Confidence Must Replace Fear
IMPORTANCE OF EFFICIENCY IN PRODUCTION AND DISTRIBUTION
By THURMAN W. ARNOLD, Assistant Attorney General of the United States
Before the Illinois State Bar Association, Chicago, Ill., June 3, 1942
Vital Speeches of the Day, Vol. VIII, pp. 557-561.
THIS is a war which will determine whether the democratic institutions of America will survive. We are met here today to dedicate this Bar Association to the paramount task of winning that war—to discuss ways and means of making the organized effort of lawyers most effective to that end. In the tremendous effort to mobilize America every civilian organization must play its part. Lawyers are rightly proud of the power and influence of bar associations, both local and national. They believe that their organized power and influence can be harnessed to serve the nation in war. They want to formulate a program and define the tasks which bar associations can most effectively do. Then they want to take off their coats and get to work. And the leaders of the Illinois Bar Association have informed me that they want their association to lead in this campaign, instead of following.
We are not here to organize a cheering section. Lawyers today do not need exhortation or oratory. We already know the deadly seriousness of our task. We are here today, not to whip up our enthusiasm, but to determine the practical part that this bar association can play in mobilizing ournation. To lay out such a program we must first analyze the problem as a lawyer analyzes a case that he is going to try. If we are to correct the mistakes of the past we must begin with a statement of fact which describes what those mistakes were.
I think that we can all agree today that our greatest mistake was the illusion that we were safe from attack. We were too long in waking up to the reality of our danger. In a world filled with powerful gangsters we thought we could live at peace if we let these gangsters severely alone and isolated ourselves behind our own local fortifications. When President Roosevelt remarked only a couple of years ago that the frontiers of America were in France, he was met with a storm of protest. We did not realize that the only way to live at peace with gangsters is to search them out and to destroy them. We watched the growth of powerful military organizations in Japan and Germany with complacency. We allowed our foreign economic policy to be dictated by private international cartels that armed our enemies and restricted our own production capacity. We restricted our production of vital military materials in orderto maintain a policy of stabilized prices and low turnover. We were afraid to expand production because we thought too much production was an economic evil. We were the richest nation in the world. And so it was natural to think that the nation which had the most money could arm faster than nations that, according to our standards, were bankrupt. We were opulent and arrogant at the same time. We were endowed with what Homer Lea writing 33 years ago called "The Valor of Ignorance."
That book written so long ago reads today as if it had been published in 1939. It predicts our complacent ignorance of the growing strength of our enemies, our underestimation of their powers of attack, our failure to prepare. I will read you a few passages and ask you why these warnings were ignored, because we must answer that question honestly if the same thing is not to happen all over again: (Quote from "The Valor of Ignorance.")
"Whenever a nation becomes excessively opulent and arrogant, at the same time being without military power to defend its opulence or support its arrogance, it is in a dangerous position. Whenever the wealth and luxury of a nation stands in inverse ratio to its military strength, the hour of its desolation, if not at hand, approaches. When the opulence and unmartial qualities of one nation stand in inverse ratio to the poverty and military prowess of another, while their expansion is convergent, then results those inevitable wars wherein the commercial nation collapses and departs from the activities of mankind forever.
The only poverty from which a nation suffers in war is poverty resulting from the excesses of opulence. In a nation ruled by opulence, men and the souls of men are not only the valets of wealth, but the nation itself is obsequious to it. The government pursues its course through a labyrinthine way; the interests of countless individuals are paramount to those of state, and national ambition ceases to exist. The commonwealth in protecting individual interests resorts to expedients that are as temporary as the lives of those who make them. Yet to these transitory acts the integrity of national greatness is sacrificed. When war falls upon such a nation it becomes disunited. In the same myriad-minded manner that it carried on the mercantile projects of peace it attempts the conduct of a war; then disintegration, disaster and destruction ensue.
