the now formulated statements analyzing the British war business in America and setting forth what our negotiators regarded as the proper charges for the British to pay in settlement. These assistants were Mr. Ralph W. Gwinn, who was to present the Liberty engine case; Mr. Miller D. Steever, in charge of the airplane lumber claim; and Mr. F. C. Weems, who had prepared the smokeless powder and cotton linters cases. The conferences began immediately, and such was the progress made that within ten days a complete agreement was reached, and the British war business in the United States was definitely terminated. The so-called Cuthell-Inverforth Agreement, which embodied the terms of settlement, was dated May 10, 1919.

The agreement, reached so speedily and with such complete mutual accord, terminated a vast business within the United States. From the United States as dealer, Great Britain had procured smokeless powder, picric acid, airplane lumber, and Liberty engines. As a partner of the United States, Great Britain participated in the pool of cotton linters which cornered the entire American supply for the benefit of the powder mills. England was also a partner with us in the project to build a chain of chemical factories in America to produce acetone, used in making dope for airplane wings. These factories never came into production, and the project was closed out with a loss of over $6,000,000, half of which loss the British were bound to share. We participated with England in the purchase of Australasian wool. The terms under which the wool contract was closed out were noted in a previous chapter of this volume.

The celerity with which these complicated war transactions were terminated was a distinct triumph in international negotiation. The British, when they entered the conferences, probably had no idea that they were to be rushed through to any such speedy conclusion. The conferences, in fact, began as if they were to drag along for an extended time. On the first day Mr. Gwinn gave a careful and clear exposition of the Liberty engine case, setting forth in detail just what we had done and to what extent the British ought to participate in the costs. Although, whenever any of his figures were challenged, the American delegation proceeded then and there to make adjustments apparently to the satisfaction of the British commissioners, yet when Mr. Gwinn had concluded, the Americans were unable to gain from the British any expression of opinion as to whether the total would be accepted, at least tentatively, as the British obligation. It was evident that the British expected to prepare and, later on, press an argument against the American statement. If this procedure were to be followed throughout the negotiations, it would be many weeks before the conferees could reach any final agreement.

This outcome of the first day’s negotiation was a disappointment to the Americans, but they determined to try again next day. The next morning Mr. Steever took up the airplane lumber case, and talked for nearly four hours. He went into a description of the picturesque phases of the northwestern lumbering enterprise—the felling of the spruce trees, the steel cables on which the great trunks slid down the mountain sides, the railroads built into hitherto inaccessible wildernesses. But punctuating his rhetoric were the hard figures of costs, expenditures, losses, deliveries, and values. The British had shared in this whole enterprise in the Pacific Northwest, the development of which had never reached the stage of turning out the airplane lumber at low prices. As Mr. Steever talked he invited interruption and objection, and the British delegates availed themselves of the invitation. The various objections were resolved as the case was unfolded. At the conclusion Mr. Cuthell asked for any further objections to the statement. But the British had exhausted their challenges during the presentation of the claim. The only objection raised was to British participation in the cost of certain dry kilns in which the export airplane lumber was not treated. This item was promptly subtracted from the claim’s total, and then Mr. Cuthell briefly urged that the column’s footing be accepted tentatively as the British obligation. If not to the surprise of the Americans, certainly to their extreme gratification, the British commission agreed.

That was the real victory, for it set the precedent for the entire settlement. Each day the Americans presented a new case; and each evening when the American representatives left the Hotel Metropole in London, where the conferences were held, a tentative agreement in that case had been reached. Finally all the claims were settled tentatively, except the Liberty engine claim. Once more the Americans pressed to have the original statement accepted, and it was. It was understood, however, that all figures were to be subject to verification by a British audit of the books of the War Department in Washington.

On the tenth day the Americans brought to the Metropole a tentative written agreement, embodying all the sub-settlements agreed upon. Mr. Cuthell then pointed out the considerable cost of a British audit of our books, the possibilities of friction arising over the presence of British auditors in our War Department over an extended period, and the likelihood, since all the American estimates were conservative, that the audit would not in any event greatly change the amount of the British obligation and might even increase it; and he suggested that it would be good policy for the British to accept the tentative figure as final and let it go at that. Lord Inverforth promptly agreed. That was cricket, as the English say.

The agreement fixed the cash liability of the British Government for its unpaid American war bills and its obligations arising from the termination of its American contracts and engagements at $35,464,823.10. Of this the Liberty engine item was the largest item—approximately $14,000,000. The British paid over $13,000,000 to satisfy all claims of the United States arising from the British purchases of airplane spruce, fir, and cedar. Its powder contracts accounted for nearly $4,700,000 of the settlement sum, wood distillates (principally acetone) for about $2,900,000, and its 2-per-cent share in the linters pool for the rest.

Practically all the settlements made by the Cuthell Board were carried as offsets to the American liabilities under the general foreign liquidation accomplished by the United States Liquidation Commission; but the British preferred to make their settlements separate transactions. Accordingly, on August 2, 1919, a representative of the British Treasury delivered to the War Department a check in payment of the British obligation under the terms of the Cuthell-Inverforth Agreement. This, however, was not a complete termination for Great Britain. That Government admitted full liability under numerous other, but small, claims which the War Department had not yet had time to prepare in detail. As invoices were subsequently presented to the British Government, these claims were promptly paid. The minor cases came to approximately $7,000,000.

