How “Silver Bullets” Are Made in Britain
By Prime Minister Asquith
For the first time in the financial history of Great Britain, Prime Minister Asquith declared in his Guildhall speech of June 29, an unlimited and democratic war loan was popularized, appealing to all classes, including the poorest, and advertising the sale through the Post Office of vouchers for as low as 5 shillings to be turned into stock. His speech was intended also to initiate a movement for saving and thrift among the people as the only secure means against national impoverishment by the war.
A statement by Reginald McKenna, the Chancellor of the Exchequer, in the House of Commons on July 13, showed that approximately £600,000,000, or $3,000,000,000, had been subscribed, making this the greatest war loan raised in the history of any nation. The total number of subscribers through the Bank of England was 550,000, aggregating £570,000,000, or $2,850,000,000, while 547,000 persons had subscribed $75,000,000 through the Post Office. Besides this no estimate of the small vouchers taken out had been made, and the Post Office subscriptions had not been closed. The gigantic total, Mr. McKenna said, represented only new money, and not any stock which will be issued for purposes of conversion. Prime Minister Asquith's speech appears in full below.
In his speech in the Guildhall, London, on June 29, 1915, Mr. Asquith said:
THIS is, I think, the third time since the war began that I have had the privilege of addressing you in this hall. On the first occasion, as far back as September last, I came here to appeal to you to supply men to be trained to fight our battles at the front. Today I have come to ask you here in the City of London for what is equally necessary for the success of our cause—for the ways and means which no community in the Empire is better qualified to provide, to organise, and to replenish.
This is the costliest war that has ever been waged. A hundred years ago our ancestors spent eight hundred millions to vindicate, as we are vindicating today, the freedom of Europe, in a war which lasted the best part of 20 years, which brings out a rough average of considerably less than a million pounds a week. Our total expenditure today approaches for one year a thousand millions, and we are spending now, and are likely to spend for weeks and months to come, something like three million pounds a day. Our daily revenue from taxation, I suppose, works out less than three-quarters of a million per day.
Those are facts which speak for themselves, and they show the urgent necessity, not only for a loan, but for a national loan—a loan far larger in its scale, far broader in its basis, and far more imperious in its demand upon every class and every section of the community than any in our history.
For the first time in our financial experience no limit has been placed on the amount to be raised; and that means that every citizen in the country is invited to subscribe as much as he can to help us to a complete and speedy victory. I need not dwell on its attractiveness from the mere investor's point of view. Indeed, the only criticism which I have heard in or outside the House of Commons is that it is perhaps a little too generous in its terms. That is a fault, if it be a fault, upon the right side.
For £100 in cash you get £100 in stock, with interest at 4½ per cent. on the credit of the British Exchequer. The loan is redeemable in thirty years, when every subscriber, or those who succeed him, must get his money back in full, and the Government retain an option to repay at the end of ten years. That is the earliest date on which any question of re-investment can arise. Further, the stock or bonds will be accepted at par, with an allowance for accrued interest as the equivalent of cash, for subscription to any loan that the Government may issue in this country throughout the war.
I want especially to emphasise that this is for the first time in our financial history a great democratic loan. The State is appealing to all classes, including those whose resources are most limited, to step in and contribute their share to meet a supreme national need. The Post Office will receive subscriptions for £5, or any multiple of £5, and will sell vouchers for 5s. and upwards which can be gradually accumulated, and by December 1st next turned into stock of the new loan.
Every advantage which is given to the big capitalist is granted also in the same degree to the smallest supporter of the country's credit and finance. And, under such conditions, I am confident that the success of the loan as a financial instrument ought to be, and indeed is now, absolutely secured. (Cheers.)
This meeting was called not only to advertise the advantages of the War Loan, but to initiate a concerted national movement for what may be called war economy. My text is a very simple one. It is this: "Waste on the part either of individuals or of classes, which is always foolish and shortsighted, is, in these times, nothing short of a national danger." According to statisticians, the annual income of this country—I speak of the country and not of the Government—the annual income of this country is from two thousand two hundred and fifty to two thousand four hundred millions, and the annual expenditure of all classes is estimated at something like two thousand millions. It follows that the balance annually saved and invested, either at home or abroad, is normally between three hundred and four hundred millions.
