~- 000992 000992 / THE PEOPLE'S FIGHT • for COAL AND POWER

By H. S. RAUSHENBUSH Secretary, Committee on Coal and Giant Power Author of "The Anthracite Question" flORIDA ATLANTIC UNIVERSITY LIBRARY SOCIALIST - LABOR COLLECTION

Copyright, 1926, by LEAGUE FOR INDUSTRIAL DEMOCRACY 70 Fifth Ave., New York No. 13 10 Cents a Copy 1926 ~ League for Industrial Democracy 70 Fifth Avenue, New York City

OBJECT: "EDUCATION FOR A NEW SOCIAL ORDER BASED ON PRODUCTION FOR USE AND NOT FOR PROFIT." The League invites those in sympathy with its object to join its ranks. It has chapters in colleges and in cities. Write for information to the directors.

OFFICERS (1925-1926) President, ROBERT MORSS LOVETT Vice-Presidents Treasurer ZONA GALE STUART CHASE JOHN HAYNES HOLMES Executive Drrectors VLADIMIR KARAPETOFF HARRY W. LAIDLER JAMES H. MAURER NORMAN THOMAS VIDA D. SCUDO'ER Field Secretary PAUL BLANSHARD

SOME PUBLICATIONS OF THE LEAGUE What Is Industrial Democracy? By Norman Thomas. 1925...... lSc Public Ownership Here and Abroad. By Harry W. Laidler. 1924...... lSc Challenge of Waste. By Stuart Chase. 1925...... 10e How America Lives. By Harry W. Laidler. 1924...... lOc The Profit Motive. By Harry F. Ward. 1924...... 10c The Challenge of War. By Norman Thomas. 1924..... lOc How Canada Manages Its Electric Energy. By Harry W. Laidler. 1924...... Sc Roads to Freedom. By Harry W. Laidler. 1924...... lOc The People's Fight for Coal and Power. By H. S. Raushenbush. 1926...... IOc

Special Prices for Bundle Orders CONTENTS

Page INTRODUCTION...... 4

CHAPTER I-BITUMINOUS COAL: THE BREAKDOWN OF THE FEUDAL SySTEM...... 5 Vital Nature of the Industry-Unreliability-The Show Down-Affected with a Public Interest-The Broken Promise of Competition-Eleven Defects in the Industry­ The Miners' Present Plight-The Miners' Hope-The Confusing Crisis-Social Control-Twelve Considerations in Planning.

CHAPTER II-THE PROPOSAL FOR A REPUBLIC..... 17 The Leaderless Public-A Futile Remedy-Skeptical Labor Leadership-One Plan for a Republic-Problems of Ownership, Control, Wages-Compensation for Present Owners-Incentives for Efficiency-Sharing in Management.

CHAPTER III-THE ROAD OF ANTHRACITE 24 Monopoly-Sheltered Control-High Cost of Independ­ ents-Burden of Private Control-Strike Issues-No Answer to Strike Problems.

CHAPTER IV-A PROPOSAL FOR A CHANGE OF OWNERSHIP. ... 28 Wages and Finance-Industry Free in Fifty Years-Three Steps Toward Liquidation-Cutting of Capital Charges -The Question of Control.

CHAPTER V-POWER-TO PLAN FOR THE FUTURE.. 31 Industrial vs. Human Needs-A Promise-Without Guar­ antee of Greater Human Welfare-Labor May Lose­ An Alternative-Coming Monopoly-Uncontrolled by Default-Mortgaging the Future.

BIBLIOGRAPHY. .. 36 INTRODUCTION

HIS presentation of the developing coal and power situ­ T ation, with all its promise and menace, is based upon one assumption: That a nation of sentimentalists will in time outgrow its immaturity. We may yet come to the place where the veneration, induced by the long life of our traditional system of free and ruthless enterprise, will succumb to our daily and matter-of-fact vexation with its inadequacies. For the day when we are willing to put aside our sentiment and be hard­ headed realists in our industrial and political life, this pamphlet is written.

The Committee on Coal and Giant Power, established by the League for Industrial Democracy, is considering the function, needs and social possibilities of the coal and power industries. It will publish the results of its researches and planning for the better organization of our industrial life. The People's Fight for Coal and Power, which is not published by the Committee, discusses the factors that have made such research and planning a social necessity.

H. S. RAUSHENBUSH. THE PEOPLE'S FIGHT for COAL AND POWER

CHAPTER 1. BITUMINOUS COAL: THE BREAKDOWN OF THE FEUDAL SYSTEM ({ In a jumble of mines which the natives love to call the bituminous coal industry, it is proper for each individual to do good that evil may come of it."-Hamilton and Wright.

VITAL NATURE OF THE BITUMINOUS INDUSTRY ERE is a vital industry: Shut down our coal mines and the whole country would soon not only be cold but H hungry and idle. Modern civilization is built upon coal. The industry's unin­ terrupted service is essential to the railroads, the light and power industries, the production of steel, the building trades, every manufacture, chemicals, dyes, medicines, in short, to the weH being of everybody. It enters, in some form, even into the production and distribution of every food. Even fresh eggs and fresh milk reach the market behind the steam driven locomotives. AN UNRELIABLE INDUSTRY We might well suppose that such a vital industry would long ago have been planned and developed to meet our needs con­ tinuously and well. We might well suppose that the job of furnishing the power to keep the wheels of industry turning would be considered too essential to leave to the chance of unsupervised, uncontrolled, conflicting interests of several thousand scattered companies. Quite vain suppositions those. The industry is still on the feudal basis; small scattering rivals battle each other and when the public profits it is by accident rather than design. There has been no planned unified develop­ ment in response to need. There has been no development of 5 a policy that would guarantee economies, have and hold a sound labor policy, treat a great natural resource as a great national asset. Every two or four years the nation is threatened with partial paralysis due to wage disputes in the coal industry. Again and again in the last generation the industry has literally run wild with panic shortages, over-expansion, transportation crises, speculation, and the unconscionable profit-taking of those who have as an excuse a prerponition that tomorrow they may perish. . THE SHOWDOWN We are not rich enough to support the luxury of such a situ­ ation for any great length of time. The showdown is coming soon, much as it has come in the British Isles. In 1927, if not before, when the Jacksonville agreement between the union operators .and the United Mine Workers of America terminates, there is prospect of a nation-wide crisis that will force a reor­ ganization of the industry, stripping it down to the basis of its essential function.! Nor is there the slightest intimation or evidence that the industry will, even then, on its own initiative, strip itself down to its job, or ever from within its present premises conduct its affairs in a manner which does not consti­ tute a standing menace to the economic welfare of the people as a whole. Left to the mercies of unrestricted competition and conse­ quent misdevelopment in the bituminous fields, with a state of open or smouldering warfare between management and miners a perpetual factor, and with the sole incentive to production lying in the maximum profit to be wrung from the consumer­ the industry has raised for itself problems that it has never yet solved, that it has no plan for solving now.