Progress almost equally swift was made by the Cuthell Board in securing a settlement of the American claims against France. At first there was no official French agency empowered to make such a settlement. Mr. Cuthell and his assistants proceeded immediately to Paris after making the British agreement and importuned the French Government to designate a representative competent to conclude a settlement. There they were joined by Messrs. Charles B. Shelton, William Fisher, John H. Ray, Jr., and Harry A. Fisher, who brought with them from Washington the formulated statements of various American claims against the French. After several days’ delay Premier Clemenceau appointed the French Liquidation Commission, headed by M. Édouard de Billy, who had been with the French High Commission in Washington during the war and was therefore familiar with the French contracts in the United States. To France the War Department had sold picric acid, cotton linters, smokeless powder, airplane lumber, and Liberty engines. The French liability in these cases was finally fixed at $95,968,561.87, and a formal agreement admitting the liability was signed on May 29, 1919. There were other considerable claims against France, the statements of which had not yet been prepared. Later (September 9, 1919) Mr. Cuthell came to an agreement with M. Casenave, minister plenipotentiary of France in the United States, whereby the French admitted an additional liability of $64,910,352.92. Of this sum, $38,000,000 represented ocean freight charges upon war supplies bought by France in the United States and carried to France in American army cargo transports.

Two additional settlements with France, one terminating the French contract with J. G. White & Company for raw materials for airplane manufacture and the other terminating the French contract with the General Vehicle Company for the production of Gnome rotary airplane engines, increased the French liability by $2,117,785.34. These settlements were made in France by Mr. Monte Appel, chief assistant to Mr. Cuthell. The total liability arising from the American war business of France was therefore $162,996,700.13. This sum went into the general settlement agreement made with the French by the United States Liquidation Commission.

Soon after the French settlement was a fact, the Italian Government appointed a commission to treat with the Cuthell Board. The Italian agreement, dated August 13, 1919, admitted an obligation on the part of Italy in the sum of $5,200,000, representing Italian war purchases of picric acid, smokeless powder, airplane lumber, linters, and trinitrotoluol, this agreement not including an admitted obligation of approximately $395,000 for Liberty engines, clothing, and other small items not yet invoiced. Against this obligation Italy presented a claim for $4,053,073 for the overseas transportation of American troops on Italian ships. The Italian Government paid the difference, namely, $1,146,927 to the War Department on September 26, 1919, and also paid the minor claims as they were presented.

Minor claims against the governments of Belgium, Brazil, Canada, Cuba, and Czecho-Slovakia, to the total of $4,709,330.89, were presented by the Cuthell Board and paid by the governments concerned.

* * * * *

While the Cuthell Board was engaged in rendering the bills to the Allies for supplies purchased by them in America and collecting the money on those bills,—and here let it be said that the collections were greater in aggregate amount than the total sum involved in all the claims for or against the United States prosecuted or resisted by the nation’s official diplomacy from the beginning of our national existence up to the outbreak of the war in Europe; international transactions which included the Louisiana Purchase, the purchase of Alaska, and the purchase of the Canal Zone,—all the while that Mr. Cuthell and his associates were collecting money for Uncle Sam, the United States Liquidation Commission was busy adjusting the fit of the shoe on the old gentleman’s other foot. In other words, the Commission was paying the war bills owed by the United States to the Allies. This was a business equally great and even more important.

There was some question whether the President, with all his war powers, could legally empower boards and commissions to conclude international settlements involving the passing of money, since such power resided only in the State Department, the acts of which had to be ratified by Congress before they were binding upon the United States. The Cuthell Board and the United States Liquidation Commission were actually created in January and February, 1919; but to remove any doubt as to the binding force of their settlements, Congress, on March 2, 1919, passed an act empowering the Secretary of War to settle, through any agency he might set up, all international war claims in which the War Department was involved.

The Secretary of War appointed Mr. Edwin B. Parker chairman of the United States Liquidation Commission. As members he appointed Brigadier General Charles G. Dawes, Mr. Homer H. Johnson, and Hon. Henry F. Hollis. During the active part of the war Judge Parker had held the important post of priorities commissioner of the War Industries Board. General Dawes, in private life a Chicago banker, had been General Purchasing Agent of the A. E. F. In 1920 he sprang into national prominence when, as a witness before a congressional investigating committee, in vigorous and unconventional style he defended the material transactions of the A. E. F. and denounced those critics who, in searching for waste and lavish expenditure, evidently overlooked the fact that the prime purpose of the A. E. F. was to defeat a dangerous enemy on the field of battle. His striking utterances on that occasion did more than reams of printed propaganda to reconcile the American public to the inevitable wastes of the war. President Harding soon afterwards appointed “Hell and Maria” Dawes, as he had come to be known, federal budget commissioner, thus placing him in charge of the most important attempt at economy in national expenditures which the United States had ever made. Mr. Johnson was an able and well-known lawyer of Cleveland. Mr. Hollis was a former United States senator from New Hampshire.

When the Liquidation Commission reached France and organized for work about March 1, 1919, it found the ground well prepared for it. Mr. Edward R. Stettinius, the well-known New York financier, had been sent to France in July, 1918, as a special representative of the Secretary of War to act as a sort of surveyor-general over the war industry resulting from the foreign orders placed by the American Expeditionary Forces. Mr. Stettinius found that a considerable part of the munitions being procured abroad was being produced and delivered under informal and more or less vague agreements and understandings. Before the armistice Mr. Stettinius had done his best to reduce some of the more important of these understandings to the form of written, definite contracts. Promptly after the armistice he took steps to cancel all further production for the Americans and then began the negotiations leading to the settlements. Mr. Stettinius resigned in January, 1919, and the United States Liquidation Commission inherited these various negotiations in the stages at which Mr. Stettinius left them.

Although, as we have said, the characteristic note of our industrial demobilization abroad was outright cancellation of contracts and the payment of indemnities, the policy was not maintained consistently. There were several important exceptions, and one of these was the method adopted in terminating the British manufacture of artillery and shell for the A. E. F. The numerous orders, contracts, and agreements placed and made by the A. E. F. for the delivery of British artillery and ammunition were consolidated, on October 19, 1918, by Mr. Stettinius in conference with Mr. Winston Churchill, then the British Minister of Munitions, into a single formal agreement. In terminating this contract after the armistice Mr. Stettinius assumed that it would be better to accept completed guns and ammunition, even though these might be surplus above the future requirements of the Army, than to pay heavy cancellation indemnities and receive nothing in return. Artillery does not deteriorate rapidly, either materially or in design. The negotiations opened by Mr. Stettinius with the British Government looking to this end were picked up by the Liquidation Commission, which, in March, 1919, reached an agreement with the British that, in lieu of paying any cancellation damages, the United States would accept a limited quantity of matériel completed after the armistice under the American contract.