On the other hand, in a military power where individuals are considered only as instruments of its greatness, the dreadful intentness of its aims knows no discouragement, the straight-forwardness of its progress no hesitation, the terribleness of its energy no fatigue. Neither property nor mankind disturb its calculations. It is systematic, simple in design, relentless in prosecution. Theories of finance carry with them no awe; revenues and commerce it takes as it finds them; millionaires and economists strike no terror to its heart, for the excise and stamp duties it levies are not on material resources, but on the souls and passions and ambitions of men. These resources are exhaustless, and so long as nations conceal these facts from themselves, so long must they suffer and be vanquished and die."
And so it was that we were confused in purpose even after the outbreak of the war in Europe. We did not realize the strength of Germany until after the fall of France. We were contemptuous toward Japan until after Pearl Harbor. Let me quote again from Homer Lea writing 33 years ago: "A war with Japan demonstrates the truth of the statement that no one can foretell from age to age, or even from decade to decade, in what quarter of the world willrise up a great military nation. This Minerva birth of militant power has always been to mankind an enigma, a dread, but never as yet a lesson. By these things he never profits. He forgets when he should remember, and scorns where he should inquire. So from time to time do warring, conquering tribes burst upon the incredulous world; sometimes from rocky places; sometimes out of wreckage; down from alcoves of God, or up from abysses, they thunder and destroy."
At the end of the world war we had not learned the lesson that Homer Lea was trying to teach. We relied on ideals and good will and international trade to give us security. We watched great military powers grow up in Germany and Japan with exactly the attitude that Homer Lea describes.
Today we realize our present national peril. But that quotation I have just read still has meaning for us in the year that is to come. Our military strength is increasing so fast that sooner or later we are going to be temporarily safe from actual attack. We will then be safe from actually losing the war. We will be at least holding the enemy at arm's length on every front. The question will then arise whether we should isolate ourselves behind these new fortifications and make a peace while the power of our enemies is still intact.
Once we are safe from losing the war, the task of winning it will appear an unnecessary sacrifice to many well-meaning individuals. They will suggest new treaties which outlaw war as an instrument of national policy, or boards of international arbitration to protect against aggressive military power. We must arm ourselves today against the influences for a negotiated peace which leaves our enemies still strong enough to prepare for another war.
What will happen if we negotiate a peace which leaves us without control of our enemies? Look back to the last war. After the defeat of Germany, Duisberg, head of the German Dye Trust, said that the military war was over, but the economic war had just begun. Then we thought he was talking nonsense. Today we know what he meant. Last week the Department of Justice discovered a list of the international cartels formed with particular relation to American business by the German Dye Trust. There were one hundred and sixty-two such agreements. They permeated the structure of American industry. They gave private groups the power to control our foreign economic policy, to divide world markets, to make international commercial deals with our enemies unknown to our Department of State.
To these international cartels we owe the peace of Munich. To these same cartels we owe the failure to expand American industry prior to Pearl Harbor. To the interests of these cartels in stabilizing prices and restricting production we owe our present scarcity in all basic materials.
To a large extent our present industrial unpreparedness of this war is due to the fact that Germany through international cartels built up its own production and assisted the democracies in restricting their production in electrical equipment, in drugs, in chemicals, in basic war materials such as magnesium and aluminum. International cartels with the active assistance of American interests have operated to deprive us of markets in our own hemisphere by giving them away to Germany.
These restrictions of production are now being rapidly terminated as the war effort gets under way. America is awake to that particular aspect of the problem. But there is another danger from the existance of these cartels which we have yet to face. It is a danger which will be felt in their influence over the peace that is to come. That danger arisesfrom the fact that these cartels have not been terminated, they have only been suspended during the war.
The small group of American businessmen who are parties to these international rings are not unpatriotic But they still think of the war as a temporary recess from business as usual with a strong Germany. They expect to begin the game all over again after the war. It is significant that all these cartel leaders still talk and think as if the war would end in a stalemate, and that, therefore, they must be in a position to continue their arrangements with a strong Germany after the war. This is not shown by their public speeches, but by the actual documents and memoranda of business policy which we find in their files. If you read the documentary evidence in the hearings on the rubber cartel of Standard Oil of New Jersey and the German Dye Trust we will get a typical pattern of the thinking of international cartel leaders continuing after Pearl Harbor.