Upon a nation so circumstanced, and with such habits, there has suddenly descended—for we did not anticipate it, nor prepared the way for it—the thundercloud of war—war which, as we now know well, if we add to our own direct expenditure the financing of other countries, will cost us in round figures about a thousand millions in the year. Now how are we, who normally have only three hundred or four hundred millions to spare in a year, to meet this huge and unexpected extraordinary draft upon our resources?
The courses open are four. The first is the sale of investments or property. We have, it is said, invested abroad something like four thousand millions sterling. Can we draw upon that to finance the war? Well, there are two things to be said about any such suggestion. The first is that our power of sale is limited by the power of other countries to buy, and that power, under existing conditions, is strictly limited.
The second thing to be said is this: That, if we were to try, assuming it to be practicable, to pay for the war in this way, we should end it so much poorer. The war must, in any case, impoverish us to some extent, but we should end it so much poorer, because the income we now receive, mainly from goods and services from abroad, would be proportionately, and permanently, reduced. I dismiss that, therefore, as out of the question.
Similar considerations seem to show the impracticability on any considerable scale of a second possible expedient, namely, borrowing abroad. The amount that could be raised in any foreign market at this moment, in comparison with the sum required, is practically infinitesimal, and, if it were possible on any considerable scale, we should again have to face the prospects of ending the war a debtor country, with a huge annual drain on our goods and our services, which would flow abroad in the payment of interest and the redemption of principal. That again, therefore, for all practical purposes, may be brushed aside.
There is a third course—payment out of our gold reserve, but that need only be stated to be discarded. We cannot impair the basis of the great system of credit which has made this City of London the financial centre and capital of the world.
There remains only one course, the one we have come here today to advocate, and to press upon our fellow-countrymen—to diminish our expenditure and to increase our savings.
If you save more you can lend the State more, and the nation will be proportionately enabled to pay for the war out of its own pocket. A second proposition, equally simple, and equally true, is this. If you spend less, you either reduce the cost and volume of our imports, or you leave a larger volume of commodities available for export.
The state of the trade balance between ourselves and other countries at this moment affords grounds—I do not say for anxiety, but for serious thought. If you look at the Board of Trade returns for the first five months—that is, to the end of the month of May—of the present year—you will find, as compared with the corresponding period of last year, that our imports have increased by thirty-five and a half millions; while our exports and re-exports have decreased by seventy-three and three-quarter millions. What does that mean? It means a total addition in five months of our indebtedness to other countries of nearly a hundred and ten millions, and if that rate were to continue till we reached the end of a completed year, the figure of indebtedness would rise to over two hundred and sixty millions.
That is a serious prospect, and I want to ask you, and those outside, how can that tendency be counteracted? The answer is a very simple one—by reducing all unnecessary expenditure, first, of imported goods—familiar illustrations are tea, tobacco, wine, sugar, petrol; I could easily add to the list—and that would mean that we should have to buy less from abroad; and next, as regards goods which are made at home—you can take as an illustration beer—setting a larger quantity free for export, which means that we have more to sell abroad, and enable capital and labour here at home to be more usefully and appropriately applied. That may seem a rather dry and technical argument—(laughter)—but it goes to the root of the whole matter.
If you ask me to state the result in a sentence, it is this: All money that is spent in these days on superfluous comforts or luxuries, whether in the shape of goods or in the shape of services, means the diversion of energy which can be better employed in the national interests, either in supplying the needs of our fighting forces in the field or in making commodities for export which will go to reduce our indebtedness abroad.
And, on the other hand, every saving we make by the curtailment and limitation of our productive expenditure increases the resources which can be put by our people at the disposal of the State for the triumphant vindication of our cause.
