( -'"Ti'fP? " JWffft?V i " "-"Wli
The Commoner
8
VOL.- Tf, NO. 7
x'
k
is.
Coal, Iron and Steel Profits
The following la a copy of a letter written
by a gentleman in Washington to an official of
the government in regard to the recent unpre
cedented advances in tho prices of coal and of
iron and steel products and suggesting that the
government assume the control and supervise
tho operation of certain largo steel, iron and
coal corporations. Ed.
Washington, D. C, May 26.
Dear Sir:
Referring further to our conversation on the
subject a day or two ago, and your suggestion
that I give you a memorandum covering the
points discussed in our talk, I now have the
honor to submit tho following:
Wo aro how confident that tho Liberty Loan
will be a great success. Present Indications are
that it will bo very largely over-subscribed. The
government will therefore bo able to collect for
tho first issue of bonds two billion dollars; and
wo also believe that tho other three billions au
thorized by congress can be sold and on a fa
vorable basis.
But how far will tho proceeds of these bonds
go towards paying the bills of this and other
nations for the enormous volumo of supplies and
munitions which are being purchased every day?
For tho principal articles purchased we are now
boing required to pay from twice to four times
tho prices which prevailed less than three years
ago. Therefore, In order to obtain these sup
plies, we are doing what is equivalent to selling
the Liborty Bonds at 25c on the dollar, in buy
ing steel at four times the price which' pre
vailed in 1913; or we are selling bonds at the
equivalent of 33c on tho dollar, when we invest
thoir proceeds in coal or wheat at three times
the prices wo paid in 1914.
This simply means, of course, that three bil
lion dollars of Liberty Bonds at 1917 prices will
buy only one billion dollars worth, or less, of
supplies at 1914 prices.
Lot ub now soo to whom the government and
the allies aro paying the extra four or five bil
lion dollars, Which represent the advance which
has taken place in two and one-half years in coal
and a portipn of our steel products.
I have given some thought and study to this
question, and I am quite convinced that these
additional billions of dollars are not going to
the wage earners of the' country but that they
are going principally into the pockets of tho
coal, iron and steel operators, corporations and
trusts, and to speculators and middlemen who
are' all waxing fat beyond their fondest hopes
or their wildest dreams.
I have some knowledge of the coal situation.
Some years ago, as the chief executive of a cer
tain large enterprlsa, X waj accustomed to pur
chasing a million or so tons a year at prices
ranging fiom 70c to a dollar a ton; and these
prices prevailed up to a recent period. Since
then there haa been some advance in wages, but
this advance in wages probably does not aver
age moro than somewhere between ten and
thirty cents per ton, varying in different local
ities. The price of coal at the mines has been
jumped from 75c or a dollar a ton to $4, $5, $6
and $1 per ton. In other words, for every one
dollar of increase in cost due to an advance in
wages, there have been about twenty dollars
added for other causes principally the oper
ator's greed and profit.
The production of coal In this country last
year was about 600 million tons, and this year's
production will be probably greater. Therefore,
if wo assume an average advance in the price of
coal of $4 per ton. at the mines, the increase in
our coal bill would be $2,400,000,000.
Of this colossal advance, only a small frac
tion goes to the coal miner. The rest of the in
crease is taken by the coal operators, corpora
tions and trusts, speculators and middlemen.
The coal operators made a reasonable profit
on the coal which they sold to the navy three or
four years ago under old contracts. Why
should these operators now add to the old price,
first the extra cost of wages, and then add to the
net profits which they have formerly made
1,000 to 3,000 per cent additional profit?
When a coal operator who formerly mado in.
normal times 15 cents per ton (and considered
lie was doing well in so doing) makes a net
profit of $4.50 per ton he has increased his not
profits thirty fold, or 3,000 per cent
In 1913, steel billets were quoted at $19 a
ton. This country" made last year approximately
40 million tons. The steel trust and other steel
concerns, working in perfect harmony, are now
demanding $80 to $90 a ton for steel billets at
Pittsburgh.
Tho principal steel makers own vast deposits
of practically all of the ingredients required for
the production of steel. Therefore, in order to
produce a ton of steel, the only extra cost to
them is the wage increase. A few dollars a ton
would cover this increase in wages paid to their
men; but for the same steel that they were glad
to sell at $19 or $20 per ton in 1913 and 1914,
they aro asking an advance of not a few dollars
a ton to cover any increase in wages, but an in
crease of $60 or $70 a ton more than 400 per
.cent in gross cost.
If the steel companies werG making $2 a ton
profit by selling their steel at $20, their present
profit at $85 or $90 is probably close to $60 a
ton or thirty times as great per ton as they
formerly received an increase in net of 3,000
per cent!
The steel manufacturers will claim that the
cost of steel is very much more because of the
increase in the price of coal and iron ore and
other ingredients required in steel production.
The answer to this is that the coal and iron ore
and other ingredients are largely owned by
them, and they, by concerted action, are ad
vancing the i rices of the steel elements; so that
the real increase in cost to them is practically
covered by the increase paid by them in wages.
This country made last year about 40 million
tons of steel ingots. The production this year
will probably be greater. If purchasers are to
pay an advance of $60 per ton, it means that the
steel will cost the buyers and users in excess of
what the same quantity would have cost on the
figures of 1914, say, $2,400,000,000.