AFFECTED WITH A PUBLIC INTEREST The general irritation which the misconduct of the industry has caused has brought its place in the affairs of the nation into prominence and into question. Weare waking up to the fact that if ever an industry was affected with a public interest, the coal industry is so touched. The United States Coal Com­ mission's findings in 1923 evidence our belated recognition of that fact. It said: "The practical logic that half a century ago clothed with t~e public interest the steam locomotive, and in later years the electnc power

1 The Jacksonville agreement was signed by the union operators apd !he U.¥.W.A. in 1923 to run until 1927. It maintains a daily wage of $7.50, wblch IS conSIderably more than that paid in the non-union fields. 6 station, must recognize a large element of public service in the coal mine that furnishes the necessary energy to both locomotive and power plant. "It is this indispensable service which the coal mine performs that gives the large social value both to the property and to its product, and in turn rlJis social value in effect grants to the public an interest in that use and creates a compelling reason for public control. The Commission is passing here upon an economic fact and not upon law." 2

THE BROKEN PROMISE OF COMPETITION Here is an industry where private initiative had a chance and took it. The competitive system in theory always promised order, efficient development, nicely balanced production, proper correlation with other industries, high quality coals at a cheap price, low labor costs but adequate wages, technical advance, an automatic and unquestionable progress toward the common good of al1.s The friends of the competitive system in the coal industry are the Fundamentalists of our national life. They have performed the act of faith, and so to them the mess they have made of things is only the mysterious way in which they move, the wonders of today to perform. They will have nothing to do with such modern notions as birth control of new mines, to borrow a Hamilton-Wrighting. Instead, they put their trust in a system that stopped working with any resemblance of perfection very shortly after it was formulated as an ideal. When they go into bankruptcy, and it has been done and is being done a great deal, they go down fighting, loyal martyrs to their idea1. There is the temptation to pause a while over these brave gentlemen who prefer to go down fighting rather than to do any aggressive pioneering thinking, who hope that their financial death will at least make others prosperous and who hope in vain. It must seem a glorious procession to the grave for those who take part or else they wouldn't do it, but like other battlefields one has known it is among other things a sorry mess. ELEVEN MILESTONES The bituminous industry is far gone on the road of its choos­ ing. It has passed eleven milestones on the road to failure. We must be able to recognize them when we branch out on a very different road toward a very different goal. 1. The industry is ove~-expanded. The competitive sys­

2 Reports of the U. S. Coal Commission, Vol. I. a For a brilliant analysis of tbe failure of the competitive ideal. read all, but especially the first four chapters, of " The Case of Bituminous Coal," by Walton H. Hamilton and Helen R. Wright of the Institute of Economics. Macmillan, 1925. $2.50. This book immediately takes its place as the most intelligent general thinking about the industry to date. 7 tem has failed to keep supply within hailing distance of demand. The mines of the country can today supply 970,000,000 tons where only about 500,000,000 are needed. Except for the war years, when the U. S. Fuel Administration was in charge, there has been no balancing, either accurate or'crude, between the requirements and productive possibilities. To open a small new mine needs but little capital and capital has been plentiful for investment purposes in recent years. When for one reason or another the propect of profits seemed good, there was a rush to the nation's vast coal resources, capital was raised, miners secured, shafts driven, tracks laid, coal gotten. The capacity of the old mines was increased by improved machinery. When prices slumped, the effort of all the operators was to keep their own mines going until the next boom. Wars, strikes and hard winters have all been grist to that mill. As soon as prices went up a little, the market was flooded, prices went down. There has been a steady cycle, with the weaker companies being elim­ inated for a time only to come back and work their disturbing havoc with every new expansion. And always still more adventurers, entrepreneurs, undertakers in the sinister sense of that word, have been attracted to the industry. Today it can produce almost twice as much as the country needs and the end is not yet in sight. 2. The irregularity of the industry has been costly. What the coal industry has to do is to serve the other industries of the country with the power that keeps the wheels going and to give that power steadily and economically. In spite of the great opening up of new mines, coal does not always get to the industries of the country when they want it. The normal situ­ ation, where the coal industry is dependent upon the demands of the rest of the country, is occasionally reversed and the rest 0.£ the country becomes dependent upon the eccentricities and irregularities of coal production. The mines of the country stand idle over a third of every year on the average, and some a great deal more, of course.4 And when they do run, they rarely run at full capacity. . This raises the price of coal per ton. Engineers of the Coal Commission found that working a mine four days per week raises the cost per ton from 8 to 9 per cent over full-time operation. When working three days a week, the unit cost is about 25 per cent larger than full time operation and when but • The statistics of the u .. S. Geological Survey show that the working year of ~he bituminous mines was: 1919, 195 days; 1920, 220 days; 1921, 149 days; 1922 (strtke year), 142 days; 1923, 179 days. 8 two days a week are worked, costs increase 48 per cent. Reports on sample weeks in 1924 and 1925 show that between 30 and 40 per cent of the mines surveyed were idle all week and between 9 and 21 per cent were running less than three days. 3. There has been unemployment on a wide scale. Not only the consumers pay for the planless over-expansion of the industry but the miners pay their share. Between 1915 and 1925 almost 150,000 men went into the industry. It has about 200,000 more than it needs today. Taken together the 700,000 mine workers cannot expect to average quite 200 days a year in which to earn wages to keep themselves and their families going for 365 days. In 1921 and 1922 they averaged 149 and 142 days. This was one of the main reasons for the success of the five months strike of 1922. The men felt that they could not conceivably be worse off than they were then. The miners live in small towns where there is little other work to be had. They wait for work and only those who have gone hungry for a while or worse, have not had quite enough to eat for a long time, seem to be able to approach an appreciation of what the statistical representation of such a situation means. 4. Irregular operation increases the danger' of accident. Workings which are left idle to fill with water or to cave in until the market picks up are dangerous workings. The rate of accident is highest after a mine starts up again. The miners not only need the ordinary wage to live on, they need enough extra to carry something by way of insurance for their families, for most of the state compensation laws provide only for a few thousand to be awarded in case of their death. The greater the rate of accident, the more they need this extra, by way of protection. 5. There is financial failure on a wide scale. The over­ expansion of the industry has meant the bankruptcy of many companies and a serious financial loss in expectations to the companies that have so far managed to keep their heads above water. This runs up costs. Overhead keeps going whether or not a single ton of coal is coming out of the mines. Pumps, office staff, management, interest, insurance, taxes, go merrily on and all must be covered if the operator is to show a profit, if not this year, then next. Costs go up and prices follow as soon as there is the least chance. In 1920, a third of the com­ panies reporting an income tax showed 50 per cent profits or more and one-seventh showed 100 per cent. But the very next year a third of the companies reported a loss. A loss for several years will put a company out of business, but, unfor- 9 tunately, their mines are still there, and can be opened by anyone who passes the hat and buys them in. 6. We are wasting our coal underground. The Coal Com­ mission's engineers found that over 100 million tons of coal are irrevocably but avoidably wasted and lost in the mines each year due to bad technical methods. Such methods are directly fostered by spasmodic operation and a willingness to skim the cream of the coal because that costs least. Sound engineering, we are told, depends on a balanced load. Irregular operation is destructive of mine efficiency. Generation after generation following us may have to pay the price for this waste. 7. The distribution of coal is often inadequate. Over­ expansion has spread out too thin the transportation system and the car supply. The railroads have been forced to serve 2,000 more mines than is necessary to meet all the country's needs if the remaining mines were working on a basis of rationed and planned regularity. The result is that in emergencies, there are car shortages on a nation-wide scale. This fact gives further opportunity for panic prices and quite outrageous profiteering all along the line, by operator, wholesaler and retailer. It accentuates a situation which leads to breaking of sales con­ tracts right and left, confusion and demoralization of all ordered distribution. Even in ordinary times there is enormous cross-distribution. Indiana, for example, ships coal to eleven states and receives coal from eleven states. 8. Much of the investment in the industry is inflated. Those among the coal companies that by exceptionally good coal holdings or by combination have been able to operate at a profit have often been able to do very well indeed. They are building up by reappraisals and fictitious revaluations an invest­ ment figure that makes their profits seem a small percentage and that gives them by way of depletion charges a pleasantly large and gratuitous unearned' income. The Federal Trade Commission found one bituminous company which had written up its coal land account 60 per cent, more than $60,000,000 over original cost.s It found many operators inflating costs by duplicating contingent and maintenance reserves, by including income taxes as a part of the cost, by making an arbitrary allow­ ance for interest when no such interest was actually paid, by writing in extraordinary reserves for hazards, fires and acci­ dents. Also the companies make a practice of seeing that the current tonnage carries the cost of their land speculation in

