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tions. Let me illustrate the difference between these opposing types of functions by a story.
With several associates, some twenty years ago, I became interested in developing a mine which produced coal of exceptional quality for certain uses. Our little company performed the service functions of thrift, of enterprise, of the assumption of risk, and of direct work, by saving money, risking it to develop and equip a mine, and by operating it to produce coal of a quality needed for a special purpose. Our company performed these service functions for three years and lost money in its performance every year. We also exercised the parasitic function-the vested right of sole access to a certain area of a limited natural resource. The relatively small quantity known of that particular kind of coal resulted in so great an increase in the value of this vested right that we sold the property for an amount sufficient to pay all our accumulated losses, 7 per cent per annum on the invested capital, and to return to the investors something more than twice the capital originally invested.
The politicians' and reformers' method of attacking evils generally is to extend the police power and to tax capital invested in the performance of the service functions, or incomes derived from their performance, to meet the expense. The economic method would be gradually to untax investment in, and income derived from, the service functions, while gradually increasing the tax upon those vested rights from which parasitic incomes are principally derived. This is, I believe, the most important prerequisite for the solution not merely of the social problems connected with the coal industry, but also for the solution of all of the great social problems the consideration of which is the purpose of this Conference, I know of no possible educational activity which would be more helpful to social workers than the careful study of the philosophy of Henry George. But I beg of you not to assume that Henry George, or any of his intelligent disciples, believes that single tax is a panacea for social or economic disease; it would merely establish an environment favorable to the cure of such ills.
The coal industry is the victim of an evil economic environment growing out of the lack of any principles of equity in the establishment of freight rates. Coal freight rates and their relationships are of great importance because the total amount paid by the consumers of bituminous coal for freight charges undoubtedly exceeds the amount paid for the same coal at the pit mouth, and a slight change in freight-rate relations may destroy the mining industry in one district while stimulating its activity and prosperity in another field. There is a very simple principle of equity which might be applied to railroad rates which would prove of inestimable value in stabilizing the production and transportation of coal and reducing its cost to the consuming public, namely, the charges for any service rendered by a public service corporation should be proportioned to the cost of the particular kind of service required and rendered. This principle has been applied with marked success in the electric power industry and its application is one of the causes for the enormous development of that industry,
which, in turn, has made possible a cost of lighting with incandescent electric lights in the workingman's home considerably less than the cost of equal illumination with kerosene lamps. Equitable rates tend to reduce the peaks and fill in the valleys of the load curve. Applied to coal transportation, equity would result in a rational distance-rate scale, with terminal charges which would vary at different terminals, and in some form of commutation rates whereby the charges per ton moved from a given origin to a given destination would be less with a uniform movement throughout the year than if said movement were irregular, and hence more expensive to the carrier. This, in turn, would react on the mining operation to increase the number of working days and to reduce the number of idle days. Competition would quickly eliminate the inefficient mining ventures.
A change in the economic environment which would be helpful not only to the coal industry but to all service functions would be the substitution of a standard-value dollar for the present standard-weight dollar. The labor difficulties which resulted in the inflated wage scale of 1920 and those which accompanied the effort to deflate that scale in 1922 probably would not have occurred had it not been that the purchasing power of the dollar depreciated heavily after the 1917 wage scale had been adopted, and then appreciated greatly after the 1920 scale went into effect. Technically, in 1920 the United Mine Workers were wrong, but practically, they were right; their true wages had been reduced. In 1922, when true wages advanced with no change in the wage scale, the United Mine Workers were able, by the Jacksonville Agreement, to retain the wage scale based on the value of the 1920 dollar. Actually, however, this was a barren victory for the great mass of the workers in the union field, because for many of them it meant reduced hours of work or their complete elimination from the industry, and the rapid transfer of the business to the non-union fields.
My plea, therefore, is for a sane modification of the economic environment of the business and the abandonment of political efforts which disregard natural economic law. Economic law always works, but the phenomena produced vary greatly with the environment. The expansive power of steam in a proper environment safely moves the vessel to the desired harbor, but in an improper environment will blow up the boilers, with the total destruction of the vessel.
