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About The Sunday Oregonian. (Portland, Ore.) 1881-current | View Entire Issue (Aug. 3, 1919)
1 THE SUNDAY OREGONIAN, PORTLAND, AUGUST 3, 1919. EUROPE FACING HORRORS OF STARVATION FOR ANOTHER YEA R Breakdown of Transportation Not to Be Overcome Easily and People in Populous Centers in the Interior Must Suffer. - , . BY FRANK A. VANDERLIP. America's Foremost Banker and Interoa--:. . tlonal Financier. ;"H.IT HAPPENED TO ElBOPEf i:. II1- Blocked Arteries of Commerce. IF there were nothing else the matter with Europe except the breakdown of railway transportation, most of the European nations would Etill be facing a problem of gigantic propor tions, the early settlement of which is Viot only essential to the resumption of f Industrial life, but is actually essential -,,to maintaining life itself In some of the s .large centers. Hundreds of thousands of people have starved to death In the "last 12 months in Europe. I am not .using figures as it is said Lloyd George x'-.does, merely as adjectives. There is i-. competent authority for such a state ment. This terrible catastrophe has '' only in part been caused by lack of " food. In an Important measure the disaster was directly traceable to the .breakdown in transportation, to the physical Inability to move stores of existing food Into localities w'here peo ile: were dying of starvation. At one " time there were a hundred unloaded rCargoes of food In the harbor of Mar r.aeiUes, held there because preceding -cargoes were blocking the lines of y; .transportation. ' The railroads of Spain were, on the '-whole.-in much better condition than I '..'expected to find them. In France the system has wonderfully stood the test "of the enormous movement which has been Imposed upon It But equipment is f. deficient, and much of it unbelievably ancient. Added to that is the Inef fectual system of handling the traffic. One of our high military officers de scribed the dispatching of a freight car, ' ay from Brest to Paris, as comparable '.with dropping a letter in a mailbox. Sometime, presumably, the car would o arrive at its destination, but in the meantime there was no record of its "whereabouts. V.'. No matter how Important It was to 'have it reach its destination, no way ; existed to trace it, and it might be lost nn a. sidetrack for a month. The sltua- " tion in France or even in Belgium is by! no means illustrative of the situation further east- It is true that in Belgium the Germans took up praotically all ' double track, even on the principal - main through lines and have left but single track for all traffic. Literally hundreds of masonry bridges have been destroyed in Belgium and northern t France. It is easy to say that all this ' damage can be readily repaired, and so ' It can in time. My point is that it has not been re ' paired and at the present moment the tremendous handicap resulting from 1 an Inability promptly to move freight would alone be an enormously disor " ganizing factor to the industrial life of these countries. Equipment Dilapidated. ' As one goes further east, however, the transportation system is found to be far more seriously disorganized.. It 1 is true that there has now been estab lished some through services that might be taken to indicate a return to normal railroading conditions. One can ' travel from Paris to v arsaw. or to Bel- trade, Bucharest or Constantinople. When it comes to transporting freight through the whole district east and y south of Germany and of old Austria--. Jlungary, the situation assumes serious . aspects. Serbia was swept almost clean " of all railway equipment. I was told . that at the date of the armistice there . were but nine locomotives left in - Serbia. The situation is bad in Greece as well . as in Koumania. Czecho-Slovakia, r Poland and Lithuania. In Hussia the . locomotives seem, to have been run until they ceased to function and then ' were deserted, little if any effort being made at repairs, and it is here that ' there are the most notable examples of t Starvation and ample food supplies not ; distantly separated. t. I have the highest possible authority .for the prediction that the food situa- tion will be more serious in the spring i and summer of 1920 than it has been '; this year, and indeed that it will be eo i serious that, taking into account the breakdown of transportation, it will be HIGH LIGHTS ON TOPICS THAT : . .. . . . . L - J ... I " - ; 2ori or roictr Bcrr tor uej tMAGie rF fjZorMiSQA-S Uaio wue. taks A Lr tls C the SAMePi,eASCi ' You'd hardly- fttCoc,Nije i7 AS the lWE awimai,Moai .vjoulO .Yov : I , i ,', . . - impossible to prevent another horror of starvation even if the ports of Eu rope are amply supplied with food. I am not arguing that this whole sit uation cannot be readily put to rights, but I do say that no substantial start has yet been made to do so, that even no systematic plan has yet been de veloped, and that under the very