America accordingly accepted the post-armistice delivery of 498 British-made guns, ranging in model from 60-pounders to 8-inch howitzers, and 420,000 rounds of ammunition for them. For this matériel the American Government paid £6,637,598.

A most interesting negotiation conducted by the Liquidation Commission for the United States was that which wound up the tripartite international project for the construction of 36-ton tanks, better known as the Anglo-American Mark VIII tanks. France was originally a party to this transaction only to the extent of agreeing to provide a site for the assembling plant in France. England and the United States were equal partners in the enterprise, England supplying hulls and guns and America the power and traction. The French, however, were to be permitted to buy tanks at the partnership price; but the French at first did not ask for any, asserting that their own light tank production was sufficient for them.

The plant was built at Châteauroux, Neuvy-Pailloux. About the time the project was getting well under way, heavier tanks began to demonstrate their effectiveness in the field; and then France insisted that, because her armies held the most front-line mileage, the most of the Anglo-American tanks to be built at the Châteauroux plant should be allotted to her. Reluctantly the British agreed that the first 1,200 tanks should be divided equally between France and the United States and that France should receive all of the next 300.

Then the war ended. About 24,000,000 francs had been invested at Châteauroux. The British had spent £3,000,000 in the manufacture of components and the Americans a like sum, expressed in dollars. France had not put in a centime; yet she had expected to receive nine-sixteenths of the first year’s output. The question was, what share of the heavy loss should France stand? The French arrangement with the Tank Commission was tantamount to a contract, with the British-American partnership standing in the light of contractor. It was evident, then, that the French were morally bound to pay cancellation charges—to stand part of the loss, in other words. The British and American negotiators at London thought it would be about right if France would pay back the 24,000,000 francs expended by the British and Americans at Châteauroux, and the British and Americans would throw in the tank plant itself as an inducement.

Then the question arose, how would this 24,000,000 francs be divided? Both England and America had lost heavily in the big-tank enterprise—each had, in fact, agreed to let these losses balance each other; neither was to bill the other for anything in the settlement—and here seemed to be the chance to get some of the money back. Naturally, the Americans assumed that the French reimbursement would be divided equally, since both America and England had contributed equally to the cost of the Châteauroux plant. But no, the British contended; since they had surrendered their share of the first year’s production of tanks, the lion’s share of the reimbursement should go to them. There was logic in this, but, without deciding the point, both sides repaired to Paris to present their joint tank claim to the French; and then it appeared that the British and Americans had been dividing some French chickens before they were hatched. Through M. Louis Loucheur, the Minister of Munitions, the French Government metaphorically lifted its eyebrows in surprise that its associates could present such a claim. To be sure, the French expected to take the Anglo-American heavy tanks, but so did the Americans and British expect to receive light tanks from the French industry. These were merely understandings, not formal contracts; and the French, to do their share, had made large expenditures in developing the light-tank manufacture for the benefit of all. Needless to say, the French Government had lost heavily in terminating its tank industry. These national losses should set off each other....

The British and American representatives retired to ponder this rejoinder. It seemed to have merit; yet the fact remained that somehow or other France was evidently going to emerge from the tank discussion with the Châteauroux plant in her possession. The delegates returned and argued with such force that the French Government agreed to pay 20,000,000 francs in settlement, taking over the Châteauroux plant.[14] Since the salvage value of this plant was estimated at 5,000,000 francs, the sum of 15,000,000 francs was considered as the indemnity paid by France. England then asked for five-sixths of the total payment, but the American argument scaled this down to 70 per cent. America thus received 6,000,000 francs out of the settlement.

The bargaining Yankees, however, were yet to have the final word in the tank deal. With the settlement complete, sealed and delivered, the British had on their hands 105 sets of tank parts with only junk value, although it had cost the British £5,000 a set to manufacture them. The Americans offered £1,000 a set for these parts, and the British snapped at the offer. This fine bargain enabled us later, at low cost, to assemble these parts with the American-built components and thus place in the war reserves 100 of the largest and most formidable tanks ever built.

Another, a minor, tank transaction should be noted. The British Army had supplied, during the action, sixty-four tanks of various sorts to the 301st Tank Battalion of the A. E. F. Fifty of these, some of them more or less damaged, had been returned to the British after the armistice, and the remaining fourteen were shipped to the United States. For the purchase of the fourteen and for the war use of the other fifty, the Liquidation Commission agreed to pay the British Government the sum of £189,233 2s 11d.

Outside the claims for payment for materials actually delivered, the British pressed upon the Liquidation Commission collateral claims of several sorts. One of these was for interest upon money invested by the British in stocks of goods destined for American consumption. Our people protested successfully against paying interest upon such investments, but admitted the point that we should pay interest after the goods had been delivered and we had been billed, allowing a reasonable interest-free period for vouchering and checking. Investigation showed that both armies had been dilatory in paying their bills to each other, and that the average time of delaying payment had been five months and a quarter. The British bills against America exceeded the American bills against England by some £51,000,000. One month and a half was allowed as a reasonable interest-free period after billing. Accordingly the commission agreed to pay 5-per-cent interest on the British billing excess, a sum which amounted to £797,854 11s 2d, and this America paid.[15]

It was impossible for the Liquidation Commission to make a lump settlement of all the minor bills, accounts, and claims of Great Britain against America, because of the difficulties in securing full statements of the indebtedness. It was roughly estimated, however, that these claims would aggregate £10,000,000.