The secret influence of the international cartel is going to be thrown in favor of peace without victory when the first opportunity arises—just as it was thrown in that direction at Munich. Their international financial power, their control of world markets all depend upon taking up with Germany where they left off. They are going to be joined by many sincere people who dread the task of completing the job of victory when we are no longer afraid of actual attack. We must fortify ourselves today against these influences which may creep upon us unawares within the next two years.
And here is the first task before this bar association—organized opposition to the idea of peace without victory. Through your committees, through your resolutions, through your formulated programs you should speak with a united voice that national security for the future cannot depend upon ideals, it must be based upon power to prevent militant nations from arising and again threatening our institutions with attack. The Minerva-like birth of militant power must cease to be, to quote again from Homer Lea, "An enigma, a dread, but never yet a lesson." The oceans are too narrow today to give a security that is not based upon actual power. The Bar Association with a united voice must oppose any drive for peace that may come out of the discouragements that are possible and even probable in the next two years, unless that peace is one that gives us power instantly to suppress international gangsterism whenever it rears its head. This organization of lawyers must impress upon the thought of their community that our duty is to build up our morale to win this war abroad and never permit it to end in the same division of power and international anarchy which makes one victory in the World War and in an initial defeat only twenty-five years later.
No drive for peace is possible now while we are still flushed with indignation over Pearl Harbor—while we are still in actual danger of attack. But a glance at the newspapers will show you that a situation is soon developing under which peace without victory may easily be mobilized among some people by a few dominant groups. The military commentator, Hanson Baldwin, whose percentage for correct guesses is very high, said on May 20th, (I quote) "Since December 7th the strategic situation has steadily deteriorated from the point of view of the united nations." Let us not blink this fact or be misled by headlines showing heroic resistance in China and Russia. The united nations are still losing the military battle. America is gradually winning the production battle. The time is coming when our production will be high, our defenses temporarily impregnable. At that very time the strategic situation abroad may indicate that we must build up an offensive all over again from the beginning through the slow and painful process of years.
Then will come the drive for peace to take advantage of our temporary security. Then will come Americas opportunity for a second Munich.
Then will come a chance to repeat the peace of the last war. And some new Duisberg will say, with even better prospects than he had before, "The military war is over, now we will begin the economic war." If Germany could do it in 1914 after a crushing defeat, they can do it twice as fast in 1943 after a stalemate, and with the help of Japan. To organizations like this Bar Association is left the task of arming us against the repetition of the economic and military possibility of a peace without power to sustain it.
This, as I see it, is the first task of the American Bar with respect to the military war abroad. The other task relates to the war of production at home. The American Bar are not production experts. But there is today a psychological handicap to the work of production men which the Bar, better than any other organization, is in a position to combat if it speaks with a united voice. What has been the trouble with our industrial morale at home up to Pearl Harbor? I assert that it has not been a lack of willingness to make present sacrifices, but a lack of positive faith in our own institutions for the long-run future. We have been afraid to expand production because through long continued restrictions on full production imposed both by business cartels and legislative enactment we have adopted a policy of scarcity economics—a policy of high cost and low turnover; of stabilized prices. We have been afraid to accept the benefits of our own efficiency because we thought a capitalistic system could not distribute the full amount of goods our plants could produce. We had only a wavering faith in our own economic tradition.
The war put us under the necessity of changing those restrictive habits—it has forced us to produce. But we undertook that task as a sacrifice, not as an opportunity, spending half of our time talking about a depression that would follow the war.
It was during the long years of the depression our faith in the capitalistic system we are fighting to preserve became weak, and our industrial morale low.
There is too much economic pessimism left in our land today. We are talking too much about social revolutions, or managerial revolutions, depending on which side of the fence we happen to be. Sincere people question how we can produce and distribute goods after the war without the direct intervention of a strong central government. Everywhere you hear talk of the depression that is supposed to be coming because of the vast increase of productive capacity which the war is bringing about.
The trouble with that sort of talk is two-fold. In the first place it destroys that fundamental confidence in our way of life—in our basic institutions. If a general organizing an army felt that every increase of its equipment was an economic evil he would approach that task of organization with a confused mind. In the second place the fear of a depression caused by our vast increase of productive capacity is dividing group against group today, because each group feels that it must seize enough economic power to protect itself against the depression that is to come.