I said our cause. That, after all, is the summary and conclusion of the whole matter. We are making here and throughout the Empire a great national and Imperial effort, unique, supreme. The recruiting of soldiers and sailors, the provision of munitions, the organisation of our industries, the practice of economy, the avoidance of waste, the accumulation of adequate war funds, the mobilisation of all our forces, moral, material, personal—all these are contributory and convergent streams which are directed to and concentrated upon one unifying end, one absorbing and governing purpose.
It is not merely with us a question of self-preservation, of safeguarding against hostile design and attack the fabric which has withstood so many storms of our corporate and national life. That in itself would justify all our endeavours. But there is something even larger and worthier at stake in this great testing trial of our people.
There is not a man or a woman among us but he or she is touched even in the faintest degree with a sense of the higher issues which now hang in the balance, who has not, during this last year, become growingly conscious that, in the order of Providence, we here have been entrusted with the guardianship of interests and ideals which stretch far beyond the shores of these islands, beyond even the confines of our world-spread Empire, which concern the whole future of humanity. (Cheers.)
Is right or is force to dominate mankind? Comfort, prosperity, luxury, a well-fed and securely sheltered existence, not without the embellishments and concentrations of art and literature, and perhaps some conventional type of religion—all these we can purchase at a price, but at what a price! At the sacrifice of what makes life, national or personal, alone worth living. My Lord Mayor and citizens of London, we are not going to make that sacrifice (loud and prolonged cheers, the audience rising and waving their hats). Rather than make it, we shall fight to the end, to the last farthing of our money, to the last ounce of our strength, to the last drop of our blood. (Loud cheers.)
Cases Reserved
By SIR OWEN SEAMAN
[From Punch.]
"The Government are of opinion that the general question of personal responsibility shall be reserved until the end of the War."—Mr. Balfour in the House.
Let sentence wait. The apportionment of blame
To those who compassed each inhuman wrong
Can bide till Justice bares her sword of flame;
But let your memories be long!
And, lest they fail you, wearied into sleep,
Bring out your tablets wrought of molten steel;
There let the record be charáctered deep
In biting acid, past repeal.
And not their names alone, of high estate,
Drunk with desire of power, at whose mere nod
The slaves that execute their lust of hate
Laugh at the laws of man and God;
But also theirs who shame their English breed,
Who go their ways and eat and drink and play,
Or find in England's bitter hour of need
Their chance of pouching heavier pay;
And theirs, the little talkers, who delight
To beard their betters, on great tasks intent,
Cheapening our statecraft in the alien's sight
For joy of self-advertisement.
Today, with hands to weightier business set,
Silent contempt is all you can afford;
But put them on your list and they shall get,
When you are free, their full reward.
New Recruiting in Britain
By Field Marshal Earl Kitchener, Secretary of State for War
State registration of all persons, male and female, between the ages of fifteen and sixty-five, the particulars to include each person's age, work, and employers, and his registering to be accompanied by an invitation that he volunteer for work for which he may have special fitness, was the provision introduced in the House of Commons on June 29, 1915, and passed by that body on July 8. In explaining the bill's intent its introducer, Mr. Walter Long, who is President of the Local Government Board, replied on July 9 to the objection of critics who saw in it the first steps to compulsory service. He said that the National Register stood or fell by itself. So far as the use of it went, so far as the adoption of compulsion went, he declared frankly that the Prime Minister would be the last man in England to say, in the face of the situation in which Britons found themselves, anything which would prevent the Government adopting compulsory service tomorrow if they believed it to be right and necessary in order to bring this war to an end. Their hands were absolutely free. On the same day Earl Kitchener opened a recruiting campaign with a speech in the London Guildhall, which appears in part below.
