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LIBRARY

UNIVERSITY OF CALIFORNIA
RIVERSIDE



GREAT AMERICAN ISSUES



GREAT
AMERICAN ISSUES

POLITICAL SOCIAL ECONOMIC

(A CONSTRUCTIVE STUDY)
BY

JOHN HAYS HAMMOND

AND

JEREMIAH W. JENKS



NEW YORK

CHARLES SCRIBNER'S SONS
1921






COPYWGHT, 1921, BY

CHARLES SCRIBNER'S SONS
Published February, 1921




CONTENTS



INTRODUCTION

CHAPTER PAGE

I. TO-DAY AND TO-MORRQW i

Preparation as essential for peace as for war Inter-
nationalism during the war The limitations of inter-
national friendship Political and industrial unrest
intensified by the war National readjustments neces-
sary to meet new conditions Scope of the problems
to be solved Inadequacy of pre-war standards of ef-
ficiency American advantages and disadvantages con-
trasted Fundamental difference between conditions in
America and Europe The "vicious circle" of cheap
labor, low costs and over-production Importance of
a more equitable distribution of wealth Substance
rather than form the test of popular Government
America's opportunity in promoting world Democracy
Meaning of the term "Democracy" The relation of
individual to national welfare Problems involved in
promoting individual welfare Fundamental impor-
tance of education.

i

I. PROBLEMS OF GOVERNMENT

II. WHAT THE GOVERNMENT SHOULD Do . . .15

Democracy versus Autocracy Essentials to the ex-
pression of the Democratic Weal The proper func-
tion of Government The criterion of Good Govern-
ment The limitations of Government Popular
fallacies as to the scope and power of Government!
Governmental action restrictive rather than con-
structive Functions assigned to the Government by
Common Consent Government ownership versus pri-
vate ownership of public utilities The evils of Gov-
ernment Ownership Its Political Consequences
Freight rates on Government owned and on privately
owned railways Postal service a logical Government
monopoly, not always efficient The proper basis for
determining the question of Government ownership^
Political ideak versus methods of administration Dis-
content with the Government a normal characteristic
of Democracy What the Government can do.



vi CONTENTS

CHAPTER PAGI

III. POLITICS AND THE CITIZEN 28

The relation of politics to Government The politician
versus the statesman The basis of good Government
Present-day obstacles to good Government Pre-
dominance of lawyers in politics Conditions which
fitted the lawyer for political leadership Political
aptitude not synonymous with aptitude for Govern-
ment Defects of legal training as a preparation for
constructive leadership Inadequate representation of
business men in public life Importance of education
in civic duty Occupations which should contribute
constructive thought to pur political life Sacrifices in-
volved by the participation of business men in politics
Importance of a broader conception of our political
responsibilities.

IV. IDEALS OF AMERICAN DEMOCRACY ..... 40
Confusion as to the meaning of the term democracy
Influence of political machinery on representative Gov-
ernment The substitution of delegated Government
for representative Government The decrease of faith
in representative Government Measures adopted by
moderates to restore representative Government The
methods of the extremists The evils of the Initiative,
the Referendum, and the Recall The agencies which
have led to political reforms The two-party system
The problem of securing competence in politics Fac-
tors in the weakness of our representative system
The defects of the Primary Methods for improving
the Primary.

V. THE STRUGGLE FOR GOOD GOVERNMENT .... 54
Political skill versus administrative ability The re-
lation of politics to Government Politics a legitimate
function of legislative practise Sound principles of
more importance than political advancement Reasons
for filling executive positions through election Elimi-
nating politics from administration Fallacy of apply-
ing the elective principle to technical positions^ Need
for permanent undersecretaries in the executive de-
partments British system of permanent undersecre-
taries - Selection of undersecretaries Executive
ability versus administrative skill Evil effects of de-
centralized authority Wisdom of allowing the chief
executive to appoint his subordinates Tendency
toward higher standard of public morality Funda-
mental defects of the spoils system Disadvantage of
a multiplicity of executive appointments Advantages
of the Civil Service system Practical defects of the
Civil Service Report of the joint congressional Com-



CONTENTS vii

CHAPTER PAGE

mission on Re-classification of Salaries The Civil
Service retirement system Tendency of private busi-
ness toward Civil Service procedure Business princi-
ples as a guide to better Government.