The business or labor organization which spends half of its time devising ways to control and restrict future production that it looks at as an economic burden cannot bring to the task of present production the enthusiasm which our war effort requires. What we need is a new vision which removes this psychological handicap to the morale necessary for full production. We must get rid of the fear which now obsesses labor and industry and agriculture that every increase of productive capacity deprives them of future economic security. We must prove to American industry and labor that future prosperity and economic security—not economic collapse, will flow from the vast increase of production capacity released by the war.
We have had to take a leaf out of Germany's book in military tactics. It might be well also to look at Germany's industrial tactics; what gave her people their industrial morale since 1934? George Axelson returned from Germany in the late autumn of 1941. He wrote in the New York Times for December 16, 1941, that in spite of the Russian victory there was no sign of internal collapse on the industrial front inside Germany:
"The Germans are being constantly encouraged by their press to consider the war as a piece of good business. While the campaign against Russia was going in the right direction for the Germans, the people at home were constantly fed with statistics very similar to the profit-and-loss sheets of a prosperous corporation. Every bushel of grain and every ton of iron ore in captured territory was carefully listed as a permanent asset of the Reich for the next 1000 years. And today, the oil wells and the mines of the Japanese bag of loot are included."
Contrast our own attitude. In a report published after Pearl Harbor, the National Resources Planning Board expressed the current fear which is undermining our industrial morale, as follows:
"Many people dread to think of what is coming. Businessmen, wage earners, white-collared employees, professional people, farmers—all alike expect and fear a postwar collapse, demobilization of armies, shut-down in defense industries, unemployment, deflation, bankruptcy, hard times. Some are hoping for a post-war boom. We got that after the first World War. Not improbably we may get it again . . . if we do experience a strong post-war boom, there is, however, the gravest danger that it will lull us to sleep. Sooner or later such a boom will end in depression unless we are prepared."
The report goes on to point out the necessity of planning for the future. It outlines a number of sensible and concrete proposals. However, so long as the fear expressed in this report exists, no great organization is going to be willing to trust in the future power of the National Resources Planning Board to carry out its suggestions in the postwar depression which it predicts. We have seen similar suggestions defeated too often. The industrial leader, the labor leader, and the farm leader, each guarding the selfish interests of his own group, remembers the depression of 1930. He has little reason to believe that a different political situation will exist in the next depression. He knows that in the political confusion of a depression only the group with industrial or political power gets anywhere with Congress.
Therefore, each powerful organization in our economy is busy laying down its own selfish strategy to protect itself against the post-war depression that is supposed to come from full production. There isn't the slightest evidence that tightly controlled labor organizations or industrial organizations or farm organizations are willing to turn their economic future over the National Resources Planning Board. Even Pearl Harbor has not diverted any of our organizations from their efforts to build a Maginot Line against the future enemy of full production by uncontrolled free enterprise. Labor, agriculture, and industry each wants to be in a position of sufficient dominance so it can keep its own prices from falling after the war. That is the reason for the desperate effort by labor unions, strategically locatedin basic industries, to establish closed shops. They think they will need the power over management which the closed shop gives them in the post-war depression. It is the reason why other labor unions strategically located in transportation or housing force inefficient methods and useless labor on employers. They think they will need that power at some future time when jobs are scarce. That is the reason why our great corporations have been haggling with the government in order to get contracts which protect them against the inroads they fear from new productive enterprise.
A nation that fears production, that regards it as a step toward a new depression which should be tolerated only during an emergency enters the race for production dragging a ball and chain. The fear of full production sets group against group. It results in a struggle for control after the war. It prevents us from becoming a nation with a united will to produce. It is in essence an attack on capitalism as a way of economic life.
To get the will to produce, undivided by a struggle to protect the future position of each conflicting group, we need a ringing affirmation in the fundamental soundness of our own institutions to produce prosperity for all. Never was there greater need for economic optimism. At the same time never was there greater reason to believe that the war will end our years of depression. Indeed, I believe that we are on the verge of a new industrial age—the age of light metals and plastics and chemicals. The economic progress of man is dependent upon the discovery and use of new metals. The scarcity of the bronze age was succeeded by the plenty of the iron age. Then a new economy of plenty was created by the steel age. Today the unlimited possibilities of the light metals and chemicals age lie before us.
