Raw Materials Are the Fuels of Industry


By JAMES E. MURRAY, Chairman of the Senate Special Committee on Small Business Problems

Delivered before the Mining War Council of the Colorado Mining Association, Denver, Colo., January 30, 1943

Vital Speeches of the Day, Vol. IX, pp. 314-318.

I GREATLY appreciate the privilege of attending this National Mining War Council. I am speaking here today as a citizen of a great mining state as well as a United States Senator.

For more than sixty years, Montana has been contributing vast mineral wealth vital to our national industrial development. All my active life, I have been surrounded by the traditions of mining. I enjoy the distinction of being recognized as a member of the mining fraternity. I am a Montana small mine owner myself, interested in all the problems which today are exciting your interest and study.

Mining, during this war effort is one of our most vital industries. Victory in this desperate war depends in a large measure on the contribution which our great western mining states may be able to make in the production of metals and minerals. This war will be won by the side that can produce the greatest amount of tanks, planes, ships and guns. If we are to win, we must develop our extensive deposits of metals and minerals to the utmost. A serious shortage of critical metals at a vital moment in the crucial battle of production may easily jeopardize our success on the battle fronts. We need and must have all the metals and minerals we can get from domestic sources. We must not place too much dependence on the hazardous course of importation—valuable as importations are to us. We can use all the limited amounts of raw materials we are able to import as well as all we can produce at home. I am in full accord with Secretary of the Interior Ickes—we must pile stockpile upon stockpile.

The principal concern in military and essential civilian supply is in the development and expansion of adequate sources of raw materials. Particularly is this true of the metallic and non-metallic minerals which form an important part in the foundation of our material for war and essential civilian economy.

In the early months of the war, we were greatly concerned with possible sabotage of our mines—what a stick of dynamite could do to a shaft is horrible to contemplate. At one time our military men were concerned with the possibility of losing mines by sabotage or by bombing in case we were invaded. Now we find that a few men in the War Production Board writing a directive on a simple piece of paper can just as effectively put a mine out of commission. Not my least apprehension is the present lack of inclination of the War Production Board to permit expansion of mines now operating or to permit the development of new deposits. New development is absolutely necessary if we are even tomaintain our present rate of domestic production. Certainlythere can be no substantial increase in production without adefinite program of new development.

In the face of the reluctance of the War ProductionBoard brass-hats to approve new mining projects, both thecopper and lead branches this month have issued press releases pointing out the hazards of depending on imports and emphasizing the obvious fact that safety of supply lies in domestic production. Thus they concede on one hand that we can rely with safety only on domestic supply, and on the other hand decline to encourage development of domestic supply. This conflict in policy is disconcerting to the many mining men of the country who are hanging on with the hope that the War Production Board may yet recognize the danger of this and change its policies.

The stark facts are that we are still confronted with shortages of many strategic and critical metals and minerals. Mr. Lou Holland, former Chairman of the Smaller War Plants Corporation, appearing before the Senate Special Committee on Small Business Problems last December complained bitterly that one important factor standing in the way of utilization of our small manufacturing plants is the shortage of raw materials with which to make military supplies. It then became our Committee's concern to discover the reasons for these shortages. Obviously, as military supplies come first, essential civilian manufacturing is suffering even more acutely from raw material shortages. Lack of these raw materials have already caused widespread dislocations in the ranks of small business and thousands of our small plants have been compelled to close their doors.

In my report to the Senate on behalf of the Senate Special Committee on Small Business Problems under the caption of "Critical and Strategic Materials," occurred the following paragraphs:

"One of the biggest obstacles to the fuller use of smaller plants in war production is the shortage of the steel, copper, aluminum, and other basic metals that constitute the life-blood of the war effort.

"While this committee does not feel that the shortage of metals is an excuse for the Smaller War Plants Corporation's failure to make more progress during the past months, the Committee is acutely aware of the strategic importance of our materials supply in the war program. There is no escaping the fact that our supply of critical and strategic materials sets a definite ceiling not only upon the amount of munitions that can be produced in this country, but upon the number of smaller plants that can be effectively used in war or essential civilian work.

"The committee also feels that its responsibility toward small business includes the thousands of smaller mine operators who have thus far been unable to participate effectively in the production of critical and strategical materials. The committee has heard testimony from small mine operators to the effect that the War Production Board has failed to take action looking toward the expansion of production of essential materials. Moreover, it is a well-known fact that the war construction program has permitted an overex-

pansion of factories that can not be fully utilized because of the lack of sufficient metals and minerals. In other words, we have an over-expansion of factories and an underexpansion of the mines needed to produce the materials required by the factories."

