Chapter 26 of Problems in American Democracy. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. This reading by Allison Hester of Athens, Georgia. Problems in American Democracy by Times-Williamson. Chapter 26, Education. 307, The Meaning of Education. A half century ago, education might have been defined as the process of acquiring certain types of book knowledge which contributed to the culture of the individual. More recently, the concept of education has been broadened and deepened. Present-day education aims not only to add to the culture of the individual, but to vitalize the community as well. Education is no longer limited to the schoolroom but includes all agencies and activities which in any way help toward a fuller and more responsible citizenship. Education is no longer confined to infancy and youth but is a lifelong process. Our educational system no longer assumes that the needs and capacities of all pupils are similar but attempts so to diversify training that each individual will be enabled to develop his peculiar powers and to contribute to American life in the manner best suited to his individual ability. Taken in its widest sense, education has seven great objectives.  Footnote, these objectives have been formulated by the National Commission on the Reorganization of Secondary Education in the footnote. 308, education and democracy. Two centuries ago, the education of the masses was politically a matter of small concern for most governments were conducted by a narrowly restricted class but in a democracy, education is fundamental. The idea that the masses should govern themselves is an appealing one but before self-government is safe, a comprehensive educational system must have made substantial inroads upon illiteracy and ignorance. Not only must the citizen of a democracy be individually capable but his capacity to cooperate with his fellows must be large. Under an undemocratic government, the people rely upon their rules in a democracy they must rely upon their own joint efforts. From both an individual and a social standpoint, therefore, democracy demands more of its educational system than does any other form of government. 309, development of education in the United States. Education was an important concern in most of the American colonies and especially so in New England. After 1800, the common school system was extended rapidly, the district school passing westward with the pioneer movement. Educational facilities continued to expand and to diversify until at the end of the Civil War period there were more than seven million children in the elementary schools of this country. The period following the Civil War also saw the beginnings of the high school, a characteristic American educational institution which arose to take the place of the older Latin grammar schools and the private academies. Normal schools for the training of teachers in colleges and universities for higher education developed rapidly after 1880. Today, there are more than three quarters of a million teachers in the United States instructing more than 25 million students in institutions ranging from kindergarten and elementary schools to colleges and universities. 310, merits of our educational system. The merits of our educational system are of great significance. We are definitely committed to the ideal of an educated citizenry. It has been the policy of the several states to establish and maintain free public schools. School attendance is compulsory on full or part time for children up to a certain age. The age varying from state to state. No public school is sectarian. The freedom of religious thought and action guaranteed by the federal constitution having been continued into our public school system. The public schools stimulate democratic tendencies by bringing together large masses of children from all walks of life. Our school system likewise has an Americanizing influence upon a large number of foreigners because their children study in our public schools and then carry into their homes the influence of the school. Within the last quarter of a century, our schools have greatly extended their functions becoming, in many cases, genuine community centers. 311, financing the schools. The substantial advances made in American education during the last century are a cause for congratulation. At the same time, our standards of education are rising so rapidly that a number of educational problems are becoming acute. An important problem has to do with the financial support of our rapidly expanding school system. In many states, the schools are inadequately supported by the taxpayers. In some of these states, the public schools are not readily accessible to large numbers of children. While in the schools that are accessible, the equipment is often inadequate to the demands made upon it. In many states, teachers still receive insufficient salaries. Our schools ought not to suffer from lack of funds. Ours is the richest country in the world and our school system is one of the most vital and fundamental of our institutions. Often, the failure of taxpayers properly to support the schools is due to either or both of the following causes. First, failure to appreciate the importance of education. Second, the lack of accessible wealth as a basis of taxation. The first objection must be met by so perfecting our educational system that taxpayers will be convinced that money invested in schools means large profits in the form of a more efficient and prosperous citizenship. The second objection calls for the reform of our taxation system. Three 12, control of education in the United States. In the United States, education is a state rather than a national function. There is no federal administration of schools, each state having its independent system. Each state has a system of elementary education and nearly every state has a secondary or high school system. Nearly all of the states also have state universities in which instruction is either free or is available at a nominal charge. The public schools are supported chiefly by local taxes and are controlled mainly by the local authorities. In most states, local outlays are supplemented to a greater or less degree by state contributions. State support is almost always accompanied by a measure of state control though the extent of this control varies widely among the several states. Three 13, the question of uniform standards. To what extent should there be uniformity within our school system? We have no national system of education and the lack of coordination between the educational systems of the several states has many undesirable features. Educational standards vary widely from state to state and often from county to county within the same state. The confusion growing out of this situation has given rise to the demand for the systematization or standardization of our school facilities. The question is a difficult one. Most authorities believe that education ought not to be centralized under the federal government but ought rather to remain a state function. But even though it is not desirable to allow the federal government to take over the chief educational powers of the state it is believed by many that some national agency might render valuable service in coordinating the educational programs of the several states. At present many educators feel that the federal government should insist upon minimum standards in education in the various states of the union. Standardization within each state is considered desirable by most authorities. All of the educational facilities of a given commonwealth probably ought to be coordinated under some supervising state agency. The administrative ideal in state education is so to systematize the schools of the state that they will be bound together by a common purpose guided by the same set of established principles and directed toward the same social ends. 214, school attendance. A serious defect of our educational system arises in connection with school attendance. In many states the school attendance laws are laxly enforced. It is claimed that at no one time is more than three fourths of our school population enrolled in the schools. Of those who do not comply with the school attendance laws there is a considerable percentage which cannot acquire an adequate education within the limits of the compulsory school period. Only about one third of the peoples who enter the first year of the elementary school reach the four year high school and only about one in nine is graduated. Of those who enter high school about one third leave before the beginning of the second year and about one half are gone before the beginning of the third year and fewer than one third are graduated. Within the last decade there has been a marked tendency among several states to enforce school attendance laws more strictly. No less encouraging is the growing belief among educators that the school attendance period ought so to be adjusted that every child will be guaranteed the working essentials of an education. There is grave doubt as to the wisdom of raising the minimum age at which children may withdraw from school but at least greater efforts ought to be made to keep children in school at least for part-time schooling beyond the present compulsory period as will be pointed out presently much is already being done in this direction. 315 education as preparation for daily life. It is sometimes said that our educational system neglects practical activities for subjects that have no immediate connection with the problems of daily life. Many citizens have thoughtlessly condemned the whole program of education because they have observed that particular schools have allowed pupils to go forth with a fund of miscellaneous knowledge which neither helps them get a better living nor aids them in performing the duties of citizenship. On the basis of these and allied considerations there is a growing demand that education be made more practical. There is much to be said for and against this attitude. Some enthusiasts are apparently carrying the demand for practical education too far. The growing importance in our industrial life of efficiency and practical training should not blind us to the fact that education is cultural as well as occupational or vocational. The education of an individual is not estimated alone by the degree to which he succeeds in practical affairs but as well by the extent to which he shows evidence of training in the appreciation of moral, artistic and literary values. It is sometimes difficult to see that the study of literature, ancient languages and similar subjects is preparation for life. And yet wise training in these fields may prove as important as studies which aid more directly and immediately in getting a living. On the other hand, our educational system must take note of the growing importance of industrial activities. Since education is preparation for life the school must accommodate itself to the changes which are now taking place in our economic and social organization. As modern society becomes more complex more tinged with industrial elements more a matter of cooperation and interdependence education must become more highly evolved more attentive to vocational needs and more emphatic in the stress which it lays upon the actual duties of citizenship. The more complex the needs of daily life therefore the greater the necessity of shifting emphasis in education but in thus shifting the emphasis in education we must be careful not to disturb the balance between cultural and practical subjects to discriminate between what should be taught and what should be omitted from the curriculum to retain the finest elements of our cultural studies but at the same time to fit our citizens to meet the demands of office, shop and factory these are the tasks of the educator. 