II. PROBLEMS OF LABOR

VI. LABOR, CAPITAL, AND THE COMMUNITY .... 75
International aspects of the relations between Labor
and Capital Advantages and disadvantages of our
export trade The proper ratio of export trade to our
total trade Advantages of domestic consumption of
our raw materials Factors in determining the mutual
relations of Labor and Capital Community interests
involved in the adjustment of relations between Labor
and Capital Demands of Labor and Capital con-
trasted Interests of Labor and Capital reciprocal
The relation of labor conditions to public interests
Industrial Autocracy versus Industrial Democracy
The evils of an Industrial Autocracy Unwise ex-
tension of the principle of industrial freedom Atti-
tude of Labor and Capital toward the public Relation
of labor disputes to the American standard of living.

VII. THE STANDARD OF LIVING 83

Scope of the term "Standard of Living" Influence
of American industrialism on the Standard of Living
Aspects of the improved Standard of Living
Education as a factor in advancing the Standard of
Living Activity versus frugality as the basis of
American prosperity Importance of thrift Classes
most affected by the increased cost of living Relative
changes in the incomes of salaried employees and wage-
earners since the beginning of the war Importance
of maintaining and improving the Standard of Living
Relation of rising prices to social unrest Effect of
rising prices A survey of wages Difference between
real and nominal wages^ Professor Fisher's plan for
stabilizing the purchasing power of the dollar
Desirability of stable relations between prices and
wages Fundamental importance of the individual in
adjusting the Standard of Living The plea for an
adequate wage Minimum wage legislation Need for
further trial of legislation providing an adequate wage
in American industries.

VIII. LABOR DISPUTES . . .,. . .97
Significance of labor disputes The strike as a weapon
in industrial conflicts: Its purpose; results Possi-



viii CONTENTS

CHAPTER PAGE

bility of preventing strikes Statistics of strikes in the
United States The economic loss from strikes
Strikes not wholly preventable Compulsory arbitra-
tion as a remedy for strikes The principal methods
of settling labor disputes : Mediation, Investigation,
Arbitration, Cooperation Methods of arbitration con-
trasted The weakness of existing systems of arbitra-
tion Arbitration Courts as a means of settling labor
disputes Relation of industrial organization to col-
lective bargaining Collective bargaining as viewed by
the British Industrial Council Public sentiment as a
factor in the settlement of labor disputes Prevention
of strikes and industrial disputes Profit sharing not
very successful Labor cooperation in the manage-
ment of industry A suggested plan of labor participa-
tion in management The great complexity of busi-
ness.

IX. UNEMPLOYMENT .... . . . . 115

Relation of unemployment to the Standard of Living
The practical problem of unemployment Unemploy-
ment through sickness Economic value of Public
Health work Importance of thrift in mitigating the
effects of sickness Growth of voluntary Health In-
surance Prevention of sickness through Health In-
surance Compulsory Health Insurance Relation of
seasonal occupations to unemployment Free employ-
ment bureaus as a preventative of unemployment
The United States Employment Service Relieving
unemployment in periods of industrial depression :
Through restriction of immigration; through ex-
penditures for public works.

X. IMMIGRATION . . . ... . -V . 128

Immigration a menace to the American Standard of
Living Immigration) from 1820 to 1916 Census
statistics of 1910 Deterioration in the quality of our
immigrants since 1880 Immigration by countries
1904-1913 Low standards of recent immigrants Im-
migration and the labor supply Aspects of the com-
petition between immigrants and native wage-earners
Changes in the ratio of high-wage to low-wage im-
migration Foreign-born population of the United
States in 1900 and in 1910 The evils of unrestricted
immigration Legislation restricting immigration De-
fects of the literacy test The traits of a desirable im-
migrant Percentage of immigrants fully naturalized
The tendency toward naturalization as a basis for
regulating immigration Advantages of inspection of
foreign ports Need for an Immigration Commission.