One obscure and involved problem for the Commission to solve related to the so-called British “hidden losses” on steel products sold to the United States during the war. The British treatment and control of its war prices differed radically in method from ours. The War Industries Board, it will be remembered, fixed prices high enough to stimulate production and then held the industries to those prices, no matter to whom they sold. The British plan was an opposite one. With steel, for instance, the British Government simply monopolized the raw materials and sold them to the producers at prices that represented a loss to the Government. In effect, it was a subsidy. To the British public it made no difference whether it paid this subsidy or an equal amount in the increased cost of artillery, ammunition, and other munitions made of steel. But when it came to a settlement between England and the United States, the British Government insisted that the United States was not fairly entitled to the “manufacturers’ issues” price for the raw steel that went into the British-made munitions supplied to America. The British, therefore, after the main settlements, presented a supplementary claim to compensate for the hidden loss, and this claim amounted approximately to £3,770,000.

In principle, the Commission was willing to admit the force of the British contention. It asked the British, however, to prepare a more definite statement, showing (1) the average British governmental loss on all steel supplied to manufacturers for the year preceding the armistice, (2) the amount of such steel that went into products sold to America, and, finally, (3) the hidden loss on all steel furnished to America as thus estimated. When the revised statement was presented, it was found to contain items of hidden loss which America could not possibly allow. The British war subsidies went all through their war industry. For instance, in order to stimulate production, the British Government had paid subsidies to the makers of silica brick, used in building steel furnaces. The British asked us to stand a part of this subsidy, inasmuch as some of the shell supplied to us had been produced from furnaces built of subsidized brick. The Commission retorted by asking why Great Britain did not also ask us to share the subsidy on the bread the British steel workers had eaten while they were working on the American artillery and shell orders. In other words, we were willing to pay hidden losses so long as they were not too remotely connected with the American contracts. The Commission also raised the shrewd question, why, since the British were asking us to pay for hidden losses, they did not admit us to the benefits of their “hidden profits”—viz., the profit taxes collected from the British steel manufacturers.

In the autumn of 1920 General G. W. Burr, the Director of Purchase, Storage, and Traffic after the armistice and a member of the War Department Claims Board, went to England to close up all the outstanding claims existing between the United States and Great Britain as a result of the war. The outcome of his negotiations was the Burr-Niemeyer Agreement, which tied up all loose ends and brought about a final termination of the war business between the two nations. All pending claims were brought into one lump-sum settlement, under the terms of which the United States paid to Great Britain the sum of £2,946,511 2s 8d. This sum settled all the miscellaneous and minor claims noted above; settled, too, the debt owed by the United States to the British for the maintenance of our Siberian Expedition; and settled all other claims, including the hidden-loss claim and a British claim for reimbursement for various “overhead” inspection and storage charges. The settlement figure was much under what the British had originally claimed. In this settlement the hidden-loss and “overhead” claims were paired in a single item which accounted for approximately £1,500,000 of the total paid by the United States. The Burr-Niemeyer Agreement was dated November 23, 1920.

One general claim set up by the British Government against the United States the Liquidation Commission rejected. After we had paid to Great Britain the bill rendered for the transportation of our troops and supplies in England, the British Government rendered a supplementary bill for the same services. During the war Great Britain gave guaranties of income to the British railways, and in settling with the railroads the British Government granted to them an increase in military passenger rates, an increase which was retroactive to April 1, 1919. The British asked us to pay our share of the retroactive increase. This was refused on the ground that by the same token we could hold the British to their share of the loss sustained by the American Government in its operation of the American railroads by the United States Railroad Administration, since our roads had hauled great quantities of British supplies. To open up closed settlements because of retroactive agreements would open up a Pandora’s box of troubles for both nations.

Thus the international bargaining went on, back and forth, give and take, broad principles of settlement prevailing rather than the minute and individual merits of particular items, both sides accepting estimates and unaudited totals and each relying upon the good faith of the other. Thus this tremendously involved and intricate business was closed up with dispatch and amiability. As a rule the A. E. F. in its purchases had dealt with governments, with which such liquidation methods could be adopted; but there were a few relatively small contracts made directly with private individuals in England, France, Italy, Portugal, Spain, and Switzerland. These contracts were canceled outright in the full knowledge that we should have to pay indemnities. In the settlement of such contracts the United States Liquidation Commission acted for the A. E. F. much as the War Department Claims Board did for the producing bureaus at home—as a supervisory body, approving the settlements made by the various services of the A. E. F. and paying off the contractors. In all, indemnities were paid for the cancellation of some 450 contracts in Europe. In making these settlements, the United States benefited greatly by the depreciated rates of exchange against the currencies of several of these nations, since all indemnities were paid by the United States in the currency of the countries in which the claims arose. Expressed in dollars at par, it cost the United States $3,568,653.23 to cancel the miscellaneous European contracts, but the reduced exchange rates effected a considerable saving under that figure.

It is much easier to detect the failings and peculiarities of aliens than it is to recognize our own shortcomings; and if in these pages we have exulted somewhat over the successes of our delegates in checkmating the designs of our European associates, this is not to be taken as any boast that we ourselves were too disinterested and altruistic to overlook the main chance for ourselves. The truth is that, although all the belligerents were in the field primarily to win a victory of arms, not one of them entirely lost contact with the counting room. This was clearly shown in the American arrangements for the supply of French artillery.

The numerical expansion of the A. E. F. in the spring and summer of 1918 resulted in a greatly increased demand by the A. E. F. for French artillery and ammunition. America supplied schedules of the raw materials which she could furnish, and the French made estimates of the numbers of guns they could deliver monthly to the A. E. F. But this was all understanding and mutual agreement—no formal contract was drawn. When Mr. Stettinius reached Paris in the summer of 1918, he immediately began to press to get this agreement down in black and white, so that America might know exactly what her obligations were. At that time, of course, there was no thought that the war would end within the year. About the 1st of November, however, it became evident that an armistice was drawing near, and immediately the Americans grew lukewarm on the subject of a formal contract. The reason was evident. Under the terms of a formal contract, America’s termination obligations would be questions of fact; with the affair left as an unwritten agreement, our obligations would be questions of equity, to be negotiated, and we were likely to emerge from such negotiations in better case financially than we should be if held by the set and rigid conditions of a formal contract.