• Preliminary Report of the Federal Trade Commission on Investment and Profit in Soft-Coal Mining, 1922, p. 27. 10 reserve tonnage. In 50 companies alone excess reserve coal lands of574,000,OOO tons were found that would not be touched within thirty years.6 This inflation, this confused and distorted accounting, does one thing and does it so well that one might imagine that it had been intended for that one purpose: It hides the relation of profits to actual investment and offers a plausible reason to the public why prices cannot be reduced and to the miners why wages cannot be raised. 9. The industry suffers from bad methods of coal utiliza­ tion. Over-expansion has taken away the last vestige 0.£ desire on the part of the industry to have coal consumed eco­ nomically. The emphasis is rather on quantity consumption. Dr. Steinmetz estimated that from the utilization standpoint the industry is less than 20 per cent efficient. This is not a subject to be cleared up in a day, but even on the basis of the technical process now known engineers have demonstrated that the present amount of horsepower could be generated from half the amount of coal now burned and give us in addition in the form of by-products the riches which now go up in smoke. Ford is today saving 19 million dollars a year coined out of smoke. He burns 7,500 tons of coal a day from his own captive mines. This coal costs him $5.00 delivered. In a few minutes he has converted it into by-products worth $13.S6-gas, gaso­ line, ammonium sulphate, tar, creosote oil, lubricating oil, grease and 1,500 pounds of coke. The coke is crushed into powder and blown under the boilers to generate electric power at a cost almost as low as it can be obtained from waterpower at Niagara, for example, about half a cent per kilowatt. The beginning of efficient coal utilization is in sight. From the long time angle, it promises more relief to the consumer than most of the other reforms combined. In the course of this process transmission lines will probably replace transportation lines and great power systems beyond the control of any munic- ipality or state will be with us. . 10. Over-expansion has thwarted every kind of planning, budgeting of production and price control. The industry does not act as a unit in any sense of the word. It is composed of competing groups with long histories of personal and' regional jealousies. There is no association in it that can take any degree of responsibility. Even the United Mine Workers of America, which in a way is a bond and almost the only bond

• Idem, p. 31. 11 between certain competing districts, has not been able to bring an increasingly large part of the industry together even in mat­ ters of labor policy. Consequently there has been no effective pressure upon either old or new companies to keep them from a policy of still further expansion, although that is, on the whole, the last thing the industry wants or can afford. There is even no agreement among the operators who deal with the union as to their common interests among themselves or against the operators who do not deal with the union. It is this lack of unity, even of certain natural groups of the indus­ try, which, as we shall see below, is responsible in a very direct way for the manner in which events are heading up as we approach the year 1927 and the end of the Jacksonville Agreement. 11. The labor situation is loaded with dynamite. Labor relations are much more like a dog fight than the civilized conduct of the second largest industry in the country. The reasons for this have been mentioned above: an excess develop­ ment of 470,000,000 tons, 200,000 unnecessary men, irregular employment, high wage rates and low annual earnings in the union fields, low wage rates and medium annual earnings in the non-union fields. Within the last two years the non-union fields, which have on the whole better coal, have jumped from a minority, a third, of the nation's production to a majority of two-thirds. They have changed place with the union fields in importance. They condition the situation now. They have been adopting the latest mining machines, coal loaders, while the union fields have been letting this advance in technique escape them. There is the threat of still further unemployment in the increased productivity due to these machines. There is also the threat of displacing all the old prerogatives of the mining craft by the rigorous discipline of the factory.' Non­ union operators are aware of that use for the machine and use it as a means of breaking the union.

THE MINERS' PREDICAMENT The miners thought that with the immigration restrictions during and after the war, they would control the situation, that they would have whatever advantages there might be in a cornered labor market. They were in error. There was no way of keeping men from the farms and other industries out • Carter Goodrich, The Miners' Freedom, Marshall Jones, Boston, 1925, an impor. tant contrihution on the psychology of the workers, in relation to discipline, freedom, independence, unionism, etc. 12 of the mines when work was good there. Or, at least, they found no such way that would work. They are, as Hamilton and Wright point out, in an unusually bad way because the worst slumps occur in the coal industry when the rest of the nation's industries are also slumping and do not need coal. At such times it is almost impossible for them to get jobs elsewhere. The miners thought that, with the signing of the Jacksonville agreement in 1923 to keep their war and post-war gains in wage rates for four years, they would draw enough miners from the non-union fields and have enough power to be able to run a successful organization campaign on the non-union fields and so bring the country almost entirely up to the union standard. Again they were in error, as events turned out. Some of the union operators, notably those in the Kanawha region of West Virginia and in Kentucky, decided that they would rather try to rq.n non-union than to sign that agreement. So the union found itself engaged in a war with "its own people" and was not free to conduct the fight it intended upon the unorganized tonnage. The unorganized tonnage has been increasing. There is almost no work in some of the older Ohio fields, there was little in large parts of Illinois and Pennsylvania until the anthracite strike of 1925-26 intervened and helped swell the demand for. bituminous. More and more companies in the northern, union fields, see no way of competing without cutting costs to the point where they can meet West Virginia, non-union, competition. That means to them a heavy cut in labor costs, directly, in wage rates. The union miners stand out against that, in part because their present annual earnings are low; in part because they see no end to that policy: If union wages were cut, non­ union wages, already lower, would be cut still further. That would necessitate another cut in union wages, and they would soon be working for whatever fun there might be in getting exercise. The miners have the hope that the country's need for bituminous coal will increase rapidly and that more and more work will be resumed in the industry. There is no evidence that the country's demands are increasing rapidly. Improved methods of consumption, of conversion into electric power and the like are reducing the amount of coal needed per unit of power rather than increasing it. In any case the industry is already over-expanded about twice the amount of the nation's 13 present needs and the miners have no guarantee that any further production that might be called for will come from the union rather than from the non-union fields. Outside of this hope for increased demand, the miners put their faith in the " law of supply and demand," which, in this case, means they hope that the process of combination and con­ solidation that has been going on for some years, notably in Illinois, will continue until all the smaller, weaker companies are either taken into the combination or definitely ruined and put out of business for good and all to the point where they will never bring their mines back to plague the industry with a new over-expansion. The miners figure that the consolidated companies will be more efficient, more profitable, and easier for them to deal with.8 They have as yet no other plan for ridding the industry of its extra men. They have as yet no plan for preventing the opening of old or new mines after the process of combination and consolidation has brought- for a moment the supply within hailing distance of the demand. A general plan, involving federal control over the whole question of further development, was offered some years ago by a committee appointed to study nationalization. It has never been pressed by any mine leaders other than those on that committee. The miners, somewhat like the operators, are handicapped in having no single body representative of the whole industry with whom they might deal.

THE CONFUSING CRISIS The bituminous coal industry has these eleven milestones as part of its present experience. It has not passed them in the sense that they are behind it. It has passed them only in the sense that they layout and evidence the road it is now traveling. It is a road with a jumping off place not far ahead. The cheap labor of the South is doing to the northern coal industry what it has already done to the northern textile indus­ try. The New England manufacturers have cut wages, closed down awhile, cut wages again, and are now seeking to reestab­ lish the 54-hour week so that they may on all points be on the

8 The process of comhination, which has had a stabilizing effect on the coal industry in Germany, presents two alternatives. Either the great comhinations will compete against each other, in which case we shall have all the disadvantages of the present system on a plane only slightly higher. Or, they will not compete against each other. In this case they will have a control so great that some sort of public regulation will have to be instituted. The question then becomes: Will it not be better to have the unified control effected at once under complete public supervision, in the interests of consumers and workers? . 14 basis of competitive equality with the South. The northern coal producers, with a stronger union opposing them, are equally eager to meet southern competition, but have not yet succeeded· to any great extent in cutting wages. An attempt along that line is being made and will probably be continued. until the expiration of the present contract in 1927, when the union will be confronted with a concerted demand on the part of all the northern operators for a wholesale wage reduction and will have to fight, in some cases, for its life. Until 1927 the union, with its strength mainly in the North, Illinois, Indiana,. Ohio, Kansas and Pennsylvania, will have to face the alternatives of very little work or an official or unofficial wage cut. The loss of production means very slim rations for the union men. The union fields have been so organized that they have rarely had occasion to show their resentment at their non-union competitors. Herrin was such an occasion. There is no reason to believe that if many more operators follow the example of the Pittsburgh Coal Company and try to run non-union in a traditionally old union territory, the miners will not get quite beyond any control of their official leaders and express their resentment in dramatic and violent ways. The union may tem­ porarily be waning in effective strength, but there is a very primitive sort of life in the organization yet. All this promises to be very exciting newspaper reading, but it gets us nowhere with the real problem of the industry, the equalization of demand and supply on the efficient basis of good wages and continuous low priced coal and power.

