For each of these important commodities the prices within the year, with the single exception of white potatoes, have more than doubled. These are indeed amazing advances in prices. The advances must not only stop, but there must be recession in the prices of necessities to reasonable amounts.

The unexampled prices of all commodities have placed a heavy burden upon the consumer, and especially the consumers who are on a monthly salary or a day wage; and these constitute the great proportion of the population. It is true that there have been advances in wages in some cases several-but these together seldom amount to more than 25 per cent, and therefore they are not at all in proportion to the increased cost of living. Since the exaggerated prices have imposed hardship upon all people of moderate means, the situation has aroused general alarm. Serious trouble is likely to confront us the coming winter unless relief is obtained. If the war is to be won, economic conditions must be made such that those who have a small income will be treated justly.

The causes of mounting prices.-The fundamental cause of the mounting prices is that which has already been explained, an unusual and extraordinary demand from abroad for all essential commodities. However, this has been only one factor in the process.

When it was once appreciated that there was a relative shortage of the essential commodities, the home purchasers, instead of buying ordinary amounts, purchased in advance of their needs. Thus the family, instead of buying flour by the sack, bought a number of barrels, or, in some cases, bought flour for years ahead. The same is true in regard to sugar. Similarly during the spring and summer of 1917, when it was appreciated that there was a shortage in coal, many manufacturers were trying to protect their businesses by accumulating reserves to carry them through the winter. The same was true of those who desired coal for heat. The consequence was that the demands of purchasers were far beyond what would have been necessary to meet actual needs had the ordinary procedure been followed. This frenzy of excessive buying has greatly aggravated the situation. Another most important cause of the enhancing prices was that a time when there is great demand is especially advantageous for speculators to accumulate great stores of goods of various kinds and

hold them for advances in prices. This was done on a great scale throughout the country for every essential commodity.

Finally, when the conditions are as above, it is especially easy for those in a given line of business at a particular locality to cooperate to push prices upward and thus greatly increase the profits of their business. This also was done on a vast scale for many commodities. Based upon the first factor, the second, third, and fourth factors have come in, each with reinforcing power, to accelerate prices. The tendencies above described, once started, are cumulative, and the enhancement of prices goes on with increasing velocity. The prices of foods are advanced; the employees must have higher pay because of the increased cost of food; the raw materials for manufactured articles are advanced; the manufacturer charges a higher price for his articles because he must pay more for his labor and an increased price for his raw materials. At each stage the advance of prices is made more than sufficient to cover the additional cost. The cycle thus completed is begun again with food, and the circle once more gone around. The second cycle completed, the conditions are right for a third cycle, and so on indefinitely, with the result that prices have been and still are rising beyond all reason, like a spiral ascending to the sky.

Failure of law of supply and demand and competition. The facts which have been presented show that the laws of supply and demand and competition adequately to control prices have broken down, for the simple reason that for every staple commodity the demand is greater than the supply. In normal years before the war, as we have seen, the potential capacity of the United States for almost every essential commodity was greater than the home demand. The agricultural lands were developed so as to produce a large surplus, all that could be marketed at home and abroad at a reasonable price. The coal mines were so developed that they could produce many million tons more than the market demanded. Steel and iron mills similarly were developed so as to meet not only the ordinary demand, but to respond quickly to exceptional demands. Under these circumstances the prices, if not adequately controlled, had been largely controlled by supply and demand, except where there had been cooperation of purchasers or manipulators, or both, to control the market.

The excess demand. The situation was wholly changed by the world war. For every important commodity the demand exceeds the supply. For the staple foods the demand is greater than any possible supply. For coal the demand exceeds the capacity for delivery. For steel the demand is far beyond the capacity of all mills.

It is not possible to give average percentages of the extent to which the demand exceeds the supply; but it is safe to say that the percentage upon the average would not be large, probably not more than 20 per cent, and for scarcely any commodity more than 30 or 40 per cent.

However, this moderate excess demand of, say, 20 per cent, taken in connection with buying in advance of needs, of forestalling by speculators and combinations to control the market, has been sufficient to increase the prices of many essential commodities by 100, 200, 300, and even 400 per cent, and for certain articles greater

amounts.