The Lord Mayor of London, in calling upon Lord Kitchener, said the Empire had indeed been highly fortunate in having him at the head of the War Office in this great national crisis. Earl Kitchener was received with cheers as he said:
HITHERTO the remarks that I have found it necessary to make on the subject of recruiting have been mainly addressed to the House of Lords; but I have felt that the time had now come when I may with advantage avail myself of the courteous invitation of the Lord Mayor to appear among you, and in this historic Guildhall make another and a larger demand on the resources of British manhood. Enjoying as I do the privilege of a Freeman of this great City—(hear, hear!)—I can be sure that words uttered in the heart of London will be spread broadcast throughout the Empire. (Cheers.) Our thoughts naturally turn to the splendid efforts of the Oversea Dominions and India, who, from the earliest days of the war, have ranged themselves side by side with the Mother Country. The prepared armed forces of India were the first to take the field, closely followed by the gallant Canadians—(cheers)—who are now fighting alongside their British and French comrades in Flanders, and are there presenting a solid and impenetrable front against the enemy. In the Dardanelles the Australians and New Zealanders—(cheers)—combined with the same elements, have already accomplished a feat of arms of almost unexampled brilliancy, and are pushing the campaign to a successful conclusion. In each of these great Dominions new and large contingents are being prepared, while South Africa, not content with the successful conclusion of the arduous campaign in South-West Africa, is now offering large forces to engage the enemy in the main theatre of war. (Cheers.) Strengthened by the unflinching support of our fellow-citizens across the seas, we seek to develop our own military resources to their utmost limits, and this is the purpose which brings us together today.
Napoleon, when asked what were the three things necessary for a successful war, replied: "Money, money, money." Today we vary that phrase, and say: "Men, material, and money." As regards the supply of money for the war, the Government are negotiating a new loan, the marked success of which is greatly due to the very favorable response made by the City. To meet the need for material, the energetic manner in which the new Ministry of Munitions is coping with the many difficulties which confront the production of our great requirements affords abundant proof that this very important work is being dealt with in a highly satisfactory manner. (Cheers.) There still remains the vital need for men to fill the ranks of our Armies, and it is to emphasize this point and bring it home to the people of this country that I have come here this afternoon. When I took up the office that I hold, I did so as a soldier, not as a politician—(loud cheers)—and I warned my fellow countrymen that the war would be not only arduous, but long. (Hear, hear.) In one of my earliest statements made after the beginning of the war I said that I should require "More men, and still more, until the enemy is crushed." I repeat that statement today with even greater insistence. All the reasons which led me to think in August, 1914, that this war would be a prolonged one hold good at the present time. It is true we are in an immeasurably better situation now than ten months ago—(hear, hear)—but the position today is at least as serious as it was then. The thorough preparedness of Germany, due to her strenuous efforts, sustained at high pressure for some forty years, have issued in a military organization as complex in character as it is perfect in machinery. Never before has any nation been so elaborately organized for imposing her will upon the other nations of the world; and her vast resources of military strength are wielded by an autocracy which is peculiarly adapted for the conduct of war. It is true that Germany's long preparation has enabled her to utilize her whole resources from the very commencement of the war, while our policy is one of gradually increasing our effective forces. It might be said with truth that she must decrease, whilst we must increase.
It would be difficult to exaggerate the value of the response that has been made to my previous appeals, but I am here today to make another demand on the manhood of the country to come forward to its defence. I was from the first unwilling to ask for a supply of men in excess of the equipment available for them. I hold it to be most undesirable that soldiers, keen to take their place in the field, should be thus checked and possibly discouraged, or that the completion of this training should be hampered owing to lack of arms. We have now happily reached a period when it can be said that this drawback has been surmounted, and that the troops in training can be supplied with sufficient arms and material to turn them out as efficient soldiers.
When the great rush of recruiting occurred in August and September of last year, there was a natural difficulty in finding accommodation for the many thousands who answered to the call for men to complete the existing armed forces and the New Armies. Now, however, I am glad to say we have throughout the country provided accommodation calculated to be sufficient and suitable for our requirements. Further, there was in the early autumn a very natural difficulty in clothing and equipping the newly raised units. Now we are able to clothe and equip all recruits as they come in, and thus the call for men is no longer restricted by any limitations, such as the lack of material for training.