316 Vocational Education Vocational training is one of the most significant developments in modern education. This type of education is designed to train the young person to earn a good living in that branch of work for which he seems best fitted. Some of the supporters of Vocational Education believe that this specialized form of training ought to be commenced very early and in connection with the regular curriculum. Others think that vocational education should not be attempted until the child has been given enough generalized training to enable him properly to perform the fundamental duties of citizenship. But whatever its relation to the curriculum Vocational Education is of great significance. If combined with vocational guidance it not only prevents the boy or girl from aimlessly drifting into an unskilled occupation but it singles out for special attention children who show special aptitude for particular trades and professions. Vocational Education for the blind, the deaf, the crippled and the otherwise disabled is a social service of the finest and most constructive type. 317, Federal Encouragement of Vocational Education. In February 1917, Congress passed the Smith Hughes Act establishing a federal board for Vocational Education. This board promotes vocational education in cooperation with several states and administers the federal aid grant to the states under the act. Each state accepting the provisions of the act must provide a state board to control a system of vocational schools. Evening, part time and continuation schools offer instruction in agriculture, industry, commerce, transportation and the professions. Each state must also agree to appropriate either through the state or locally an amount of money for teacher salaries equivalent to the sum received from the federal board. Such states must also agree to provide proper buildings and meet the running expenses of the system. In the first year under this act, the federal appropriations amounted to more than a million and a half dollars. This sum is to be increased annually until the year 1925 to 1926 when the states will receive $7 million from the federal government in support of vocational education. 318, Limitations of the Conventional School Term. A few decades ago, the typical school in an American city offered instruction to certain classes of young people between nine o'clock in the morning and three or four o'clock in the afternoon, four from 150 to 180 days a year. During the rest of the time, the school house was idle. This policy greatly restricted the education of important groups of people. Adult immigrants were barred from the elementary public schools, persons desiring educational guidance and special fields often found that the school offered them no help. Cripples, men and women employed in the daytime, and other individuals who found it impossible or inconvenient to attend school during the conventional time limits were restricted in educational opportunity. Many boys and girls who drop out of school because of the necessity of going to work do so before their education has been completed. For most of these classes, the inability to take advantage of the regular school term has meant the denial of adequate education. 319, Wider Use of the School Plant. Recently, the wider use of the school plant movement is helping these classes to secure or continue their education. For unassimilated immigrants, day and evening courses in citizenship are now provided in many cities and towns. In many cities, vacation schools have been established for the convenience of children who have failed in their studies or who are able and willing to make unusual progress in various subjects. For those who work by day, there is often a chance to go to school by night. For those who find it inexperient to leave their homes, there are in many places, traveling libraries and corresponding courses. In some Western states, the farmer now has an opportunity of taking extension courses from the state university during those seasons in which his work is lightest. For pupils who are under the necessity of partially or entirely supporting themselves, some cities now have part-time or all around the year schools. 320, The School as a Social Center. Closely associated with the movement to extend school facilities to those who would ordinarily be debarred from them is the movement toward making the school a social center. Many city and some rural schools now provide free to the general public lectures on science, art, literature and business. Moving pictures, dramatics and other forms of entertainment are becoming a regular feature of this type of schoolwork. In many schools, the gymnasiums are available to the public under reasonable restrictions. Folk singing and dancing are being encouraged in numerous schools. School rooms devoted by day to regular school courses are in many places being used during the evening for discussion of public questions. In these and other ways, the school is becoming a center of life for the community. It is extending into the homes of the people and is becoming the instrument of the community rather than of a particular group. 321 Education and Social Progress. We may sum up the problem so far discussed in this text by noting that their solution calls for three different types of treatment. First, we must strike at the root of poverty by giving every individual just what he earns by making it possible for every individual to learn enough to support himself and his family decently and by teaching him to spend his income wisely and economically. Second, wise and careful laws must be passed for the purpose of correcting and lessening the social defects of American democracy. Third, education must be relied upon to render the individual able and willing to do his duty toward himself and his country. The boys and girls of today are the voters and homemakers of tomorrow and the responsibility of preparing those boys and girls for the efficient conduct of community life rests almost entirely upon the school. Thus, education is one of the most basic factors in social progress. Neither a reorganized economic system, nor the most carefully drawn laws on social questions will solve the problem of American democracy until the individual citizen is trained to a proper appreciation of his responsibilities toward himself and toward his country. End of chapter 26. Chapter 27 of Problems in American Democracy. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. This reading by Allison Hester of Athens, Georgia. Problems in American democracy by Times-Williamson. Part four, American political problems. A, some economic functions of government. Chapter 27, Public Interest in Business Regulation. 322, Necessity of Public Interest in Business. Although individuals carry on business primarily for their own ends, the economic activities of men affect not only themselves, but the community as well. If every individual voluntarily confined his attention to those forms of business which strengthened the community as well as adding to his own prosperity, there would be little need for laws regulating the conduct of business. But because experience has shown that some persons will seek to benefit themselves in ways that react to the injury of the community, it becomes necessary for law to adjust private and public interests. A community cannot remain indifferent to the economic activities of its citizens. Public interest in business is a fundamental necessity if the community is to be safeguarded against the abuses of free enterprise. 323, Nature of Public Interest in Business. In general, the object of laws regulating business is either to encourage helpful business methods or to discourage harmful business methods. A good deal of legislation has been designed positively to encourage helpful business methods, yet it remains true that the most significant of our industrial laws have been aimed primarily at the discouragement of harmful business. A fundamental American ideal is to ensure to the individual as much freedom of action as is consistent with the public interest. Thus, we believe that if harmful business is controlled or suppressed, private initiative may be trusted to develop helpful business methods without the aid of fostering legislation. In this and the following chapter, therefore we may confine our attention to the legislation designed to suppress harmful business methods. 324, The Nature of Monopoly. We may begin the discussion by inquiring into the nature and significance of monopoly. Under open competitive conditions, the free play of supply and demand between a number of producers and a number of prospective consumers fixes the price of a commodity. In such cases, consumers are protected against exorbitant prices by the fact that rival producers will underbid each other in the effort to sell their goods. But if the supply of a good, say wheat, is not in the hands of several rival producers, but is under the control of a unified group of persons, competition between the owners of the wheat is suppressed sufficiently to enable this unified group more nearly to dictate the price for which wheat shall sell. In such a case, a monopoly is said to exist. Complete control of the supply of a commodity is rare, even for short periods. But modern business offers many instances of enterprises which are more or less monopolistic in character. The essential danger of monopoly is that those who have secured control of the available supply of a commodity will use that control to benefit themselves at the expense of the public. By combining their individual businesses, producers who were formerly rivals may secure the chief advantage of large scale management. That is to say, the cost of production per unit may be decreased. Because several combined plants might be operated more economically than several independent concerns. If the cost of production is decreased, the combining producers can afford to lower the price of their product. But if they are practically in control of the entire supply, they will not lower the price unless it serves their interest to do so. Indeed, it is more likely that they will take advantage of their monopoly to raise the price. 325, types of monopoly. Monopolies are variously classified, but for our purpose, they may be called either natural or unnatural. A natural monopoly may exist where, by the very nature of the business, competition is either impossible or socially undesirable. Examples of this type of monopoly are gas and waterworks, street railways, stream railways, and similar industries. These will be discussed in the next chapter. Where an unnatural monopoly exists, it is not because the essential character of the business renders it unfit for the competitive system, but because competition has been artificially suppressed. The traditional example of an unnatural monopoly is that form of large scale combination, which is popularly known as a trust. 326, origin of the trust. After the Civil War, rivalry in many industries was so intense as to lead to cutthroat competition and a consequent reduction in profits. For the purpose of securing the advantages of monopoly, many previously competing businesses combined. In 1882, John D. Rockefeller organized the Standard Oil Company, the first trust in this country. The plan drawn up by Mr. Rockefeller provided that the owners of a number of oil refineries should place their stock in the hands of a board of trustees. In exchange for this stock, the owners received trust certificates on which they were paid dividends. Having control of the stock, the trustees were enabled to manage the combining corporations as one concern, thus maintaining a unified control over supply in opening the way to monopoly profits. 