Nevertheless, the United States did not seek to evade its just obligations under the French ordnance agreement. France had spent large sums of money in expanding the industry to take care of the expected American consumption, and the money so spent was a proper charge against the United States in any settlement. Immediately after the armistice Mr. Stettinius ordered production stopped on our orders; but this the French, for domestic, social, and economic reasons, were unable to do; and at first they were inclined to insist that we should accept and pay for a large quantity of artillery produced during a gradual termination of the industry. Mr. Stettinius successfully maintained the position that this post-armistice production was undertaken purely in pursuance of an internal policy of the French Government and that by no stretch of logic could it be entered as a proper war charge against the United States. Mr. Stettinius then went on to conduct the settlement negotiations, and these were about complete when the Liquidation Commission arrived to inherit the transaction and to draw the final settlement contract.

As in the settlement of the British artillery contract, the American negotiators accepted guns and ammunition produced after the armistice by the French; and they did it in complete consistency with the position and policy defined in the preceding paragraph. The armistice found great numbers of French guns in process of manufacture for the A. E. F. The United States was obligated to accept and pay for this unfinished material. After the inventory of it had been taken, the Liquidation Commission suggested that in lieu of the unfinished parts the United States accept their value in full completions and that the production of all other guns be canceled without charge to the United States. This alternative, allowing, as it did, a measure of post-armistice production in the French mills, the French Government quickly accepted and, in carrying out the terms of the subsequent settlement contract, delivered to the United States 944 75-millimeter gun units, 700 155-millimeter howitzer units, and 198 155-millimeter gun units, all with limbers and with additional parts as spares. For these the United States paid 117,501,887.45 francs.

The French agreed to a similar plan in canceling the construction of airplanes and engines for the United States. This construction had been undertaken under a formal contract, signed by General Pershing. The contract contained no cancellation clause, but the French Government had provided for cancellation in its subcontracts with the French producers. Under the terms of the contract large numbers of airplane cellules (airplanes without engines), engines, and other aëronautical supplies were in production on the day of the armistice. In lieu of unfinished parts, the French agreed to deliver their equivalent (in value) in finished equipment. Under a preliminary agreement the United States acknowledged a cancellation debt of 167,667,761 francs. Of this, about 23,000,000 francs represented cancellation charges and the rest money to be paid for completed materials, the schedule of which included 3,568 cellules and 3,979 engines. This preliminary agreement, however, was modified later by the French Liberty engine settlement negotiated by the Cuthell Board. Under this settlement France agreed to accept and pay for Liberty engines still to be delivered, to the value of $19,530,000, and in addition to pay nearly $2,000,000 in cancellation indemnities.

This, then, was the situation. We were bound to accept and pay for a large number of French airplanes and engines which we did not need. The French were bound to accept and pay for a large number of Liberty engines which they did not need. We could, however, use some of the French planes and engines, and the French wanted 500 Liberty engines. Therefore we agreed to deliver the 500 engines and to accept French materials up to their value, and then to offset the excess number of Liberties provided for in the engine settlement agreement against the excess of French air materials named in the French aircraft settlement contract. This left a surplus of Liberty engines with the A. E. F., but these were delivered to the British to fulfill our obligations under the British Liberty engine settlement; and a few of the engines were sold to Poland.

The settlement with France for our use of her railroads during the war was so complicated that it would not be profitable to go into the details here. The intricacy of the problem was due to the fact that, while 2,000,000 Americans in France had used the French railroads for every transportation need,—and our forces fought farther from their expeditionary bases than did any other army in France,—we, in turn, had supplied to the French railroads locomotives, cars, crews, repairing, coal, track construction, and many other items. The Liquidation Commission itself did not attempt to go into these details, but turned the whole transaction over to a special section headed by Colonel F. A. Delano, the Deputy Director General of Transportation for the A. E. F., who had formerly been president of the Wabash Railroad and a member of the Federal Reserve Board. The upshot of the settlement was that we acknowledged a debt to France of 434,985,399.73 francs after all our claims had been set off against the French claim.

The United States Liquidation Commission agreed to pay to the French Government the sum of 3,000,000 francs for port dues assessed against our vessels for their use of French ports during the war.

When these and other subsidiary questions of settlement had been decided and the proper credits established by agreement in each instance, the United States Liquidation Commission took up the task of a general blanket settlement of the business relations between France and the United States during the war. This was a long and involved work; but, since the major items in the settlement had already been determined, there was little difficulty in securing an agreement. The General Settlement was dated November 25, 1919. It embraced all transactions between the two nations from April 6, 1917, to August 20, 1919, except (1) France’s purchases of our surplus military property, (2) the railroad transportation and the port dues settlements noted above, and (3) France’s claim arising from the overseas transportation of American troops in French transports. The sum total of the other claims showed that the United States owed France 1,488,619,027.52 francs and that France owed the United States $177,149,866.86. The rate of exchange and form of payment were left to future negotiations by the United States Treasury; but, assuming that francs were worth ten to the dollar, the net balance in favor of the United States was about $28,000,000.

We are not yet ready, however, to determine the net financial result of the international war business relations in which America was a participant. There was still the money to be realized from the sale of our surplus military property abroad. It will be remembered that one of the two functions of the United States Liquidation Commission was to dispose of the expeditionary property. Out of the sales transactions arose the largest single credit to the account of the United States on the international ledger: the proceeds from the bulk sale of A. E. F. installations and supplies to the French Government.

