Coal and Reconstruction
I
WITHOUT going elaborately into all the facts which strongly support the premise, the one outstanding fact of our economic history seems to be that in the past the causes of our industrial upheavals have been variable and, generally, local. For that reason, they have had their seat first in one district and then in another. When the cause thus moved from place to place, each new readjustment movement had to spring from a quarter which had not previously figured in any such enterprise. Thus, Washington supplied the remedy for the depression following the Civil War; New York readjusted railroad finance in 1873; Pittsburg and New York shared the honor of restoring the equilibrium after the depression of 1893 to 1897, and so on.
We have, in recent months, passed through a major economic disturbance. It is all the more serious because many, instead of few, things caused it, and because these things occurred all over the world and in practically all industries, instead of being confined to certain regions as heretofore. In a word, we are suffering from a complication of disorders. Without attempting a complete enumeration, I shall mention a few.
The world’s gold-supply has so completely changed hands that many countries have less than they need and others have more than enough. The result in both cases is seriously to disturb currency values. This alone would, normally, bring industrial distress.
Also, the money itself has been transferred from customary into stranger channels. There was, first, an enormous subtraction of funds from peace pursuits to add to the outlay for war. There was, second, and after the war, the subtraction of vast sums of money from the production of necessities, to add enormously to the outlay for luxuries and amusement. There has been the withdrawal of cash from investment in sound securities, to increase vastly the volume of speculation in new and venturesome enterprises. And, finally, there has been the diversion of money from productive business to pay the vastly increased cost of government. Unsupported, these things would have caused an economic storm.
In business, the changes from what is usual or customary have been sweeping. Never, for instance, has there been such a shifting of labor as has taken place in the last two years. Two million men went out of business into the American Expeditionary Force. Four and one half millions were moved away from farms and hamlets in the West to the war industries of the East. And the flow of labor as between the countries has all but been reversed. If there had been no other cause, this would have given us one of our greatest reconstruction problems.
It may be a mere detail, but it is important, that, during the war, the old channels in which raw materials moved were destroyed and new channels were created by governmental order. To indicate how sweeping this change was, we need only say that before the war the natural flow of coal was toward the West; during the war it was toward the East. Other changes were equally violent. This alone would have amounted to enough of a disturbance to call for a great effort at readjustment.
Furthermore, before the war we depended upon other countries for certain things used in our industry. We have begun now to produce those things for ourselves. Likewise, we have begun to change over from an importing to a large exporting country. Both of these things involve an era of uncertainty, and hence of business speculation. For that reason they are potent causes of industrial disturbance.
Although we have quite enough to contend against, we are, in addition, confronted by demands for violent changes of policy, which sink to the vitals of any industrial enterprise. It has been suggested, for example, —and frequently,—that we shall substitute coöperation for competition in business, and nationalization for private control. It is urged, also, that we shall abandon our established policy of national isolation, and become part of a world-federation. Either of these things would, if proposed and insisted upon in a period of prosperity, have so shaken the foundations of industry as to have required a great reconstruction effort.
One fact, it seems to me, stands out boldly. We were a people accustomed to industrial disturbances easily localized. We are brought face to face with an international disturbance so diffused as to defy centralization, to say nothing of localization. Consequently, we have become confused, and desiring to be rid of the problem, have unblushingly turned it over to ‘the government.’
This can only prove disastrous, because our representatives in Congress were not chosen because of any peculiar fitness even to discuss such problems, to say nothing of solving them. On the contrary, they were selected when the old order prevailed. In a word, we are imposing new and colossal tasks upon men who are, in the main, small men.
The world industrial situation has become so complex that every member of Congress is in the position of a lawyer who is forced to try one hundred cases at once. With so many and such complex problems confronting them, it is not to be wondered at that they are confused.
So great has been this confusion that it has been all but impossible at times to persuade men to abandon proposals of mere expedients and to discuss those measures which must be adopted if the new national policy is to be sound. At times, it has seemed likely that we would all be so blinded by the immediate and the passing problem, that we could not see at all clearly what must be done to assure the best good of the people in that calmer period into which we must soon pass. It has been particularly difficult to separate any one subject — even such a basic one as coal — from the mass of things pressing for attention, and to persuade Congress to discuss it soberly and constructively.