327, present meaning of the term trust. The plan initiated by Mr. Rockefeller was so successful that other groups of industries adopted it. After 1890, the original trust device was forbidden by statute and the trust proper declined in importance. But there continued to be a large number of industrial combinations, which under slightly different forms have secured all of the advantages of the original trust. In some cases, previously competing corporations have actually amalgamated and still other cases, combining concerns have secured the advantages of monopoly by forming a holding company. A holding company is a corporation which is created for the express purpose of holding or controlling stock in several other corporations. This, the holding company does by buying a sufficient amount of the stock of the combining concerns to ensure unity of management and control. Since the holding company and similar devices secure the chief advantages of the original trust, the word trust is now used to designate any closely knit combination which has monopolistic advantages. 328, Growth of the Trust Movement. The trust movement developed rapidly after 1882. There were important combinations in the oil, tin, sugar, steel, tobacco, paper and other industries. By 1898, there had been formed some 80 trusts with a total capitalization of about $1 billion. At the beginning of 1904, the number of trusts exceeded 300 while their combined capital totaled more than $5 billion. The largest single trust was the United States Steel Corporation which was capitalized at almost a billion and a half dollars. At the beginning of 1911, in which year the Supreme Court of the United States ordered two important trusts to dissolve, the combined capital of the trusts was probably in excess of $6 billion. 329, Abuse of Power by the Trusts. Trusts have often abused their monopolistic powers. They have often used their wealth to corrupt legislatures and to attempt to influence even the courts in their effort to prevent laws and court decisions from restricting their monopoly. The corruption of railway corporations and of political parties has been partly due to the evil influence of the trusts. Trusts have often crushed out independent concerns that endeavored to compete with them. This has been accomplished partly by inducing railroads to discriminate against independent concerns and in favor of the trusts, partly by cutting prices in competitive markets until independent concerns were crushed out and partly by the use of bribes, threats and other unfair methods. After competition had been suppressed, the trusts took advantage of their monopoly to raise prices on their products, thus imposing a heavy burden upon the public. 330, The Sherman Antitrust Act, 1890. During the 80s, a number of states attempted to control the trust movement, but the federal government has exclusive jurisdiction over interstate business. And for this reason, the action of the states was limited to the control of the relatively unimportant trust business lying entirely within their respective borders. The fact that an increasing proportion of trust business was interstate and character stimulated interest in the federal antitrust legislation. And in 1890, the Sherman Antitrust Act was passed. This act declared illegal every contract, combination in the form of trust or otherwise or a conspiracy in restraint of trade or commerce among the several states or with foreign nations. 331, Failure of the Sherman Act. For more than 20 years after its passage, the Sherman Act did little to curb the growth of the trusts. Indeed, the most marked tendency toward trust formation occurred after 1890. Numerous suits were brought under the act, but the lukewarm attitude of the courts rendered difficult the administration of the law. After 1911, the courts held that the restraint of trade was illegal if unreasonable, but few juries could be found that could agree upon the difference between a reasonable and an unreasonable restraint of trade. Lastly, combinations which had been organized under the original trust plan were not disheartened by court decrees ordering them to dissolve, but reorganized under some device which was practically as effective as the trust plan but which did not technically violate the Sherman Act. 332, Further legislation in 1914. Finally, in 1911, the government succeeded in dissolving the Standard Oil Company in the American Tobacco Company, two of the largest trusts in the country. This success encouraged the Department of Justice to institute other suits and stimulated such general interest in the trust problem that in 1914, Congress passed two new antitrust acts. These were the Clayton Act and the Federal Trade Commission Act. The general effect of these laws was to strengthen antitrust legislation by correcting some of the fundamental defects of the Sherman Act and by still further extending the power of the federal government over monopolistic combinations. 333, The Clayton Act of 1914. The Clayton Act forbids unjustifiable discriminations in the prices charged to different persons and also prohibits the lease or sale of goods made with the understanding that the leasee or purchaser shall not patronize competing concerns. The Act specifies a number of other practices which constitute unreasonable restraints of trade, somewhat complicated limitations are imposed upon interlocking directorates by which is meant the practice of individuals being on the board of directors of different corporations. Footnote, the danger of the interlocking directorate, of course, is that individuals who are directors in two or more corporations may attempt to suppress competition between those corporations. This may lead to monopoly. End of footnote. The Act likewise forbids the acquisition by one corporation of stock and another corporation when the effect may be to substantially lessen competition between such corporations or to tend to create a monopoly. 334, The Federal Trade Commission Act of 1914. The second of the two acts of 1914 created a federal trade commission of five members appointed by the president. The commission has the power to require annual or special reports from interstate corporations in such form and relating to such matters as it may prescribe. At the request of the attorney general, the commission must investigate and report upon any corporation alleged to be violating the antitrust laws. The most important power of the commission is undoubtedly that of issuing orders, restraining the use of unfair methods of competition and commerce. This clause aims at prevention rather than at punishment. And if its power is wisely used, it will check monopoly in the early stages. Most authorities claim that in this regard, the work of the commission has already proved definitely helpful. 335, The Outlook. Since 1911 and especially since the passage of the two acts of 1914, the trust situation has materially improved. The vague and wholly inadequate powers of the old Sherman Act have been clarified and supplemented by the more specific provisions of the Clayton and Federal Trade Commission Acts. Fairly adequate machinery for the investigation and prosecution of trusts is now provided. The present laws cover not only combinations making use of the old trust device, but also combinations employing other methods of exercising monopoly control. The Federal Trade Commission Act provides for publicity so that public opinion may have a chance to enforce the principle of fair play in open competition and business. The trust problem in the United States is not yet solved, but the careful control which we are now exercising over this type of organization justifies the belief that the trust evil will become less important as time goes on. 336, The Trust Problem of the Future. In connection with the matter of making antitrust legislation more effective, a new and pressing problem is arising. This has to do with the necessity of distinguishing first between the legitimate and the illegitimate practices of trusts. Footnote, large-scale combination or management allows important economies to be practiced. Plant can be used more advantageously. Supervision is less costly. Supplies can be purchased in large quantities and hence more cheaply, et cetera. The securing of these economies constitutes a legitimate feature of large-scale combination or management. End of footnote. And second, between combinations which are monopolistic and combinations in which there is no element of monopoly. We are coming to realize a fact which in Europe has long been a matter of common knowledge, namely that trusts are never wholly and unqualifiedly bad. The law should not aim to destroy trusts, but rather should attempt so to regulate their activities that their economical features will be preserved while their harmful practices will be suppressed. Laws should also recognize the fact that many large-scale combinations have in them no element of monopoly and that such combinations should be exempted from antitrust prosecution. In drawing up antitrust legislation, prohibitions and restrictions should be as concise and as definite as possible, both in order to facilitate the execution of the law and in order to prevent hardships being worked upon combinations which have consistently observed the rules of fair play in competitive business. End of chapter 27. Chapter 28 of Problems in American Democracy. This is a LibriVox recording. Oh, LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. This reading by Allison Hester of Athens, Georgia. Problems in American Democracy by Times Williamson. Chapter 28. Public interest in business. Ownership. 337, basis of natural monopoly. The most important examples of natural monopoly are found in those industries which are known as public utilities. Public utilities include gas and electric lightworks, waterworks, telephone and telegraph plants and electric and steam railways. These industries are by their very nature unsuited to the competitive system. This is chiefly because they operate under the principle of decreasing cost. That is to say, the greater the volume of business handled by a single plant, the less the cost of production per unit. In order to serve 100,000 customers with gas, for example, it may be necessary to make an initial outlay of $90,000 in plant and supplies. With this identical plant, however, the gasworks could really manufacture gas sufficient to serve more than 100,000. If later the city grows and the number of customers using gas doubles, the gasworks already having its basic plant will not have to expend another $90,000, but only say an additional $30,000. This principle has the double effect of virtually prohibiting competition and of encouraging combination. Since a street or a neighborhood can be served with water or gas more cheaply by a single plant than by several competing plants, competing plants tend to combine in order to secure the economies resulting from decreasing costs and large scale production. On the other hand, the cost of duplicating a set of water mains or a network of street car tracks is so prohibitive as to render competition undesirable both from the standpoint of the utility and from the standpoint of the public. This natural tendency toward monopoly together with the social importance of public utilities has given rise to a demand that businesses of this type be publicly owned. The problem of public ownership may be considered under two heads. First, the municipal ownership of local utilities and second, the national ownership of steam railroads. A, municipal ownership. 