CONTENTS ix



III. PROBLEMS OF BUSINESS

CHAPTER PAGE

XI. THE HIGH COST OF LIVING 143

Factors in the high cost of living: High standards of
living; larger incomes; the war; extravaganceDis-
tinction between high cost of living and high prices
Taxes and the high cost of living Chief cause ef high
prices is increase in money supply: Increase in world
supply of gold; reorganization of American banking
system; increase in supply of gold in the United
States; change in nature of expenditures by Govern-
ment and people ; bonds and treasury certificates
Varying effects of increase in prices upon different
classes "Profiteers" and the high cost of living" Essen-
tials to the restoration of normal economic conditions :
The inflation of currency and credit; the Government
and its obligations; the need of thrift; increase in
business and production.

XII. COMPETITION AND BIG BUSINESS 160

Relative importance of our internal trade and foreign
trade Fundamental importance of our internal trade
Attitude of the Government toward Big Business
Typical misdeeds charged to Big Business Relation of
business malpractices to private and to public interests
Confusion of thought as to the value of competition
Methods of unfair or unrestricted competition
Relation of size to business efficiency Natural mo-
nopolies Consequences of unregulated monopoly
Aspects of the problem of Big Business Advantages
of large scale production Importance of constructive
legislation in the field of Big Business Need for a
Federal Business Commission Limitations of the Fed-
eral Trade Commission Federal incorporation of Big
Business.

XIII. THE TARIFF 174

Principles to be considered in adjusting the tariff
Economic experience versus political opinion as a
guide to tariff revision Tariff systems in use Kinds
of duties in use The object of a protective tariff
The tariff and sectional interests Classification of
goods produced Factors to be considered in levying
a tariff Secondary advantages of a protective tariff:
Developing newly created industries; prevention of
dumping; bargaining for world markets; establishing
our economic independence Relation of the tariff to
industrial activity Advantages of a protective tariff
summarized Distribution of the benefits of a pro-
tective tariff Relative effect of a protective tariff on



x CONTENTS

CHAPTER PAGZ

wages and the cost of living Economic status of
American and European wage-earners contrasted.

XIV. FOREIGN TRADE 195

Tendency to exaggerate the importance of our foreign
trade Essentials to our success in competing for for-
eign trade Our ideal foreign policy Our advantage
in raw materials The balance of trade, 1904-1914
Effect of the war on our trade balance Fundamental
importance of our home market Need for new for-
eign markets for our surplus products Effect of the
war on international trade Wisdom of a liberal policy
toward the economic rehabilitation of Europe Re-
strictions which should be placed on the use of Ameri-
can funds by Europe Importance of increasing our
oil resources Proposed plans for helping Europe
Rationing credits under an international loan; pur-
chase of European enterprises with American capital
Importance of the so-called "backward nations ' as
a market for American products International invest-
ments as a factor in the development of foreign trade
Importance of good security for foreign loans Pro-
posed High Court of Equity for the settlement of in-
ternational disputes Importance of a broader attitude
by the Government toward American investments ^in
foreign countries Advantage to backward countries
of influx of foreign capital Essentials to an intelligent
foreign trade policy.

XV. PROBLEMS OF FOREIGN EXCHANGE .... 210
Pre-war situation regarding balance of trade Changes
in trade balance brought about by the war Depreci-
ation of European currencies Increases in public
debts The "pegging" arrangement to maintain ex-
change The effect of the withdrawal of British,
French and Italian support Proposals for improve-
ment of exchange situation Conditions in Germany
and Austria Conditions with European neutrals
Canadian conditions Latin- American conditions :
Argentina, Brazil, Chili Situation in the Orient:
Japan, India, China Far Eastern financial problem for
the United States.

IV. REMEDIAL SUGGESTIONS: MISTAKEN;
HELPFUL; SOUND

XVI. PROPOSED FORMS OF SOCIAL AND POLITICAL ORGANIZA-
TION. SOCIALISM, ANARCHISM, TRADE UNIONISM,

SYNDICALISM AND SOVIETISM 235

The doctrine of Socialism Program of Conservative
Socialists Policies of Radical Socialists Anarchy



CONTENTS xi

CHAPTER PAGE

defined The aims of theoretical Anarchists Phil-
osophic Anarchism in the United States Characteris-
tics of Trade Unionism Aspects of Collective Bar-
gaining Violation of trade agreements Weapons of
Labor and Capital Distinction between "Craft Union-
ism" and "Industrial Unionism" Political Attitude of
American Trade Unionists Achievements of the
American wage-earner The "Guild Socialist" move-
mentThe theory of Syndicalism Program of the
Syndicalists The "One Big Union" movement
Sovietism in theory and practise.