The arguments sustaining the wisdom of a bulk sale of the expeditionary property have already been sufficiently rehearsed in this volume. The first step on our part leading to the negotiations was to take an inventory of the entire property. The difficulty encountered then may be deduced from the fact that the French and the British, whose surpluses were not inordinately greater than ours, never even attempted such an inventory of their own property. The A. E. F. was a going concern, continually drawing from the stocks on hand, and its personnel was shifting and diminishing. Nevertheless, by a strong force of men, under the direction of Colonel J. H. Graham, Engineer Corps, in six weeks of day and night work, such an inventory was taken, the property being divided into eighteen categories, as follows: 1. Clothing and textiles; 2. Subsistence supplies; 3. Kitchen utensils and household furnishings; 4. Machinery, metals, tools, and hardware; 5. Building materials; 6. Forest products; 7. Railway and dock equipment; 8. Transport equipment (trucks, motor cars, motorcycles, wagons, horses and mules, etc.); 9. Hospital supplies, toilet supplies, and chemicals; 10. Photographic, measuring, and musical instruments; 11. Electrical equipment; 12. Oils, gasoline, and paints; 13. Ordnance and gas-warfare equipment; 14. Blasting apparatus and supplies; 15. Printing machinery and supplies; 16. Office fixtures, stationery, and supplies; 17. Hides and leather; 18. Aëronautical equipment.

These eighteen categories included only the movable property of the A. E. F. There were still to be considered the fixed installations—the barracks, camps, hospitals, warehouses, docks, railroad yards, buildings of almost every conceivable type. Judge Parker, the chairman of the Commission, cabled to France, before he sailed for Europe, a direction that the installations be inventoried and appraised. This work was first undertaken by Colonel Graham, who later, after he took charge of the inventory of movables, was succeeded by Brigadier General Edgar Jadwin, whose subsequent appraisal was known as the Jadwin Report. It showed the war cost of construction to have been $165,661,000, the normal cost $81,543,000, and the armistice value $39,256,000. As a matter of fact, any sum obtainable for the installations was clear gain, since the salvage value of the structures would not have paid the cost of dismantling (assuming that this work would have required the labor of 40,000 men for seven months), the ground rentals, and the costs of restoring the sites to their original condition.

Photo by Howard E. Coffin

WRECK OF COAL MINE AT LENS

Photo by Signal Corps

MOTOR TRANSPORT SALVAGE IN FRANCE

Then arose the determination of the “utilization value” of the movable stocks. This was estimated by taking the war cost of production, plus the cost of freighting the goods to France, and subtracting various estimated allowances—for natural deterioration, for expected losses from fire, theft, and other causes, for the saving to the United States in costs of merchandizing, labor, storage, insurance, interest on investment, and other overhead expense obviated by a possible bulk sale, for the fact that the stocks were widely scattered and had to be collected to be of use. The Commission consolidated these subtractions into a lump deduction of 25 per cent of the estimated value. Thus determined, the utilization value of both installations and movables was set at $562,230,800; and this was the figure carried by the Commission into the negotiations with the French.

From a photograph taken in France

INTERALLIED PURCHASERS

Left to right: Louis Loucheur, French Minister of Munitions; Winston Churchill, British Minister of Munitions; David Lloyd-George, Prime Minister of England; and Bernard M. Baruch, Chairman of the War Industries Board.

The French Government designated M. Paul Morel, the French Undersecretary of Finance for the Liquidation of War Stocks, to represent it in the negotiations with the Commission. On April 7, 1919, it was agreed in principle that France would buy the American installations, at any rate, at a price still to be fixed, the French assuming all charges and claims against the installations. The French were not so sure about the movables. M. Morel first proposed that the French Government pick out what it wanted and negotiate a price for the selection. But this would have skimmed the cream of the American property and left the A. E. F. with large quantities of unsalable materials which in all likelihood would eventually have become fuel for bonfires. This proposal was therefore rejected, and the French representatives were urged as a duty to buy all the movables in bulk, since the French people could use practically all the supplies. M. Morel, after consultation with his principals, eventually agreed to buy all the stocks at a price to be fixed.

Came the question then of the price. M. Morel’s first bid was 1,500,000,000 francs. Reckoning the value of francs then at ten to the dollar, that was an offer of $150,000,000, an offer firmly rejected. This was followed by other offers which our representatives could not entertain. The negotiations, which had begun early in April, continued throughout the spring and the fore part of the summer. M. André Tardieu and other eminent Frenchmen entered the conferences in July. On July 24 a tentative agreement was reached, and its terms were practically those of the bulk-sale contract, which was dated August 1, 1919.

France paid $400,000,000 for the property, the United States accepting in payment interest-bearing 10-year French bonds. Not all the property listed in the original inventory was involved in the sale. America made certain exceptions: (1) all animals (these were sold separately for a total of $29,016,506.59); (2) supplies previously sold out of the surplus stocks to France herself and other buyers to the value of $77,265,597.83; (3) military equipment returned to the United States, valued at $15,000,000; (4) supplies needed for the maintenance of the remnant of the A. E. F., worth $4,000,000; and (5) supplies worth $10,000,000 turned over to the American Red Cross as a gift. Thus, the utilization value of the original inventory was scaled down by these subtractions to approximately $427,000,000, and for this quantity the French Government paid $400,000,000—a fair return. It should be noted that in paying this price the French Government also canceled its claim for the payment of customs duties on the goods, and a conservative estimate placed the aggregate amount of these unpaid duties at $150,000,000. An even greater benefit to us was the fact that by the terms of the settlement France assumed all land claims which might otherwise have been pressed upon the United States by French nationals for years to come.

The bulk sale to France was the largest single transaction in the disposition of the A. E. F. surplus; but there were many other sales, some of them large. Goods went in these transactions to the governments of the Allies (France herself, outside the general sale, being a purchaser to the extent of $95,000,000), to individuals, companies, and syndicates in western Europe, to relief societies, to coöperative societies in the Balkans (these, being the economic organization of whole peoples, were not affected by political changes and sometimes seemed to have greater stability than the new governments themselves), to the governments of the so-called “liberated nations,” and to other purchasers. Although the United States Liquidation Commission made every effort to keep each transaction on the dollar basis, it was not always possible to do so, and payments were accepted in pounds sterling, in francs, in marks, and in other European currency, sometimes much depreciated. Yet, translating foreign money into terms of the dollar at average rates of exchange, and adding in the $400,000,000 received from France, we reach a total of approximately $800,000,000 received by the United States for the entire quantity of American military property left in Europe after the return of the expedition. It is roughly estimated that the property thus sold cost the United States $1,328,000,000. The salvage return, therefore, was practically 60 per cent of the cost. The miscellaneous sales transactions have practically all been closed, and the receipts have been covered into the Treasury. The French $400,000,000 is represented by bonds maturing in 1929.