338, regulation of local utilities. In many American cities, it was formally the custom of the city council to confer valuable privileges upon the public service corporations on terms that did not adequately safeguard the public interest. In making such grants called franchises, city councils often permitted private corporations the free use of the streets and other public property for long periods of time or even in perpetuity. The abuses growing out of the careless use of the franchise granting power have recently led to a more strict supervision of franchises to public service corporations. In most cities, franchises are no longer perpetual but are limited to a definite and rather short period, say 50 years. To an increasing extent, franchises are drawn up by experts so that the terms of the grant will safeguard the interests of the public. In many states, there are now public service commissions that have the power to regulate privately owned utilities. The chief aim of such commissions is to keep informed as to the condition of the utilities and to fix rates and charges which the commission considers fair and reasonable. 339, arguments for municipal ownership. Those favoring municipal ownership as opposed to regulation declare that the conditions affecting rates change so rapidly that no public service commission can fix rates fairly or promptly. Public ownership would save the cost of regulation in many cases, a considerable item. It is maintained that regulation is inevitably a failure and that in the view of the social importance of public utilities, ownership is a logical and necessary step. Important social gains are claimed for municipal ownership. It is said that where the plan has been tried, it has promoted civic interest and has enlisted a higher type of public official. If all utilities were municipally owned, state legislatures and city councils would no longer be subjected to the danger of corruption by private corporations seeking franchises. If utilities were owned by the municipality, it is claimed service and social welfare rather than profits would become the ideal. The public plant could afford to offer lower rates because it would not be under the necessity of earning high profits. Finally, service could be extended into outlying or sparsely settled districts which are now neglected by privately owned companies because of the high expense and small profits that would result from such extension. 340, arguments against municipal ownership. Other students of the problem believe that public regulation of utilities is preferable to municipal ownership. Those holding this view maintain that on the whole, regulation has proved satisfactory and that ownership is therefore unnecessary. Rather than improving the public service by enlisting a higher type of public official, it is maintained. Municipal ownership would increase political corruption by enlarging the number of positions which would become the spoils of the political party in power. The periodic political changes resulting from frequent elections in cities would demoralize the administration of the utilities. Under our present system of government, municipal ownership means a lack of centralized control, a factor which would lessen administrative responsibility and encourage inefficiency. The opponents of municipal ownership also contend that the inefficiency resulting from this form of control would increase the cost of management. This increased cost would in turn necessitate higher rates. Moreover, municipal ownership might increase enormously the indebtedness of the municipality since either private plants would have to be purchased or new plants erected at public expense. 341, extent of municipal ownership. Some cities have tried municipal ownership and have abandoned the scheme as unworkable. In some instances, this failure has been due to the inherent difficulties of the case. In other instances, the inefficiency of the city administration has prevented success. In still other cities, ownership of various utilities has proved markedly successful. Most American cities now own their own waterworks and about one third of them own their own gas or electric light plants. A few cities own either a part or the whole of their street railways. Municipal ownership of public utilities is still in its infancy, but the movement is growing. 342, conditions of municipal ownership. Past experience indicates several mistakes to be avoided in any future consideration of the problem of municipal ownership. The terms upon which the city purchases a utility ought not to be so severe as to discourage the future development of new utilities by private enterprise. Public ownership is practicable only when the utility has passed the experimental stage for governmental agencies cannot effectively carry on the experiments nor assume the risks so essential to the development of a new enterprise. Any discussion of public ownership ought to include a consideration of social and political factors as well as matters which are strictly economic. The question of municipal ownership should be decided purely on the basis of local conditions for particular utilities. The successful ownership of street railways in one city does not necessarily mean that a second city may be equally successful in operating this utility, nor does the successful administration of a gas works by one city necessarily mean that the same city can effectively administer its street railways. Part B, national ownership of railroads. 343, development of railroads in the United States. The railroad history of the United States began when the Baltimore and Ohio was open to traffic in 1830, but until the middle of the century, transportation in this country was chiefly by wagon roads, rivers and canals. After 1850, the westward expansion and the development of industry throughout the country greatly stimulated railway building. Encouraged by lavish land grants and other bounties extended by both state and federal governments, railroad corporations flung a network of railroads across the continent. Local roads were transformed by extension and consolidation into great trunk lines embracing thousands of miles. From 9,021 in 1850, a railway mileage increased to 93,267 in 1880 to 193,345 in 1900 and to approximately 260,000 in 1922. 344, the principle of decreasing cost. While the rapid development of American railroads has had an inestimable effect upon our national prosperity, railway development has brought with it serious evils. In order to understand the nature of these evils, let us notice that with railroads as with municipal utilities, the cost per unit of product or service declines with an increase in the number of units furnished. A railroad must maintain its roadbed, depots and terminals whether one or a hundred trains are run and whether freight or passenger cars run empty or full. Many of the railroads operating expenses also go on regardless of the volume of business. Thus, the cost of handling units of traffic declines as the volume of that traffic increases. These circumstances influence rate making in two ways. In the first place, railroads can afford to accept extra traffic at a relatively low rate because carrying extra traffic adds relatively little to the railroad's expenses. In the second place, rates in general cannot be definitely connected with the expense of carrying specific commodities. Hence, rates are often determined on the basis of expediency. This means that high rates are charged on valuable commodities because those commodities can pay high rates while low rates are charged on cheap goods because those goods cannot stand a high charge. This is called charging what the traffic will bear. 345, evils attending railroad development. Since many of the expenses of the railroad go on regardless of the amount of traffic carried, railroads are constantly searching for extra business. Competition between railroads has tended to be very severe. Rate wars have been common because of the small cost of handling extra units of traffic. In the struggle for business, railroads once habitually offered low rates on competitive roads or lines and then made up for this relatively unprofitable practice by charging high rates on non-competitive roads. The desire for extra business, together with the pressure exerted by trusts and other large shippers, encouraged railroads to make rates which discriminated between products, between localities, and even between individuals. The ruinous character of competition often led to monopolistic combinations which proceeded to charge the general public exorbitant rates but which rendered poor service. 346, early state legislation. During the early stages of railroad development, the railroads were generally regarded as public benefactors for the reason that they aided materially in the settlement of the West. But after about 1870, the railroads began to be accused of abusing their position. A greater degree of legal control over the roads was demanded. The first attempts at the regulation of railroad corporations were made by several of the states. For 15 years, various commonwealths tried to control the railroads through state railway commissions armed with extensive powers. These commissions eliminated some of the more glaring abuses of railroad combination, but for several reasons, state regulation was relatively ineffective. The states had, of course, no authority over interstate business and most railroad revenues were derived from this type of business. State laws regulating railroads were often declared unconstitutional by the courts. Lastly, powerful railroad corporations often exceeded in bribing state legislatures to refrain from taking action against them. Due to these influences, state regulation was generally conceded to be a failure. 347, federal legislation. The failure of state laws effectively to control the railroads led to the enactment by Congress of the Interstate Commerce Act of 1887. This federal act created an Interstate Commerce Commission of seven members appointed by the president and charged with the enforcement of the act. The act also prohibited discriminations and forbade unjust and unreasonable rates. It required that railroads should make rates public and that they should not change rates without due notice. Pooling was forbidden, that is to say, railroads apparently competing with one another were no longer to merge or pool their combined business with the understanding that each was to get a previously determined share of the joint profits. The objection to pooling was that it suppressed competition and encouraged monopoly. In the years that followed, however, the Interstate Commerce Act checked railroad abuses very little. The machinery of the act was so defective as to render difficult the successful prosecution of offenders. Railroad interests exerted an evil influence upon government officials who were attempting to enforce the act. The administration of the law was also markedly impeded by the fact that the courts tended to interpret the act of 1887 in such a way as to limit the powers of the commission. To a considerable extent, discriminations and unnecessarily high rates continued until after the opening of the 20th century. Then in 1903, the Elkins Act revived some of the waning powers of the commission. Three years later, 1906, the Hepburn Law increased the membership of the commission, improved its machinery, and extended and reinforced its control over rates. In 1910, the Mann-Elkins Act strengthened the position of the commission in several particulars. In spite of this additional legislation, however, the rather sorry record of railroad regulation up to the time of the World War repeatedly raised the question of national ownership of railroads. 