AMERICAN FOOD ADMINISTRATION; GENERAL REGULATION, CONTROL OF WHEAT AND PORK; ORGANIZATION IN THE STATES

In attacking the problem of food control by enforced regulation Hoover frankly repeatedly described his position as that of one who was choosing the lesser of two evils; the other and greater one was that of having no regulation at all. Political economists and others called his attention constantly to the fact that the old reliable law of supply and demand would take care of his troubles if he would but let it. If, because of the great demand, high food prices prevailed, their prevalence would automatically solve the problem of food shortage. They would stimulate production and curtail consumption; our people would buy less and there would be more of a surplus to send to the Allies.

Hoover’s answer was that unrestricted sky-rocketing of prices would certainly curtail consumption, but it would be the consumption by the poor, the hosts of wage-earners and the small-salaried. It would not cut down consumption by the rich, and it would promptly lead to sharp class feeling, widespread popular dissatisfaction and resentment, even revolt. War time was no time to force any such situation as this.

The remedy offered by supply and demand was one which would only bring on another and worse illness. But Hoover realized and declared over and over again that even a necessary interference with the law of supply and demand was at best an evil. But it was less of an evil, under the circumstances, than not to interfere with it to some degree. These were not normal but abnormal times, and regulation by supply and demand is primarily a process for normal times. And it is a process that requires time to do its remedial work, and there was no time.

But Hoover did not and does not believe in price-fixing or immediate government control of commerce where they can be avoided. In his statement before the Senate Committee on Agriculture in June, 1917, he said:

“The food administrations of Europe and the powers that they possess are of the nature of dictatorship, but happily ours is not their plight.... The tendency there has been for the government to take over the functions of the middleman, first with one commodity and then with another, until in the extreme case of Germany practically all food commodities are taken directly by the government from the producers and allotted by an iron-clad system of ticket distribution to the consumer. The whole of the great distributing agencies, and the financial system which revolved around them, have been suspended for the war or destroyed for good. That is the system which is dictatorship, and which, so far as I can see, this country need never approach.

“In distinction from this, our conception of the problem in the United States is that we should assemble the voluntary effort of the people, of the men who represent the great trades; that we should, in effect, undertake with their cooeperation the regulation of the distributing machinery of the country in such a manner that we may restore its function as nearly as may be to a pre-war basis, and thus eliminate, so far as may be, the evils and failures which have sprung up. And, at the same time, we propose to mobilize the spirit of self-denial and self-sacrifice in this country in order that we may reduce our national waste and our national expenditure.”

The primary basis of the commodity control, that is the control of the manufacture, wholesale selling, storage, and distribution of foodstuffs lay in the licensing provisions of the Food Control law. Any handler of foods, not an immediate producer or a retailer whose gross sales did not exceed $100,000 a year, could be forced to carry on his business under license, and authority was provided to issue regulations prescribing just, reasonable, non-discriminatory and fair storage charges, commissions, profits, and practices. This license control was the Food Administration’s principal means of enforcing provisions against all wasteful, unjust, and unreasonable charges and procedures.

But it was far from easy to determine all at once either what trades and commodities should be taken under control or what kind and degree of control should be exercised. As Hoover said to the Senate Committee on Agriculture, using a metaphor springing from his engineering experience:

“It is impossible, in constructing routes and bridges through the forest of speculation and difficulty to describe in advance the route and detail of these roads and bridges which we must push forward from day to day into the unknown.”

And, referring again to the same matter in an address before the United States Chamber of Commerce in September, 1917, he said:

“We shall find as we go on with the war and its increasing economic disruption, that first one commodity then another will need to be taken under control. We shall, however, profit by experience if we lay down no hard and fast rules, but if we deal with each situation on its merits. So long as demand and supply have free play in a commodity we had best leave it alone. Our attention to the break in normal economic control in other commodities must be designed to repair the break, not to set up new economic systems or theories.”

Hoover believed in making haste slowly. But he had to move. The crisis of the situation was upon us, the dike was already leaking and measures were demanded which would stop the leak before it became a flood. In the exigency there was no time for the Food Administrator to devise and carefully test plans suggested by even the most favored theories of economists, if these plans offered remedies which would only be available in an indeterminate future. The scope of the war had disorganized the life and practices of the whole world, had overthrown all precedents, shattered all fundamental relations. And on nothing was its disturbing influence upon the normal more potent than in relation to food supply.