It is an axiom that the larger an army is, the greater is its need of an ever-swelling number of men of recruitable age to maintain it at its full strength; yet, at the very same time the supply of those very men is automatically decreasing. Nor must it be forgotten that the great demand which has arisen for the supply of munitions, equipment, etc., for the armed forces of this country and of our Allies also, as well as the economic and financial necessity of keeping up the production of manufactured goods, involves the retention of a large number of men in various trades and manufactures, many of whom would otherwise be available for the Colors. In respect of our great and increasing military requirements for men, I am glad to state how much we are indebted to the help given to the Recruiting Staff of the Regular Army and to the Territorial Associations throughout the country by the many Voluntary Recruiting Committees formed in all the counties and cities, and in many important boroughs for this purpose.
The public has watched with eager interest the growth and the rapidly acquired efficiency of the New Armies, whose dimensions have already reached a figure which only a short while ago would have been considered utterly unthinkable. (Cheers.) But there is a tendency, perhaps, to overlook the fact that these larger armies require still larger reserves, to make good the wastage at the front. And one cannot ignore the certainty that our requirements in this respect will be large, continuous, and persistent; for one feels that our gallant soldiers in the fighting line are beckoning, with an urgency at once imperious and pathetic, to those who remain at home to come out and play their part too. Recruiting meetings, recruiting marches, and the unwearied labors of the recruiting officers, committees, and individuals have borne good fruit, and I look forward with confidence to such labors being continued as energetically as hitherto.
But we must go a step further, so as to attract and attach individuals who from shyness—(laughter)—or other causes—(renewed laughter)—have not yet yielded to their own patriotic impulses. The Government have asked Parliament to pass a Registration Bill, with the object of ascertaining how many men and women there are in the country between the ages of fifteen and sixty-five eligible for the national service, whether in the navy or army, or for the manufacture of munitions, or to fulfil other necessary services. When this registration is completed we shall anyhow be able to note the men between the ages of nineteen and forty not required for munition or other necessary industrial work and therefore available, if physically fit, for the fighting line. Steps will be taken to approach, with a view to enlistment, all possible candidates for the Army—unmarried men to be preferred before married men, as far as may be. (Loud cheers.) Of course, the work of completing the registration will extend over some weeks, and meanwhile it is of vital and paramount importance that as large a number of men as possible should press forward to enlist, so that the men's training may be complete when they are required for the field. I would urge all employers to help in this matter, by releasing all men qualified for service with the Colors and replacing them by men of unrecruitable age, or by women, as has already been found feasible in so many cases.
When the registration becomes operative I feel sure that the Corporation of the City of London will not be content with its earlier efforts, intensely valuable as they have been, but will use its great facilities to set an example of canvassing for the cause. This canvass should be addressed with stern emphasis to such unpatriotic employers as, according to returns, have restrained their men from enlisting.
What the numbers required are likely to be it is clearly inexpedient to shout abroad. (Hear, hear.) Our constant refusal to publish either these or any other figures likely to prove useful to the enemy needs neither explanation nor apology. It is often urged that if more information were given as to the work and whereabouts of various units, recruiting would be strongly stimulated. But this is the precise information which would be of the greatest value to the enemy, and it is agreeable to note that a German Prince in high command ruefully recorded the other day his complete ignorance as to our New Armies. (Laughter and cheers.)
But one set of figures, available for everybody, and indicating with sufficient particularity the needs of our forces in the field, is supplied by the casualty lists. With regard to these lists, however—serious and sad as they necessarily are—let two points be borne in mind, first, that a very large percentage of the casualties represents comparatively slight hurts, the sufferers from which in time return to the front; and, secondly, that, if the figures seem to run very high, the magnitude of the operations is thereby suggested. Indeed, these casualty lists, whose great length may now and again induce undue depression of spirits, are an instructive indication of the huge extent of the operations undertaken now reached by the British forces in the field.