348, arguments in favor of national ownership of railroads. The arguments in favor of national ownership of railroads are similar to those advanced in behalf of the municipal ownership of local utilities. The failure of regulation, coupled with the social importance of the railroads, is said to render ownership imperative. Government ownership of railroads is said to have succeeded in several of the countries of Europe, notably in Prussia. It is believed by many that government ownership would attract a high grade of public official. It has also thought that with the change to public ownership, the corruption of state legislatures by railroads would cease. Since the roads would be taken out of private hands and administered as a unit by the federal government, discriminations, and other unfair practices would cease. It is also held that under public ownership, service rather than profits would become the ideal. Since profits would no longer be necessary, lower rates could be offered. Government ownership would allow the elimination of duplicating lines in competitive areas and would permit the extension of new lines into areas not immediately profitable. Thus, railroads now operated solely for private gain would become instruments of social as well as industrial progress. 349, arguments against national ownership of railroads. Opponents of national ownership maintain that the experience of Prussia and other European countries is no guide to railroad management in this country. Differences in political organization between this and European countries, for example, render unreliable the results of public ownership in Prussia and other parts of Europe. Many opponents of government ownership contend that the elimination of private control would increase rather than decrease political corruption. Various political interests, they say, would bring pressure to bear in favor of low rates for their particular sections of the country. It is often maintained that the substitution of public for private ownership would discourage personal initiative because public officials would take little genuine interest in the railroads. It is said that government administration of railroads would be marked by waste and inefficiency. This would necessitate higher rates instead of permitting rates to be reduced. The large initial cost of acquiring the roads is urged against public ownership, as is the gigantic task of administering so vast an industry. A last important objection to public ownership is that it would cause rates to be rigid. Rates would be fixed for relatively long periods and by a supervisory agency rather than automatically changing with business conditions as under private ownership. This rigidity would force business to adapt itself to rates instead of allowing rates to adapt themselves to business needs. 350, government control of railroads, 1917 to 1920. Shortly after our entry into the World War, the congested condition of the railroads, together with the urgent need for a unified transportation system, led to a temporary abandonment of private control. On December 28th, 1917, President Wilson took over the nation's railroads under powers conferred upon him by Congress. The roads were centralized under Director General McAdoo, assisted by seven regional directors who administered the railroads in different sections of the country. The act empowering the president to take over the railroads provided that such control should not extend beyond 21 months after the conclusion of the Treaty of Peace with Germany. But there has never been a well-organized movement for government ownership of railroads in this country and when after the signing of the armistice in November 1918, the immediate return of the roads to private control was demanded. There was little opposition. A number of plans proposing various combinations of public and private control were rejected. And on March 1st, 1920, the roads were returned to their former owners. 351, results of government control during the World War. Government control of the nation's railroads between 1917 and 1920 resulted in a number of important economies. Repair shops were coordinated so as to be used more systematically and hence more economically. The consolidation of ticket offices and cities affected a substantial saving. The coordination of terminals allowed a more economical use of equipment than had been possible under private control. The unification of the various railroad systems allowed a more direct routing of freight than would otherwise have been possible. There was also a reduction in some unnecessarily large managerial salaries. On the other hand, the quality of railroad services declined under government control. The personal efficiency of many types of railroad employees also decreased. Most important of all, there was a sharp increase in both freight and passenger rates. The period of wartime control was abnormal. Hence the record of the roads under government control during this period cannot be taken as wholly indicative of what would happen under permanent government control in peacetime, but it should be noted on the whole that the record of the railroad administration between 1917 and 1920 was good. That the above dimension economies were affected cannot be denied. Moreover, the decline in service and efficiency as well as the increase in rates is at least partially explained by the abnormal conditions over which the railroad administration had no control. The winter of 1917 to 1918 was the most rigorous in railroad history. This circumstance, combined with the unusually heavy demands for the transportation of war equipment, helped to demoralize the service from the very beginning of the period of government control. For a number of years previous to 1917, there had been an acute shortage of boxcars and other equipment, which also helped to explain the poor quality of service furnished during the war. The labor force was demoralized by the drafting for war service of many trained railroad employees. It is claimed that certain railroad officials sought to discredit government control by hampering the administration of the roads, but this charge cannot be proved. 352, the Transportation Act of 1920. Government control in wartime revealed the true status of the railroads as nothing else could. It was seen that up to the period of the World War, federal legislation on railroads had in some cases been too indulgent, but in other cases, so severe as to work a hardship upon the roads. To pave the way for a fairer and more effective regulation of the nation's railroads, the Transportation Act of 1920 was passed. At present, the railroads are privately owned, but publicly regulated by the Interstate Commerce Commission, according to the provisions of the Interstate Commerce Act of 1887, the Elkins Act of 1903, the Hepburn Law of 1906, the Mann-Elkins Act of 1910, and the Transportation Act of 1920. 353, summary of present legislation on railroads. At the present time, all unfair discriminations are generally forbidden, but it is now recognized that under certain conditions, a discrimination may be economically justified. Therefore, when the inability to levy a discriminatory rate would work a hardship upon a railroad, the commission is authorized to suspend the rule. Pooling is likewise generally forbidden, but here again, the commission may authorize the practice at its discretion. Limitations are placed upon the power of railroads to transport commodities in which they are interested as producers. All interstate rates are to be just and reasonable, and the commission is empowered to say what constitutes just and reasonable rates. In order to prevent rate wars, the commission is now empowered to fix minimum as well as maximum rates. The Act of 1920 also gives the commission the power to establish interstate rates where such rates unjustly discriminate against interstate or foreign commerce. An interstate rate, of course, is one which has to do only with freight or passenger movements, which begin and end within the borders of a single state. The Act of 1920 extended government control over the railroads in a number of important particulars. To check certain financial abuses, the commission now has supervision over the issue of railroad securities. For the purpose of increasing the social value of the nation's railroads, the Act of 1920 instructs the commission to plan the consolidation of existing roads into a limited number of systems. Another clause in the Act of 1920 provides that no railroad may abandon lines, build new lines, or extend old ones without the consent of the commission. In times of national emergency, moreover, the commission may direct the routing of the nation's freight without regard to the ownership of the lines involved. Lastly, the Act of 1920 made provision for a permanent arbitration board for the settlement of labor disputes in the railroad industry. 354, the Outlook. In view of the defective character of regulatory legislation previous to 1900, government ownership of railroads did not seem unlikely, but since the Acts of 1903, 1906, and 1910, and especially since the passage of the Transportation Act of 1920, there has been such high promise of efficient regulation as to minimize the movement toward government ownership. Not only are old abuses now more likely to be remedied, but the Interstate Commerce Commission is now empowered to relieve the roads of many undeserved burdens, especially as the commission keenly appreciative of the necessity of stabilizing the credit of the railroads. Until this is done, the investing public will have little confidence in the railroad business and the roads will continue to be inadequately financed. Perhaps the greatest problem now before the commission is to complete the physical valuation of the railroads begun in 1913. This valuation aims to discover by investigations conducted by expert appraisers the actual value of all railroad property in the United States at present time. On the basis of this valuation, the commission believes that it can estimate the probable amount of invested capital which the railroads represent. After this has been done, the commission can calculate what rates the railroads must charge in order to earn a fair dividend on their money. The completion of this physical valuation is, therefore necessary, if the Interstate Commerce Commission is to fix rates which are just and reasonable from the standpoint of the public on one hand and from the standpoint of the railroads on the other. End of chapter 28. Chapter 29 of Problems in American Democracy. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. This reading by Allison Hester of Athens, Georgia. Problems in American Democracy by Times-Williamson. Chapter 29, The Tariff. 