But, notwithstanding the unavoidable evils that arise from the economic environment of the industry, established by state and federal legislation, much can be accomplished by the individual operator toward stabilizing the operation of his own undertaking; if he will use and not ignore natural economic law, he may contribute to the welfare of his employees, of the carrier which transports his coal, and of the customers who are willing to cooperate with him in making regular mining operations possible, and he may, under favorable conditions, secure a cash reward for his efforts. Unfortunately, coal operators are pretty much like a cross-section of society; we do not like to think in terms of ultimate causation or in terms of function. It is so much simpler to think in terms of proximate
causation and of personalities. To one who is willing to think of ultimate causes and to forget personalities, idle mines, coal famines, Herrin riots, and the suspension of the constitutional rights of free speech and free assemblage are merely symptoms. They are the natural results of a politico-economic environment in which men's natural desires appear to be more easily satisfied by antisocial activities than by the efficient performance of service functions.
May I close with two quotations which seem to me applicable to the bituminous coal situation? First, the last stanza of one of A. E. Housman's poems: To think that two and two are four,
And neither five nor three;
The heart of man hath long been sore,
Coal operators, mine workers, politicians, journalists, and social reformers continue to act as though two and two were either three or five.
The other quotation is from Tagore:
Facts are many, but the truth is one. The animal intelligence knows fact, the human mind has power to apprehend truth. The apple falls from the tree, the rain descends upon the earth— you can go on burdening your memory with such facts and never come to an end, but once you get hold of the law of gravitation, you can dispense with the necessity of collecting facts ad infinitum. You have got one truth which governs numberless facts. The discovery of truth is pure joy to man-it is a liberation of his mind. For a mere fact is like a blind lane, it leads only to itself-it has no beyond. But a truth opens up a whole horizon, it leads us to the infinite.
THE SOCIAL SIGNIFICANCE OF THE COAL
H. S. Raushenbush, Secretary, Committee on Coal
and Power, New York
The discussions tonight have been amazing to me. The analysis of the coal industry which has been made so far is, in my opinion, neither adequate nor accurate. This leads to two direct exceptions to what has been said. The first speaker (Dr. Devine) pictured the coal industry as suffering from mildly adolescent troubles such as a probation officer might easily correct. If mild regulation is all that is needed there is no particular point in our meeting here tonight, and Calvin Coolidge might sleep in the White House another four years without our coming to grief over the industry. The situation is much more serious than he has painted it. Before the next year is over there will be unpleasantly human things to tell us that it cannot be dismissed so lightly; unpleasant things reeking of sweat and blood to tell us that the situation is one of those almost impossible ones out of which men fight their way savagely.
The second speaker (Mr. Blauvelt) has spent his time giving you another misconception of the situation. He would make it appear that the industry
was plagued by legislative interference all the time; that if left alone something which he calls "natural laws" would right the industry. There is no legislation regulating the coal industry, nor have we had any such legislation since the war or before it. The income tax laws and antitrust laws do not differentiate the coal industry from other industries. The mess the industry is in today is pretty much the result of the "natural laws" which Mr. Blauvelt wants to have preserved or reenacted-which is it? Another thing which astonished me was the casual way in which he tossed off, as a remedy for the coal industry, a plan of confiscation. Certainly his idea of revolutionizing the freight-rate structure in order to favor an entirely new set of cities over Cleveland and Chicago and the present terminals is a confiscation of present property values in those present terminals as definite as any which the first speaker inveighed against.
