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.