355, The Principle of Exchange. In chapters seven and eight, it was pointed out that when individuals divide up their labor so that each becomes a highly specialized workman, there is a resultant increase in the community's productivity. Similarly, when one section of the country is adapted primarily to manufacturing, while another section is peculiarly suited to farming, there is a gain in national productivity when each of these areas specializes in those activities which it can carry on most effectively and is content to resort to trade in order to secure the benefit of industries specialized elsewhere. So far as the economic principle is concerned, there is likewise a gain when different countries specialize in those forms of production at which their citizens are most effective and are content to secure through international trade the products of specialization in other countries. 356, Nature of the Tariff. But though all civilized nations allow and even encourage the division of labor among their individual citizens and among the various areas within their boundaries, many countries restrict the degree to which their citizens may exchange their surplus products for the surplus products of foreign producers. In the United States, for example, Congress has the power to levy a duty or tariff on foreign made goods which are brought into this country for sale. This tariff may be levied primarily to increase national revenue, in which case the rate of duty is generally too low to keep foreign goods out of our markets. When the tariff is purely a revenue measure, free trade is said to exist. On the other hand, a tariff may be so high that domestic goods will be protected in our markets against competition from foreign made goods of a similar grade. In this case, a protective tariff is said to exist though such a measure also brings in revenue. Most tariff measures indeed contain both revenue and protective elements and it is only when a tariff act is primarily a protective measure that we speak of it as a protective tariff. 357, the meaning of protection. Let us be sure that we understand exactly what is meant by protection. Suppose that in the absence of a protective tariff, an English-made shoe can be produced and brought to this country at a total cost of $3.00. Let us assume that this shoe competes in the American market with an American-made shoe, which is of a similar grade, but which, for various reasons, it costs $3.50 to produce. Suppose further that both English and American producer must make a profit of $0.50 per pair of shoes or go out of business. In the resulting rivalry, the English shoe can sell for $3.50 and make a profit. Competition would force the American producer to sell his shoe for $3.50 also, but since this would give him no profit, he would be forced out of business. In such a case, the American manufacturer might secure the passage of a protective tariff on this type of shoe so that the English shoe would be charged 75 cents to enter this country for sale here. This would bring the total cost of the English shoe up to $3.75 and to make a profit, this shoe would have to sell for $4.25. But since the American shoe can be sold for $4, the English shoe is forced out of the market. Footnote, if in this example, the duty were, say, 25 cents, the foreign shoe could continue to enter our markets and compete with the American shoe. In this case, the tariff would be a revenue, not a protective measure in the footnote. The tariff question arises primarily in connection with the matter of protection and may be stated as follows. Alt-Congress to interfere with international trade by levying protective duties on imports and, if so, just how and to what extent should such duties be levied? 358, Tariff History of the United States. The first tariff measure in our national history was the Act of 1789. This was a revenue measure, though it gave some degree of protection to American industries. Down to the close of the War of 1812, our tariff was mainly for revenue purposes. After the close of that war, a heavy duty on foreign iron and textile products was imposed for the purpose of protecting domestic producers against the cheaply selling English goods which were flooding our markets. After 1816, it became our policy to combine in the same tariff act high protective duties with revenue duties. In 1824, the general level of duties was raised. In 1828, Congress endeavored to lay a tariff which would suit all sections of the country, but the attempt failed. Between 1828 and 1842, the tariff was gradually lowered. Between 1842 and 1861, our tariff policy was unsettled, but in the latter year, the domestic disturbances brought on by the Civil War resulted in the passage of a tariff which turned out to be highly protective. In the period immediately following the Civil War, the tariff continued to be very high, due cheaply to pressure from industrial interests which had secured protection from the war rates. In spite of attempted reform in 1870, 1873 and 1883, the tariff continued to be highly protective. In 1894, the Democrats reduced the tariff somewhat. And in 1909, the Republicans attempted to satisfy a popular demand for lower rates by the passage of the Payne-Aldridge Act. This measure reduced some rates, but not enough to satisfy the popular mind. In 1912, the Democrats returned to power and the following year passed the Underwood Simmons Act, lowering the rates on many classes of commodities and placing a number of important articles on the free list in 1920. The Republican Party again secured control of the government and the tariff was raised. At present, our tariff is highly protective. 359, compromise character of tariff. Our tariff history is full of inconsistencies. The pendulum has swung first to low duties and then to severely high duties. No tariff has satisfied all the interests involved. Indeed, no other issue with the possible exception of slavery has provoked as much political strife as the tariff. Every tariff is essentially a compromise for a duty upon practically any commodity, which we might select will benefit some of our citizens while it will either prove of no use to other individuals or will actually injure them. Animated by self-interests, the farmer, the lumberman, the miner, or the manufacturer, each desires a protective duty on the commodity which he produces and a low rate or a no duty at all upon the commodities which he consumes. As a result, the tariff has become a sectional problem in the solving of which congressmen have too often considered as paramount the economic interests of the particular locality which they represent. 360, nature of the tariff argument. The tariff question generally divides men into two camps, those favoring free trade and those demanding duties that are highly protective. From the standpoint of economics, the most vital argument against protection is that there is no fundamental reason why there should not be free trade between nations. Protection is economically wasteful because it diverts capital and labor from industries in which we are relatively effective to industries in which our productivity is relatively low. High protection is thus said to decrease national productivity and to impose a burden upon the consumer by preventing him from purchasing cheaper foreign made goods. In view of these facts, the free trader claims that to the extent that the tariff is an economic proposition, the burden of proof rests upon the protectionist. If this assertion is accepted, the tariff argument consists of the attempts of the protectionist to outweigh the above economic argument for free trade by putting forth economic arguments for protection and by developing social and political reasons for a protective tariff. 361, an earlier tariff argument. Formally one of the most important arguments for protection was the home market theory. This theory was advanced in 1824 by Henry Clay. In the effort to win the agricultural interests to protection, Clay maintained that a protective tariff on manufacturers would develop urban centers and that this would increase the purchasing power of the city dweller. This increased purchasing power, Clay declared, would assure the farmer of a steady domestic market, not only for his staples, but also for perishable goods which could not be shipped to foreign countries. Though still heard in tariff discussions, this argument now exerts less influence than formally. Perfected means of transportation have tended to place domestic and foreign markets on an equal footing. Moreover, the population of our cities has increased so much more rapidly than has the productivity of our farms that it is unnecessary artificially to create a home market for the farmer's produce. 362, the wages argument. At the present time, one of the most important arguments in favor of a protective tariff is that it either creates or maintains a relatively high level of wages for workmen engaged in the protected industries. Those advancing this argument believe that free trade would lower wages and depress the standard of living for large groups of workmen. The free trader maintains that high wages do not depend upon protection and this for three reasons. First, equally high wages are often paid in protected and unprotected industries alike. Second, high wages do exist in a number of protected industries but many of these industries also paid high wages before protection had been secured. Third, there is nothing in a protective tariff to force employers to pay more than the current wage. Rather than raising wages, Professor Tossig maintains, protection restricts the geographical division of labor causes industry to turn to less advantageous channels, lessens the productivity of labor and so tends to lower the general rate of wages. 363, the vested interests argument. An important argument in favor of continued protection is that the introduction of free trade would ruin valuable manufacturing businesses which have been built up under protection and which are unprepared or unable to maintain themselves against foreign competition. In the case of such industries, it is maintained the removal of protection might result in economic disaster. Factories would have to close, investments would depreciate and numerous laborers would be thrown out of employment. There is great force in this argument. Even the most ardent free trader will admit that a sudden removal of tariff duties might be demoralizing to industries long used to protection. Nevertheless, the vested interests argument is not so much an argument for continued protection as it is a reason why there should be gradual rather than a sudden removal of protective duties. If protection were to be scaled down gradually and wisely, there is no reason why capital invested in industries unable to stand foreign competition could not be gradually transferred to industries unaffected by foreign competition. 