SOCIAL CONTROL There is place here for those who believe that intelligent social control is preferable in the long run, and, after all the nec­ essary bows to the institutionalized stupidity of our ancestors have been made, to the lack of intelligent control. We have in the main let the industry jolly well alone to muddle through. During the war years we clipped the soaring wings of profits a little, but not much. The Anti-Trust Act is in force. Otherwise the industry has been free. It has proved that this freedom is not enough. Now it looks as if its only solution to the problems it has raised for itself is a proposal for lower and still lower wages, a shifting of production from the fields near the main industrial centers to the fields furthest away from them, a few large consolidations out of the bank­ rupt ruins of a thousand small companies. And even this 15 hard-boiled solution, with all its promise of bloodshed, gives 110 promise of avoiding another over-expansion as soon as the next great industrial boom gets under way. The road to Hell is paved with old mine workings, and it is always open. We can either leave it open for the courageous gentlemen gamblers who seem indefinitely willing to take their chances, or we can :say" Here, this industry has been a plaything too long. It is too important now to play with. Too many jobs, too many people depend upon its functioning as a coal and power industry should function. It's time to get back to work. All those who feel an irresistible urge to speculate will now be excused, breveted honorary captains of indu,stry and may betake them­ selves to the simple pleasures of the stock exchange or the resuscitation of the latterly somewhat defunct Red menace."

CONSIDERATIONS IN PLANNING The milestones which mark the road the industry has already traveled condition in a way the proposed roads out from the failure of the competitive ideal toward the possibilities of indus­ trial democracy. Certain changes stand out as essential: 1. There must be strict control over further expansion and a well considered policy of eliminating temporarily or per­ manently the present excess mines. 2. There must be a rationing of production among the re­ maining mines on a basis that will allow each of them to con­ centrate their working time most efficiently. 3. There must be well developed plans for distributing the excess working force gradually into other industries, keeping in the bituminous industry those men most efficient for its purposes. 4. There must be greater emphasis upon the value of human life, greater organized effort to eliminate accidents. 5. There must be the elimination of the excess capital invested in the industry. The industry should pay only what it has to for the capital it needs, and for no other capital. 6. There must be a more calculated decision on the amount of coal we are going to waste underground. Either we are going to skim the cream and let the future generations pay the bill for ,getting out the less accessible and more costly coal, or we are going to share the expenses with the future generations. Here is a problem not at all unlike the one of reducing taxes now and shoving the burden of our war indebtedness on the future, or paying taxes now and paying off the indebtedness 16 now. Certainly it is not something to be left to the varying judgment of ten thousand scattered mine managers. 7. There must be a distribution of coal and power on a less haphazard basis than the present one. Now coal is carried extra hundreds of miles because wages in a certain area are lowest or because the sympathies of the large commercial users are with the anti-union producers. 8. There must be an end to the long process of inflating investments. .It nearly bankrupted the railroads. The country cannot afford to have even its essential industries take more than their fair share of the national income. 9. There must be much more efficient utilization of the coal mined. The development of power stations and lines, for example, must be on the basis of public need rather than on the basis of the short time competitive advantage of one coal and power combination over another. 10. There must be unified responsibility for the conduct of the industry. 11. There must be a definite decision on labor policy. The industry cannot be half non-union and half anti-union, or one­ third union and two-thirds anti-union without the constant pos­ sibility of open or undercover warfare and threat to the peace and stability of planned production. The union must decide whether it will take its responsible place in the' management of the industry or not, and, if it chooses the former, set about it at once. 12. The consuming public must be protected from the powers of large regional monopolies and from a political bureaucracy quite as much as from the failure of the economic theory of free competition.

CHAPTER II. THE PROPOSAL FOR A REPUBLIC

THE LEADERLESS PUBLIC HESE essential changes cannot be effected from within the boundaries of the present system of competing private T management and control. Yet one cannot overthrow the whole industry and start anew. The system as it stands today will have to be patched up, laboriously and bit by bit. But there remains a great difference in whether the patching is done with a purpose of getting the whole machine to work as a unit or with a purpose of getting only some small part of it to work for a while. 17 The patching must be done by industrial statesmen and engineers, people who can recognize a failure when they see one, people who can see beyond the backfences of their own little bailiwicks to the possibility of a great industry functioning as a unit to furnish continuous cheap power to a great nation. There must be consideration of the point of view that a cheapening of the necessities of life raises the national standard of living and frees the minds of men for a fuller enjoyment of the benefits of civilization, such as they are. And there must be men who can force a constant consideration of that viewpoint. To date there has been no leader in or out of Congress who has been able to force a showdown on the purposes for which the power and coal industries exist and to cause a reorganiza­ tion on the basis of function rather than profit. Instead we have had men like the members of the recent United States Coal Commission who would not consider plans for nationaliza­ tion of the industry, for example, because they alleged that there was no public sentiment in favor of such plans. They could have created that sentiment overnight if they had considered such plans and found them good. They call to mind the good old days when there was very little sentiment in favor of recognizing the fact that the earth was not so flat as it had been supposed to be. They also call to mind the incident of the French patriot who in revolutionary days looked out of his window and saw the mob hurrying down the streets and rushed after them, explaining as he dashed off, "I must go, I'm their leader."

A FUTILE REMEDY If, however, nothing is to be done without a ready made public sentiment, the fault in not having that sort of pressure ready to bear is our own. In the anthracite strike of 1925-26 it seemed for a long time that there was no representative of the public, from the President down, who knew enough about the industry or cared enough about the public interest, to force the operators and miners to get out of the fog in which they were fighting and join issue on the essentials. For three months until Governor Pinchot and the Committee on Coal and Giant Power proposed their separate plans for settle­ ment, the only proposal that was heard was ridiculous. It came from the Governor of a great eastern state, and also from the former Chairman of the Coal Commission: 'Penn­ sylvania has the remedy in its own hands. It can enact a 18 law repealing the provision that miners must work two years in the anthracite fields before' they are granted miners' certificates.' They meant that if the bars were let down for non-union miners to enter the anthracite fields, the mines would start working again. Anyone who knows the anthracite fields, any­ one living there, knows that any attempt to import non-union men to break one of the 100 per cent strikes they run in that part of the country would be nothing less than an incitement to riot, mayhem, murder and suicide. Yet that was all the· public's leaders had to offer by way of suggestion. If anyone had been foolish enough to take their suggestion and violence' had followed their advisers should have been indicted as accessories before the fact. Rarely has there been such a bankruptcy of leadership. Rarely has such a ridiculously ineffective suggestion been· received with a more wondering vacuous face, such numbness, such dumbness. It was an occasion for loud and raucous laughter on the part of the generality, but it was only the miners who saw the point and did the laughing.

SKEPTICAL LABOR LEADERSHIP Sherwood Anderson is struck by a quality in the lives of Americans that he calls impotence. Walter Lippmann finds. complexity too much for democracy. These things are perti­ nent. We of the public have so much else to keep us busy that the few extra dollars or the few hundred extra dollars. that we payout because of an inefficient coal and power indus­ try are only a small part of our worries. Few of us ever bring ourselves to imagining what a part high coal bills play in the lives of our underlying population. Few of us ever see the cultural possibilities that lurk in cheap power. Few of us see what irregular employment and low annual earnings do to 700,000 bituminous coal miners, their' wives and children. "If they want sympathy" we say, or we· might say if we bothered to think about it, "let them do something about it themselves." Things, however, also seem complex to them. They face their present crisis with distaste. They face any long-term planning for the industry with skepticism. They did once· intend to do something about the industry. They voted in favor of nationalization several times. Mr. John L. Lewis,. 19 President of the United Mine Workers of America, told the President's Conference on Unemployment; "The bituminous industry has sunk far beyond the point where any appreciable improvement may be effected by suggestions for sta.bilizing the market demands. Short of nationalization indeed, I can see no relief } for the crying evils of the industry other than drastic Government control and regulation for the purpose of safeguarding the interests not only of the mine workers, but also of the consumer and the employer." Shortly after that, the nation's business picked up. Nine­ teen hundred and twenty was a good year for them, a long strike in 1922 created a shortage and high prices, and 1923 was a fairly good year. It seemed possible to go ahead without the changes and responsibilities of nationalization. The govern­ ment in 1920, in 1922, in 1923, and again in 1925, gave little evidence of being a trustworthy partner to labor in any common enterprise. Under such circumstances a nationalization program seemed a good card to hold and a poor one to play. Meanwhile the industry has gone on under the competitive ideal to the place where the union has less power in terms of production than it had in 1920 or 1923. It is not at all beyond the realms of possibility that it will again take off the shelf the plans for , nationalization and look them over with a more experienced eye, considering them a little less in the light of a luxury and more in the light of a necessity. It is the party most vitally interested. Unless it wants a sweeping change, that change will be slow in coming.

