The World Cotton Situation


By W. L. CLAYTON, Chairman of the Board of Anderson, Clayton & Co., Cotton Brokers, and formerly Vice Chairman Business Advisory Council of the Department of Commerce

Delivered at a dinner tendered by the Waco Chamber of Commerce to delegates to the Cotton Research Congressat Waco, Texas, June 27, 1940

Vital Speeches of the Day, Vol. VI, pp. 696-699

THROUGHOUT the world, catastrophic events have taken possession of men's minds. The awful drama of total war, snuffing out empires and human life and human liberty on a brutal and colossal scale, dominates the daily thoughts and lives of people everywhere. With a kind of fascinated horror, they read and listen and wonder.

It seems petty to talk about the world cotton situation when the world itself has exploded and is on fire.

It is more appropriate tonight to talk about the world revolution, its meaning to the United States and, incidentally, its effect on cotton.

Please, therefore, do not be surprised if I exercise generously the license usually permitted a speaker.

Anything which must be discussed in terms of world trade is obviously just now in an extremely difficult, even almost tragic, position.

The naked truth is that world trade, in any normal sense, lies prostrate.

Cotton, as the fibre from which about three-fourths of the world's clothing is made, is peculiarly an article of international trade.

In consequence, the cotton producer and every part of the great raw cotton industry, wherever located, faces a dark and uncertain future.

The situation must, nevertheless, be studied in terms of today and tomorrow.

Yesterday's experience, with its successes, its failures and its mistakes, almost certainly holds no lamp for tomorrow's guidance.

The present situation, briefly, is this:

For the past five years the international trade in raw cotton of all growths has averaged about 12 1/2 million bales annually.

Of this volume, the United States has furnished a little over 5 million bales.

Today, the war has effectively eliminated as importers of cotton practically the entire Continent of Europe, consuming about 5 millions of bales annually of all growths of cotton.

Those countries to which exports are still possible, such as Great Britain, Japan, China, etc., have in recent years taken an average of millions of bales of all kinds of cotton, of which the United States has furnished about 3 million bales. It is extremely doubtful if, with a continuation of the war, these countries will buy more than 2 to 2 1/2 million bales of our cotton. As you know, the exports of United States cotton normally averaged nearly 8 million bales, and for the past five years the average has been something over 5 million bales.

Thus, for cotton as well as for other agricultural commodifies, we are rapidly approaching a realization of that catch slogan of the isolationists—"The American market for the American farmer." What the isolationists have not understood or, at any rate, have not made clear, is that this really means "Only the American market for the American farmer."

On that basis, of course, we have in the United States a surplus of at least 2 million farm families and 75 to 100 million acres of farm land.

So much for today!

Now, who knows what kind of world we shall face tomorrow?

This much seems certain: If the dictators win this war, the United States must embark on a preparedness program of colossal proportions.

That means, among other things, an economic and, to some extent, a political revolution in the United States.

The awful shriek of the dive bomber, and the relentless march of the armored tank across Flanders and France brought to an end in the United States the so-called good old days when we became great and rich and complacent and a little soft.

The dictators built thousands of these instruments of destruction. We shall probably build them by the tens of thousands, bigger and still more destructive. And a two-ocean navy.

A new order which we hate, but a new order just the same.

How many of us now realize what this means to our way of life?

We hear much about the fifth column and the Trojan horse.

These are not first problems. We shall know how to deal with these things.

Our first problem is to decide what our international policy is to be.

As to the Western Hemisphere, the decision is apparently already made that the Monroe Doctrine is to be literally and rigorously enforced.

Anything less than that would probably mean that before many years we would meet the same fate which has recently befallen half a dozen other democracies.

But to a layman the enforcement of the Monroe Doctrine throughout the Western Hemisphere, with Europe in the hands of the dictators, looks like much the biggest order we have even undertaken.

It probably means military preparation sufficient to meet and overcome the combined offensive military resources of any three dictators in the world.

Our second problem is to obtain from competent authorities blueprints and specifications of an integrated defense program.

Our third problem is to organize the job itself, and, what is of enormous importance, to study and plan the necessary readjustments in our domestic economy and, to some extent, of our political philosophy. Without such readjustment it will be impossible to carry out this gigantic enterprise.

