working with the single aim of patriotism, and as long as this is true we should and will give them our complete support.

N°

The Excess Profits Tax

TOW, of course, if the price fixed is sufficient to enable the least economical producers to stay in business and thereby increase the total volume, the more efficient producers will be making abnormal profits. These excess profits, moreover, will be due to the war. In other words, the efficient producers by the Government's policy of pricefixing are put in the position of profiting by their country's needs.

There are two ways of relieving them from the predicament of making too much money, for while they are, as other people, in business to make money, they are not in business to take advantage of their country's war needs. The first method is to revise price-fixing so that the inefficient get a price sufficient to keep them going and the efficient get a less price which will keep them active. The administration of a price scale different for nearly every producer is practically impossible. The other method is to tax excess profits, which the Government is doing. This, of course, does amount practically to taking for the public purposes of the Government a part anyway of the amount which the Government and the public paid. these industries, because of the abnormal conditions. This is certainly not an exact system. It will inevitably fall harder on some than on others-even as some soldiers get killed and others do not-but it seems to be the fairest practical plan to go on.

Moreover, letting a man make the money even if a large part is taken away from him again gives him more incentive to abnormal effort than if he were not allowed to make it. Suppose a man whose business usually made a profit of $100,000 saw an opportunity under a high fixed price to double his plant and make $300,000 a year. Even if he knew that the Government would take $100,000 of it from him in excess taxes, nevertheless the chance to enlarge his plant would urge him on. And he would have this comforting thought as he made the plunge: "If high prices and changing conditions cut my profit from the expected $300,000 down to $150,000 or $200,000, the Government will not put on the excess tax. I have that tax money to fall back on as a kind

of insurance against loss." But if prices were fixed low and the most he could expect to get from his extra effort would be another $100,000 profit if all went well, high prices of construction and changing conditions might well make him hesitate, for if anything went wrong he might make nothing for the extra effort or might even jeopardize the old profit.

It may appear to people who are not engaged in commerce that when men are risking their lives without abnormal inducements, business men might risk their businesses a little more freely. Perhaps they might, but as a matter of fact they don't. And it cannot be laid to a lack of patriotism, either, for any number of men will give up and have given up their businesses altogether to serve the Government, and many to risk their lives; but these same men will not rush into added production which their business training tells them will not be profitable. Nor is this phenomenon noticeable only in this country. It is the same in all the warring countries. The Government can conscript every able-bodied man in France, but if it started to conscript the savings of the French people there would be a revolution.

Fixing high prices to increase production and taxing excess profits seems the only feasible way to meet the war-industry situation. The success of the plan depends chiefly on its administration by the Government.

T

The Poor Retailer

HE frequent appearance of wholesale prices in the press has led the public to an even keener realization than usual of the costs and difficulties of distribution and retailing, and has led also to some unfair resentment against retailers.

It is common to hear such arguments as these: "The price of coal wholesale used to be, let us say, $2 a ton and the retail price $4. Now the wholesale price is $4 and the retail price $8. But it does not cost much more for freight; why shouldn't the retail price be $6? Why should the coal dealer rob us?" But that is not all the story. When the price was $2 at the mine, a retailer for $50,000 could buy 25,000 tons. When the price was $4 he would have to borrow another $50,000 to buy the same amount of coal. Moreover, while his freight has advanced only a little, his labor, the keep of his teams, and his taxes have increased a great deal.

In other words, the man who suggests that the retailer add to his prices only the extra to be paid the mine is asking him to double the amount of his business as expressed in money, meet a great many extra expenses, incur a greater risk (for unsold coal at $4 is more embarrassing than when it costs $2), all for the same gross profit that he charged before. It is practically asking the retailer to go into bankruptcy.

The truth of the matter is that if the distribution and retailing of coal costs as much as its production when its production is $2 a ton, they will cost about the same proportion when coal is $4 a ton; and this is not far from true of most products.