The means of control by license regulations adopted by the Food Administration were many and various. From the beginning the stocks of manufacturers and dealers were limited, so that a continuous and even distribution might prevent shortage and high prices; contracts for future delivery were limited again to secure an equal distribution and lessen the possibility of speculative profits from the rising market. Wasteful and expensive practices were forbidden. All these means were capable of rather definite application. But a greater difficulty came in the equally important and necessary work of limiting profits and securing a more direct distribution from manufacturer and large food handler to consumer.

The many regulations and the varying activities necessary to achieve these needs were mostly looked after by a Division of Distribution and certain allied divisions, devoting their attention to special groups of commodities. The principal division was under the immediate direction of Theodore Whitmarsh, one of the most vigorous and able of Hoover’s volunteer helpers. Under Hoover’s direction Whitmarsh and his associates at the head of the special commodity divisions worked out the manifold details of a regulatory system which was gradually extended to a most varied assortment of foodstuffs, trades and manufactures.

At the end of 1918 over 250,000 food-handling corporations, firms, and individuals were under Food Administration licenses. Meat, fish, poultry, eggs, butter, milk, potatoes, fresh and dried vegetables, and fruits, canned goods, the coarse grains and rice, vegetable oils, coffee, and such various commodities accessory to food-handling, as ice, ammonia (for ice-making), arsenic (for insecticides), jute bags, sisal, etc., were under direct control to greater or less extent, except when in the hands of the actual producers and the ultimate retailers. And by the indirect means of a wide publicity of “fair prices,” and by an influence exerted through the wholesalers, even the retailers were brought into some degree of agreement or control in connection with the Food Administration effort to eliminate unfair dealing and food profiteering.

But more important than the control of any one of these many foods, or perhaps than of all of them together, and more discussed both in Food Administration days and since, was the control of wheat, and, as a part of it, of flour and bread. Some of the methods and results of food conservation as especially applied to wheat have already been referred to, but here we are especially concerned with the methods of governmental control as applied to this grain.

Hoover had learned in Belgium, and by his observation of the situation in England and Europe, that the poetic expression that bread is the staff of life becomes endowed with an intense practical significance to the food controllers and the peoples in bread-eating countries suffering from food-shortage. The loudest call of hungry people, their primary anxiety and the first care of the food-controlling authorities all converge on wheat. The dietetic regime for a semi-starving people is strong or weak, appeasing or dangerous, in proportion to the bread it contains. If the bread ration is normal or sufficient much repression can be used in the case of other foods. With bread there is life. The call of the Allies on America was for wheat above all else. More than one half of the normal dietary of France is composed of wheat bread. England normally uses less bread and more meat, but in the war time she found she could lessen meat supply more safely than bread supply. It was for the possible lack of 75,000,000 bushels of wheat that Lord Rhondda saw the defeat of the Allies staring him in the face.

The government control of the American wheat as contrasted with its voluntary conservation, took many forms, touching it as grain, as flour, and as bread, as object of special stimulation for production, as prior commodity for transportation, and as export product. But curiously, that feature of its control for which the Food Administration has been most subject to ill-considered criticism is one for which the Food Administration has the least responsibility; this is the government-established “fair price” to the grower.

The Food Control Law as passed by Congress in August, 1917, contained a provision, guaranteeing a price of two dollars a bushel for the 1918 wheat crop. It was put in to stimulate production to insure the needed supply for the war period. And it was intended to benefit the farmer. On the basis of this the Government would presumably be able, by proper regulation of the food handlers and commercial practices intermediate between the producer and consumer, both to assure the farmers of a good price and the consumer of not being driven to panic and revolt by an impossible cost of his daily bread. That such a regulation was absolutely and immediately necessary was obvious from the fact that at the very time the Food Administration was being organized unofficially along the lines of conservation propaganda in May, 1917, wheat was selling in Chicago at $3.25 a bushel and the consumer was paying for his bread on that basis, although the official estimate of the Department of Agriculture of the average price actually received by the farmer for his crop was but $1.44 a bushel.