The two blanket transactions with France—the bulk sale of buildings and supplies and the general settlement of claims—were of great value to the United States in relieving this nation of the responsibility of having to deal with individual French claimants. In taking over all the A. E. F. installations the French Government agreed to hold the United States harmless from all claims for property damage and restoration. In the general settlement the French Government assumed responsibility for all other claims of French nationals against the United States and agreed to settle with the claimants. If, however, the claims paid by France exceed 12,000,000 francs, America is bound to pay the excess up to 6,000,000 francs. Except for this arrangement, the American Government would have had to maintain in France for years an organization for dealing with French individuals’ claims.

* * * * *

We are now in position to see in close approximation the financial result to the United States of the international war business. On the credit side we have the Cuthell settlements, amounting to $48,716,080.99 in all—this figure, however, not including the Cuthell Board’s settlement with the French, the debt of France on her American war contracts being carried over into the general settlement effected by the United States Liquidation Commission. We have, as a further credit, the 6,000,000 francs which were the American share of the French payment in the liquidation of the Anglo-American heavy tank project. Finally, the general settlement of the Liquidation Commission with the French Government brought to the Treasury the further sum of $28,000,000. To all these credits must be added the $800,000,000 received from the sale of the A. E. F. property. The sum of all the American credits (counting ten francs as a dollar) is approximately $877,000,000.

From this credit, however, we must subtract, first, £17,726,685 13s 13d as the American obligation embodied in the termination contracts made with the British Government by the Liquidation Commission, and £2,946,511 2s 8d as our debt to England under the Burr-Niemeyer Agreement. We must subtract also the $3,568,653.23 paid by the A. E. F. in cancellation charges to individual European contractors. A final subtraction is the 437,985,399.73 francs paid by the Liquidation Commission for port dues and for the transportation of the A. E. F. on French railroads. Translating pounds sterling and francs into dollars at average exchange rates, the total debit of the United States is found to have been about $120,000,000. The net balance, therefore, in favor of the United States as a result of the international war industrial transactions was the sum, approximately, of $757,000,000.

CHAPTER XIX
THE BALANCE SHEET

What did the war cost America? It may be that an accurate answer to that question will never be given. Certainly it cannot be given now, when the stocks of surplus materials are still being sold and the final settlements of the more difficult claims are still being made. Still, we can arrive at a fair approximation of what the war cost the War Department alone. In doing so we must deal with billions of dollars in our columns, and therefore errors and differences of a few millions, or even of a few hundred millions, have no important effect upon the totals. Even if all costs and credits could be figured out to the penny, the result would not be much unlike the estimates which follow.

As a starting point we can take the appropriations for the Army made by Congress, since all the war costs of the War Department must be included within those appropriations. And we find that for the Army Congress appropriated in all, for every war purpose, the sum of $24,373,274,223.67. But not all these appropriations were expended. Some were made late in the war, and none of the money authorized by these acts to be spent was even obligated before the armistice terminated all proposed new projects. Congress hastened to repeal the untouched appropriations, and the various repeal acts canceled authorizations to the amount of $7,703,448,569.36. Therefore, the net amount made available to the War Department by the war appropriations was $16,669,825,654.31.

This figure still does not represent the gross war cost of maintaining the War Department, but it is close to it. Since final expenditures and reimbursements have not yet been determined, but are still growing, as claims are paid and surplus property is sold, it is necessary that we accept a date somewhere and examine the ledger on that day, and from this examination we may be able to estimate closely the final figures. The date chosen here is April 17, 1920,—a day far enough this side of the armistice to bring the figures fairly close to their ultimate and conclusive form. By that day the Army was almost completely demobilized, the liquidation of the Army’s foreign affairs was virtually complete, the demobilization of the domestic war industry was approaching the end, and the greater part of the surplus war supplies had been sold.

On April 17, 1920, then, we find that the actual expenditures of the War Department had reached the total of $16,276,288,337.19. This was within $400,000,000 of the net war appropriations, the difference, of course, being in the Treasury as unexpended balances available to those paying the final war bills of the War Department. Yet this expenditure cannot be labeled the cash cost of the war to the Army. We must first make several large deductions for money derived from sales of materials and, especially, for the property on hand set aside for the permanent Army and for the military readiness of the United States.

The foreign liquidation, as we have seen, recovered into the Treasury approximately $757,000,000. On April 17, 1920, the sales of military property in the United States had brought in the sum of $641,261,000. Transfers of army property for use by other departments of the Government—a proper credit—involved materials valued at $42,096,000. On the date selected there still remained in the United States surplus, but unsold, army property valued at $600,000,000. The average recovery from the sale of surplus within the United States was about 75 per cent of the cost. Assuming that this ratio would hold throughout the entire liquidation, we can anticipate a cash recovery of $450,000,000 from the surplus still existing on April 17, 1920.[16]

These reimbursements, however, even in the aggregate, constitute a minor credit when compared with the value of the equipment left by the war enterprise to be the inheritance of the permanent establishment and to be insurance of the continued safety of the United States in a world not yet willing to lay down its arms. The property of the War Department at the beginning of the war with Germany was estimated to be worth $500,000,000. At the end of the demobilization the property of the War Department was worth, at a rough estimate, $6,000,000,000. It is evident, therefore, that this increment in value—$5,500,000,000—represents present useful property, and that it must be subtracted from the expenditures in order to arrive at the net cost of the war itself. This valuation of property on hand, incidentally, does not include the value of real estate and buildings acquired during the war and retained in use afterwards, since it has never been fully determined as yet which of these installations will be kept.