American War Supplies
By George Wellington Porter
The subjoined article appraising the stimulation given to the war industries of the United States by the European conflict appeared originally in The New York Times of July 18.
WITHIN the last ten months contracts for war supplies estimated to exceed $1,000,000,000 have been placed in the United States.
When war was declared last August this country was suffering from acute industrial depression; many factories shut down, others operating on short time, and labor without employment. After the paralyzing effect of the news that war was declared had worn away, business men here realized the great opportunity about to be afforded them of furnishing war supplies which must soon be in demand. Their expectations were soon fulfilled, as almost immediately most of the Governments sent commissions to the United States. Some had orders to buy, while others were authorized to get prices and submit samples.
It was not long until mills and factories were being operated to capacity, turning out boots and shoes, blankets, sweaters, socks, underwear, &c. The manufacturers of these articles were merely required to secure additional help in order to increase their plants' production.
The situation was different in relation to filling orders for arms and ammunition. At first, as was natural, this business was placed with concerns engaged in the manufacture of these commodities. Shortly they were swamped with orders, and to be able to fill them plants were enlarged, new equipment added, and additional help employed.
More and more orders came pouring in, and, as the arms and munition houses were by this time up to and some over capacity, acceptance by them of further business was impossible. Here, then, was the opportunity for the manufacturers of rails, rivets, electrical and agricultural machinery, locomotives, &c., to secure their share of this enormous business being offered. The manner in which they arose to the occasion is striking testimony of the great resourcefulness, efficiency, ingenuity, and adaptability of the American manufacturer.
The question of labor was of minor importance, due primarily to the fact that many thousands of men were without employment and anxious to secure work, and secondarily for the reason that skilled labor was not an essential factor. Most of the work is done by machinery and in a short period of time a mechanic of ordinary intelligence will become proficient in running a machine. The necessary trained labor could be secured without difficulty. Numbers of highly trained employes at Government arsenals are now with private arms and ammunition concerns. The labor problem therefore was negligible. However, three serious difficulties had yet to be overcome by the manufacturers wishing to engage in this new line of business—the securing of new machinery, raw materials, and capital.
The larger concerns had machinery and apparatus on hand suitable to most of the work, but much new machinery was needed, especially for the manufacture of rifles, and needed in a hurry. Time is the essence of these war supplies contracts, and, as many manufacturers agreed to make early deliveries, it was up to them to secure this new machinery and have it installed without delay; otherwise they could not manufacture and make deliveries as agreed to.
In this event they would suffer the penalty for non-fulfillment, as stipulated in the bond given by them to the purchaser at the time of signing the contract. These bonds are known as "fulfillment bonds" and are issued by responsible surety companies, usually to the amount of 5 per cent. of the total contract price, on behalf of the vendors, guaranteeing their deliveries and fulfillment of the contract.
In the earlier stages of this war supply business the question of his ability to secure raw materials with which to manufacture arms and ammunition or picric acid—this latter being used to manufacture higher explosives—was of no great concern to the manufacturer taking an order; but as orders came pouring in from abroad for ever larger amounts of supplies it was clearly evident that the demand for raw materials would shortly equal, if not exceed, the supply thereof. This condition was soon brought about, and today is one to be most seriously reckoned with by the manufacturer before accepting a contract.
Some of the materials needed with which to manufacture the supplies are mild carbon steel for the barrels, bayonets, bolt, and locks; well-seasoned ash or maple, straight-grained, for the stocks; brass, iron, powder, antimony, benzol or phenol, sulphuric acid, nitric acid, and caustic soda, &c. Of these various materials the most difficult to secure are those used in the manufacture of picric acid.
Today it is almost impossible to secure phenol, certainly in any considerable quantities, and it is almost as difficult to secure sulphuric acid and nitric acid. Germany has been the source of supply in the past for picric acid. Before the war it sold around 35 cents to 40 cents per pound, dry basis; recently it has sold at over $2 per pound for spot, that is immediate delivery, and is quoted at from $1.25 to $1.60 per pound for early future deliveries.