best of conditions, the task is one that will consume a great deal of time. In the interval the transportation situation presents a most serious obstacle to the distribution of food and necessities, and makes doubly difficult the restarting of industry. Among all of Europe's needs, none Is more poignant than the rehabilitation of her railroads. Occasionally I had an interview that was so rich in material and that was given under such circumstances that I could make very brief running notes. I find in my notebook, which indeed is a lamentably scanty and scrappy one. the notes of an interview I. have had with a man who has made a great suc cess on two continents and knows thoroughly from personal experience the railroad conditions in America, England and in Europe, and who has rendered distinguished service through out the war. My talk with him ranged over many subjects. Portions of the Interview would logically fall in vari ous chapters of this book, but perhaps it will be as interesting and readable to try to give an outline of what he had to say without any attempt at logical arrangement. "In France the railroad tariff is fixed by law. It is now admittedly too low, but there has been an indisposition ma terially to increase it, just as there has been an indisposition materially to in crease taxes. The result Is a sad de ficiency in income and a serious de cline in the physical condition of the rolling stock. The French railroads seem never to scrap rolling stock. I have seen a locomotive regularly run ning on a French railroad that bore the date 1S57 on its nameplate. That loco motive would be in a museum in America. Its boiler tubes were all of copper. It is today in regular opera tion. The way in which France has conserved its old rolling stock makes tne wonder if Americans have not gone mad on rebuilding railroads. "Economical as is the management of the French lines, their income at the present too low rates is not sufficient to keep up properly their physical con dition. The allies have paid the Nord railway three million pounds on ac count, and that is all that has kept the road going. The finances of all the French roads are bad. "In France a tremendous amount will have to be spent to restore the rail roads to a good physical condition. The problem is by no means insurmount able, but France will have to nut un rates. Everything that a railroad buya has gone up and there must be an ad vance in the price of what it has to sell. If the French railroad managers would only introduce some kind of ef ficiency, if they would learn to do some nungs in tne way they have seen then done under American and English dl rectlon, their position would be much easier. I think after the Americans and English have gone home the r rencn will introduce a better system Dut they dislike to do that under the eyes or the foreigners. England Finds Remedy. "In England an extraordinarily happy arrangement was made at the very out break of the war. The British eovern ment took over 95 per cent of the rail road lines, guaranteeing them the same net return as they made in 1913. The government allows the same amount to De spent on upkeep and charged to op erating expenses as was spent in 1912. plus 20 per cent, the 20 per cent being allowed to cover the increased cost of material and labor. There was so much difficulty in getting labor that one million pounds of this upkeep funds is unexpended. "The passenger rates in England were Increased 50 per cent, not so much to get additional revenue as to prevent travel. Freight rates were not materi ally raised. Much traffic that had for merly moved by water had to be moved by rail, and this made new tariffs nec essary and increased the business of the railroads. There was formed a railroad executive committee, made up of 11 or 12 managers. The president of the Board of Trade was the nominal head, but he was not active. No conclusion was put into force without the unani mous consent of this executive commit tee. They were broad-minded in their attitude and did not hamper the gov ernment and the result is that there has been built up no controversy be- . ' I ? I - .,- '-r i V I - , - - CI xs, -. ; -' i I I 7 1. 3l , - - i . " -v 3 5, ;i A - 5 I " i v! CI. . : ' -v-' - ' lx not ) OOP OCT) tween the government and the mana gers. 