The report further says:

". . . the chairman of the committee raised the question as to whether or not a War Minerals Director should be established and given full statutory power to co-ordinate the activities of the many Federal agencies engaged in the discovery, development, production, importing and financing of metals and minerals. The committee has also sent an inquiry to the five agencies whose activities bear most directly upon the question: The War Department, the Navy Department, the War Production Board, the Department of Commerce, and the Department of the Interior. This inquiry is aimed at getting the full picture of our requirements for critical and strategic raw materials, the extent to which the smaller or sub-marginal mine operators are being used in meeting these requirements, the specific programs in connection with copper, lead, zinc, steel, aluminum, manganese, and other critical metals and minerals, the type of personnel in charge of the materials programs in these agencies, and the possible legislative or administrative changes which might more fully define responsibilities and result in more effective administration. Careful and comprehensive responses are being received from these agencies. When the material has been assembled and analyzed, the committee will report its findings and conclusions."

Mr. Donald Nelson, Chairman of the War Production Board, expressed the situation graphically in a recent letter to me in which he wrote, "Shortages of materials do limit the number of plants which can be utilized, but we shall never know how much materials we really can muster until the pressure is even greater than it is today, with many, many hungry industrial mouths crying to be fed with raw materials. Particularly potent is the desperate and highly vocal demand on metal and mineral extractive and processing industries, the strongest incentive toward increasing basic production and bringing in new sources of supply. This factor is now at work and must continue to be at work in iron and steel, copper, lead, zinc, and many other critical minerals."

Personally, I feel sure that Mr. Nelson has consistently realized the necessity for full encouragement of mining in an all-out program. Unfortunately, the War Production Board seems to be pervaded with bankers, stockbrokers and military men who do not realize that minerals are not produced merely by waving a wand. Secretary Ickes said upon being told of Mr. Nelson's statement, "I am glad to see in the statement a real recognition on Mr. Nelson's part, at least, of the need for increasing our domestic production of materials, particularly of minerals and metals. It would be very helpful if Mr. Nelson's whole organization also saw clearly the need for increased domestic production of minerals and metals." I heartily agree with Mr. Ickes on this matter. My impression is that the Chairman of the War Production Board sees clearly that a restrictive policy applied to mining expansion and new developments will be fatal to obtaining adequate raw material supplies. I also believe that those charged with finished goods production and many of the engineers in the lower reaches of the War Production Board believe the same thing. But there seems to be an impervious layer of officials sitting in between, which renders the work of both impotent. They operate on a plausible basis, but their decisions will seldom stand up under the clear light of reason and the results are proving fatal to the war effort.

The metals and minerals picture must be viewed in three parts before it can be seen in its final perspective: (1) domestic supplies, (2) imported supplies, and (3) reclaimed materials from salvage operation.

In my studies I have learned that salvage is an important factor in stretching out our raw materials. But, obviously, salvage operations can supply only a small part of our total requirements. And, even in salvage operations the wrong viewpoint sometimes is taken. A high WPB official, with real responsibility in the mining program, is said to have remarked that if he had a million dollars to spend for zinc, he would prefer to spend it on a scrap campaign rather than on mine developments. It is scarcely necessary to point out to a group like this that of all scrap campaigns, one to retrieve secondary zinc would net the least results.

Imports are supplying large quantities of minerals, but naturally the amounts which can be obtained, excepting for imports from Mexico and Canada, depend on the amounts of shipping available and the direction in which they happen to be traveling according to the fortunes of war. There is an opinion in some quarters that we should exhaust the resources of our neighbors before we tap our own. Secretary Ickes, appearing before the Senate Small Business Committee answered that one. He said: "Our need for domestic production of strategic minerals should eventually become obvious—even to the blind . . . There has been far too much tendency to resolve all our problems of mineral shortages in favor of importation."

When I asked Secretary Ickes if he believed it preferable to preserve our national resources by exhausting those of our neighbors, and if he thought such a policy compatible with a sound war program, he answered, "I have indicated that I don't . . . I see no cause for alarm in any projected rate of depletion of our mineral resources, provided the necessary steps are taken to ensure that as a given mineral resource is depleted, other mineral resources are developed which will take its place."

I know that you, as mining men, at times have had differences of opinion with the Secretary of the Interior, but I heartily recommend that you get a copy of the hearings of the Senate Small Business Committee containing these and other pertinent remarks.