ONE PLAN FOR A REPUBLIC In 1923 the Nationalization Research Committee of the United Mine Workers made public a plan for nationalizing the coal industries, both bituminous and anthracite. Inasmuch as the anthracite miners a little later proposed a somewhat different plan for their own industry, we may consider the plan for nationalization of the bituminous industry now and the other below. It is a proposal for the abolition of the competitive feudal system and the establishment of a republic. In considering its merits we must remember that neither the miners nor those of the public who have general welfare of the nation at heart are interested in nationalization as an end. It is useful only as a means of removing the ineffective control of the present owners and substituting a more democratic control. 20 The Nationalization Research Committee proposed: 1. Ownership. The nation should buy the bituminous mines and the unmined coal lands, paying adequately for all estab­ lished expectations to income. The committee estimated the -present cost of this at about four billion dollars. 2. Control. Control of the industry should be separated from mine management and administration. " The decision of policy is one thing. The job of administration, that is, running the industry, is quite a different thing. To give control to the <:ommunity as a whole, to safeguard the future as well as the present, to W'actice the American policy of conservation equally with that of busi­ ness initiative-all this is in the job of control." 1 Inside the industry, that is, in the administration, the workers are to have" a larger area of control" than heretofore. But the larger questions of policy, production, budgeting and the like are to be the province of the new owners, the public. For this purpose the miners suggest a permanent, federal inter­ state commission of mines,' composed of 11 members, five to be named by professional and industrial organizations and six by the President. At the head of it is a new cabinet officer, the Secretary of Mines. "The functions of this Federal Commission include fact-finding, scientific costing, budget determination, price-fixing, research." On the other hand, the administration of the industry should be invested in a National Mining Council made up of three kinds of members: (1) the managerial, technical and financial administrative heads of the industry, (2) the miners, and (3) the coal consumers, the consumers in other allied indus­ tries and the community. There are to be regional councils for all the large coal field groupings composed on the same lines. The mine committees are to remain and have an advisory function, but" the mine is conducted by the mine manager." These men are appointed by the National Mining Council in consultation with the regional councils. The reason for this separation of policy control and adminis­ tration, and the advantage of it, lies in the fact that ". .. for the first time in the history of t"Ile industry, disputed wage questions will be removed from the administration of the industry where they do not belong and placed under the economic control of the industry where they do belong. The mine manager will be able to turn his face away from the business office and direct his full attention to the getting out of coal .. ."

1 How to Run Coal. Issued by the Nationalization Research Committee, U.M.W.A., 1922. (Can be secured from John Bl"Ophy, Dist. 2, U.M.W., Clearfield, Pa.) 21 3. Determination of Wages. Wages which are, of course, the most important thing to the miners and determine the character of their social life, are to be based " not on emotional appeal, nor class warfare, but on measurement." A national basic wage is to be established and considered the first charge against the industry. Regional and local variations from this are to take the form of differentials for risk, difficulty, skill, working conditions in regard to yardage, rockfalls, timbering, dirt and falls. The union, however, is to be completely safeguarded, col­ lective bargaining is to be recognized. Here, they say: "The prime cause of labor disputes is removed by nationalization in the elimination of the profit motive. Nevertheless, such questions as the division of the annual product and rates of pay for the various grades of work, and the conditions of the working place will always remain." Wages, then, are to be determined by a Joint Wage Scale Committee representative of the miners and of the directors of the industry, the miners' representatives to be appointed by the United Mine Workers. A Bureau of Wage Measurement connected with the Federal Commission of Mines is to assist in ascertaining the facts upon which wages for particular jobs can be scientifically determined. 4. Conditions of Success. Certain" Conditions of Success" are laid down. Administrative organizing minds must be attracted and kept in the public service. A competent technical staff must be employed. The union must be 100 per cent organ­ ized. The public must accept collective bargaining as the basis of wage agreements. There must be a large labor representation in all departments of government. There must be a political labor party. They say: "Without these safeguards, nationalization will be control of the industry by a group of ,business men in the interest of private enterprise. The reason is this. American public opinion will demand and rightly demand that all the important problems of control and expenditure shall be finally decided by representatives designated by the people. At present these representatives would probably be citizens unsympathetic to labor. Until labor is adequately represented in voting strength, Government Commissions will be made up of politicians and' big' business men."

PROBLEM OF COMPENSATION FOR PRESENT OWNERS What the miners propose is but the beginning of a plan, a plan, however, which, whether they know it or not, is much more important to them now than it ever was before. They make clear their attitude on several important points. Two of 22 the three traditional prerogatives of ownership are to be trans­ ferred: The right to unlimited profits and the ri'ght to control. These are to be shared with the miners and the public. The other right, that of interest as the price of capital, is to be retained; there is to be adequate compensation for all who have either. bought mines or coal lands. The miners also make very clear that they will in no way give up the right to a large say in the division of the product of the industry and they give rio guarantee of any limits on that say. They also condition the success of the plan upon a large labor support in the government. Unfortunately the work of this Committee was suspended and it did not get around to the consideration of certain prob­ lems which have a very direct bearing on the feasibility of the nationalization plan. The shift of production from the northern union mines to the southern, non-union mines, means that many of the northern properties are dropping in their established expecta­ tions almost overnight down to a point approaching zero. Can the Federal Commission of Mines afford to buy up all these mines, all the coal lands of the country on the basis of their former expectations before the shift in production started? One of the limits to the amount that wages can be raised is the amount of interest to be paid. If the miners let them­ selves in for an expenditure of four billion dollars and the interest on that, $200,000,000 annually in perpetuity, they may find that they will have exceeding difficulty in keeping wages in step with the increasing prosperity of the rest of the nation, and keeping coal prices reasonably low. The whole question of valuation, in a period when values are changing so rapidly, should be given a great deal of very sober thought when further proposals for nationalization are made.

INCENTIVES FOR EFFICIENCY In discussing the wage differentials that are to be maintained between districts and regions, the miners have also to consider the effect that mining machinery has upon production. Those mines which are most efficiently and modernly equipped produce more and more efficiently than the mines which have not seen the advantage of machinery or have been financially unable to install it. Are the wages of the whole industry to be divided without consideration of the fact that certain districts because of their efficiency produce by far the largest sums available for wages? What incentive other than the one of 23 working for the common good, will there be for the miners of one region to do their utmost? This needs some working out.

ELIMINATION OF MINING FORCE Further, to what extent will the miners help in the problem of eliminating the extra 150,000 to 200,000 men that are now dependent upon the industry? And on what basis will they allow an elimination? The new nationalized coal industry may very well demand men who can run machines but who have none of the old union craftsman's viewpoint nor his ability to stand up and fight for himself and his fellows. Will the miners insist that elimination be on the basis of juniority in point of time? Will they insist or try to insist upon an elimination only of the men who are being brought in every day from the farms and hills to work for the first time in the mines of West Virginia and Kentucky?

SHARING IN MANAGEMENT In proposing this plan the miners have opened up a great many problems for themselves. Not the least of these is the question of the value of democratic control, a share in manage­ ment, to them and to the industry. They have yet to find out what advantages they can offer the industry and the nation as a result of any increased control over management. They have been fighting against private control so long that they have not gotten around to considering this part of the question very seriously. It will, for the most, be a new field of endeavor to them. The success of their plan, of almost any nationaliza­ tion plan they or anyone else may offer, will rest upon the amount of responsibility that they are not only willing but desirous and capable of assuming.