Congress had provided a government guarantee only for the 1918 crop. At the time of the organization of the Food Administration the 1917 crop was on the point of coming to market. It seemed highly desirable for the sake of the farmers to insure their receipt of a fair price for this crop, also. Therefore the President appointed a committee composed of representatives of leading farmers’ and consumers’ organizations together with a number of agricultural experts from the agricultural colleges of the country under the chairmanship of President H. H. Garfield of Williams College, later U. S. Fuel Administrator, to fix on a “fair price” for the 1917 crop. The Food Administrator, as publicly announced by President Wilson at the time, took “no part in the deliberations of the committee” nor “in any way intimated an opinion regarding that price.”

The Committee in view of the fact that the price for 1918 wheat was already guaranteed at $2.00 it was later increased by the President to $2.26 and that any smaller price would undoubtedly lead to a considerable holding over of 1917 wheat for sale at the 1918 price and that a higher price would have been dangerously unfair to the consumers, especially the great body of working men, recommended a “fair price” of $2.20 a bushel for 1917 wheat. It was a price a little higher than that guaranteed by England to its farmers, about the same as that adopted by Germany, and a little less than that guaranteed by France, so desperate that she was ready to pay anything for production, and was already forestalling the complaint of consumers by subsidizing the bread. The President adopted the price as recommended to him by the Committee, but there was no Congressional guarantee to back it up. So, with the fair price thus determined by an independent commission, the Food Administrator proceeded with plans for holding the price of wheat at this level and reflecting it to the farmer. The principal steps taken to effect this were:

First, the creation of a government corporation (the U. S. Grain Corporation) which, acting under the provision of the Food Control Law authorizing the government to buy and sell foodstuffs, could deal in wheat and exert its influence in the maintenance of the fair price by acting as a dominant commercial agency for the buying, selling, and distribution of wheat.

Second, the licensing of all store handlers and millers of wheat and controlling them both through voluntary agreements and license regulations.

Third, the prohibition of trading in futures.

As an illustration of the results quickly obtained by these measures we may note that while the farmer was getting in the year just before the war about 27 per cent of the cost of each loaf of bread for the wheat in it, to which the miller added about 6-1/2 per cent and the middlemen and bakers the remaining 66-1/2 per cent, and in 1915, after the war began, the respective proportions were 30 per cent, 11 per cent, and 59 per cent, in 1918, after the Food Administrator’s control was in force, the farmer got 40 per cent, the miller 3 per cent, and the others 57 per cent. Or, as another illustration, while in 1917, when there was no food control the difference between the price of the farmers’ wheat and the flour made from it was $11.00 per barrel this margin during Food Administration days was about $3.50.

An enumeration of the many and ingenious measures adopted by Hoover and Julius Barnes, the self-sacrificing and highly efficient head of the Grain Corporation, to acquit themselves and the Government with fairness to all interests of the tremendous responsibility and undertaking thus imposed on them would carry us beyond the limits of our space. These controllers of the American wheat had in their hands the fate of nations. The Allies had to be supplied; and the American farmers had to be stimulated to top effort; and the American consumers, which means the whole people, had to be kept uninjured in working efficiency and undismayed by possibility of food panic which would result from prohibitive prices, or actual shortage. If the war was to be won there simply had to be wheat enough for all, America and Allies alike, and it had to be available both as regards distribution and price.

The results of the American wheat control can be summed up in one word: success. The unwearying labors and undiminished devotion necessary to achieve this success in face of great difficulties and much criticism cannot be so readily summed up. But without them the history of the war would have been a different history. We should never forget this. In the records of the methods and results of the control lies the matter, all ready for the competent pen, for an epic of the wheat, the fit third part of the trilogy that Frank Norris began with “The Octopus” and “The Pit” and had, at the call of death, to leave unwritten.

Another phase of Hoover’s food regulatory activity, concerning which there was, and still continues to be, much discussion, is that of his attempt to insure a stimulated production of hogs by a stabilized price which should well reward the grower and yet not lead to such an exorbitant cost to the consumer as would have been a dangerous hardship to our own people and an unfair hold-up of our associates in the war. Next to wheat, pork products were the American food supplies most necessary to the Allies.