From the beginning to the end of the war, Europe had needed nothing more than it had needed coal. When this need was first expressed, Europe had leaned upon Great Britain, and Great Britain had failed at the most critical time. Thereafter, the safety of the Allied cause depended upon the ability of America to supply the needed coal. Rather, however, than employ precious ship space to move the coal itself, the European coal-shortage had been translated into a munitions shortage, — coal and other things in manufactured combination, — and was passed on to us in that form.
When this burden was first put upon us, we despaired of being able to carry it. At so late a day as May, 1918, we were on the point of confessing our inability to produce either the coal or the iron which Europe needed. We were — officially, at least — without hope. When they had been prodded out of this disconsolate mood, our officials abandoned their attempt to make good the world deficit by depending solely upon a programme of American sacrifice. Thus, finally, they agreed to try to meet the shortage by producing more coal. Our new programme had succeeded so surprisingly well, that by the middle of October, — only five months after its adoption, — not only had the shortage disappeared, but we had a satisfactory quantity in reserve.
In November, when yhe armistice was signed, the war needs, of course, subsided. This was followed by a mild winter during which there was subnormal industrial activity. On both accounts, the need for coal was reduced sharply. The resultant situation was unavoidable. The mines could produce twice as much coal as was needed, and they had to compete with storage piles which they had created. Knowing that every mine would want to run, if only to hold the miners together, and believing that more coal would be produced than could be sold, every buyer expected, and with excellent reason, a sharp drop in coal prices. However, prices did not break as sharply as was anticipated, because wages still were on the war basis. And so the buyers refused to buy, and coal-production fell off to an alarming extent.
II
Meanwhile, all of Western Europe had been led to believe that coal could be procured from America in practically limitless quantities, if only the ships were provided. Europe believed there would be plenty of ships. Great Britain was so cock-sure on both scores, that she assumed that her own coalsupplies would thus be released to satisfy the demands of her established foreign commerce. So Great Britain stepped with confidence into the worldmarkets, to bid again for export coal business. She seemed particularly keen to accept South American coal contracts. She even insisted that these contracts should have a life of five years. Thus, the implied programme was that America should satisfy Europe’s demands for coal to a certain extent, while Great Britain used a portion of her production to bolster up her trade in South America and elsewhere. This programme was disturbed violently by several developments.
The American people began, in April and May, to fear that they might run headlong into a new shortage if they continued in the comfortable dream that such a danger was forever past. They came to realize that we never have produced in winter all the coal used in the winter months. Instead, it is the unburned summer production which assures an abundant coal-supply in the winter.
With customary impetuosity, America began to buy coal. She worked herself into such a state of alarm over the coal of the coming winter, that by the end of July she began to pay extravagant premiums for the higher grade coals—anthracite, smokeless, and some of the other favorite brands. With two and a half to three months intervening before any cold weather might even be expected, the coal users were as insistent in August upon immediate delivery as they customarily are in February.
Beginning about March 1, 1919, I made frequent trips over a territory which extended from the Atlantic coast to the Missouri River. Diligent and persistent inquiries developed these facts.
The householders bought so eagerly during the summer that the retail coaldealers had, in the main, done seventyfive per cent of their winter business before November 1. Many users, naturally, had none. But a large majority were amply protected.
The railroads were unprotected. They had engaged in a prolonged dispute with coal-producers as to the prices which they were to pay for coal. This delayed the storage of coal. Also, the Railroad Administration expected, on January 1, to return the railroads to their private owners, and did not desire to have on hand at that time any more fuel than the private owners had turned over to the administration. This kept storage down. All told, the railways were in a dangerous position.
To the gas and electric companies, coal is raw material. With coal prices high and with the selling price of gas and electricity held down by ordinance, they had a very narrow margin to cover their manufacturing cost. Living from day to day, in the hope either that coal prices would come down or that the selling price of gas and electricity would be increased, they neglected coalstorage. They also were in danger.
Many big factories had such an uncertain business future and had had such a sorry experience with stored coal the year before, — many of their piles had burned, — that they had decided not to store.
Generally speaking, coal-storage among the larger and more important concerns which use coal for steammaking was decidedly subnormal. The big task, as winter approached, was to relieve industry generally from the danger of a shortage.
Meanwhile, Europe was confessedly puzzled by the turn of events. She wanted American coal, but could not get it despite the report that our mines were idle because we could not sell the coal. Hundreds of ships had been released for war-service, but they were not available to carry coal, as everyone had expected they would be. Something was wrong, but no one could trace it. It was not until early fall that the seeming mystery was cleared. The fact was that Europe had expected to be able, in the main, to feed itself. Instead, its food-production had proved disappointing, and emergency relief had to be carried into the fall and winter. This took the ships which otherwise would have carried coal.