'In an unguarded moment the gov ernment promised the unions that it would sympathetically consider an eight-hour day. With the armistice the unions immediately came forward and demanded an eight-hour day at once. Lloyd Geofge, Sir Albert Auckland, Stanley Geddes and Sir Herbert Walker i all made promises before election that are now difficult to carry out. Dur ing the war hours ranged from 10 to 12 day, and sometimes there were cases of men working 16 hours a day. An eight-hour day would add 25,000.000 annually to the operating expenses. The present increase of wages over the pre war total is 55,000.000, so that if an eight-hour day is granted on top of the present wages, the operating costs for labor alone will be. 80,000,000 more than prior to the war. English Public Divide. "Standardization, co-operation and the operation of all the roads as one system will save about 15.000.000 per annum, leaving 55,000.000 to be met by increased rates. Hallway economists agree that this cannot be done. It means doubling the expense. Winston Church ill before election promised nationali zation. His unauthorized promise was not denied until after the election. Now England is to have a new ministry of ways and transportation, but as yet no definite government policy has been an nounced. "The English public is divided upon the subject of nationalization. The sub ject, however, is not so complicated as it is in America. The difference be tween the railroad situation in the United States and in England lies in the fact that there is no vindictiveness in England between the government, the railways and labor. There has been no such acts in England as the taking away of private cars, or the reducing of salaries of managers. The English pub lic always stands for fair play. 'Is it cricket?" is a question ever in the minds of Englishmen. In America the policy of legislators and of the Interstate Com merce commission has often been vin dictive. England will probably be slow in making its final decision in regard to the railroads. It is the habit there to consider public questions carefully but in the end it will be fairly consid ered and the owners of railroad securi ties will be treated fairly. Against Political Influence. "Personally, I think the government ought to get out of the railroad busi ness. Political influences will always hamper its policy of management. doubt if railroads can ever be publicly run successfully in a democracy, al though perhaps they can in an autoc racy. "I have been spending some time in Belgium. ' You can discount somewhat the Belgian hard-luck stories. The Bel gian is inclined to exploit his misery. It is true that certain towns were wiped out, but all were not. Belgian agricul ture is better than it was before the war. The Belgian children have been well fed. Keep an eye on Belgium. Her industries may revive first in Eu rope, and she has great ability in the in dustrial field. 'Here in France industry is handi capped in many ways. The Frenchman s jealous and suspicious of his neigh bors. He is an individualist and does not like to co-operate. The genius of the French is for small business. They do not want Americans or English to cdme in to do business in France. That policy is undoubtedly a mistake. They ought to welcome the energy and brains of outsiders who would help them to get going.' There has been enough al truism and amateur charity in regard to f ranee. Whit France ought to do is to let capital and brains flow in and give vi tality to her whole industrial life. She should do away with her restrictions. nut in fact she has become more Chau vinistic than ever. ro not be deceived, however, by the possibility of recovery in ranee. France has been very sick, but there is nothing wrong with her constitution, "foreigners can do busi ness in France if they will only learn now to go about it. Americans partic ularly do not know how to deal with i renchmen. Americans are too direct and too blunt- "Xo Frenchman wants to talk busl ness In the first Interview, and much of the business of France is done by in direction, one must take time to find out where the lines lie nd in direct contact never take a Frenchman too seriously. The field of industry in France would be difficult for an out sider, but in the field of finance .there Is unlimited opportunity. Brains and Capital Needed. "You ask what America should be doing in Europe. Europe is fairly cry ing for brains and capital. There are possibilities everywhere, and there are particular possibilities in some of the by-ways of Europe that capital does not think of. Portugal is one. Clear sighted engineers with a business sense would find many opportunities in Portugal, and in Spain. . There are great mineral resources there and an excellent climate. One of the old regions of the wjrld, Mesopotamia, will be made to flourish like a green bay tree if a little capital and some brains would get hold of the situation and revive the irrigation system of ages ago. In the Balkans and in the east there are coal and oil to be developed. In Roumania there are mineral and agricultural possibili ties. The Germans made no mistake in selecting the near east as a place for investment. They organized banks there, and the banker did not take chances.. He knew what he was about. There is a banking vacuum from the Adriatic east. I" rues Investlsatlon. "If America will study these op portunities and will link Imagination with an actual knowledge of existing conditions, she can, with her ways of dealing with things, made a new world out of these backward countries. The greatest export America could send to those countries