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ish thinking on industry and commerce merit careful study. Let me say further that these points merit sympathetic study because of suggestive ideas that may be useful to American industry and

commerce.

The United States has had much to teach the world in production. It is not too early, however, to realize that there will be vigorous foreign competition. The United States at present holds a preferred position because our industries have not been so much affected by the war as have those of the great nations of Europe. The rate of improvement in this country, however, as in European countries, will depend upon the insight and energy directed toward increased efficiency.

Respectfully,

To Hon. EDWIN F. SWEET,

PHILIP B. KENNEDY,
Director of Bureau.

Acting Secretary of Commerce.

BRITISH INDUSTRIAL RECONSTRUCTION AND COMMERCIAL

POLICIES.

INTRODUCTION.

Early in the war the British began to plan for reconstruction. As a result reconstruction plans in many cases were originally formulated with reference to certain conditions and upon certain assumptions that lost relevancy as the war continued and the number of participating nations increased. The unexpected length of the period of active hostilities was of itself a disturbing factor; and with the downfall of the Russian Empire and the entrance of the United States a new situation was created. Finally, the dissolution of Austria-Hungary and the collapse of the German Empire, which seem not to have been anticipated, brought about a condition of affairs calling for a reconstruction of the reconstruction program itself.

The months that passed between the signing of the armistice and the formulation of the treaty with Germany were marked by uncertainty and indecision. No one seems to have foreseen the obvious result of the cessation of active warfare-the prolonged deliberations of the peace conference and the diverting of official attention from internal to external questions. Under stress of war governmental authority had been centralized in a small War Cabinet, and subsequently, with the prolonged absence of the Prime Minister and other Government leaders, the initiative and the executive force essential to reconstruction were inadequate. The British press, however, did not neglect the subject; and the business and industrial interests and the people generally could not do so. The result was a period of discussion, both wise and unwise, with sometimes not a little bitterness and recrimination.

The trend of discussion at that time is indicated by the following excerpts from a special article in the London Sunday Observer of April 13, 1919:

Fighting ceased five months ago and peace is supposed to be only a few weeks distant, and yet we are likely to be as overwhelmed in the first rush of the new conditions as we were in the first waves of enemy invasion. *

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Very little evidence is so far forthcoming that either the Government or the mercantile community has a proper conception of what lies before the nation and the world when peace has been signed and we are at liberty to address ourselves to reorganization problems. The various departmental committees are nibbling at the fringe of the subject-they discuss largely nonessentials and avoid the basic principles. The war seems to have taught our merchants and manufacturers little or nothing in the way of cooperation and coordination. The committees are apparently oblivious of the fact that we have only won the war by combined action. They do not realize that, as destruction has been on an international scale, so renovation, to be speedy, effective, and thorough, must be organized on similar generous lines. Had there

been no national and international control civilization would have gone to pieces under war conditions, but we are almost forced to believe from the general commercial attitude that there is no objection to its doing so when the struggle averts to a purely economic phase.

As the possibility of peace drew nearer and nearer there arose a cry from the various industries for release from State control. Each desired to go. its own way and be free to do very much what it likes. Thus far we have been working, defective as our arrangements are, more or less like a machine with parts fairly well coordinated. Now the idea seems to be that this machine shall be suddenly thrown out of gear and the separate parts proceed to operate on their own account. Whatever saving we have managed to effect during the war period by a better distribution of labor and ma erials, the concentration of industries in localities most favorable for their deveopment, and the parceling out of production in more economical units is to be mainly thrown away. The usual reason assigned for this policy is that a purely individualistic system could not win us the war, and it will not enable us to win the fruits of victory presently.

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Here, then, we have this welter of conflicting demands, and not the smallest attempt made to reconcile them. All the industries clamor for release from the control which alone made it possible to use them as an effective instrument for operating national interests during the war, and so far from profiting by the experience of the past four years their only desire now appears to be to get back to that choas in which industrial work was carried on in pre-war times. This is the worst possible spirit in which to enter on the task of reconstruction, and unless we pull ourselves sharply up we shall certainly find ourselves in a condition the majority of our people will not endure-and rightly so. We have to realize that because a less organized and an indifferently educated community allowed our older industries to develop in a manner wasteful and often degrading (the Coal Commission shows the degree to which this has gone on in coal mining and distribution) the new generation will not only actively oppose a reversion to what remains of that method, but will call for a considerable improvement on it. Yet it is symptomatic of the atrophied mentality of not a few of our manufacturers that they contemplate a return to a state of affairs that will accord them greater license and freedom than that which previously existed, and this avowedly not because it will mean better national prosperity and efficiency, but because it will conduce-or they delude themselves that it will-to larger individual profits.