364. Tariff arguments accentuated by the World War. Three arguments in favor of protection have taken on greater importance because of the World War. One of these is the anti-dumping argument. From the standpoint of the American tariff, dumping is the practice which some foreign producers have of temporarily selling their surplus goods in this country at an abnormally low price. Footnote, some American producers in turn dump in foreign markets, but with this practice, we are not here concerned. End of footnote. If dumping were permanent, we would gain because we would be getting goods at a much lower price than we could manufacture them. The evil of dumping grows out of the fact that it tends to force domestic producers out of business. Then later, the foreign supply may diminish, in which case, we suffer from a shortage of goods. If foreign producers do continue to supply the American market, they may take advantage of the fact that American competitors have been forced out of business and demand monopoly prices. The free trader admits the force of the anti-dumping argument and concedes that the intense economic rivalry growing out of the World War rendered desirable tariff rates which would protect domestic producers against dumping. Another protectionist argument, which has gained in strength because of the war, is the infant industries argument. Protectionists claim that industries really adapted to this country may be prevented from arising here because of their inability, while still in the experimental stage to meet strong competition from well-established foreign producers. When an industry is in the experimental stage, the cost of protection is relatively high and the price will be correspondingly high. Well-established and economically conducted businesses can undersell these experimental or infant industries. Protection for such infant industries is therefore salt until such time as they will be able to stand foreign competition. The free trader has generally replied that such protection may be desirable in some cases but maintains that care should be taken to make such protection both moderate and temporary. Otherwise, protection will perpetuate industries for which we are really unsuited. During the World War, American producers began to manufacture dyes and chemicals formally imported from Germany. The industrial importance of these products gave weight to the belief that the new industries which sprang up in this country during the World War were entitled to protection against foreign competition. A third protectionist argument, which was strengthened by the World War, is the military or self-sufficiency argument. It has long been the claim of the protectionist that high tariff duties encourage the development in this country of all industries producing the necessities of life as well as all supplies which are vital in wartime. High protection was thus defended on the grounds that it permitted the United States to be nationally self-sufficing, thus allowing us to be relatively independent of other countries, especially in wartime. Previous to the World War, many free traders scoffed at this argument as resting upon an unjustified fear of war. But this attitude was changed by the dangers to which we were subjected by the interruption of our foreign trade during the war. At present, the military or self-sufficiency argument is of great importance. 365, the trend toward protection. Of late years, therefore, there has been a distinct trend toward protection in this country. The fear of dumping, the desire to protect infant industries established during the World War, and the increased importance of the military or self-sufficiency argument have been factors in this trend. Another factor has been that the Republican Party, traditionally committed to a policy of high protection, returned to power in 1920. A last important influence has been an increased need for federal revenue. The World War not only increased our indebtedness, but the advent of national prohibition in 1919 cut off a source of federal revenue, formerly very important. 366, tariff needs. From the standpoint of practical politics, one of the greatest needs of our time is for an intelligent and public-spirited handling of tariff problems. The tariff is a technical and highly complex question upon which politicians have, here to fore, had too much to say and trained economists too little. Too often, vague claims and political propaganda have carried more weight than have facts. It is asserted by many that the tariff can never be taken out of politics, but this is perhaps too strong a statement. In this connection, an interesting development was the establishment in 1916 of the United States Tariff Commission. This commission consists of six members appointed by the president for 12 years. Not more than three of the members may belong to the same political party. It is the duty of the commission to investigate conditions bearing upon the tariff and to report its findings to Congress. It is hoped that this plan will place at the disposal of Congress scientific data on which to base tariff legislation. So far, the commission has not materially reduced the influence of politics upon tariff legislation, though it is perhaps too soon to expect results. It is sometimes said that our tariff policy ought to be less changeable. Certain it is that our tariff history is full of inconsistencies and irrational fluctuations, but the question of a tariff policy is a thorny one. Manifestly, business should not be forced to accommodate itself to a purely political manipulation of the tariff. On the contrary, the tariff ought to vary with changes in business conditions at home and abroad. Whatever may be implied by a tariff policy, it is also certain that the tariff should somewhat accommodate itself to revenue needs. Beyond these somewhat general statements, however, it is hardly safe to say what should be the basic elements in a national tariff policy. End of chapter 29, chapter 30 of Problems in American Democracy. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. This reading by Allison Hester of Athens, Georgia. Problems in American Democracy by Times-Williamson. Chapter 30, Conservation. 367, Attitude of the Early Settler Toward Natural Resources. The chief concern of the early American settler was to turn a virgin continent into homes as quickly and as easily as possible. During the 17th, 18th, and most of the 19th century, our natural resources were very abundant, while labor and capital were relatively scarce. As the settler spread across the Appalachians into the Great West, it was to be expected, therefore, that the homemaker should use labor and capital as carefully as possible, and that he should use generously such resources as forest, water power, and soil fertility. Little blame attaches to the early settler for this attitude. Indeed, he acted in accordance with sound economic law. This economic law declares that under any particular set of circumstances, factors of production should be carefully used in proportion as they are scarce and generously used in proportion as they are abundant. 368, Result, Growing Scarcity of Natural Resources. The rapid settlement of the West was essential to our national unity and development. Nevertheless, the extensive and even lavish use of natural wealth since colonial times has lately called attention to the scarce city of resources formally considered overabundant. More than three fourths of our original forest area has been culled, cut over, or burned since colonial times. Wholesale logging methods have swept vast areas bare of valuable timber. careless cutting has wasted a quarter of our timber supply. In the lumber mill, about 40% of the entire volume of the logs is lost by wasteful methods of work. Since 1870, forest fires have annually destroyed more than $50 million worth of timber. All together, our timber supply is diminishing three or four times as fast as we are replenishing it. By holding sod in place, forests furnish a sponge-like reservoir which absorbs rainfall and then retains it sufficiently to ensure that it will be paid out only gradually. The process of cutting down forests, called deforestation, destroys the sod so that streams formally fed from forested areas by a steady process become dangerously swollen in certain seasons and greatly reduced in size at other times. One effect of this alteration of freshets with abnormally dry periods is a loss of steady and dependable water power. Deforestation has also had an injurious effect upon agriculture. When heavy rains wash valuable surface soil from the tops and sides of hills, these denuded areas are rendered less valuable for grazing while the overabundance of topsoil in the valleys retards effective cultivation. Agriculture also suffers from the fact that streams which would ordinarily furnish a steady supply of irrigation water are often either in a state of flood or practically dried up. Despite the excellent work done by the Department of Agriculture, American farming methods are in many sections of the country, both careless and wasteful. The abundance of land in past years seemed to justify our free use of it. Nevertheless, such use has in many cases resulted in a serious loss of fertility. Careless tillage and a failure to rotate crops have resulted in a heavy loss of nitrogen, potassium, phosphorus, and other essential soil elements. Here to four, we have used coal very lavishly. Often as much coal has been wasted as has been mined, mining corporations have often neglected low grade coal deposits and have abandoned mines without having first removed all of the accessible high grade coal. Imperfect combustion, both in dwellings and in industrial establishments is said to waste more than a third of our coal as well as creating a costly and injurious smoke nuisance. Our consumption of coal is doubling every 10 years. In view of the fact that our coal deposits are limited, this increasing consumption is a serious development. Iron too has been used wastefully. The bog iron deposits of the Atlantic coast were used up before 1800 and as the result of an intense industrial development since 1850, the supply of high grade ores is being speedily diminished. Oil and gas have been used lavishly and even in some cases, deliberately wasted. 369 high prices. The lavish use of natural resources which has characterized the American people since colonial times has been an important factor in the cost of living. In early days, there was an abundance of resources in few people to use them. At present, the supply of many of our resources is greatly diminished and there is a much larger population seeking to use them. In the case of every natural resource, the supply is either limited or is failing to increase as rapidly as are the demands upon it. The result is higher prices for coal, wood, iron, oil, gas and similar commodities. It is at least partly due to the heavy drain upon our resources that the cost of building homes, heating them, feeding the population and carrying on the varied activities of American industry is steadily increasing. 370, monopoly. Throughout the history of our natural resources, there has been a strong tendency toward monopoly. Natural resources should be safeguarded for the benefit of the people as a whole yet much of our natural wealth has been monopolized by individuals. Four fifths of our timber lands are privately owned and of that four fifths, about half is controlled by 250 companies. Two thirds of the developed water power in this country is controlled by a small group of power interests. Defective land laws, the lax administration of good laws and extravagant land grants to railroads have allowed private fortunes to be built up without a proportionate advantage to the public. Coal and petroleum deposits are controlled largely by a few corporations while a heavy percentage of our copper and iron deposits is in private hands. 371, the conservation movement. After the middle of the 19th century, the growing scarcity of many natural resources called attention to the need of conserving them. Conservation means to utilize economically rather than to hoard. It means furthermore that resources should be used so that both the present and the future generations will reap a proper benefit from America's great natural gifts. Thus, conservation seeks, Mr. Van Hys once said, the greatest good to the greatest number and for the longest time. The dawn of the conservation idea stimulated a reaction against the careless administration of natural resources. Toward the end of the 19th century, there was an increasing amount of legislation encouraging the legitimate use of natural resources on the one hand and repressing monopoly on the other. After the opening of the 20th century, interest in conservation increased. In 1908, President Roosevelt called a conference of the governors of various states for the purpose of considering this vital problem. And from that meeting, dates a definite and nationwide conservation policy in this country. Some of the effects of this changing attitude toward natural resources may now be noted. 