Hogs are a corn product. The cost of production of hogs depends rather more upon the price of corn than upon any other factor. Investigation showed that owing to the violent fluctuations in demand for corn and hogs during the war, there had been five periods between the beginning of the war and September, 1917, in which it had been more profitable to sell corn than to feed it to swine at the price of hogs then prevailing, while there were only three periods when the reverse was true. In the preceding eight years there had been only two periods in which the direct sale of corn was more profitable than feeding it to swine.

The results of these periods of unprofitable feeding was to retard hog production, as the grower was discouraged from breeding during those periods. Hoover therefore decided that the maintenance of a proper relation between the price of corn and the price of hogs was the best method of assuring an increased production of pork. Furthermore, the violent fluctuations in the price of hogs tended to lift the price of the pork products to the consumer unduly, for at every new rise the stocks already in the warehouses over the whole country were marked up and the spread between the consumer and the producer thereby increased. A stabilization of the price of hogs was therefore as necessary for the protection of the consumer for the sake of a reduction of this spread as it was in the case of other foodstuffs.

In order that the swine growers should have an opportunity to participate in the determination of what method would be most fair and effective in establishing this stabilization and stimulating production, a committee of leading producers was asked to investigate the whole matter. This committee made a report late in October, 1917, which, after setting out the situation in detail and calling attention to the imperative need of a stimulation of production, declared that although hog production for the ten years ending 1916 had been maintained on a ratio of 11.66 bushels of corn to 100 pounds of hog, there had been but little profit to the grower on this basis and that it would be desirable for the sake of stimulation to pay at least the equivalent of 13.33 bushels of corn per hundred pounds of average hog and, if possible, as much as 14.33 pounds. On this latter ratio the committee believed that production could be increased fifteen per cent above the normal. The Committee added an expression of its belief that “the best emergency method of immediately stabilizing the market and preventing the premature marketing of light unfinished pigs and breeding stock would be to establish a minimum emergency price for good to select hogs of sixteen dollars a hundred pounds on the Chicago market.”

As the Food Administrator had no power to fix prices by law, nor to guarantee a price for the producer backed by money in the U. S. Treasury as in the case of the wheat guarantee, the only means available to him to assure a stable minimum price for hogs was to come to an agreement with the principal buyers both of hogs and the prepared pork products that they would pay a price which would make this minimum possible. This was accomplished by Hoover, with the approval of the President, in the following way: The Allies agreed with the United States that their purchases of food supplies would be made through the Food Administration (as already explained earlier in this book). They then agreed with the Food Administrator that their orders for pork and pork products might be placed with the packers at prices which would enable the packers to buy the hogs offered them at not less than the minimum price agreed to between the Food Administrator and the producers. The orders for our Army and Navy, and for other large buyers, such as the Belgian Relief and Red Cross, were also placed through the Food Administration upon the same price basis. The packers then agreed with the Food Administration that if these orders were placed with them at the stated prices they would pay to the producer the minimum price announced by the Food Administration. The combined orders of these principal buyers called for from thirty to forty per cent of the pork and pork products produced in the United States, and the price paid by them would obviously determine the price for the whole amount.

With this power, derived solely by agreement, and not, as many of the producers seemed to understand, or rather, misunderstand, by governmental authority exercised, as in the case of wheat, to establish a government-backed guarantee, the Food Administrator announced on November 3, 1917, that:

“The prices (of hogs) so far as we can effect them will not go below a minimum of about $15.50 per hundredweight for the average of the packers’ droves on the Chicago market until further notice.... We have had and shall have the advice of a board composed of practical hog-growers and experts. That board advises us that the best yardstick to measure the cost of production of hogs is the cost of corn. The board further advises that the ratio of corn price to hog price on the average over a series of years has been about twelve to one (or a little less). In the past when the ratio has gone lower than twelve to one, the stock of hogs in the country has decreased. When it was higher than twelve the hogs have increased. The board has given its judgment that to bring the stock of hogs back to normal under the present conditions the ratio should be about thirteen. Therefore, as to the hogs farrowed next spring, we will try to stabilize the price so that the farmer can count on getting for each one hundred pounds of hog ready for market, thirteen times the average cost per bushel of the corn fed to the hogs.... But let there be no misunderstanding of this statement. It is not a guarantee backed by money. It is not a promise by the packers. It is a statement of the intention and policy of the Food Administration which means to do justice to the farmer.”