A manufacturer who pays an agent 30 or 40 per cent. for selling his product [which is common enough] must increase the retail price not only to cover the added cost of production but also enough to pay the retailer his 30 or 40 per cent. of that addition. Suppose a product sold at retail for one dollar, of which the retailer got 40 cents and the manufacturer 60, of which 6 cents, or 10 per cent., was profit. If the price went up 50 per cent. it would cost the manufacturer 81 cents to make it. His same percentage of profit would give him 9 cents. The retailer would pay 90 cents, and if he got the same percentage of profit the public would pay $1.50. An increase of 27 cents in the cost of production normally added 50 cents to the public price without any profiteering or any one's having even made a larger percentage of profit than usual on his total turnover. There are probably several panaceas for this evil, but until they are tried in practice and succeed we shall have to worry along with the tendency of prices to increase by multiplication rather than addition-and the retailer is as likely to do as much worrying as any one else over this manifestation of the general cussedness of things.

essential facts are as follows: On September Ist, the United States had 2,380,000 gross tons of shipping actively engaged in the foreign trade, including the tonnage which we have taken over-let us hope permanently-from our enemies. We have under contract and construction 5,924,700 tons, all of which, says Mr. Hurley, will be under commission by the end of 1918. Thus our total shipping, including that in hand and that under construction, aggregates 8,304,700 tons. Besides this, the present Congressional programme provides for 5,000,000 tons dead weight, all of which can be finished by the end of 1919. This, reduced to gross tonnage, and added to that already in hand and contracted for, will give us, by December 31, 1919, a total merchant fleet of 9,563,000 gross tons.

The latest official figures, supplied by Premier Lloyd-George, indicated that Germany was sinking 500,000 tons a month-this including the losses of all nations.

This is 6,000,000 tons a year. Our building programme and that of the British will offset this when our building programme is in full swing. But we have first got to face this winter and next spring, when our programme will still be mostly in paper and on the stocks. Mr. Hurley promises about 6,000,000 tons of our new shipping by January, 1919.

In making public these figures, the Federal Shipping Board has set itself a task which it must exert its every resource to realize. And the public should not reach a stage of selfcongratulation that will interfere seriously with the active, unceasing prosecution of all our war plans.

The crucial time for us to fix our eyes upon is next spring, and then we should look to the future. Next spring we shall be under greater pressure for tonnage than now, for we shall have more men abroad to care for. Only the ships that were started early will be in the water to help us then. The Germans began. their ruthlessness on February 1st. We went to war in April and have begun our building at various times since. Germany will, therefore, have had nearly a year in which to get ships under water before our ships that are building are launched in large numbers. Just before our building begins to yield tonnage in large quantities-next spring-will be our lowest time, and we need to strain every building nerve to meet it. From then on the situation should improve rapidly.

T

War Financing

HE second Liberty Loan campaign has impressed more forcibly upon the public the need for individual saving to finance the war. As the war continues, each succeeding loan, to be successful, must bring home with increasing clearness to all patriotic citizens the necessity of saving for the Government. If it is realized that the normal savings of the country are less than $5,000,000,000 annually, or $50 per person, the magnitude of the financial problem becomes apparent when Secretary McAdoo calls upon Congress for $18,000,000,000 to cover our first year's expenses, including advances to our Allies. Our normal savings of $50 each have in the past gone into many investment channels. We are now confronted with the necessity of getting $180 per person for the Government alone.

The average income of an American family is probably not more than $1,000 for three or four people. It is manifestly impossible for families whose income is no more than $1,000 or $1,200 to have $180 per member ready in cash for the war. That being true, the people who have more money are going to have to meet the war expenses, and the better prepared they are to do it the easier it will be. It may seem unfair, but when the Nation needs. money it must get it from the people who have it. There is no other way.