CHAPTER III. THE ROAD OF ANTHRACITE

QUASI-MONOPOLY LOSELY packed within 480 square miles in the eastern part of Pennsylvania is the anthracite industry selling C every year about 70,000,000 gross tons of fuel to heat the homes of the East and Middle West and employing about 158,000 men in that work. It once ranked the bituminous industry in importance and production. Since 1870 it has followed the road of consolidation and combination, a fact which called forth the following comment from the Coal Commission: 24 " The fundamental evil of the anthracite industry is that of monopoly­ the treatment of limited natural resources as if they were like other private property. Reliance on competition without supervision has resulted in a permanent level of high prices, above which extortionate increases were made whenever a suspension of mining or other disturb­ ances gave rise to 'the phenomenon of premium coal ... there is a rising flood of costs and of prices which does not recede with the fall in the prices of commodities in general and which does not yield to such measures, entirely justifiable and desirable for other reasons, as the separation of mining from the railroads." 1 This monopoly has consisted in the past of a retention in the hands of eight large interests of about 80 per cent of the coal mined and 90 per cent of the coal land reserves and of a strong connection with the anthracite railroads which made for high freight rates, which in turn squeezed the independent companies out. Most of the connections with the railroads have, nominally, been dissolved within the last ten years. A continued community of interests as between the large coal companies seems to remain, however. Production has been held down rather definitely to a certain level. The prices of the large companies differ from each other by only 5 per cent and that difference is due largely to geographical variations from the market.

SHELTERED CONTROL The industry is not a complete monopoly. Over a fifth of the present production is mined by independent companies. These usually have to pay h~gh royalties or because of the: small size of their operations have high costs. During the war the Fuel Administration allowed them to charge 75 cents per ton more than the old line coal companies but now, with a free hand, in every shortage they charge much more, usually three dollars more, sometimes as high as six dollars more. These relatively small and unimportant independents selling at high prices afford a shelter behind which the larger companies,. with lower costs, can both increase prices unduly and still avoid public condemnation and regulation and can also refuse to give wage increases, basing their stand on the plea that the industry as a whole cannot afford it.2

THE HIGH COST COMPANIES These high cost companies create a situation where it is possible for the large profitable companies to avoid absorbing

1 Report of the U. S. Coal Commission, Vol. I, p. 267. I Not all of the old line companies are, however, low cost companies. Two of them have invested so heavily and injudiciously in coal land reserves that the taxes· and carrying charges have raised their costs a great deal. 25 wage increases out of their profits and to pass such increases ,as they are forced to grant by strikes along to the consumer. They are a very convenient shelter indeed to the large com­ panies. Doubtless if the large companies held the whole in­ dustry in their own hands they would have been the occasion of very definite governmental price regulation by now. Their example has been followed by wholesalers and retailers. In emergencies they hide behind the high cost of a small part of the coal they buy, and sell much of it at the highest price the market will stand. Concentrated control has made for stability, but it has not made for cheap coal and the miners have had to fight hard enough for every cent of wage increases they have received. Judging by the experience of the anthracite industry, there is no special reason to believe that if the bituminous industry succeeds in repealing the Anti-trust Act and takes its next step along the road of anthracite, the public or even the miners will be greatly benefited.

BURDEN OF PRIVATE CONTROL The burden of private control is very heavy. The present 'owners of the anthracite industry have, on the whole, taken very large profits out of it. They have inflated it within the last ten years about $200,000,000, a third of the present value carried on their books. They have given evidence of intention to inflate it still further, in fact almost $400,000,000 more.3 They not only establish a claim to a "fair return" on this inflation, but, because mining is a wasting asset industry, the owners receive back the total inflation in the form of depletion reserves, which are charged to the consumers in the price of every ton of coal. The industry is also suffering from the profit taking of the coal land owners, who charge royalties on every ton mined on their lands. These royalties have been put on the basis of a percentage of the sales price, so the bigher the price goes the larger the royalty is. In some cases it amounts to $2.40 per ton. The companies have also insisted upon all the other preroga­ tives of ownership, including control over management. This might have been shared with the miners. The miners have 11ad to fight for every inch of the road they now have in sharing with management some of its old prerogatives and they have not gone very far along this road. The management

3 Report of the U. S. Coal Commission. Vol. II, pp'. 901-986; Vol. I, p. 74. 26 still has complete power over the length of the working year. It can cut it, lowering production to boost prices, as it wishes. It can claim all the advantages resulting either from the in­ creased efficiency of labor or the increased productivity of modern equipment. STRIKE ISSUES In 1923 and again in 1925, and in every suspension of work that may take place in the next few years, the issues are the same and really very simple. The miners say that they need more money to live on. They claim that all the mine workers need more money. The operators retort that (1) the industry cannot afford to pay any further wage increases out of its profits or accumulated surplus, and so, if there is to be any increase, it will have to be paid for by the public in the form of higher prices; and (2) the public will not pay any higher prices for anthracite, but will turn to low-volatile bituminous and oil as substitutes instead. The miners scout both of these statements and the operators scout the miners' claim that they need any more money to live on. This is the regular procedure. For the purposes of both a short-time strike settlement and a long term planning for the industry, these statements should be broken up into their component parts: How many miners need more money to live on? Is a flat increase for all the best way of reaching the most underpaid or will a careful adjustment upward of the lowest piecework rates and lowest day rates reach the men most in need? On the other hand, which of· the companies cannot pay an increase in wages out of their present profits? How many of them are there? Is their inability to make large profits and pay good wages due to remediable causes, such as their own inefficiency or some very high royalty contract or some inflation in their book assets? What is being done to bring their costs down? Nothing? Then what is the intention of the industry, to continue hiding behind these relatively unprofitable companies and allow long strikes to take place so that the people may freeze to the point where they will make up their minds to pay an extra dollar or two a ton for anthracite? Is that all the industry offers by way of relief from its difficulties? Is there any plan for a wage pool for the larger, more profitable companies to put the sums available for wages into a joint pool and thus protect the high cost companies? Is there any intention of seeking 27 "to repeal the anti-trust law and make a complete monopoly out of the anthracite industry, thus spreading out the difficulties of .the smaller, less profitable companies over the whole industry?

No ANSWER TO STRIKE PROBLEMS The owners have no answer, no plan for change in the economic- or technical basis of the industry. They do say this. They want to avoid suspensions of work by establishing 'a board to arbitrate the miners' demands at the period of every negotiation. They know the miners' aversion to arbitration. They are probably aware that insistence upon the demand for arbitration means a long strike whenever it is made, and govern themselves accordingly. The miners have no answer, either. Possibly a series of long strikes will force the smaller com­ -panies out of business or drive them into the arms of the larger companies and thus make their bargaining with the industry as a whole a little more simple. But the miners have since 1923 made no proposal for elimina­ tion of the onerous control of private ownership. They thought then, and they have not thought since then, that the time had come when they would have to fight for every cent of further :increase in wages, that the claims on the income of the industry were so tightly drawn that they would have to change the organization of the industry considerably. Under this pressure they proposed a plan for lowering costs by eliminating a socially useless ownership.

CHAPTER IV. A PROPOSAL FOR A CHANGE OF OWNERSHIP

WAGES AND FINANCE '1 N 1923 the three presidents of the anthracite districts of the United Mine Workers proposed to the Coal Commission for its study a plan for liquidation of the present owner­ ship of the anthracite industry.l They admitted that they were mainly interested in wages and went on to explain how they came to the point of proposing this plan for paying off and discharging the present owners of the industry: " Wage increases must come either from operating economies, or from limitation of excessive charges for the use of capital, assuming price

1 Anthracite Accounting and Fi"ance. Statement by the Anthracite Representatives >of the V.M.W.A., Thomas Kennedy, C. J. Golden, William Brennan, together with Ellis Searles and John Moore, representing the U.M.W.A., 1923. 28 levels to be unchanged. The question of wages is thus bound up with that of finance, and it follows that we have a vital interest in the future financing of the industry. .. ." While admitting that further efficiencies of management may ·do something to make better wages possible, they said: "As the situation now stands the claims of those who have put -capital into the industry stand in the way of the claims of the public for lower prices, and of the miners for better wages. There is no reason to helieve that such opposition will grow less in the future."