Also, in France and Belgium, the German army had destroyed 29,000,000 tons of annual coal-production. The Scandinavian countries had no coal and wanted it, and Britain could not supply it. Switzerland and Italy were almost wholly without coal of their own, and needed jointly about 12,000,000 tons to make their position secure.
Great Britain, upon whom they all relied, had not only sold large tonnages to South America, but was beginning to fall off in production. Her pre-war exports had been 77,000,000 tons annually. In 1918, they were 28,500,000 tons. Then, in 1919, the demand of her miners for the immediate nationalization of the mines raised an acute issue. While this was being threshed out, coal-production practically stopped. When resumed, it was admittedly upon such a reduced scale that Great Britain faced the immediate and alarming possibility that she might be forced to retire finally from the world-market. This implied not only her flat desertion of Europe, but also her repudiation of vital South American contracts. This was the amazing result of having yielded to the demands of the miners for the socialization of the mines, and the reduction in their hours of labor. This situation may help somewhat to explain some of the forceful utterances of Mr. Lloyd George in the late summer and autumn.
The European situation resulted quite naturally in an imperative demand upon us for coal. Our mines were, however, involved at that moment in satisfying the intense domestic demand. Besides, our own Shipping Board was so pressed to supply ships to many ambitious industries, that it had less than enough ships to move the needed coal. Foreign-owned ships were not available, because they were carrying food. But if they had been available, and if we had had the coal to sell, we still had to face the fact that we lacked on our Atlantic seaboard enough docks over which to transfer the coal from cars to vessels. That was another discovery of the early autumn.
Thus we sat facing the fact that, with a great world-market awaiting our mines, and with enough mine-capacity — if we employed it steadily — to satisfy the whole world, we were blocked by the temporary preoccupation of the world-shipping and by our decided limitations as to tidewater dock facilities.
III
It was while we were in this position that, after a few false starts, the House deferred to the Senate in the matter of the coal investigation, and the Senate assigned a sub-committee of the Committee on Interstate Commerce to the task. It fell to the lot of Joseph S. Frelinghuysen of New Jersey to head this committee. Its confusion was apparent from the beginning. In the absence of a clear analysis of the facts of the industry, it had to fall back on general figures. It had as an estimate of demand only a rough guess made six months earlier by Dr. Garfield. It had the statement of production by the United States Geological Survey. These two figures, when compared, showed a shortage of 85,000,000 tons. Thus the committee found themselves facing what they believed to be an acute shortage at home and the need to supply a stupendous tonnage of coal to Europe. They did not see how we could pass through the winter without a world competitive struggle for coal that would raise prices at home to prohibitive levels. Naturally, they were in a mood to resume price-regulation.
It was at this critical juncture in our coal-affairs — when a permanent policy touching a basic resource was likely to be announced in answer to what seemed to be a serious temporary problem — that the railroad brotherhoods sent their representatives to Washington, to begin what was to develop into one of the greatest labor crises in any country at any time. They demanded of the President either that their wages be advanced or that the cost of living be reduced. The alternative was a strike. Following closely in order were the demands of policemen and firemen that their unions be recognized; the strike of the steel-mill workers; the calling together and the dramatic adjournment of the President’s Industrial Conference; and, finally, the calling of the strike of the bituminous miners, when their old contracts had still some time to run. I am content here with this partial catalogue because it punctuates the coal investigation, and indicates how many distractions the Senators who were trying to understand coal had to endure.
They had before them only the rough outline of bituminous, when the railroad brotherhoods created a diversion by their ultimatum.
They had received only the preamble to anthracite, when the steel men’s strike came, followed at once by the Industrial Conference.
On these two accounts, the coal inquiry had been practically suspended for a month. Then the strike of the bituminous miners was called. This directed the attention of the Capital to coal. The Senate, which felt an impulse to act, naturally turned to its committee for information and advice. The House, which had deferred to the Senate in the matter of a coal inquiry, looked to the same committee. It was not prepared to respond.
On November 1, two major coalproblems confronted Washington. One was to quiet — conquer, if necessary — the miners, so that enough coal might be produced to keep the country going. The other was to encourage coal to take its proper place in the world-markets and, at the same time, to expand along neglected but natural lines at home. Restoring order at the mines and preparing the ground for coal trade-expansion were in reality but two parts of one programme. And curiously enough, the adoption of a policy which would successfully meet either need would also meet the other.