It would be fatal for the American people to underestimate the sacrifices involved.

It has been said that Germany's preparation for war cost forty billions of dollars.

If that is correct, the cost to us will be much more.

Call it sixty billions of dollars, to be spent at the rate of fifteen billions of dollars annually for four years.

This is a lot of money, but we have become used to billions in spending Government money.

The man in the street probably will say, "Well, it's a big price to pay, but I guess it's worth it, so let's get on with the job."

But does he realize that it is impossible to put any such sum of money into the building of such a colossal military machine without automatically and drastically lowering the standard of living for every one now enjoying a standard above the very minimum?

The labor, the materials, the shop room, the capital required in this huge undertaking cannot also be used to supply us with the luxuries to which we have become accustomed in recent years.

Fifteen billions of dollars exceeds all the wages and all the salaries paid out by all the manufacturing plants in the whole United States in any year of our history. It is twice the value of our entire agricultural production, employing about one-third of our population.

Taxes must be drastically increased not only for raising the money to pay the bill, but to forcibly take buying power away from the middle and upper income groups, so that they will be compelled to substantially lessen their demands on productive capacity, freeing it for use in the vital preparedness program.

We cannot pass on much of the cost of this program to our children and grandchildren because we have already asked them to assume twenty-five billion dollars of new debt contracted during the past eight years. Modern children have a way of becoming disobedient when pressed too hard.

Public control needs to be exercised over new construction of all kinds so that no unessential demands will be made on the economy which may slow down or impede the preparedness program.

Labor must make its contribution in longer hours; the job cannot be done on a forty-hour week. Strikes, either of capital or labor, cannot be tolerated.

Drastic economies must be effected in the administration of all non-military departments of the Government. Relief appropriations must be scaled down and finally discontinued; political distribution of P.W.A. and W.P.A. projects must cease, in fact these agencies must disappear entirely when the preparedness program gets under way.

There will be work for every one who can work, and local communities must take care of those who cannot.

In short, under the new order, legislation for and by minority pressure groups, thinking only of their own selfish interests, must cease if we do not want to go the way of the other democracies.

The emphasis for national endeavor must be taken off of reform and placed on production.

Leon Blum concentrated on reform and social progress in France to the point where he almost caused the ruin of his country long before the German army set foot on French soil; meantime, in Germany they were tightening their belts, working sixty hours a week and building the most colossal fighting machine the world has ever known. Hitler's victories were won in preparation for the battle, long before a gun was fired.

Do I hear someone say that's all very well, but this is the United States and we are not going to turn the clock back in this country in any such way as that? All right, but if the people of this country fail to realize, and quickly, that the old order has perished; that playtime is over; that we must work and economize as our forefathers did, then they are not worthy of the pioneers who subdued the savages, cleared the wilderness, and laid the foundations of our glorious country.

I do not mean to speak disparagingly of any group of men.

Some of the finest patriots in this country are in Washington working fifteen to eighteen hours a day, but isn't it clear that the necessary decisions in this crisis cannot be made in time by a body of men, many of whom have their eyes and ears glued to the next election?

If we go on as we are now going, won't we repeat the tragic experience of France and England, finding ourselves pitifully unprepared and at a time when it is too late?

The only safe course is to recognize that although we are still at peace, the future is so menacing that we must act as if we were already at war.

Our slow-acting democratic system of checks and balances is the best in the world for conditions of peace, but it cannot cope with the problems of modern warfare.

We would be much wiser to recognize now, rather than later, that we must make a temporary surrender of some of our cherished institutions if we wish to preserve any of them for future generations.

Now, turning from war to peace, such as it will be, let me give you a picture, as I see it, of the world trade situation if the dictators win this war, or even if it ends in a kind of stalemate.

Here it is:

A bankrupt totalitarian Europe, returning to peacetime industrial production at starvation wages and long hours, requiring vast quantities of foodstuffs, fibres, and other raw materials.

Latin America, Africa and Asia, warehouses bulging with raw materials, the sale of which was interrupted by war, requiring manufactured goods of all kinds.

The United States, with practically all the gold in the world, a huge industrial plant, working at high wages and short hours, large stocks of cotton, wheat and corn, and other raw materials, and a high protective tariff.