The deductions, then, on account of sales and on account of property retained, amount to $7,390,000,000, and this is the gross credit on the war page of the army ledger. To find the net cost of the war proper, we must subtract this from the gross expenditures, and we must do this roughly; because with transactions so large, indefinite, and complicated, it becomes absurd to reduce the figures to cents or even to thousands of dollars. The rough subtraction gives us the figure $8,885,000,000, which is not many millions away from the actual net cost. This, of course, represents cost to the War Department alone. It does not include the Navy’s costs, nor those of the United States Shipping Board, nor of the United States Railroad Administration, nor any costs of other great and expensive war enterprises which properly must be added in to give the full score of the cost of the war to the United States.

This net cost, this sum of $8,885,000,000, represents what the Government paid in transporting the 4,000,000 men of the Army, in feeding them, clothing them, and providing them with all other sorts of expendable supplies which they actually consumed, and in paying the troops their wages. The supply cost, of course, includes the cost of the industrial liquidation after the armistice and the losses from the shrinkages and wastes of war. The whole bill comes out at about $2,200 a man.

This, too, is but the direct cash cost, the cost in money. The intangible costs, which are never brought into a tabulation of this kind, are, after all, the true costs of war. They include the 50,000 American soldiers killed in battle in Europe. They include also the 200,000 Americans who were wounded in the fighting—some of them still, two and a half years after the armistice, in hospitals and thousands of them facing life with permanently impaired bodies. These usually unreckoned costs, too, include the 57,000 who died of disease or accident while in the service.

But beyond these losses of life there were other profound penalties which the people paid and are still paying. These, too, must be set down to the account of war in any complete reckoning. One of them was the greatly increased cost of almost everything necessary to sustain life and render it pleasant, including particularly an increase of rentals, bringing with it, as a natural consequence, the overcrowding of living quarters, to the detriment of the health of those existing in such conditions. The high costs of living are aggravated by the special war taxes laid everywhere, taxes which, in one form or another, must be imposed for many years to come in order to pay for the losses of the war.

There were, moreover, spiritual losses—an incredible moral slump from the national exaltation of the war to the bickering and bitterness of the demobilization. Governments fell as the war-ridden peoples of the earth blindly and brutishly vented their spleen and irritation for the hardships they had experienced upon those who chanced to be in power. Erstwhile statesmanship lapsed into a narrow, advantage-seeking partizanship that regarded not, it sometimes seemed in this country, even the fate of the world. The United States turned its back upon the League of Nations, which was the most ambitious attempt ever made by the nations of the earth to substitute a rule of reason for the rule of force.

But if we recite these and other intangible and indirect costs that might be named, then we are equally justified in looking for the benefits derived from our participation in the war; and we find these benefits to be great ones. First of all, we gained the victory; and that alone, and especially so because the cause of America was righteous, was worth all it cost in blood and money and burdens shouldered for the future. We gained, moreover, a state of preparedness for war that would have been impossible of attainment under any other circumstances. In the reserves of supplies we have equipment ready to arm 1,000,000 men as rapidly as they can take the field. In the reserves of machinery we have a potential war industry capable of maintaining such an army until industry generally can take up the manufacture of munitions. Not again during the existence of the present generation should we, if the emergency came, have to experience the uncertainties and delays of 1917 in the production of supplies. We have within our war reserves the machinery and the materials for producing all the more difficult sorts of munitions, and we have, moreover, preserved records of how to produce them.

Then, again, the health of the nation has presumably gained a benefit from the experience. Hundreds of thousands of young men were removed from sedentary occupations and placed in the vigorous, ordered, athletic regimen of camp life. Several months of this, on the average, did not fail to have its effect, and the medical records of the Army showed a marked increase in the average weight of soldiers during the war. Akin to this consideration is the fact that men were picked up from farms, villages, and city neighborhoods and transported to distant parts of the earth. This travel broadened thousands of them, quickened their ambition, and strengthened their life purposes. Moreover, the men of the Army were thoroughly mixed in the ranks and services. The boy from Maine fraternized with the one from Arizona, and Illinois and Virginia sent their sons to be comrades. Sectional, national, and even racial lines disappeared in the ranks. This extensive regional interacquaintanceship is to-day a national asset. The infiltration of 4,000,000 men who secured these individual benefits into the civilian life of America is calculated to elevate the physical, mental, and moral tone of the whole nation and to improve America’s homogeneity.

Other benefits might be named. The principle of selective military service has been established by the precedent set in the World War. As long as that experience is remembered there will be no danger that America would ever return, in any serious emergency, to the unscientific volunteer system that takes the brave and the enterprising and leaves behind the indolent and timorous. Above all, we must count as gain from the war the confirmation it gave us in our faith in our ability to continue our existence as a nation. The experience demonstrated that our national resources include not only valor in arms in boundless quantity, but also the ability to organize effectively a nation as great as ours for a purpose as complicated as modern war has come to be. The experience in 1917 and 1918 gave us a firm foundation for national self-confidence.

These are all benefits and gains which may properly be set off against the intangible costs of the war. Among the benefits secured, however, is not yet one which we might, in 1917 and 1918, have expected to find there. The American host which crossed to France went, almost to a man, uplifted and made heroic by the feeling that it was an army of crusaders fighting to end wars forever. No mere instinct of self-preservation, no simple prospect of a victory over a strange, foreign enemy in gray uniforms, could have inspired the morale of the American Expeditionary Forces, nor yet that of the forces in training in the United States, nor that of American industry in its eager, headlong devotion to the national undertaking. This was to be Armageddon, the last of wars, the war to make safe the unwarlike peoples of the world; and no cynical dictum that man is still too near his neolithic savagery to rely on anything other than might in his international contentions, no Chauvinistic picture of new migrations of Asiatic hordes, can change the fundamental fact that America went to war in the belief that its chiefest object was to end war forever. Until we have made some national attempt to secure that benefit, the page will not balance.