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.