You will find them most illuminating and instructive and I think you will agree with me that he spoke sound common sense. He complained bitterly that "the apathy encountered by our production plans is typical. Our technology is well in advance of production. Tested processes for extracting metals are accepted half-heartedly and then only after repeated urgings." In another place, Mr. Ickes remarks, "We've made the effort to force increased production of metals. We're still making it. But the story on all of the metals you mentioned tends to be pretty much the same. The effort peters out, somehow, in the War Production Board. And it isn't a simple matter of dealing with definite refusals."

I can appreciate this feeling. I have felt it myself. I can understand the feeling of frustration engendered in the breast of a mining man who knows how badly metals and minerals are needed for the war effort and yet finds himself given the run-around from bureaucrat to bureaucrat, only to find that a mine which was satisfactory to them in April is of no value in December. This actually happened to one miner who testified before our Committee. He had expended $70,000 to keep a mine open until the vacillating bureaucrats could make up their minds. "At least my zinc can't be torpedoed," he remarked. Little did he know what was in store for him. It was "torpedoed" with a little piece

of paper from the War Production Board saying they thought his zinc would cost too much and withholding approval of the project. Perhaps ten million pounds of zinc, ready to mine, were thus lost to the war effort.

But I am diverging from the subject of imports. Not alone is the only secure source of supply the North American Continent, but particularly, our own United States. Although we may have empty ships returning from various parts of the globe, to divert this shipping for thousands of miles over long, frequently unprotected sea lanes not only encourage loss of ships and cargoes but through waste of traveling time seriously cuts our shipping capacity. However, I do not quarrel with getting materials from abroad as long as we do not unwisely neglect domestic sources. Personally, I do not believe we can have too much of any raw material during the uncertain course of this war.

Several reasons are currently given for the now decreasing production of some minerals and metals in the United States, and especially of the base metals, copper and zinc. Two reasons are particularly emphasized, the lack of critical materials for allotment to the mining industry under the Controlled Materials Plan, and the lack of adequate man power for our mines. These alleged reasons are repeated over and over again by responsible officials as their excuses for not expanding present facilities and for not opening up the hundreds of new sources of non-ferrous minerals represented by our small and marginal mines.

I feel that the public should know if the excuses being given for not expanding our raw materials resources are sufficient or whether they reflect a defeatist attitude on the part of officials responsible for the program. I should not like to suggest that any ulterior motives might operate; however, a lifetime training in an artificial economy of scarcity is hard to overcome.

Perhaps, as the Small Business Committee suggests, we should have a War Minerals Director to direct and coordinate the work of the War Production Board, the Reconstruction Finance Corporation, the Man Power Commission, the Smaller War Plants Corporation, the Board of Economic Warfare, the Metals Reserve Corporation, the Defense Plants Corporation, the U. S. Geological Survey, the Bureau of Mines, and a few other alphabetical agencies all acting independently and hopelessly messing up the minerals and metals war program. I have noticed an increasing interest among members of the mining industry, reflected in the press, in the idea of a War Minerals Director, and it may be well for this Mining War Council to consider the proposal for the appointment of such a director. If Congress would legislate the requisite authority to such an office and a strong man from the industry were chosen, I feel that much good would be accomplished. At least we would have an ultimate authority beyond whom the buck could not be passed. As it is, the bureaucrats throw the ball from one to the other, and you can't put your finger on the one responsible for the run-around. It is a case of "button, button, who has the button?"

It has been authoritatively stated that ten thousand men would completely staff the present non-ferrous mineral mines. A pool of twenty thousand should leave an adequate margin for opening all of our important marginal mines and hundreds of our small mines. Only a portion of these men need be skilled workers, and most of them, where necessary, could be trained in mines now operating. It seems incredible indeed that while the Manpower Commission is pretending to deal with millions of workers in the manufacturing industry, it is impotent to find a few thousand strong backsto fill the astonishingly small requirements of the industry which furnishes the bulk of the raw materials which keep war and essential civilian industry operating.

Even more incredible is the attitude towards the allotment of critical materials. Mining uses relatively small amounts of critical materials. Yet your industry produces the greatest part of what all industry uses. The War Production Board Mining Branch has informed me that just enough critical material has been allotted to keep our present mines operating, but none for expansion or new operations. Could anything be more stupid? As a matter of fact, the Director of the War Production Board Facilities Bureau has stated it as his opinion that expanding our mining operations in 1943 will not increase our production in 1943 but will seriously hinder the overall war effort! What kind of short-range planning is this? What kind of impractical theorists are we plagued with? Much War Production Board planning seems to be on a day-to-day basis, and the metals and minerals program is certainly no exception.