The coal industry disturbs the pleasant sense of complacency into which we find ourselves drifting with regard to labor in this country. We are told so often that industry is becoming efficient and, with the increase in its efficiency, wages are increasing. Gradually we let ourselves believe this and believe that all is well, although within the last year two distinguished economists (Mr. Douglas and Mr. Soule) have pointed out, first, that while national productivity over thirty years increased 52 per cent, labor's share of it increased only 26 per cent, or one-half; and second, that an increasingly larger part of our national income is going, not to the producing industries at all, but to the distributing end, to the wholesalers, middlemen of various kinds, and the retailers. The coal industry, like the textile industry, accentuates these findings. It is the unpleasant morning-after which is always there to greet us after the nights of our pleasant drunken dreams of peace and prosperity among men of good will. Its presence cannot be conjured away any more than a similar situation could be conjured away in Great Britain, where 900,000 men are now locked out.
The analogy with Great Britain's situation, while not complete, has its points of interest. First, both countries are expanded far beyond the coal market's demand. Here the overexpansion is due largely to improvement in technique: coal-cutters, coal-loaders, more efficient ways of working the face. The result is that we have an immediate potential capacity of five hundred million tons more than we use, an overexpansion of 100 per cent. Second, both countries have many extra workers. The number in America is now estimated at 150,000 or 200,000 and if the technical improvements now established in some of the mines become universal, that number may be raised to 400,000 within ten years. Third, both countries have their bankruptcies. During the last four months of 1925, without the subsidy, 73 per cent of the British mines were running at a loss. Over here the shift in production has lowered values in some parts of the country to the point where capitalized earnings would give a total value close to zero. This, of course, is a very real form of confiscation, informal but actual. Fourth, the earnings of the men in both countries are very low. Secretary of Labor Davis has shown, in an article in the
Monthly Labor Review, March, 1926, the average annual earnings for miners and loaders in 1924 in certain of the states. In Alabama these crafts worked 220 days for $1,005; in Illinois, 148 days for $1,265; in Indiana, 136 days for $1,164; in Kansas, 151 days for $894; in Kentucky, 174 days for $980; in Ohio, 143 days for $1,025; in Pennsylvania, 180 days for $1,152; in West Virginia, 182 days for $1,110.
There is another similarity between the two countries: Fifth, the rank and file of the miners are willing to tighten their belts and go out on strike and starve, as they did, for example, in 1922. We must not neglect to count on this. As long as there is the American tradition of not taking a licking lying down, as long as there is the American tradition of dying with your boots on, we may expect the miners not to take any further lowering of these already low annual earnings without a struggle. This entirely American tradition led entirely American-born-and-bred miners to do what they did at Herrin, and throughout our history the attempt to take their food away from them has always led people to violence. This may not be wise or right, but it is inherent in the situation. Sixth, a final similarity between the two countries lies in the fact that the industries of the two countries do not seem to be able to absorb the extra men. As Hamilton and Wright have pointed out, the men in the coal industry are in an especially bad way when it comes to hunting for new jobs because when the coal industry is depressed the rest of industry is also depressed.
The dissimilarities between the two countries are, roughly, three. First, foreign competition is not such a large factor in our coal industry; second, we have mechanized, and are mechanizing, to a greater extent than they have done in Great Britain; third, the union in America now extends over only 40 per cent of the production; in Great Britain it extends over the total production.
Here we have the amazing situation of a new industrial revolution (a very rapid improvement in the technique of coal mining) taking place in the industry which made the old industrial revolution a possibility; and, further, we have a breakdown of the promise that increased efficiency means better wages and greater profits.
In this situation the miners have, in human terms, the largest stake. Generally speaking, the more their wages are cut in one way or another, the lower the price of coal is to the great industries, railroads, and public utilities purchasing coal. The consuming public, which in the case of bituminous coal consists of these large industrial corporations, will not protest at a situation which lowers the price of one of the main raw materials. Nor, when coal prices go up, do the industries of the country have great difficulty in passing the cost on to the consumers. This is the main reason why there has been much less call for the reorganization of the bituminous industry than for the reorganization of the anthracite industry where the consumers are householders and cannot pass on any price increases. Nor do the owners and stockholders have quite the same kind of stake in the industry as the miners have. Presumably those who have money to