For each individual, the problem is how to increase the country's total savings. Our gross annual income was estimated before the war at $30,000,000,000. Great prosperity has added materially to this; but it is doubtful if much of the increase has gone into the savings account. The needs of the Government now call for an adjustment of living expenses to leave an adequate amount of this income to carry on the war. It can be stated roughly that one fourth of every income is needed by the Government in addition to its other sources of income.

anxious that the people at home shall strive to realize the immensity of the task in which we are engaged and shall, through patience and confidence,

help us to accomplish that task in the shortest pos

sible time. Everything is going well with us, both as a nation and as an army. We are making giant strides day by day, but we are just started.

We came into the war without an army. We have always been a peace-loving people, and undoubtedly the great majority of us hoped we should be spared war. So now we must build an entire new organization, and build it so big and so strong that we can take our place along with our Allies, who already have had three years' time and experience.

I realize how very difficult it is for the people at home to visualize the war, to visualize the effort that lies behind the war. Our problems are greater than any France or Great Britain had to solve, but we are solving them and will continue to do so.

It is impossible to create a vast fighting machine merely by the wave of the hand. I wish that it were possible to do so and that we might be fighting the German Government this minute. We know that the only way to defeat the German Army is to hammer it and keep on hammering it. That is what we expect to be doing with all our fresh strength and enthusiasm during next year's campaign.

When our soldiers take over a piece of the battle line, there will be particular reason to heed this advice for patience, for any great demand for an American offensive which forced us into an undertaking for which we are not prepared would almost surely sacrifice our men without cause, discourage our Allies, and add comfort to our enemies. The desire for too early offensive will be greater with our army abroad than here. Not only will their natural desire to fight impel them; but they will chafe under the contrast of comparative inactivity with the French and British armies. Moreover, there can hardly help being a strong popular desire in France for the Americans to get into action early, a desire based partly on the long time in which France has been engaged and partly on a lack of appreciation of the fact that our army, unlike its own, was not ready to fight when it was mobilized. But if we are to do our part successfully, it is imperative that we let no undue haste mar our initial effort on the front. We must, as General Pershing says, wait until a year after our entrance into the war before we expect any serious military activity-although, of course, we will have taken. over part of the line before that.

On the other hand, if impatience is out of place in regard to the army at the front it is not out of place when applied to war preparations

at home. Despite every warning, the Government let the war come upon us as if it were a surprise. It is humanly impossible to make up all the time that was lost when we refused to make any pre-war preparation. It is, therefore, doubly incumbent upon us as a nation and as a Government to make every effort to make up what we can of the opportunities we lost; and there is every reason why we should have a vigorous impatience with any slackness in our war measures here. The year of grace between April, 1917, and April, 1918, is enough to give the Germans. We have that to answer for because we would not prepare before the war. We must give no more grace.

I'

Sabotage and Labor Unions

T IS important that all Americans, at this juncture, understand the difference between the genuine labor union and other organizations that at the present are making much trouble in this country, especially in the West. The average newspaper reader rather hazily regards the I. W. W. as something in the nature of a labor union. Such a conception does an organization like the American Federation of Labor a great injustice. The I. W. W. is not engaged in the campaign which we mainly associate with workmen's combinations. It is not seeking to improve the conditions of workmen, to obtain higher wages and better working conditions, or to bring about changes in our industrial system in the interests of the working class. The so-called International Workers have one aim and one aim only-the utter destruction of the existing political and econo

mic order. They are not engaging in strikes. Their one activity is the wanton destruction of property. They smash machinery, flood mines, burn wheat, destroy fruit, dynamite reservoirs and aqueducts, and tie up railroads. Probably most people believe that they commit these depredations in order to bring employers to terms. Not at all. The employers cannot purchase immunity by paying high wages, reducing hours, or making easier working conditions. The International Workers are solely engaged in a continuous attempt to destroy all physical evidences of an economic order which they regard as iniquitous.

