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.