Antimony is becoming so scarce, never having been produced in any great quantity in this country, that in the new contracts being submitted for shrapnel shell it is stipulated that some other hardening ingredients may be substituted in the bullets, either totally or partly replacing the antimony.
Brass is essential to the manufacture of cartridges. The term "brass" is commonly understood to mean an alloy of copper and zinc.
Up to a short time ago electrolytic copper was selling at 20½ cents a pound, lead at 7 cents a pound, commercial zinc at 29½ cents a pound. Zinc ore, from which spelter is obtained, reached the price of $112 a ton. American spelter was nearly $500 a ton, compared with $110 a ton before the war. Spelter was almost unobtainable. In England the situation was acute, the metal there being quoted only nominally at around $550 a ton for immediate delivery.
Within the last few days prices have dropped materially, but how long they will remain at these lower levels it is impossible to predict. If the war continues for any length of time the demand for all these metals is certainly bound to increase, and this will automatically again send up prices.
The world's production of spelter in 1913 (the latest authentic figures obtainable) was 1,093,635 short tons. Of this the United States produced 346,676 tons, or 31.7 per cent.; Germany, 312,075 tons, or 28.6 per cent.; Belgium, 217,928 tons, or 19.9 per cent.; France and Spain, 78,289 tons; and Great Britain, 65,197 tons. The world's production of spelter in 1913 exceeded that of 1912 by 25,590 tons, or 2.2 per cent. The greatest increase was contributed by Germany, which exceeded its production of 1912 by 4.4 per cent. The United States made a gain of 2.3 per cent. The excess of the world's production over consumption in 1913 was only 27,316 tons.
As can be seen from the above figures, Germany has control of practically one-half, possibly now over one-half, of the world's production of spelter. Her position with respect to iron and coal is equally strong, the United States not included. In 1913 Germany's production of pig iron was 19,000 tons; Great Britain, 10,500 tons; France, 5,225 tons; Russia, 4,475 tons; Austria and Belgium, over 2,000 tons each; Italy, negligible. She has captured a large proportion of the coal resources of France as well. Her strength is her own plus that of conquered territory.
Before a contract for war supplies is let, more particularly with reference to contracts for arms and ammunition, the manufacturer is requested to "qualify." This means he must show his ability to "make good" on the contract he wishes to secure. If he is now or has been in the past successfully engaged in the manufacture of the particular article in question, this is usually sufficient; if it is out of his regular line, then he must prove to the satisfaction of the War Department or the purchasing agent, as the case may be, that he has the technical knowledge necessary for its production. In either event he must have an efficient organization, suitable plants, with proper equipment and men to operate same; also the necessary raw materials in hand or under option to purchase.
In most instances the manufacturer taking these war orders has been obliged to enlarge his plants, add new machinery and purchase raw materials so as to be able to handle the business. This meant the expenditure of large amounts of money on his part.
He did not have to depend, however, upon his own normal financial resources, as the contracts carry a substantial cash payment in advance, usually 25 per cent. of the total contract price. This advance payment is deposited in some New York bank simultaneously with the manufacturer's depositing a surety bond guaranteeing his deliveries, and upon the manufacturer executing an additional surety bond guaranteeing his responsibility he could draw down all or any part of the cash advance he might wish to use for his immediate needs.
Before issuing these bonds the surety companies make rigid examination as to the ability of the manufacturer to fulfill his contract. The commission charged for issuing these bonds is from 2½ to 5 per cent. on the amount involved. The demand for bonds has been so great during the last six months that it has taxed to the limit the combined resources of all the surety companies in the country.
The remaining part of the contract price is usually guaranteed by bankers' irrevocable letters of credit or deposits made with New York banks, to be drawn against as the goods are delivered, f.o.b. the factory—that is, free on board the cars—or f.a.s. the seaboard—that is, free alongside ship—as the terms may provide.