INDUSTRY FREE IN FIFTY YEARS With that conflict defined, they proposed to declare the in­ dustry a public utility, limit the rate of return to be paid to ·capital invested in it and on those terms to buyout all the investors in the industry over a period of fifty years. They said: "The financing of the industry should be so regulated that within fifty years the industry can be entirely free from the charges made upon it by present investors. This applies to both mining companies and coal land companies. It is proposed that this be done without the slightest impairment of reasonable investment totals by: "(a) Completing the retirement of the present bonded indebtedness. "(b) Replacing the actual investment represented in outstanding stock 'by ·bonds bearing interest at six per cent' ... ,and then retiring such bonds over a fifty year period. Power to take stock for conversion purposes, by eminent domain, shall vest in the regulating authority. "(c) Arranging for public or joint ownership and control of the prop­ erties as the stock is replaced by bonds." In other words the miners want to discharge the capital invested in the industry and free themselves from its oppressive control and heavy levies upon the income of the industry. They lay down the principle that the industry should pay no more than it must for capital and that, inasmuch as the services which investors render to the industry is not a permanent one, their control should not be permanent either. They cite the. fact that ma~agers and miners are both paid for their services only until they are not needed any more and are then dis­ charged and propose to follow the companies in "their quite accurate logic" and treat the services of the investors like the services of managers and miners.

THREE STEPS FORWARD They proposed three steps toward this liquidation of owner­ ship. 1. The industry is ·to be taken over on the basis of its actual cost, which is around $400,000,000. 2. The present 29 Londed indebtedness, which was estimated to be $100,000,000, is to be taken over and retired in 27 years, at a total cost for interest and principal of $170,610,000. 3. The present stock covering the rest of the actual cost, which is estimated at about $300,000,000, is to be converted into 6 per cent bonds terminat­ ing at various intervals over the next fifty years. The total sum necessary to retire these new bonds and pay the interest on them would come to $853,670,000. So the total cost of retiring both the present bonds and stocks would be $1,024,280,000, which would be spread over a period of fifty years. CUTTING OF CAPITAL CHARGES The miners came to this interesting conclusion: That, at the present rate of production, the average cost of paying all· the capital claims off would amount to only 28 cents a ton for fifty years, and after that would drop to 0. At present the capital claims (depletion, interest, profits) were estimated as ranging from 58 cents per ton in 1918, 1919 and 1920 to $1.40 per ton in 1923. 2 The cost per ton of this refunding plan is thus about one-third of the claims of the investors in 1920, and about one-fifth of those claims in 1923. The miners' pro­ posal would not only cut down the present claims of the investors, which have been increasing and which are one of the most serious burdens of the industry, but it would also stop the tendency to further inflation which is underway. (As has been pointed out before, between 1913 and 1923, approxi­ mately $200,000,000 inflation took place and certain anthracite engineers estimated for the information of the Coal Commis­ sion that the value based on capitalized earnings wo·uld amount to $989,000,000, which is almost $400,000,000 more than is carried on the books of the industry at the moment.) If these two objects could be accomplished, the possibilities of cheaper coal and better wages in the future would be improved greatly. However, the Coal Commission did not consider, or at least gave no evidence of having considered, this plan and the miners have not insisted upon it.

THE QUESTION OF CONTROL The miners were not specific in regard to the nature of the corporation in which the control would be vested. They sug- • .This latter estimate is, in view of the Coal Commission's figures for the first quarter of 1923, to be revised downward a few cents for 1923, and indications are that it must go down still further for the years 1924 and 1925, but not enough to change the argument for the saving to be made by curtailment of the unrestricted right to take· as much profit and depletion as the industry will bear. 30 gested that it might rest with the management, the public, the miners, presumably a combination of all three. The control would be introduced concurrent with the conversion of the capital stock into the new bonds. "It is probable," they said, "that such control would have to be exercised by a holding company under government auspices." Here, in this proposal for a change in the ownership of the industry, is a step out of the fog in which our present strikes are fought. It leads to the establishment of a permanent rela­ tion for the division of income as between present owners, miners, management and the public, based on their function in the industry. It leads along the road that industrial democracy also travels.

CHAPTER V. POWER-TO PLAN FOR THE FUTURE HE most important material factor on the edge of our economic and social life today is the development of the T power industry. Any planning for the future of the nation, or for any large part of it such as the coal industries, must take into consideration this factor. The rapid development of our power resources holds the promise and problems of cheap power, if we can control it. It holds also the threat of extortion at the hands of a few great consolidated holding companies, if we cannot control it.

INDUSTRIAL vs. HUMAN NEEDS Already two schools of social thinking have taken a vigorous attitude toward our developing power industry. The one speaks of "super-power," the accelerated continuation of our present policy of furnishing power cheaply to the industrial plants and expensively to the small consumers. The other speaks of it as "giant power" and hopes to adopt the great technical change to the social needs of the country, especially of the small consumers. It holds out the promise of cheap power for light, heat, domestic management, farm machinery, everything that will make work in the home and isolated farm lighter and more pleasant. It foresees also a movement from the great factory cities to the small towns and the development of indigenous cultures, all made possible by the long-distance transmission of power. It attempts to put the social needs of the nation above the apparent technical needs of the industrial system. 31 A PROMISE What does this tremendous increase in power development mean to us? Already the industry is capitalized at six billion dollars and every two years adds another half billion. Con­ trolled or uncontrolled it means something to our common life. The electrification of manufactures and mines alone means,_ according to Frank G. Baum, a prominent electrical authority, that 100,000,000 tons of coal will be saved annually.! Electrifi­ cation of the railroad industry would make possible a further saving of 85,000,000 tons.2 Even admitting that these develop­ ments stretch out toward the future somewhat indefinitely, there is here the promise of greater efficiency, greater economy in manufacturing. There is, closely connected with that, the promise of greater productivity, for productivity seems to in­ crease in the mechanical industries in direct proportion to the amount of horsepower put at the disposal of the workers.

WITHOUT GUARANTEE OF GREATER HUMAN WELFARE Increased efficiency in industry, increased productivity, these things are an unsigned promissory note. Of themselves they offer no guarantee of a more even distribution of the national income and greater ability to satisfy our increasing material wants. Organized labor, with its Atlantic City declaration that wages should increase in direct ratio to national productiv­ ity, may attempt to cash the promissory note.s It is at the moment far from being in a position of sufficient power to do so. The mechanical industries are exactly the ones where organized labor is, on the whole, weakest. Its craft union structure, hanging over from the days of the slow geared machine, stands in the way of any attempt to establish and maintain a claim for the increased productivity of the industry as a whole.