The so-called common metals on which our economy is now based are really not common, but scarce. Copper, lead, zinc and nickel combined are only one-twentieth as abundant as magnesium. Magnesium alloys are stronger and easier to work than aluminum. They can take the place of steel. Aluminum is twice as abundant as iron. Plastics can take the place of glass and steel and other metals. They are based on chemicals whose supply is unlimited.
This means more abundant housing, cheaper transportation. Airplanes, trains and automobiles will be lighter and stronger. They will be operated by more efficient fuels. Each of these new materials will compete with others. Soon we will increase magnesium production from 6,000 tons to 360,000 tons. This means that the steel companies must produce better steel instead of idling under the umbrella of non-competitive practices as they did in the past.
With the unrestricted production of these new light metals the whole price structure will be lower. The consumer's dollar will be worth more. The farmer can exchange his products for houses built like Fords, for lighter and better farm machinery. Millions of jobs will be created by the unleashing of this new productive capacity which can be exchange for full production on the farm.
An so winning the war is going to make the capitalistic system work, because it will revive it with the new blood of full production. There is only one danger—that the new light metals will again fall into the hands of cartels with power to restrict their supply and make them high cost specialties.
With this vision we need only one long-range economic policy during the present crisis—to keep our new wealth from falling into the control of private groups whose interests will lie in preventing its use. Once we catch that vision our problems of cooperation with labor, industry, andagriculture will be solved. Ail of these groups are patriotic. They need only to be assured that economic collapse will not follow their present efforts to produce. Then they can stop trying to protect their future positions and give their whole heart to the work at hand.
There are a lot of people who blame the capitalistic system for the shortages in basic materials which now confront us, and for the failure to use our full productive capacity during the two years before Pearl Harbor. To blame these shortages on the capitalistic system is defeatism of the worst kind.
I believe in the capitalistic system—not only as a guarantee of individual freedom, but as the most efficient way of production. It is the system we are fighting for against the totalitarian ideals of our enemies.
Big business is not an economic danger so long as it devotes itself to efficiency in production and distribution—so long as its management is not directing its policy to maintain high prices and low turnover.
When we rid big business of that kind of management that compels that kind of policy, we will not only win the war, but we will establish an economy of abundance after the war with the minimum of government regulation or control.
There can be no greater nonsense than the idea that a mechanized age can get along without big business—its research, its technicians, its production managers. Not only our production during the war, but our way of life after the war depends on big business.
When big business is freed by the inevitable pressures of the war, small business will have opportunities never dreamed of during the period of our depression. Think of the hundreds of thousands of small businessmen who owedtheir living to the rapid development and the full production of the automobile industry. And then envisage a future of small businesses when, through the development of new techniques and the use of new competing metals, the housing industry will be free to produce houses like Fords. Transportation will be cheaper, the consumers dollar will be worth more—the farmer will get more goods for his money.
And so I know of no more important task in winning the war on the industrial front than for the organized American Bar to use its united voice, to kill the economic pessimism about the soundness of competitive capitalism that is dividing us into separate groups today, each fighting for control. Ideas of social and managerial revolutions today are creating pressure groups who are demanding power over management, power over prices, power over production in order to give them a defensive position in the chaos they fear is coming as the result of over-production. The way to fight that sort of disunity is to convince our people that the institutions of competitive capitalism for which we are fighting are fundamentally sound, that they need not fear for the future, that they are fighting a war which will not only liberate America from attack but will liberate our people from future want and insecurity, by compelling us to abandon the restrictions on production that has created want in the midst of plenty during the days of our depression.
That is peculiarly the function and the obligation of the American Bar. They are the guardians of our institutions of American industrial freedom. And when they have raised our faith in the efficiency of those institutions, we can fight the battle of production at home with an undivided mind and purpose, and the enthusiasm of one who knows he is creating a better economic future for his children.