This picture may be over-simplified but it certainly suggests that South America, Africa and Asia will swap their raw materials to Europe for cheap manufactured goods, and that the United States will be left holding its surpluses both of agricultural and industrial products.

This has for us both economic and political implications. Not only are there strong ties of race, culture and language between South America and the old world, but the economy of the two areas is much more complementary than that of the United States and South America.

Europe needs all South American products; we need only a few.

Indeed, South America and the United States are competitors in the production for export of numerous commodities, principally cotton and grain.

Closer economic relations between Europe and South America will almost certainly be accompanied by closer political contact which will render more difficult our enforcement of the Monroe Doctrine.

On the other hand if South America, Africa and Asia preempt the European cotton market, for example, what are we going to do with our cotton surpluses?

These momentous questions are a ringing challenge to our realism, our vision and our ingenuity.

Nobody knows the answers, but the direction in which we should seek a solution of these problems may be suggested. First, as to Latin America:

It is vital to the successful enforcement of the Monroe Doctrine that everything possible be done to draw closer the ties of trade and amity which already exist between Latin America and the United States.

There must be no waving of the big stick. We must play the commercial game fairly. We must stop subsidizing our trade where it comes into competition with theirs.

We should study the development of resources and commercial possibilities in Latin America with the view of bringing their economy into a more complementary relationship to ours, and we must be prepared to invest large sums of capital there to that end.

We must find ways and means of buying more Latin American goods, or risk redoubled totalitarian penetration there of an extremely dangerous character.

Now, as to our trade with Europe.

For years we have sold much more to Europe than we have bought from her.

When the war ends this trade unbalance will certainly be corrected. If this correction is accomplished by the simple process of shifting European purchases of raw materials from the United States to those countries willing to accept payment in goods, it will be a heavy blow to our entire domestic economy.

American cotton would naturally be the chief sufferer. We cannot afford to surrender our European markets for cotton and other raw materials without exerting the utmost endeavors to hold them.

The only apparent way to hold these markets is to be realistic about the matter and be prepared to trade our goods for theirs, scrapping the tariff in the process. With so much of our industrial plant and labor diverted to military production, this suggestion may not be so difficult or radical as it may at first appear.

Bilateral, or barter, systems of international trade are cumbersome and destructive of trade itself. If any substantial part of world trade has to be done on that system, it will result in a serious contraction of world trade and a regrettable lowering in the standard of living. A lowering in the world standard of living is inevitable in any case, but it could be relatively short-lived with international trade conducted on a multi-lateral or free exchange—gold settlement basis.

With an Allied victory, international trade could be reestablished at the end of the war, on a free exchange—gold settlement basis, using a portion of the huge gold holdings of the United States to get the system working.

A victory by the dictators appears definitely to bar any such solution, nevertheless it should not be excluded as one of the possibilities.

The United States has consistently stood for the principle of multi-lateral trade as opposed to the so-called barter system, but if the rest of the world adopts totalitarian methods of trade, we will be compelled to conform if we wish to sell our surpluses. Barter means the swapping of goods for goods. Obviously, that can only be done in our case by setting aside the tariff in many particulars.

The alternative to this course is to so readjust our economy as to become almost entirely self-contained. This would involve such far-reaching and radical changes, accompanied by so severe a reduction in our standard of living that it is very doubtful if democracy would survive the shock. Just as one example, there would be the problem of the two million farm families in the United States whose production is normally required for export, not to mention the more direct and immediate effect on the South of the loss of our cotton exports.

Rather than undertake any such radical readjustment, would it not be much wiser to trade with the rest of the world in whatever way may be open to us, meanwhile working with every means in our power to restore international sanity as quickly as possible?

Fateful days lie ahead.

Days which will test our patriotism, our mettle, our ability to make sacrifices.

Everyone of us, each according to his circumstances, will now have to make a contribution to the preservation of our way of life.

History must not say of us, "Too bad, but they couldn't take it!"

When the situation becomes somewhat clearer, doubtless the President of the United States will tell us what

and will give us a kind of blueprint of what we must do to stop this juggernaut of destruction before it reaches the western world.

The American people are entitled to the whole story, bad as it may be. That they can chin whatever program has to be followed, when they understand it, let no man for one moment doubt.