The Sunday Oregonian. (Portland, Ore.) 1881-current, August 03, 1919, SECTION FOUR, Page 6, Image 66

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Breakdown of Transportation Not to Be Overcome Easily and People in Populous Centers in the Interior Must Suffer.
America's Foremost Banker and Interoa--:.
. tlonal Financier.
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
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
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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
"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
"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-
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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
"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
There seems to me much sound mig
gestion in this interview, as well as
Informing discussion of the European
railroad situation.
AN 1
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
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,'
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 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
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
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
, 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
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
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
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.)