However, manpower lack seems to be the crux of the situation. This is partly due to poor planning in our manpower program, but I realize it is also tied to the wage factor. Whether by flat price increases or bigger premiums, we must have adequate prices for the miners' products so that competitive wages may be paid and workers kept happily in our mines, mills and smelters. You must be able to afford liberal development programs. There is too much stress being placed on the financial picture. You can't shoot the Japs with dollar bills! Minerals are what we need to knock them over! If higher prices allow a few mines to make excessive profits, I can assure you and the OPA that my friend Henry Morgenthau will be close at hand to relieve you of such a burden.

The destruction of mining enterprises through repeal of percentage depletion allowance in our tax bills has been one of the most persistent efforts of the Treasury. The fight is coming up again. This short-sighted policy has been headed off so far only by hard and determined work of the mining industry with the support of those members of the Senate and the House who realize that such a move would ruin the mining business. A mine is not a lasting asset—it is a wasting asset. Unless the miner's capital can be returned so that he may look for and develop a new mine when the one he is working is exhausted, continuation of mining production is in grave danger, and no sensible man would venture his capital to develop new ore bodies. We must fight this policy of Morgenthau's to the last ditch!

This brings me to the topic of mine financing. There is little or no venture capital left since the advent of our program of crushing taxes. The miner is almost without exception dependent today on governmental financing which may be obtained, depending on the circumstances, from the Reconstruction Finance Corporation, the Metals Reserve, or the Small War Plants Corporation. But let me point out flatly that none of these institutions will put out substantial sums unless the project is approved by the War Production Board. This seems logical, as on the War Production Board is saddled the responsibility for obtaining and coordinating production. We have the strange experience these days of seeing Mr. Jones' Reconstruction Finance Corporation, once the most conservative of organizations, liberalizing its program while the War Production Board, which has no financial responsibility, splits nickels. All of these gentlemen who are so concerned with the safety of mining investments should realize that "war itself is not a safe business.

I can, I am glad to say, lay claim to sponsoring considerable legislation, some as early as in 1940, which has allowed the Reconstruction Finance Corporation to loosen up its purse strings to the mining industry. As Chairman of the Senate Small Business Committee, I sponsored the Smaller War Plants Corporation which provides, among other things, for assistance to small mine operators. Under its newly appointed and able Chairman, Col. Robert Wood Johnson, I hope that agency will soon be taking active steps in the financing of a raw materials program, including metals and minerals.

Every major mining project then, from inception to financing, depends upon what Mr. Ickes designates as "layers of desk engineers" in WPB. My impression is that most of these engineers, considering the limitations of their training in the profit motive frame, want to do a good job of domestic mineral production. Those who set the policies are the culpable officials—those who set the "men and materials" formulas—those, for example, who would prohibit the operation of a mine containing zinc because it also contains lead, gold and silver, by calculating all the costs against the zinc only. There was a time when gold and silver were considered an economic godsend—the presence of these once precious metals frequently allows production of lean base metal ores. But today, from the attitude of the War Production Board, one would think that the Creator made a serious error in permitting deposits of complex ores!

It seems to me that before the War Production Board takes drastic steps having dangerous effects on any branch of the mining industry, as in the case of the fatal order L-208 closing gold mines, it should notify those interested far in advance of taking action. Every opportunity should be given to the victims to present their case. Furthermore, any such drastic order as the gold mine closing order should be preceded by appropriate legislation affording relief for those affected by possible harsh and ruinous results. I was strongly against this order, as I saw clearly that it would result in the economic loss outweighing the benefits to the war effort. Mining men generally could easily foresee that it would result in great disappointment. The gain in manpower to strategic and critical mines was infinitesimal. Now, with my gold mine relief measure, S. 344, which I have introduced in the Senate, we are trying hard to lock the stable door after the WPB has stolen the horse! When this bill comes up for hearings, which will be soon, I invite those of you who are concerned to appear before the Senate Committee on Mines and Mining and present the miner's case in no uncertain terms. I shall do everything possible to get this bill passed promptly.

It would seem as though a defeatist attitude on the part of some War Production Board officials responsible for the Controlled Materials Plan is causing unnecessary shortages of raw materials if, as WPB Program Vice-Chairman Ferdinand Eberstadt indicated to the Small Business Committee on December 15, 1942, these officials are cutting our war manufacturing programs within the scope of the present raw material supply instead of encouraging by every possible means the development and production of more minerals from our marginal and small mines. By the expansion of presently operating mines, we should investigate carefully the reasons for this attitude and ascertain the immediate cure. Eberstadt said "the material shortage is colossal." The Small Business Committee contemplates a series of hearings on various phases of the raw materials program, particularly touching on non-ferrous minerals and metals. Aside from the base metals, I am informed that all is by no means wellwith the ferro-alloys program. There is becoming evident an indication to discourage further production of manganese and chrome; the vanadium situation may bear looking into, and these are by no means all. I recently submitted the following memorandum to Mr. Donald Nelson, Chairman of the War Production Board:

"On March 20, 1942, I headed a delegation which called on you and submitted recommendation for $1.00 per unit for ores running 40 per cent and above in manganese. You were fully sympathetic and I am confident you recognized the importance of the situation and endeavored to establish this price to small producers, even to those producing in less than carload lots. I believe that representatives in your organization have advised you, as they have advised others, that the purchase in less than carload lots has been approved and that the price of $1.00 per unit has been established. This price established, however, does not apply to 40 per cent ores as recommended and as you, no doubt, feel was granted. It simply shows the extent to which discrimination against small producers is being carried on in your organization. The price of $1.00 per unit was granted May 4, 1942, by the Metals Reserve Company after consultation with the Manganese Branch of the War Production Board, but this price applies to ores running 48 per cent and above in metallic manganese. Only producers with costly benefication plants can produce 48 per cent ore. Small mines without benefication plants can hand-pick or concentrate the grade to the neighborhood of 40 per cent for which they receive only 65 cents per unit. A unit is 22.4 pounds of metallic manganese regardless of whether it is contained in a ton of ore containing 40 or 48 per cent metallic manganese.

"Why was a $1.00 per unit not established for 40 per cent ore as recommended?

"Why has the purchase in less than carload lots not been made available to all manganese producing states?

"Why has the Manganese Branch of the War Production Board almost invariably attempted to discourage and frustrate new developments by small producers in the United States?

"Why all this, then subsidies and ships for foreign producers, jeopardizing the security to the country and lives of sailors and seamen?

"What is this 'buffer' committee known as the Technological Committee' formed largely of representatives of companies owning foreign manganese mines, which passes on new manganese developments and plans proposed for the lower grade ores?

"What is the background and experience of those in the Manganese Branch of the War Production Board?"

Are additional, workable sources of domestic essential minerals available for the war effort? You and I know they are! Will our mining industry go all out, if given reasonable support, to produce these minerals? You and I know it will!

Preliminary investigation indicates that our raw material planning has been, and is being done in a short-sighted fashion, on a short-range instead of a long-range basis. One excuse for this which I do not believe to be valid is often repeated—military and lend-lease requirements are too "fluid" and fluctuating to permit firm figures to be known long enough in advance for concrete planning operations. In other words, as the requirements change, we may find that we appear to have too little of a metal today and too much tomorrow. It is my firm conviction that the logical answerto this is—we can't have too much of anything. Our stockpiles cannot be too large. We cannot have too many mines operating.

If this liberal and rational attitude were the philosophy of the War Production Board planners, we would be able to feed ample raw materials to our smaller war plants; we might not have to curtail our essential civilian economy to the extent of permanently ruining small business and radically changing our American way of life. It is neither just nor healthy that one hundred mammoth manufacturers should hog about 70 per cent of our total output, the volume which had formerly engaged the production facilities of 170,000 smaller concerns. This dangerous trend is reflected in mining by the War Production Board's extraordinary reluctance to allow small mines to operate.

Many of the troubles I have discussed are gradually being ironed out. Preparing for war has been a tremendous task and mistakes are inevitable. I feel that the War Production Board is responding to constructive criticism. I am confident that with public support strongly behind the Senators and Congressmen who are pointing out mistakes and suggesting cures further progress will be made.

To sum up, we need all the raw materials we can get. We should not be afraid that large stockpiles may result in stocks of materials being left over after the war. We should be glad of this possibility of providing for our post-warneeds. If domestic production can be supplemented by imports, so much the better. In other words, this is not the time to apply an economy of scarcity and inhibit the development of our mineral deposits. Good planning and a slight readjustment in the application of men and materials could solve the major problems of your industry.

On the basis of first things first, full production in our mines must be had before full production in our manufacturing plants can be maintained.

I am determined to discover and bring about the removal of the bottlenecks which restrict full production of raw materials, and we propose to begin with critical and strategic non-ferrous minerals.

The material of war must be produced in increasing amounts and in a never-ending stream if America is to remain the bulwark and the arsenal of democracy. We owe a duty, not only to our allies, but more particularly to our fighting men, to our soldiers, sailors and marines who are fighting this global war to preserve our independence and insure our security.

We must crush forever the militaristic ambitions of the would-be world enslavers, the Huns of the West and the East. At the same time, we owe it to our posterity to preserve and strengthen the institutions of private enterprise under which this nation has attained its enviable position of power and influence in the world.