20 



HARDWOOD RECORD 



April 25, ini'.t 



seDtatives of the steel interests myself, that there was only one way to 

 meet that responsibility, and that was to say that I would not give this 

 official endorsement to these high prices, as prices representing the lowest 

 level which could be expected by the public, and I took the responsibility 

 of acting in that way. It was not for the purpose of getting for the rail- 

 road administration prices so low as to be destructive to the industry, 

 nor was it for the purpose of trying to get prices lower than the general 

 public would get. It was rather for the purpose of preventing the most 

 unfortunate influence which would keep prices up when they ought not 

 to be kept up, and which would put the railroad administration and the 

 public at a disadvantage for a long time to come in getting lower prices 

 for steel articles. 



I spoke Just now of this spectre that has stalked over the country about 

 the railroad administration concentrating its buying power, and being a 

 tremendous monopolistic buyer so as to Injure the Industries of the 

 country. That argument has even been urged with a very straight face 

 with respect to steel, that here was a great danger of the monopolistic 

 buying of steel and a great danger that would occur to the public if 

 there could be such a monopolistic buying of steel. The argument was 

 made, apparently ignoring the fact that the country had been disturbed 

 tor many years on account of the monopolistic selling of steel, and I did 

 not believe the public would shed many tears over the possibilities of 

 concentration of buying power in view of the apparent long concentration 

 of selling powers ; but even In that respect, we do not approach the propo- 

 sition with any desire other than to deal with the public in a businesslike 

 way in this situation, and in doing that I want to withhold my official 

 endorsement of prices, which I believe were unduly high prices, and 

 which ought not to be sustained for a long time to come through govern- 

 mental support. 



EouGH Sledding fob Railroads 



Director-Qeneral Hines took up one by one a number of the hard 

 problems confronting the railroads. He declared that they are con- 

 fronted with a falling off in their business which threatens to 

 become more rapid than any reduction in expenses can possibly be. 

 The exigencies of war conditions saddled the roads with inex- 

 perienced labor, and training to the point of efficiency is slow and 

 costly. 



With regard to the policy of the retention of the roads under 

 governmental management, Mr. Hinea said it was necessary in 

 order to take care of them during the period of readjustment. If 

 the railroads had been under private management they would have 

 been confronted with exactly the same situation. They would have 

 been loaded down with war costs, just as every other industry is, 

 and they would have been laboring along with an inadequate busi- 

 ness to take care of those costs. 



Mr. Hines repelled the charge, which he said he had heard, to the 

 effect that the high cost of railroad management was due to gov- 

 ernment control. 



He had a suggestion in regard to financing the railroads. He 

 favored a government guarantee of a fixed rate of interest on rail- 

 road investment, and the consolidation of all the roads in a few 

 strong systems, so that the poor revenue earners could be taken 

 care of by the more opulent. That would enable the railroads to 

 finance their operations. He thought it would come to that or to 

 government ownership. 



Comment by B. A. Long 



Beply to the address by Mr. Hines was made by R. A. Long of 

 Kansas City, in regard to the policy of the railroads of withholding 

 their purchases of steel, at the present price level. Mr. Long pro- 

 ceeded: 



My question is this : How d(j we know, or rather, more directly, how 

 does Mr. Hines know, that the prices as applied to the steel products 

 are not reasonable prices? 



I am sure we are all interested in that proposition, because as I under- 

 stand it the prime idea of the industrial board was to search into and 

 make such an investigation of it as was necessary to determine whether 

 or not a given product was reasonable as to the price asked, and if they 

 felt it was, then to make that pronouncement throughout the country 

 so that the consuming public would have some concrete evidence, through 

 an investigating body, leading them to believe that the prices were legiti- 

 mate, and hence business should flow on in its regular channels. There is 

 in my mind no other problem before us today of so great Importance in a 

 business way as that very fact. 



Speaking directly upon the lumber industry, and those materials that 

 go into buildings, there can be no question today, at least as I view It, 

 but what the statement that we hear frequently made, expresses the 

 situation more vividly than anything I have heard In a long while, that 

 the business of the country is dammed up, or In other words, in the 

 building line there is a vast amount of building necessary to be done in 



practically every city of any size throughout the United States. 