1 Atlas of the U. S. A. Electric Power Industry, .p. 6: "It appears that the power industry, to meet the economic situation of the United States, may be required to double its present capacity and loads in about five years. If the plant additions be largely made by the construction of water powers and by the development of high voltage transmission systems, there could be saved by the electrification of the manu­ factures, mines and quarries notably 100,000,000 tons of coal per year. This is about 20 per cent of the present production, and represents about one-half of the coal used by tbese industries. There should result a saving to the present users of this coal of probably $10 per ton burned under the boilers." 2 Quoted in the Giant Power Issue of the Survey Graphic, March, 1924, p. 559. It is pointed out that two-thirds of the railroads do not as yet have sufficient traffic density to warrant electrification. S The important pa~agraph of t!'e resolution on wage I'0licl;' p,\ssed by the Con­ vention of the Amencan FederatIOn of Labor at Atlantic C,ty tn October, 1925, follows: "Social inequality, industrial instability and injustice must increase unless the workers' real wages, the purchasing power of their wages, coupled with a con· tinuing reduction in the number of hours making up the working day, are progressed in proportion to man's increasing power of production." 32 LABOR MAY LOSE Unless organized labor can control this new technical revolu­ tion of electric power, it stands to lose in very much the same' way as it did from the old industrial revolution of steam power. The saving in the use of coal has already put many miners out of work and threatens the security of many more.' It threatens, the railroad workers on coal carrying roads, on electrified roads, in all industries that are being electrified. Men will be laid off.. If the evidence of the mining industry holds any lesson for us, the extra men will hang around, uncertain where to turn, accept­ ing part time work, and constituting a very definite and long' time threat to labor standards in the industries in which they are employed, a threat that will affect other industries as well. Cheap power, left uncontrolled, holds still another threaf to' labor, as Carter Goodrich has pointed out.4 The old industrial revolution resulted in the substitution of repetitive work for skilled and varied work. Cheap power has meant Fordized jobs and the destruction of the old craftsmanship. There is no good reasot). to believe that it will do anything to better the" life on the job now. There is, he says, a possible compensa­ tion for this in the very different sort of freedom that might come from the extension of union activity, and the acceptance of a more responsible part in the running of industry. The' great bulk of labor has, however, shown no notable willingness to effect such a compensation. It lost out before by having no policy. It may lose out now by having insufficient power to', enforce its policy. So far we have presumed that there would be more (and' cheaper) power for industry, and discussed the question of its effect upon the largest group directly involved in industry, labor. We have, in other words, accepted the supposition of the " super-power" people, that the development of the power' industry will continue in its present channels. We have seen­ that it holds little more than a vague promise that labor's posi­ tion in the economic order will be greatly improved. Nor is there, it might be added, any guarantee that the distributive agencies, wholesalers and retailers, will not absorb any share· of the increased efficiency which the industrialists do not appropriate. During the last twenty years their share of the' nation's income has grown considerably. Unless labor can force the industrialists to claim back from the distributors a 'A....als of the America.. Academy of Social and Political Science, January-.. March, 1925, Vol. CXVIII. 33 larger section of the national income, "super-power" holds little promise to labor or to the consumer of industrial products. AN ALTERNATIVE There is for a little while, still, the quite different oppor­ tunity of "giant power," based and planned on the needs of small consumers for help in their domestic and farming work. The new art of long-distance transmission, under proper public control, according to one writer on the subject, ". .. will do for power what the railroads did for goods. That is, it will bring to every man's door power in any desired quantity, of standard quality, and at p,rices substantially uniform for each class of service. This power will be furnished from a common reservoir, into which will be poured substantially all energy generated by steam and water power, and from which all men will draw the power they need." 5 COMING MONOPOLY Engineers, lawyers and economists seem to agree that this pooling of power involves a centralized control, either by a compact among the several states most affected in each case, or by the federal government. Morris Llewellyn Cooke, director of Pennsylvania's Giant Power Survey, says: "This [pool of power] means such complete interlocking of all elec­ trical facilities as to constitute monopoly, and monopoly on a wide scale in energy, perhaps the most important factor in our material life. Whether as a public or as a regulated private enterprise, it still spells monopoly." 6 The holding companies in control of our public utilities and our power plants and transmission lines are consolidating rapidly and are doing an enormously profitable business. Stuart Chase cites an increase in the net income of eleven holding companies which were in 1921 taking in $39,692,000 and in 1924 took in a net profit of $71,194,000.7 They are issuing stocl< dividends and no par value stock at a great rate, establishing claims upon the industry for a return upon that stock at any time that the government might take over the industry. They are doing for power stocks exactly what the railroad companies did for railroad stocks, inflating them. They are getting into a position where they can consolidate an enor­ mous control over other industries.s They are, moreover, safer • Phillip P. Wells, former chief law officer of the U. S. Reclamation Service. Giant Power Issue, Survey Graphic, March, 1924. eIdem. 7 NeW Repltblic, Dec. 2, 1925. 8 Investigation of the Chicago, Milwaukee and St. Paul Railway receivership brought out that one of its directors, John D. Ryan, was at the same time president of the Montana Power Company, which owned all of the capital stock of four other power companies, two of which were under ninety·nine year contracts to supply electric power to the St. Paul. New York Times, Dec. 19, 1925. 34 in the process, for railroads were early admitted to be affected with a public interest and subject to regulation, whereas the holding companies of the power industry are not subject to the regulation of the states to which the public utilities are subject.

UNCONTROLLED BY DEFAULT Of the effectiveness of state public service commISSiOns to act as a restraining force during a period of combination and consolidation, Morris Cooke said: .. The consolidation and expansion of electric companies and systems is now going forward at a rapid rate. Theoretically, this process is under ,both the supervision and control of our public service commis­ sions; but the day to day grind of rate cases and other relatively minor matters almost preclude any vital participation by these commissions in planning out the new electrical day." 9

MORTGAGING THE FUTURE Here, then, is our situation: We are plunging into a great development that will profoundly affect both coal industries and, in time, the life of every individual in the nation. It cannot be considered apart from the coal industries. The coal industries cannot be considered apart from the power industry. We have the alternatives of sharing heavily in the promised increase in national health and material prosperity or of letting a small group gain all the monopoly advantages of the new development. So far we have made no move to protect our­ selves. So far we have chosen the policy of inactivity. Under our eyes the power industry will reorganize the coal industries while we sit back and watch. It will establish capital claims that we will be straining for years to payoff. It will grow until by its terrific power over our industrial life we will have to bestir ourselves and control it, and then it will be too late to gain the advantages from it that we mioght have had. We have heard much of the benefits we are to have from the development of the power industry. We are credulous, we believe what people tell us. We invert the biblical injunction to read that they are also served, who only stand and wait. However, the economic interpretation of that injunction in its original form is that those who only stand and wait serve the purpose of letting others step in and mortgage their future for them. , We have never grown up. We still believe that the activities of our investing group automatically redound to the benefit of

• Survey Graphic, March, 1924. 35 all. By this policy of open-eyed and inactive waiting for Santa Claus we are giving away the benefits of the new indus­ trial revolution in exchange for such comfort as there may be in romantic sentimentalism over the dear old system of private initiative and free competition. It hardly seems enough.

BRIEF BIBLIOGRAPHY The Case of Bituminous Coal. Walton Hamilton and Helen Wright. Institute of Economics, 1925. Macmillan. A functional study of the bituminous coal industry of more value than the combined reports of the Coal Commission. Reports of the U. S. Coal Commission. In five volumes. Published in 1925. U. S. Government Printing Office. A descriptive, largely statistical study of the anthracite and bituminous industries. Undigested material. Giant Power Survey of Pennsylvania. Morris L. Cooke and Asso­ ciates, 1925. Planning the beginnings of social control in t'"ne second industrial state of the nation. Obtainable from the Governor of Pennsylvania. Giant Power Number, Survey Graphic. Edited' by Robert W. Bruere, March, 1924. . A glimpse at the social possibilities and implications of Giant Power, present and future. Giant Power Number of the Annals of the American Academy of Social and Political Science. Jan.-March, 1925, Vol. CXVIII. Edited by Mor.ris L. Cooke. Discussions of the implications of power development by a wide range of authorities. How Canada Manages Electrical Energy. Harry W. Laidler, 1925. Obtainable at 5c a copy from League for Industrial Democracy, 70 Fifth Ave., New York City. Anthracite Accounting and Finance, 1923. A pamphlet by the anthracite representatives of the United Mine Workers. Obtainable from Mr. Thomas Kennedy, Secretary-Treasurer, U.M.W.A., Hazleton, Pa. Proposing liquidation of the present ownership of the industry. How to Run Coal. Issued by the Nationalization Research Committee, U.M.W.A., 1922. Can be secured from Mr. John Brophy, President District No.2, U.M.W.A., Clearfield, Pa. What the Coal Commission Found. By E. A. Hunt and F. G. Tryon and J, H. Willits. The Williams and Wilkins Co., 1925. A resume of the important studies of the U. S. Coal Commission. Government Ownership of Coal Mines. Selected Articles, Pro and Con, compiled by Julia E. Johnsen. N. Y.: H. W. Wilson, 1923. The Anthracite Question. H. S. Raushenbush. N. Y.: H. W. Wilson.

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