The effect of Hoover’s action to accomplish the imperatively needed stimulated production of hogs began to appear by the next July and from that time on was very marked, the production reaching an increase over normal of thirty percent. The price assured to the farmers by the Food Administration was maintained uniformly from November, 1917, to August, 1918. In October, however, a critical situation arose because, by reason of the growing peace talk, a sharp decline in the price of corn occurred and this decline spread fear among the growers that a similar reduction would take place in the price of hogs because of the fixed thirteen to one corn and hog ratio. A rapid marketing of hogs ensued which broke the price.

With the Armistice there was an immediate change of attitude on the part of the Allies who had been trying to build up reserves of pork products to use in times of possible increased difficulty of transportation. They now moved promptly toward a reduction of purchases. This made serious difficulties in maintaining the price to the producers during the months of December, January, and February. But Hoover’s original assurance to the growers covered these months. It required most vigorous pressure on his part to compel the Allies to live up to their purchasing agreements. But he was finally successful in disposing of the material offered by the growers and thus was able to keep faith with them.

Some criticism of the Food Administration because of this maintenance of prices was voiced by consumers. But two important things must be remembered in this connection. In the first place the stabilized price was established primarily for the sake of stimulating an imperatively needed increased production. In the second place the assurance of the Food Administration given to the growers in November, 1917, that it would do what it could to maintain the price for hogs farrowed in the spring of 1918 covered sales extending to the spring of 1919. No one knew that an armistice would come in November, 1918. The only safe plan was to try to insure a food supply for a reasonably long time in advance. To have broken the agreement with the producers when the armistice came would have caused many of them great, even ruinous losses. Besides it would have been a plain breach of faith. Hoover would not do it.

In March, 1919, the War Trade Board was no longer willing to continue its export restrictions. It was only by virtue of these that the Food Administration had any control of the situation. They were canceled and from that time on the market was uncontrolled. But by then, the major hog run was disposed of, and the Food Administration had acquitted itself of its obligation to the producers.

This is a long and dry story of pigs and corn and difficulty. But I think it well to tell it, even though it may be dull, because it seems to be so little known. Hoover’s situation vis a vis pigs and producers and packers in those strenuous days of threatened collapse of an all-important food supply seems to be too little understood. And this little understanding has resulted in too much unfair criticism. Now let us turn to another story with more humans than hogs in it.

Hoover had said, in May, 1917, within a few days after the President had told him that he wanted him to administer the food of America, as a war measure: “I conceive that the essence of all special war administration falls into two phases: first, centralized and single responsibility; second, delegation of this responsibility to decentralized administration.”

Then let us recall how soon after that we were all assuming some share in this “decentralized administration.” If we had not all become Federal Food Administrators of states, or county, or city, or rural sub-food administrators, or even members of food conservation committees or members of honor ration leagues, we were all at least, household food administrators. We were all administering, in a new light and with a new aim, the food we bought or cooked or ate. Hoover, the centralized and responsible head, had decentralized food administration right down to each one of us.

This decentralization began with an organization of all the states. The general responsibility for this work was vested in a particular division of the Food Administration, directed by John W. Hallowell, a young engineer and business man who revealed a conspicuous capacity in this important position. As early as June, inquiry was made of Governors of the states and of other public officials and prominent men concerning desirable men who would be willing to volunteer their services in directing the work of the Food Administration within their state, as their part in the war work of the nation. Early in July as many as had been so far selected came to Washington for a first conference with Hoover, at which plans were made for proceeding with the work within the states immediately upon the passage of the Food Control Act. By August 10 when the Food Administration was formally established, Federal Food Administrators were already selected for about half the states. The rest were soon chosen. Frequent meetings were held in Washington.