That is, the miner contended that, while his daily wage was large enough, his annual income was too small. This he attributed to the fact that he had work to do on only 200 to 210 days a year. He did not believe it possible to get more work. So he demanded more money, and that his work period be spread more evenly through the year. His plan in the latter direction was to work the mines six hours per day instead of eight, and five days a week instead of six.
The other alternative was to find more work for the miner to do, so that he could earn more per year because he worked a greater number of days. This meant that American mines must find an export market. This was a logical line of development, for many reasons. Great Britain had been the world’s largest coal exporter, but for many reasons she was a receding factor. The most important of these reasons was that her coal-reserve was disappearing so rapidly that she could not afford long to continue to export 77,000,000 tons a year. To do so would endanger too greatly her own economic future. Lord Rhondda, her leading coal-owner, had told me, as early as seven years ago, that Britain could not hope to sustain her export coal trade on her own resources. Therefore, he spent months in an effort to buy American coal-mines. As early as twelve years ago, a royal commission had laid the foundation for Lord Rhondda’s action by confiding to the government that, if Britain continued to export coal, her industrial future would be placed in grave danger.
The other reason for her withdrawal from the export coal market was that the production fell off sharply on account of labor unrest, and that her exportable surplus, which in 1913 had been 77,000,000 tons, was reduced to a possible 7,000,000 tons in 1920.
Germany was suffering in the same way. In 1913, she had produced 191,000,000 tons of bituminous coal, and some lignite; in 1919, she will produce only 70,000,000 tons (three months estimated).
When these two leading nations withdrew from the market, the burden of supplying the world with coal fell upon the United States. If we rise to the occasion, we shall not only find satisfying additional work for the miners, but we shall have done what both Great Britain and Germany did years ago: we shall have used coal as the cornerstone of our foreign trade in all lines. That is to say, those two countries sold coal only that they might get other things in exchange. If we ship our coal abroad when the world wants it, we must thereby open wide the door of the world for our merchants and manufacturers. And we can do this without serious danger to ourselves, for the reason that America has at least forty per cent of the known world’s reserve supply of coal.
That decision, if arrived at, will create a big problem. Great Britain has supplied the world with ’low volatile,’ or smokeless coal — similar to our Pocahontas. Her coal of that quality was sturdy and quite lumpy, whereas ours is friable and becomes pulverized from rough handling. When the world cannot get the British coal, it will not take our smoky coal, which alone is lumpy. Instead, it will demand our Pocahontas, or smokeless, coal. Our annual production of low volatile coal does not exceed 35,000,000 tons a year, of which 15,000,000 tons goes into industrial use, being produced by the concerns which use it. If we sell in the foreign trade the remaining 20,000,000 tons, we must sacrifice the entire home market. That we cannot do. If, instead, we should decide to double the production, we should quickly run through with our limited deposit. This coal is our best fuel for use in apartment houses. It is the best coal we have for coke-making. We dare not sell all of it abroad and deprive our own people. Nor do we dare increase, too rapidly, its production, because by so doing we should exhaust prematurely our reserve.
If we try to persuade the world-market to buy our abundant high volatile coal, we face the fact that the world does not want it because it is not equipped to use it.
I see no other way out of this dilemma than that we should subtract the volatile matter from our more abundant coals, use the gas and oils at home, and ship the compressed carbon residue abroad as a fuel, in the form of briquets. Buyers there are familiar with briquets and will buy them.
IV
That leads directly toward the solution of the next big problem. Germany had built her whole industrial and military fabric upon her controlled coal industry. She controlled the coal trade — the quarrying end of the business. By an affiliated organization, she controlled the coke-making and gas-making industry. On a few ingredients taken from the coal-tar, she built her dye industry. On a few other ingredients taken from coal-tar, she built her explosive industry. Thus, the industrial and the military strength of Germany rested upon her controlled coalpile.
No country is a larger user of dyestuffs than America. No country has used explosives more extensively in the arts and industry. There are in the by-products of coal those things which will revive our wasted soil; preserve, to lengthen the life of, our rapidly disappearing wood; and supply those things which will give life to our languishing chemical industry.