Banks here are beginning to purchase bank acceptances or bank-accepted bills of exchange, and in this manner payment is also being made to American manufacturers for goods sold to the Allies. For example, when a purchasing agent in Paris places an order for ammunition here he makes arrangements whereby the manufacturer will be authorized to draw on a New York banking institution at a stipulated maturity, and after acceptance of his drafts by such banking institution he could then negotiate these time drafts with his own banker—thus making them, less the discount, equivalent to cash—through whom they could be rediscounted by the Federal Reserve banks. These bank-accepted bills are discounted at a nominal rate of interest.
Before the war we were a debtor nation; today we are rapidly becoming, if we have not already become, a creditor nation. A year ago we were selling abroad only about as much goods as we were buying; now the balance of trade is greatly in our favor, due to the enormous export of foodstuffs and war supplies of all kinds. Monthly our exports are exceeding our imports by many millions of dollars. This indicates that foreign nations are going into debt to us.
At the time of writing this article foreign exchange was quoted as follows: London exchange, sterling, 4.76½; Paris exchange, franc, 5.45¾. By paying down $4.76½ in New York you can get £1 in London, which on a par gold basis is equivalent to $4.86 in London. By paying down 94½ cents in New York you can get the equivalent to 100 cents in Paris.
We now come to another interesting phase of this war supply business, namely, how some persons thought these war orders could be secured and how they are actually being placed. Almost immediately after the declaration of war, most of the belligerent Governments dispatched "commissions" to the United States. Some had orders to buy, and others were authorized to get prices and submit samples. In an incredibly short period of time it became generally known that foreign Governments were shopping and buying in our markets. The knowledge of this fact brought about a condition unique in our business life.
Men in all walks of life, from porters, barbers, clerks in offices, to doctors, lawyers, real estate agents, merchants, Wall Street brokers and bankers, seemed suddenly imbued with the idea of securing or bringing about the placing of a war order. Self-appointed agents, middlemen and brokers sprang up over night like mushrooms, each and every one claiming he had an order or could get an order for war supplies; or, as the case might be, he personally knew some manufacturer, or he knew a friend who had a friend who knew a manufacturer, who in turn wished to secure a contract. An official in one of our large steel companies told me some weeks ago that among others who had called at his company's offices, asking prices on shrapnel, was an undertaker.
In most instances the lack of salesmanship experience, to say nothing of any knowledge of the business and how the particular articles are manufactured, was of no consequence to the self-appointed agent in his mad desire for business.
The lobbies of our New York hotels were filled with horsemen and would-be horsemen, some months ago, almost every State being represented as far west as California; also with manufacturers and manufacturers' agents, all eager to secure a "war contract," be it for horses, shrapnel, rifles, picric acid, guncotton, toluol, cartridges, boots, shoes, sweaters, blankets, machinery and materials, &c. The very atmosphere of Manhattan Island seems impregnated with "war contractitis." We breathe it, we think it, we see it, we talk it, on our way downtown, at our offices and places of business, at our clubs, on our way home at night, in our homes, and I have been told that some have even slept it, the disease taking the shape of a nightmare.
The day of the broker, if indeed he ever had one in this business, is passed. The original commissioners have been withdrawn, or those who have been kept here are now acting as inspectors and have been replaced by purchasing agents. The firm of J.P. Morgan & Co. has been acting as purchasing agent for the English Government for some months past, is now acting in like capacity for the French Government, and has also done considerable buying for the Russian Government.
In order properly to handle this vast volume of business, a separate department was created, known as the Export Department. Connected with this department are experts in all lines—men who are thoroughly familiar with the various Governments' requirements, who know what prices should be paid, who are in close touch with each market, and who understand fully the materials they are buying.
There are a few more concerns, among which are one or two banks, trust companies, and Wall Street houses, which also have formed separate organizations for the purpose of purchasing war supplies for the Allies. As all these concerns are in close touch with the manufacturers and will only deal directly with them, the brokers and middlemen have very little, if any, chance of doing business.