would be men with a knowledge of construction, of finance and of management. These countries have had bad government so long that there is no impetus left in the native people and they have made no prog ress, in spite of having natural re sources that would have supported great development. "The course for America to follow Is. firt. to investigate, to prospect, then to construct, retaining an interest in the Junior securities, and keeping the operation in their own hands. There is an enormous field for profit to Americans and for service to these people." There seems to me much sound mig gestion in this interview, as well as Informing discussion of the European railroad situation. IV. AX ECONOMIC MADHOUSE. AN 1 ins dis IMPORTANT factor contribut g to tne present coramtruwi disorganization of Europe Is to be found In the situation of the cur rer.cies of the various nations. The chaos in the circulating medium is enough to make Europe seem like an economic madhouse. The very first days of the war saw experiments in currencies by the greatest countries which departed from all experience and disregarded in many cases all sound principles. England itself in the first days of the war had to resort to a fiat Issue by the government. Gold which was the general medium of ex. change aside from the Bank of Eng land notes, disappeared from circula tion overnight. The Bank of England had a rigidity in its circulation that permitted no LOOM LARGE JUST NOW elasticity, and the government was forced to begin the printing of riat notes before suitable paper could be found or adequate plates engraved. To day the amount of government notes outstanding in Great Britain amounts to more than one and a half billion dollars. Against this tnere is held a special deposit of gold amounting to 28,500.000 pounds or roughly $140,000,' 000. Theoretically the notes are redeem able in gold. Practically the holder of either these notes or the notes of the Bank of England would be so closely questioned in regard to the use he Intended to make of the gold, if he demanded their redemption in gold, that their redemption quality is for the present a fiction. No one is per mitted to export gold from England without a government license, and that license in fact is not granted. A bank deposit In England is payable only in Bank of England notes or the govern ment currency notes, and as these notes will not be redeemed in gold on demand, the pound sterling has ceased to represent gold. Notes Irredeemable. In France the sole national issue of circulating notes are those of the Bank of France. The outstanding Issue of these notes of the Bank of France has gone up from about 6.000.000.000 francs before the war to over 24.000.000,000. with the limit of authorization just raised to 39,000,000,000. The notes are at present irredeemable and all gold has disappeared from circulation. It is well to stop a moment, ana trans late these figures so that our minds can grasp their pignif lcance. The circu lation of the Bank of France now amounts roundly to $6,000,000,000. France has a population of about 39.- 00,000. This gives an average amount of circulation per capita of roundly J1S6. Our own circulation is $5,863.- 288.000. or $54.64 per capita, r ranee with its 39.700.000 of people and its area less than that of our south At lantic states has $750,000,000 more cir culation than we have in the United States. While the notes of the Bank of France are the only national circulajion and the only legal tender, there nas been Issued by many of the towns of France through the local chambers of commerce, circulating notes of small denomination. In Italy circulation consisted of notes of the three great banks of issue, the Bank of Italy, the Bank of Naples and the Bank of Sicily. Before the war the Italian note circulation was 1.730. 100.000 lire. Today it is 8.961,300,000 lire. , Bank Note Issue Varied. In Belgium the pre-war circulation consisted of the notes of the National Bank of Belgium. When the German government came into Brussels they were not in a position to command a further issue by the national bank, but they compelled the leading commercial bank, the Societe Generale, to put out an issue. The volume of this issue grew to large figures, but large as it was it was supplemented by issues--by every town of importance in Belgium. I have seen a collection of these Issues of Bel gian and French city currency which filled two large scrap books of perhaps a hundred pages each, each page of which was covered with an endless va riety of notes. One of these, for which the ingenious and patriotic artist who designed it was subsequently lodged in a German Jail, had on the back an outline sketch of a lion whose tongue protruded con temptuously. It was discovered by the German authorities after many of these were in circulation that the lion's bodv embraced an outline map of Bel gium and the contemptuous tongue of the Hon was that bit of Belgian terri tory that was