At each successive conference with Hoover of these state administrators, who were able men, experienced in business administration or public service, their enthusiasm, their confidence in his leadership, their response to his national ideals, their personal devotion to him, grew. Hoover’s relation to them recalled to me, with leapings of the heart, those earlier days in Brussels when the eager young men of the C. R. B. used to come rushing in from the provinces to group themselves around him and derive fresh inspiration and determination from their contact with him to see the job through and to see it through cleanly and fearlessly.

These Federal Food Administrators listened to Hoover in Washington as we listened to him in Belgium. He stirred their hearts and satisfied their minds. And they went back to their difficult tasks, with fresh conviction and renewed strength. And their tasks were truly difficult, their voluntarily assumed share of the decentralized administration was a serious one. But they, too, decentralized parts of the administration; they set up the district and county and city administrations. And they and their many helpers were the ones who carried food administration into every market and grocery store and bakery and home. The whole country, all the people, became a part of the United States Food Administration.

And that was what Hoover wanted and intended. For he knew that only the people, all of them working voluntarily together, could really administer the food of America, as it had to be administered in the great war emergency that had come to the country.

On the day after the armistice Hoover addressed the Federal Food Administrators, gathered in Washington, for the last time. In this address he outlined his attitude toward the future work of the Food Administration and, even more importantly, toward governmental food control as a policy, in the following words:

“Our work under the Food Control Act has revolved largely around the curtailment of speculation and profiteering. This act will expire at the signing of the peace with Germany, and as it represents a type of legislation only justified under war conditions, I do not expect to see its renewal. It has proved of vital importance under the economic currents and psychology of war. I do not consider it as of such usefulness in the economic currents and psychology of peace. Furthermore, it is my belief that the tendency of all such legislation, except in war, is to an over-degree to strike at the roots of individual initiative. We have secured its execution during the war as to the willing cooeperation of ninety-five per cent of the trades of the country, but under peace conditions it would degenerate into an harassing blue law.

“The law has well justified itself under war conditions. The investigations of our economic division clearly demonstrate that during the first year of the Food Administration farm prices steadily increased by fifteen per cent to twenty per cent on various computations, while wholesale prices decreased from three per cent to ten per cent, according to the basis of calculation. Thus middlemen’s cost and profits were greatly reduced. This was due to the large suppression of profiteering and speculation and to the more orderly trade practices introduced under the law.

“It is my desire that we should all recognize that we have passed a great milestone in the signing of the armistice; that we must get upon the path of peace; that therefore we should begin at once to relax the regulation and control measures of the Food Administration at every point where they do not open a possibility of profiteering and speculation. This we cannot and will not permit so far as our abilities extend until the last day that we have authority under the law. When we entered upon this work eighteen months ago our trades were rampant with speculation and profiteering. This grew mainly from the utterly insensate raids of Europe on our commodities. I look now for a turn of American food trades towards conservative and safe business because in this period that confronts us, with the decreased buying power of our own people, of uncertainty as to the progress of the world’s politics, with the Government in control of exports and imports, he would be a foolish man indeed who today started a speculation in food. This is a complete reversal of the commercial atmosphere that existed when war began eighteen months ago, and therefore the major necessity for law in repression of speculative activities is, to my mind, rapidly passing. It is our duty, however, to exert ourselves in every direction so to handle our food during reconstruction as to protect our producers and our consumers and to assure our trade from chaos and panic.”

On the same day that this address was made Hoover began the canceling of the Food Administration regulations, and this cancellation continued rapidly through November and December. It had to be done with care to prevent dangerous disorganization, and some continued control was necessary during the winter and spring in order to carry out the agreements of price stabilization entered into between the Food Administration and the producers and handlers of certain commodities, as hogs, sugar, rice, and cotton seed and its products. The wheat price guarantee and control especially provided for by Congress and later Presidential proclamation remained vested in the United States Grain Corporation. It will expire on June 30, 1920.

But Hoover could not remain in America to see this demobilization of the Food Administration through personally. Only ten days after the armistice he left for Europe, at the request of the President, to direct the participation of the United States in the imperatively needed relief of the war-ravaged countries of Eastern Europe. Edgar Rickard, who had been Hoover’s chief personal assistant through all of the Food Administration work, was appointed by the President as Acting Food Administrator in Hoover’s absence.