372, forests and water power. In 1891, a federal law provided for a system of national forest reservations. These reservations now include a substantial proportion of our forests and are steadily extending their limits. Since 1897, there has been a Bureau of Forestry which has performed invaluable services. Forest fires have been reduced, denuded areas have been reforested. Forest cutting has been controlled and a constructive program of forest culture developed. Forest reserves under the control of the individual states now total more than 10 million acres. Of late years, there has been an increasing use of dams and reservoirs for the storage of floodwaters and the development of water power. This regulation of streams gives a uniform flow of water both for navigation and irrigation purposes. 373, the land. The desire to encourage the homemaker has long been the mode of power behind our public land policy. But unfortunately, many of our earlier land laws did not prevent speculators and large corporations from fraudulently securing control of land intended for the bona fide or genuine settler. Within the last quarter of a century, our land laws have been reorganized with the double name of doing justice to this type of settler and of suppressing speculation in monopoly. As the result of land office investigations in 1913, more than 800,000 acres were returned to the public domain on the ground that they had been secured through fraud. The Department of Agriculture has steadily extended its scope. Better methods of cultivation, lessons in soil chemistry and experiments with new and special crops have helped conserve the resources of the land. An elaborate system of experiment stations has been built up since 1887. The Weather Bureau in the Department of Agriculture saves millions of dollars worth of property annually by sending out warnings of frost, storm and flood. Reclamation is increasingly important. New crops are being developed for the semi-arid lands of the West. Swamp lands in the East and South are being drained. Levees in breakwaters along the Mississippi are helping to prevent the loss of arable land through the river's changes in course. Even more important is the irrigation movement. In 1894, the Cary Act gave federal encouragement to several Western states in irrigation projects. And in 1902, the Reclamation Act provided for the construction of irrigation works under the direction of the Secretary of the Interior. The plan provided by the Act of 1902 is self-supporting. The expense of the construction and improvement of the irrigation system being met from the sale of public lands. The Administration of the Reclamation Act has already resulted in millions of acres being brought under cultivation. Minerals. Until 1873, coal lands were disposed of on practically the same terms as agricultural lands. But after that date, laws restricting the purchase of coal lands began to be increasingly severe. In 1910, Congress withdrew from public sale nearly 100 million acres of coal, petroleum and phosphate lands. At the present time, the discovery of coal on land secured by settlers for purely farming purposes entitles the government to dispose of the coal deposits under special conditions. There is also a tendency for the government to demand higher prices of individuals buying public coal lands. In some quarters, there is a demand that all coal lands be leased rather than sold. The federal government has not yet yielded to this demand, but Colorado and Wyoming now lease rather than sell their coal lands. Under the lease system in these states, the state retains ownership, but allows private individuals a definite commission per ton of coal mined. The lease system is also advocated in the case of lands containing iron, oil, and gas deposits on the ground that it safeguards the interest of the public and at the same time allows the mining corporations a fair profit. 375, reasons for optimism. In spite of the appalling waste which has been characteristic of our administration of natural resources, the outlook is distinctly encouraging. Resources used by past generations are gone forever, but at last we are making rapid strides and conserving what is left. Not only this, but we are perfecting plans for an increased supply of those resources which can be replenished. The admirable work of our Forest Service promises not only to reduce the present waste of wood products, but actually to increase the supply of timber. The service deserves high praise both for its work in saving and replenishing forests and for its wise handling of forest problems involving other resources. By reasonable thrift runs a report of the Forest Service, we can produce a constant timber supply beyond our present need and with it conserve the usefulness of our streams for irrigation, water supply, navigation and power. We now appear thoroughly awake not only to the necessity of safeguarding what is left of the public domain, but also to the necessity of increasing the productivity of inferior lands. There are still in this country more than 300 million acres of unappropriated and unreserved land. Three fourths of this area is at present fit only for grazing, but the rapid development of calf or corn, durum wheat, Persian clover and other crops suitable for dry soils bids fair greatly, fair greatly to increase the productivity of this land. The irreplaceable character of our mineral deposits together with the tendency for large industrial interests to monopolize minerals has greatly stimulated the conservation of these resources. A valuable step forward has been the reclassification of public lands to allow a special treatment of lands containing mineral deposits. Coal is still used lavishly, but nine tenths of our original deposits are still in existence. Furthermore, water power, electricity and other substitutes for coal are being developed. Our high grade iron ores will be exhausted in a few decades, but an iron shortage may be prevented by more careful mining, the use of low grade ores and the use of substitutes. Three seventy six, different resources call for different treatment. A wise conservation policy will take note of the fact that different resources call for different types of treatment. Coal, petroleum, oil and gas are limited in extent and are practically irreplaceable. These should be taken from the earth and utilized as economically as possible. The same is true of the metallic minerals, such as iron and copper, though here the use of substitutes is of greater importance than in the case of non-metallic minerals. Water can best be conserved by the wise development of water power sites and by the careful utilization of streams. Forests may be renewed, but slowly. Their conservation requires the prevention of fires, the reduction of waste and cutting and milling, the use of byproducts and scientific reforestation. Soil elements may also be renewed, though slowly and with difficulty. Reforestation prevents erosion and thus conserves soil fertility. Systems of crop rotation designed to retain nitrogen, potassium and phosphorus are valuable. Three seventy seven, some conservation needs. The above considerations indicate some of our conservation needs. It is believed by most students of conservation that federal forest holding should be extended and consolidated. There is need for more stringent forest fire regulations, especially in the case of private forests. In order to reforest the denuded areas and to grow timber scientifically, some such plan as the German system of forest culture might be adopted. There is urgent need of a systematic development of our inland waterways. The construction of more dams and reservoirs, the dredging of rivers and harbors, the coordination of canals and inland waterways and the improvement of the Mississippi Great Lakes system. All these would be helpful measures. Irrigation and other reclamation projects, including the drainage of swamp lands should be developed systematically. American farming methods ought still further to be improved. We are in need of laws penalizing wasteful methods of mining and prohibiting uneconomical methods of combustion. Probably the system of leasing rather than selling mineral lands should be extended. A last vital need in conservation is cooperation between state and federal authorities and between private individuals and public agencies. This is of great importance. Where rivers course through several states and where forest fires in one section threaten adjacent forest areas, cooperation must be secured. The Governor's Conference of 1908 stimulated cooperation between the states and the federal government. And since 1909, the National Conservation Association has been a means of coordinating the work of all persons and agencies interested in conservation. There is still, however, little cooperation between state or federal governments on the one hand and private owners on the other. It is a matter of special regret that although four-fifths of our forests are privately owned, both fire prevention and scientific forestry are little developed on private estates. 378, the question of administration. Though it is conceited on all sides that our natural resources ought to be utilized economically, there is much discussion as to whether the states or the federal government ought to dominate the conservation movement. Those favoring the extension of federal control over conservation point out that forest control, irrigation, conservation of water power, and similar projects are distinctly interstate and character and are thus properly a federal function. Federal administration is said to be necessary in order to ensure fair treatment of different localities. Finally, it is maintained, the states have either neglected the question of conservation or have handled it in their own interests rather than with regard to the national welfare. A strong party maintains, on the other hand, that conservation is primarily a state function. The movement is said to be too large for the federal government to handle. It is contended that there is no specific warrant in the Constitution for the federal control of conservation. It is also claimed that federal administration of natural resources has been accompanied by waste and inefficiency. Conservation is said to be a local question, best administered by those most interested in the problem and, by reason of their proximity to it, most familiar with it. The problem of administration is a difficult one. In a number of cases, the claims for and against federal control are obviously sound, but from the standpoint of the public, the whole matter is of secondary importance. The problem of administration ought to be decided on the basis of what is best under particular circumstances. Some phases of conservation are probably best looked after by the states, others by the federal government, still others by the state and federal governments jointly. The problem of conflicting authority ought somehow to be solved. Conservation is too vital a matter to be hampered by the question of method or means. End of chapter 30.