Sleeping in the archives of our scientific bureau in Washington are dozens of pocesses for the distillation of coal. They need only encouragement to blossom into the foundation underlying rich new industries. To-day their processes exist as a laboratory fact only. They can be translated into a real commercial achievement. In the process of translation, scores of millions of dollars must be risked. Many of them will be lost. Still, we can develop that phase of coal industry. If we do, we shall have, as a by-product, the very sort of fuel, produced from our high volatile coal, which will satisfy every demand of the foreign trade.
One of the truly big questions is how to hold safely in reserve, until it is needed, our vast reserve of coal-lands. At first that does not seem to be much of a question; but it is closely related to the others, as an incident or two will make clear. One of my ancestors was a certain Nathaniel Cushing, who was one of the ten members of the Ohio Company. Under government patent, he took up land in Ohio extending 125 miles up the Muskingum River and 100 miles inland. This embraces nearly the whole of what is now the Eastern Ohio coal-field. In Kentucky he took up two counties which are now known to be underlain with the Elkhorn seam of coal — the best in that state. In what was then Virginia, but is now West Virginia, he took up about 400,000 acres of land that is now known to be underlain with the ‘Number Two,’ or gas-seam of coal.
In time, every acre of that land reverted to the government in lieu of the payment of taxes. And only ninety years after the original grant, my brother and I canvassed the situation, — as a matter of curiosity, — only to discover that if we should do so little as pay the back taxes, our necessary capitalization upon the land would be vastly more than we could hope to pay interest on by developing coal-mines.
There are under private ownership to-day equally vast areas of coal land which are accumulating, not only compound taxes, but compound interest on the money paid for them.
Part only of the anthracite coal-land has been so held for less than fifty years. The charges are accumulating steadily. If they are all assessed against current production, the current price must rise. But, if not so assessed, the compound interest and taxes must be paid by the investor and charged against the land itself. This increases every year the intrinsic value of the coal in the ground. This causes that value to rise so steadily that it soon becomes impossible to sell the coal in competition with other forms of fuel. Anthracite is, in fact, now in a position where its value in the ground is, if honestly figured, so high that it cannot compete with other coals which are not similarly loaded with accumulated interest and tax charges.
The fact of immediate importance is that our whole reserve of bituminous coal-land is also being brought under private ownership. As it is purchased, it is listed as coal-land and tax assessments are levied against it. Also, interest charges are beginning to accrue. From now forward, the value of coalland — which cannot possibly be used for 100 or 200 years — is rising day by day. All of this burden of to-day’s interest charges and to-day’s taxes must, under the present system, as a capital charge against the coal, be passed on to the oncoming generations as its cost of coal in the ground. We are, therefore, loading our grandchildren with the burdens which we refuse to carry. I can see no way out of this, unless we strive, by the distillation process, to make the coal more valuable.
One thing is sure, namely, that, if we continue to pile upon the coal in the ground this rapidly accumulating load of taxes and interest charges, and neglect to make the coal more valuable, we shall progressively force coal out of use. We shall progressively kill, not only the coal industry, but the other industries which grow upon cheap power. As I see it, we are to-day deliberately killing coal, because we are mentally too indolent to study it carefully.
Finally, we have the coal labor-problem. We may try to think of it as part of the big labor-problem and therefore as something separate and apart from any particular industry. I can never think of labor in any other way than as a part of that industry which must satisfy the demands of its workers. That is, the coal labor-problem is, in essence, a part of the coal-problem. It must be met as such.
One demand of labor is for a fair wage. That is the one most emphasized. The other demand is for opportunity for advancement. We hear little of that through any formal channels. I do not believe we are ever going to meet the labor-problem as a whole, or for any one industry even, if we continue to try to satisfy the workman with wages only, while denying him opportunity. I believe that we shall have to give him opportunity as a first consideration, and then a fair wage as an incidental.
And I do not see how we are going to give coal-labor the opportunity which it craves unless we have tied in with coal-mining — the lowest expression of the coal business — the various processes for the conversion of the raw materials into finished products. In this way only can we come to have a series of business enterprises so linked together that a man might step from one to the other in a natural line of progression along a chosen course.
This possibility for labor is out of reach if we adopt any such shortsighted policy as to make the price of coal — the raw product from the mine only — the sole matter for consideration. Instead, I believe that we must make the question of price subordinate to the other and larger considerations.
All of this means that, before deciding anything definitely about the future of coal, we should have a thoroughgoing investigation of it. It is difficult to know how we are going to get such an investigation while we face the complex political activities previously described. The only alternative seems to be, to defer a final decision about coal until we have both time and quiet in which to mature a comprehensive investigation.