It the consuming public were satisfied that the prices today are rea- 

 sonable, as compared with the causes producing them, and that we are 

 on a new price level, the business of the country would go on and the 

 railroads would have such an enormous amount of business that they 

 could scarcely handle It. If we can satisfy the consuming public that 

 we are doing business upon a reasonable profit, as compared to cost to 

 produce all along the line, the dam would be taken away and the business 

 of the country would flow on in its normal channels. 



So, getting back to the question, Mr. Hines, may we ask what caused 

 you to conclude that the prices of steel were abnormally high as compared 

 to present conditions, and caused you to take the stand which you have 

 undoubtedly taken from the standpoint of a conscientious man? 



Mr. Hines Explains Further 



Director-General Hines went 'with more detail into the couaidera- 

 tions which had led him to make his ruling on prices, saying: 



The shape it had taken was that the railroad administration was called 

 upon to give an oflScial endorsement to the proposition that these prices 

 were so low that the public ought not to expect them to liecome lower. 

 That is a very different thing from the railroad administration making 

 its own purchases, in its own way, on a given level of prices. In some 

 curious way, the idea seems to have arisen that It was up to the railroad 

 administration to prove that those prices were not that low. 



On the contrary, it was up to the people who wanted the railroad admin- 

 istration to give that endorsement, to prove that they were that low, and 

 they wholly failed, in my opinion, to make that proof. I took this matter 

 up immediately with the most conservative, careful advisers I could get, 

 and they were unanimous in the opinion that prices were not so low as to 

 Justify that endorsement. 



I think all over the country there was a great deal of feeling that the 

 public would not buy steel at those prices, because the prices were alto- 

 gether too high. A particular government agency cannot, by its own fiat, 

 make the public buy at any given price level. The prices have to be such 

 as to commend themselves to the public. That being so, certainly the 

 railroad administration cannot Justly make any progress in that direction 

 unless it honestly believes that that point has been reached. 



As I look at it. it is up to the people who believed in these prices to 

 convince us that the prices were so low they ought not be modified. I 

 could not get any advice from any of my advisers to that effect. I could 

 not find anything in the general comments to indicate that there was any 

 consensus of oiiinion that that was the case; and that Iteing the situation 

 I was unwilling to give an endorsement which, it seemed to me, would be 

 purely artificial and would not carry conviction, but whether it carried 

 only partial conviction, still I did not want to take the responsibility of 

 having the public believe that prices were as low as they could reasonably 

 expect them to be. when I did not find anything to prove that to me. 



Mr. Long replied to this that the public did not expect the rail- 

 road administration to state whether prices were particularly low 

 or not, and he added: 



Had you gone on and bought steel in advance of the government's 

 requirements, to some extent, and not have left the impression throughout 

 the country that prices were unreasonably high, you would not have 

 caused people in all other industries to hesitate. That condition has 

 prevailed throughout the country to such an extent that I don't wonder 

 when you make the statement that the business of the railroads is so 

 greatly decreased in consequence of your overhead expense that you must 

 necessarily have a deficit. 



Change of Policy Suggested 



Mr. Hemmingway asked whether it would not be possible for the 

 railroad administration and the board to take some action to undo 

 some of the harm that had been done, or which would probably 

 be done, by continuing to withhold purchases. "If this can be 

 done," continued Mr. Hemmingway, "this dam which Mr. Long so 

 picturesquely portrayed, may be swept away within the next two 

 or three or four weeks, so that the business of the country may yet 

 move along through normal channels throughout the remaining 

 portion of the year 1919, instead of having the effect, as it is now, 

 of the dam remaining firm, fixed and solid, apparently supported 

 by your final conviction that there is no chance of a substantial 

 agreement through the industrial board with the steel people, in the 

 matter of price?" 



Mr. Hines replied that the situation had been pretty thoroughly 

 canvassed already as to the prices of steel, and the steel interests 

 had stated their prices and announced them the lowest that were 

 to be expected. The majority of the industrial board believed, 

 said Mr. Hines, that the steel interests would not make any lower 

 prices. That was the real fact of it; not that the industrial board 

 was disappointed with those prices, but it believed the steel inter- 

 ests would not make any lower prices and therefore it came to those 