Five months after the signing of the armistice the blockade continued in force, and the control of trade, domestic and foreign, had been relaxed only in special instances. Merchants and manufacturers, loaded with stocks bought at high prices, and in many cases in excessive quantities, were reluctant to sell on a falling market. Although demobilization had proceeded slowly, there was a redundancy of labor, and the payment of unemployment benefits was weakening the desire for work. Organized labor was insistent in its demands and conscious of its growing political strength, and manufacturers were not disposed to book orders calling for guaranties as to delivery. Pending the presentation of the 1919 budget, at the end of April, industrial and trading interests generally assumed a waiting attitude on account of the uncertainty as to its proposals in the matters of excess-profits taxes, tariff, and imperial preference. Minor irritants were the undue delay in the transmission of cable messages and foreign mails, the inadequate railway terminal and delivery service, and a general shortage of facilities for local transportation. The next two months were marked by the release from control of most branches of domestic trade, but conditions at the end of June had not been greatly improved.

In view of this situation there has been a tendency to underrate what has been accomplished at home and to entertain exaggerated ideas of what is being done abroad. Stress is laid upon the advantages enjoyed in the United States as a result of the great supply of gold, the

growing merchant fleet, the high standards of industrial efficiency, and the relatively unimpaired man power; and the progress of Japan and the reawakened spirit of enterprise in Sweden are viewed with apprehension. On the other hand, until recently, negative influences in competing countries have been either ignored or at least minimized. And in the background of this picture is the specter of social and industrial unrest, with its challenge to the established order and to the institutions to which the British attribute their economic position.

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From March to August, inclusive, the Government maintained a transitional" policy of restriction in the matter of imported manufactured articles; and pressure was brought to bear by industrial interests, in and out of Parliament, to have this policy continued on a permanent basis after September 1. On August 18, however, the prime minister's long-awaited statement of the Government's trade policy was presented to the House of Commons, and in it was the announcement that restrictions would be suspended, except as they might be necessary to maintain "key or pivotal industries" or to protect the manufacturer from "dumping" of foreign-made goods. This statement, however, failed to dispel the uncertainty that had prevailed, for the new policy is most indefinite and subject to restriction or relaxation by the Board of Trade. A bill to make this policy effective is now before Parliament.

FACTORIES, PLANTS, AND MACHINERY.

CHANGES WROUGHT BY THE WAR.

Since the great majority of the population of Great Britain is concerned with the manipulation, as distinct from the production, of primary goods (foodstuffs and raw materials), the matter of industrial reconstruction is recognized as of first importance. During the war every effort was made to promote the manufacture of products of direct or indirect military importance and restrictions were placed upon all other activities. The Government enlarged its existing factories, built new factories, commandeered private factories, and entered into contracts which resulted in the erection and extension of factories by private interests. Everywhere new machinery was installed and more effective methods adopted, and everywhere manufacturers converted their plants to a war basis. At the end of the period of active hostilities, therefore, the country found itself possessed of an industrial equipment of unprecedented extent, acquired at immense cost, and requiring much readjustment before peace production could be made possible.

DISPOSAL OF GOVERNMENT FACTORIES AND EQUIPMENT.

On the date of the signing of the armistice there were 302 national factories for the production of munitions, which represented a capital outlay of about £65,000,000.1 Some of these had been established by the Ministry of Munitions; others had been taken over by that ministry from private owners. The disposal of these factories was originally placed within the jurisdiction of the Ministry of Munitions, subject to Treasury sanction with the concurrence of the Ministry of Reconstruction. The factories were grouped in four general classifications: (1) Those to be retained as munition factories or converted to other public use; (2) those to be disposed of or used as industrial concerns; (3) those, not suitable for industrial purposes, to be used during the transition period for the breaking down of ammunition; and (4) those that would revert to their original owners. Concrete proposals for the utilization of the various classes were presented to the War Cabinet by the Ministry of Reconstruction.

Although voices were raised in favor of the continuation of the State-owned factories for industrial purposes, their specialized nature and their great cost served as deterrent factors, and early in 1919 the surplus Government property disposal board began to

1 A pound sterling is made up of 20 shillings, each of 12 pence, and its normal equivalent in dollars is $4.8665. Within the last year however, the rate of exchange has declined from $4.75 to $3.875 (December 3, 1919). Because of the abnormal conditions of exchange, no attempt has been made in this report to convert sterling amounts into terms of United States currency. To do so at the mint par of exchange, as is the normal practice, would be correct only in cases wholly of intranational significance, like the one above.

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