strongly held by the Belgian troops throughout the wax. In addition to the Belgian notes there was a great flotation of German marks. When the German troops evacuated Belgium the government faced the problem of withdrawing from circulation both German marks and the forced, issue of the Societe Generale. It accomplished this by giv ing in exchange a certain amount of the notes of the National Bank of Belgium and the remainder in bonds of the national government. As a re sult of this exchange it holds now more than 6,000,000.000 marks of German cur rency, an amount normally equal to $1,200,000,000. France had a similar problem In Al sace and Lorraine. With moce patrio tism than financial Judgment France exchanged French bank notes, for the marks at the rate of franca for each mark. This cost France $500,000. 000, and she now holds a corresponding amount of marks. Some Nations Worse. The currency situation in Great Brit ain. France and Belgium was simplicity itself, however, compared with that Ui some of the nations on the eastarm front. After the armistice Poland found itself poor in everything but cur rency. There were in circulation there huge amounts of Russian roubles issued under the old imperial regime, counter feits issued by Germany, counterfeits Issued by the bolshevists, Kerensky roubles, bolshevist roubles. German marks, Polish marks, representing a forced issue which Germany had com pelled during her occupation, and per haps of the least value of all. Austrian crowns. Here was a conglomeration of notes more intricate than anything Mr. Paderewski had ever tried to play. But he has made an attempt to straighten out the complication by is suing a new Polish currency and by taKing in the forced Polish issue, re turning half the notes stamped and re taining the other half against an issue of bonds, while the other currency is sues are being exchanged on various terms for Polish obligations. t-erbia. Koumania. Czecho-Slovakia had almost as complicated a currency situation and have made heroic at tempts to reduce the circulation by calling in all existing issues, return ing part of them stamped and issuing funded obligations of the state to rep resent the notes retired or carried in the state's treasury. me Austrian note issue has become so complicated and the gold reserve so slight that the gold reserve represents three-eighths of 1 per cent of the cir culation. Another currency complication that has added to the untold difficulties is found in the bolshevik attempt to coun terfeit successfully sterling, francs. pesetas, lire and marks. How far this has gone no one knows. Counterfeits of the circulating notes of the Brad ford bank, one of the few banks in England that has powers of issue left. aside from the Bank of England, have reached Lngland. The governor of the Bank of England has seen no counter feits of the Bank of England note, but there is said to be a plentiful supply of them in Constantinople and through out the near east, where a greater con- ndence was shown In Bank of England notes than in any other form of paper currency: and the bolshevists were ready to meet the demand. No l'lace for Money. This programme of wholesale coun terfeiting by the bolshevists is a part of their political programme. In bol- shevist political economy there is no place for money. They found it was impossible to withdraw money from circulation in Russia and so they con sciously set to work to make Russian money of no value by printing unlim ited amounts not only of their own rouble isaue. but of the czar notes and the Kerensky roubles. The finest money printing establish ment in the world, next to the bureau of engraving and printing In Washing ton, was located at Petrograd. How the Bolshevik Worked. The bolshevist propaganda in other nations required money and so they set to work counterfeiting the notes of other nations with the double object iu view of furnishing funds for the im mediate use . of- bolshevist propagan dists in other countries and for the deeper purpose of destroying confi dence of other peoples in their own circulation by injecting perfectly ex ecuted counterfeits into the circula tion of other countries. No one pro fesses accurately to know how far this diabolical scheme has been successful. It is regrettable that in this connec tion the bolshevists had the example of one of the allies, who counterfeited the mark while the war was on ond gave the counterfeit paper to German socialists to help their propaganda in Germany. In normal times of peace the great varieties of currency circulating in Eu rops always tended to hamper the free dom of commercial operations. The dif ficulties which flow in the train of the numerous and extremely complicated issues now in circulation make the cur rency situation on the continent a seri ous obstacle in the way of returning to a normal economic life. (Copyrighted, 1919 by the MacMnian Co.) (Another article by Mr. Vanderlip will be printed next Sunday.)