It is not the purpose here to enter into the scatter-brain philosophy that inspires the reign of terror that prevails in certain Western states, but merely to disabuse the public mind of any idea that this is a labor union movement. Such an impression is unjust, especially at a time when the labor unions, for the larger part, are rendering loyal service to their country. The American Federation of Labor has frequently passed resolutions condemning the I. W. W., while the latter organization brackets the labor unions and Wall Street as its greatest enemies.

M

R. EMERSON MCMILLIN, head of the American Light & Traction Company, started in the gas business soon after his return from the Civil War, and in fifty years of continuous service has probably done more to place 1..at business on a scientific

and profitable basis than any other individual. The success of his career illustrates Mr. Theodore N. Vail's theory that if one will take care of the constructive part and create something of advantage to the community, he need not worry as to where he "comes in," for to-day Mr. McMillin is a comparatively rich man.

Although Mr. McMillin's investments have on the whole proven highly successful, he hesitates to talk regarding his own personal experiences for the benefit of others. "My own observation," he said, "has led me to believe that few would-be investors really desire advice. They merely want approval of what they have already made up their minds to do.

"Advice cannot be offered indiscriminately, like a patent medicine. Conditions and circumstances are important governing elements. Advice appropriate to one who has never invested may be of little value to one of even some experience. Suggestions helpful to a business man might prove harmful to a nonbusiness woman. Experience is often a sad teacher, but that is the channel through which most investors get their training.

"In my young days, through hard study and close application to business, I was able to obtain managerial positions of responsibility not common to young men without capital. In the community where I lived, banks did not lend money on collateral, but almost exclusively on endorsed notes. While possessing no assets. of consequence, I was frequently called upon as manager of properties to endorse paper. My position, presumably, would enable me to see that the paper was cared for. At a time when my resources were practically nil, I was induced to join ten other men in guaranteeing a $200,000 issue of bonds of an iron and steel corporation in which I was a director. The company failed. Some of the guarantors died, leaving debts above assets, some went through bankruptcy, and some had transferred assets before guaranteeing the bonds. It was in the dark days of the iron and steel business, back in the 'seventies, and all the guarantors became bankrupt in fact, if not so adjudged by court. Soon after the failure of the company, one suit was brought against the guarantors on coupons for $300, but was dismissed on a technicality. No other suit was ever brought. I paid off the last of my obligation twelve years later. During those twelve years all I possessed was open to attachment, but I was never harassed. For many years I have regarded that endorsement as a valuable blunder, for the outcome gave me credit, where I was known, above what my assets warranted.

"Thus good sometimes grows out of what appears to be a calamity. For example: It may not be very serious misfortune for an inexperienced young man to lose on his early investments; while, on the other hand, - his success through the purchase of securities on margin may well be viewed as a misfortune. Notwithstanding the advantage resulting from this early experience of mine, my advice to the young and inexperienced, both in business and investment, is: Keep out of debt.

"Alarming as it may sound, it is none the less true that investing in securities about which one has no personal knowledge is something of a lottery. Conditions over which companies with large amounts of outstanding securities have but limited or no control may gradually depreciate a high-class security until it has but little value. This decline may be so gradual as to fail to alarm the investor until it is too late to save much from the wreck.

"That is the reason why those who are not in a position or cannot afford to take risks should invest only in the very highest grade securities. If through inheritance one has acquired a competence, or through unusual qualifications as an expert in some special vocation one is assured an income sufficient to maintain those dependent upon him, he can with propriety make investments that would appear too hazardous for one not possessing similar protection.

"Some years ago, after I was well established in business, I borrowed money freelyfor business purposes-but only when I knew I could pay back the loan without serious inconvenience, if the project for which I borrowed should prove a total failure. In fact, I followed a rule that to some men seemed foolish: My loan never exceeded my cash in the bank. Then why borrow? you ask. To keep a good cash balance. The most useful friend of a young business man is the bank with which he has transacted business and established a good credit. To assure his success, he should make it worth while for banks to seek his deposit account. If you do not use borrowed capital in business, you will probably accumulate more slowly; but, you will have peace of mind and that, after all, is what makes life worth living."