XVII. -EDUCATION 248

Importance of practical aims in education Changes
in the ratio of producers to non-producers Laxity in
school discipline Misconstruction of the principle of
equal opportunity Individual limitations in the use of
knowledge Ability to think versus the acquisition of
facts Conflict of ideals in the universities Tendency
to overestimate the value of a classical education Com-
parative value of educational systems, education and
native talent Educational ideals versus the technique
of teaching The essentials to success Americaniza-
tion of children of alien parentage The Federated
Boys' Club movement Deficiencies of our schools as
character builders Importance of manual training in
the schools Weakness of the universities in practical
training Character building the supreme need.

INDEX ....... i 267



INTRODUCTION



GREAT AMERICAN ISSUES



TO-DAY AND TOMORROW

UNLESS we put our house in order politically, socially,
industrially nothing is more certain than that we in
America are going to suffer before long from evils
scarcely less terrible than those with which war has made
the world familiar. Despite ample warning, the United
States was totally unprepared for war, and the sudden
cessation of hostilities found it totally unprepared for
peace. Despite also a modicum of useful achievement,
such as certain orders of the Federal Reserve Board, the
passage of railway legislation, and the reports of Gov-
ernment and private bodies on the wage situation, merely
a promising beginning has been made toward a solution
of our difficulties.

It is at once a blessing and a misfortune that, thanks
to the cooperation of our allies, we were not compelled
to suffer the tragic consequences due to follow our lack
of foresight. During the great war France and England
provided us with artillery, ammunition, airplanes and
ships ; and they sent over hundreds of their most experi-
enced officers to instruct us in training an army for mod-
ern warfare.

The spirit of mutual helpfulness which brought such



2 GREAT AMERICAN ISSUES

notable success to our united efforts developed because
of the overwhelming necessity of defeating Germany,
a need so urgent and so immediate that no other consid-
eration could exist beside it. Race prejudice, trade riv-
alry, conflicting ambitions, all gave way to the business
of victory, and in face of the almost universal failure of
such alliances throughout history, the great Entente
fought a bitter war and resisted every effort of an in-
genious and resourceful enemy to sow the seeds of dis-
sension in its ranks. Not until the allied nations felt
themselves secure against immediate peril from this com-
mon enemy have we seen signs of the revival of threaten-
ing jealousies.

The unpractical idealists, and there are many of
them, are disposed to read into this remarkable example
of harmonious action a significance at once false and
dangerous. They ask us to believe that the international
friendships produced by war will grow and ripen under
the generous influences of peace, and declare that the price
of the conflict, in blood, suffering, and destruction, has
not been too high, since it is now proved that the nations
of the world can in an emergency be brought together
unselfishly to serve a common aim. If this can be done
where the material surroundings are bloodshed and vio-
lence, how easy it should be, according to our theorists,
to extend and perpetuate internationalism now that the
goal of common action is the happiness of mankind.

The practical man, however, sees the probability of a
very different sequel to the war. He recalls that in Eng-
land, in France, in Italy, and even in the United States,
the general condition of affairs immediately prior to the
war was most threatening. Labor was discontented,
capital was nervous, taxation was mounting at what we
then thought to be an alarming rate. Government was



TO-DAY AND TO-MORROW 3

attempting, even in conservative England, to head off the
danger of revolutionary socialism by enacting semi-social-
ist legislation. International commercial competition had
reached a point where it was indistinguishable from po-
litical competition. Unemployment, not less in the United
States than elsewhere, was worse than it had been for
many years. The situation was indeed critical.

Then came the war! Came and passed! And now,
after the turmoil of strife, the old-time struggle and
rivalry are cropping up again. Furthermore, the prob-
lems which lie before us to-day are not those of the days
"before the war," for, far from solving them, the war
has immeasurably complicated them. Each one of these
problems has been magnified out of all semblance to its
former self, and to each have been added new and puz-
zling elements.