Who aro the beneficiaries of this enormous ad
vance in the price of steel? The answer is
largely the same as in the matter of coal the
profits are going principally into the pockets of
the steel makers, the United States Steel Corpor
ation and the other big corporations; it is not
being distributed among the people, but the"
people, this government, and the allies, are be
ing made to pay the bill.
The reptrt of the United States Steel Co. for
the first quarter of 1917 shows that for the
month of March, 1917, the net earnings of that
coporation were over $43,000,000. This is at
the rate of considerably more than 500 million
flollars per annum although it is understood
that the March earnings were nothing like as
great as they are expected to be hereafter, be
cauLe the steel trust was still furnishing its
products under many old contracts made at
lower prices; and it is suggested that, if the
March business had been done on the basis of
today's prices for steel and iron, the net earn
ings of this one corporation would be closer to
the rate of one billion dollars a year than 500
millions.
The significance of these figures may be better
appreciated when we consider that the total cap
italization of the United States Steel Corpora
tion is about 1,500 million dollars; and that 6
per cent on this entire capitalization (including
the vast amount of common stock which was
given for "good will") would be only $90,000,
000, so that the company Is already earning at
about the rate of more than five times as much
as is required to pay 6 per cent on its entire
capitalization.
The records also show that the big steel com
panies are now quoting wire rods, Pittsburgh
delivery, at $100 per ton. This compares with
$25 per ton about two years ago. Plain wire
needed by tho allies abroad and farmers at
home) in January, 1915, was quoted' at $1 35
per cwt. Today's quotation for wire is $3 45
P' h, wuile Btructural steel shapes, Philadel
phia delivery, were quoted in January, 1915, at
$1.10 per cwt., and are now priced at $4.40
four times what they were two years ago
SrS advanced from $3.90 in July, 1914,
to $10.50 today; and tin has also doubled in
value. Bessemer iron quoted in July, 1914 at
Pittsburgh, at $10.25 per ton, is today being
quoted at $44.95 per ton. S
AA8 ? 5ave illustrated in the case of the
United States Steel Corporation, the profits,
which are "being realized at this time are slmmv
colossal and beyond any possible justificaE
but tho masses of the people and this govern'
ment are beginning to suffer; the Allies have
been bltfeding grievously for the past eich Z
months becaude of tho unconscionable niS
which American business men and manner
turers have been exacting of them.
The question is, will this government permit
these conditions to continue? I earnestly and
devoutly hope that congress will adopt lochia
tion which will enable the President to control
not only the prices of food products but the
prices of all basic materials and also of certain
other manufactured products.
The problem is a great one and involves care
ful study and painful research; but it can and
must be solved., I dread to think of the busi
ness convulsions which must follow if this riot
of inflation is not curbed and controlled. We
have the foundations in this country for a
healthy, permanent and enduring prosperity
but our opportunities are being abused or dis
regarded and we are in danger of rearing a
sham and temporary edifice on stilts.
We should be ready and prepared for the time
(to use another simile) when the engine of our
aeroplane may be stalled, and if we do not vol
plane back to earth, which we have yet time to
do, we will fall perpendicularly, and the effect of
such a fall is usually fatal.
The time has arrived when the brake should
be absolutely put upon further advances in
prices of products? Let us profit in this re
spect by the wise course which has been adopt
ed by the European nations. The nation which
most quickly adopted the price control was Ger
many, and that is the nation which has suc
ceeded most effectively in conducting its war
efficiently without financial help from the out
side. It would of course, be possible for this coun
try to adopt a dual, or alternate, system of price
control, so far as manufactured articles go. First,
we might notify manufacturers that the prices
to be charged for products shall be such as to
provide a profit of not more than so much per
ton, or per other unit of measure; or, secondly,
in the. case of -some great producing plants, coal
mining and steel, iron and copper manufactur
ing, we might commandeer the plants for tho
time being and place them under government
supervision and regulation with full control over
prices.
I have spoken of the terrific advance in coal,
iron and steel, but in other articles of much in
portance advance has also been enormous. It
appears that we produced last year approx
imately two billion pounds of copper. The price
of copper as late as 1915 was about 13c a pound;
the price today is about 33c a pound. In other
words, the value of the copper output had ad
vanced from about 260 million dollars to about
660 million dollars.
And so on, through the whole range of tne
materials and products which have been so vi
tally necessary to the nations of Europe, who
have been fighting our battles and theirs and ror
the cause of civilization and all humanity, we
have been draining their financial resources
while the Germans were drawing their dioou,
and we have fattened beyond all precedent, to
our shame. ,
The unprecedented advance in the price ui
materials was the immediate result of the iran
tic efforts of England, France, Russia and ltaiy
to obtain munitions and supplies, the possession
of which was absolutely necessary for their cou
tinued existence as free peoples, and they p
to our manufacturers any price that was
manded. Has not the time come for us i to w
counsel and restore prices to a more natural
normal level? - r
If we do not do our duty now, we wi 11 saw
serious consequences, and we will not iwv
consolation ofsaying that we were no t ar
Knowledge drawn from history and tne . e. j
iences of all the past shows us clearly tie w
and danger of disregarding sound ecoi
laws, and of neglecting such Pai" T !:nd to
those which we owe to our own pec pie an
our suffering allies in such times astnest.
May I, in conclusion, remind you oi
lines of JDr. Johnson: te
"For why did Woolsey on the steeps oi ?
On weak foundations raise the enormous
Why but but to sink beneath misfortune
With louder ruin to the gulfs below.
Let us pray that no such fate shall aw
Pardon me for imposing upon you
!