The broad task before us is, then, to adjust our na-
tional life to these new world conditions, and, because of
the magnitude and importance of such an enterprise, we
must set forth certain general considerations before ex-
amining in detail the various aspects of the undertaking.
The three principal European belligerents, it should be
noted, very early provided themselves with organizations
devoted to handling after-the-war problems. Germany,
in 1916, was the first to act, and she was followed within
a year by France and England. -It was not, however,
until October, 1918, that the first sign of interest in such
matters on the part of the American Congress came to
light in the form of a proposal by Senator Weeks of
Massachusetts that a commission be created for the study
of our national requirements after the conclusion of
peace.

Although the terms of peace have imposed heavy bur-
dens upon Germany, her commercial agents are already



4 GREAT AMERICAN ISSUES

active in Russia, South America and elsewhere, attempt-
ing to gather up the old lines of influence that were tem-
porarily broken. In our own country, although through
various governmental reports and studies by such private
organizations as the Foreign Trade Council and the
United States Chamber of Commerce we are gathering
valuable material, and although in the passage of financial
and railway legislation a really good beginning has been
made, we are still only on the threshold of our new busi-
ness structure. Our attention may well be turned to
some of these after-the-war problems, that we may learn
something of what this new business structure must be-
come in order successfully to cope with the changing
situation.

During those first few months which followed the
armistice the energies of the nation were bent upon the
immediate task of bringing our soldiers home, demobiliz-
ing them, providing for the wounded, and replacing the
sound and healthy in our social and industrial system.
This work has been largely, although not yet entirely
accomplished, and we now face matters of larger import
which concern national and international affairs. The
solution of these questions involves a broad knowledge of
affairs, and a comprehensive view of world-wide move-
ments and conditions. While they touch every element
of our national life, they are to our misfortune inextri-
cably mixed up with politics ; in fact, they involve the con-
sideration of every vital factor in the internal and
external activities of our government, both on its politi-
cal and its administrative side : the tariff, our immigration
policy, our educational system, our domestic trade and
industry, our foreign commerce, our merchant marine,
the question of government ownership or control of big
business, and the relations between labor and capital.



TO-DAY AND TO-MORROW 5

These matters simply cannot be taken up where they
were left at the outbreak of war and made after a fashion
to serve our present needs. They must be frankly and
carefully examined in a spirit favorable to profound
changes in practice, and possibly even to some modifica-
tions in principle, if the facts disclose the necessity. Our
object in the following pages, therefore, must be to con-
sider each separate problem deliberately, fairly, and
thoroughly, remembering all the while that it is but a
single wheel in a complicated machine, in which no single
part can be perfect without proper correlation with the
whole. We must strive to point the way to relative per-
fection for every part, but we must always keep in mind
the necessities of the whole and of every other part in
relation thereto.

We must start with the proposition that every short-
coming of which we were conscious before the war has
now become much more urgent and much more difficult
to deal with. And we must not forget that the European
nations, because of the desperate straits in which they
now find themselves, will be compelled to develop to the
utmost every resource at their command if they are to
avert national bankruptcy. This forces the problem of
trade rivalry upon our consideration.

Our three great trade rivals England, France, and
even Germany with all her burdens, in spite of
their great handicaps of crushing debt and a depleted
labor force, to which is added the incalculably disturbing
factor of political unrest, have already begun, and in the
future will continue to force the competition for foreign
markets to a point immeasurably beyond anything we
have heretofore been called upon to meet. Our rivals will
not be content with merely getting back to their old basis
of production, for if they do no more than that they will



be unable to meet even the interest on their national debts.
It should, therefore, be brought home to every American
that our ability merely to hold our own, to retain, much
less to advance, the high standard of living in this coun-
try, cannot be left to depend upon a measure of national
efficiency which sufficed under the old conditions to sup-
ply our incomparable home market and to leave us a
comfortable surplus for international trade. This is not a
time for complacency. Our commercial rivals will direct
their best intelligence to improving the technique of every
business and manufacturing operation, and they will begin
this process not in the office and the factory, but in the
school and the university. Every energy will be turned
to furthering this single aim.


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