There is no reason to suppose that the excess demand will decrease in the near future; indeed, it is probable that for the coming year it will increase.

Notwithstanding the extraordinary efforts to increase production which our entrance in the war has created, vast new requirements for war equipment of all kinds, including foods, textiles, leather, metals for guns, munitions, etc., has kept the demand beyond the supply. At the same time this demand is created there are taken from active production in this country more than a million men.

The allies probably have 20,000,000 men in the field and 20,000,000 more that are directly connected producing munitions and materials for war consumption. Fertilizers have been lacking. In consequence of these facts, and despite the most earnest and successful efforts of the British and French to greatly increase their acreage of crops and especially wheat, their crops are certainly wholly inadequate to feed the people of these countries; for, under normal conditions, hundreds of millions of bushels of grain and vast quantities of meats have been imported from the United States by England and France and smaller amounts by Italy.

The necessities of the allies must be met.-It is just as imperative that we furnish the allies with the necessary foods, munitions, railroad equipment, as it is that we supply our own armies. Their armies are doing precisely the work that the United States Army is doing, only on a vastly larger scale. The sacrifices of the British, French, and Italians have been immeasurably greater than our own; therefore it is but a small thing to insure their securing the commodities that are essential to carry on the war to a successful conclusion.

ENORMOUS EXCESS PROFITS.

Under the conditions described in the foregoing pages, it is inevitable that the profits of the great corporations dealing in the essential commodities should be excessive. There has been nothing comparable to the profits of the present war in the history of civiliza

tion. In the United States, the most exploitive profiteering of the days of the Civil War was trivial as compared with the enormous sums which have been obtained during the present war by the great corporations dealing in the essential commodities.

By "excess profits" is meant the amount by which the profits of the war times exceed those of normal times before the war.

Cereals. There are no available figures showing the amount of the excess profits for those producing and handling the cereals for the war period as compared with the conditions before the war. To obtain accurate figures in this matter is exceedingly difficult because the profits are distributed among the producers of grain, dealers, millers, jobbers, and retailers. Mr. Herbert Hoover, in a statement before the Senate Committee on Agriculture, June 19, 1917, stated that "in the last five months on the item of flour alone $250,000,000 has been extracted from the American consumer in excess of the normal profits of manufacturers and distributers." If this statement is correct, the total excess profits made upon the grains during the last year must amount to more than $1,000,000,000, and may have reached $2,000,000,000.

Meats. According to figures presented by one of the Treasury experts to the Finance Committee of the Senate, the excess profits of 1916, as compared with 1914, and the excess profits of the four big packing companies of Chicago were as follows:

It should be understood, however, that the excess profits of $28,633,978 are not exclusively from meats, for the reason that these packing companies are engaged in allied industries and an unknown portion of them are from other sources than meat.

Metals. In regard to the excess profits in metals, Senator Simmons, on August 10, 1917, presented to the Senate figures compiled by J. P. Morgan & Co. showing the excess profits for 1916 as compared with 1914 of some of the larger metal manufactories, as follows:

Petroleum. In regard to the excess profits of petroleum, those for 1916 are stated on the same authority to be, for the Standard Oil Co. of New York, $20,425,000.

Manufactured commodities.-The excess profits of manufactured products other than the metals have been similarly large. From the same authority the excess profits of the Du Pont Powder Co. for 1916 are placed at $76,581,000, for the Corn Products Co. at $3,798,000, and for the United States Rubber Co. at $4,537,000.

Forty-eight corporations. It is also stated that the excess profits of 48 corporations, which include the above-mentioned with others, for 1916 as compared with 1914 amounted to $659,858,490.

Coal. No figures are available which will show the excess profits of the miners of coal for 1916 and 1917 as compared with years antecedent to the war. However, the enhancement of prices from two to four fold makes it certain that these profits for the entire United States in the fiscal year 1916-17 amounted to hundreds of millions of dollars, possibly to a billion dollars or more.

Transportation. The general increase in profits has also been shared by transportation. Senator Simmons, in the report mentioned gives the excess profits of the Pennsylvania Railroad Co. for 1916 as compared with 1914 as $11,741,000, and for the "Big Four" $5,843,000.

WOOD.

The foregoing statements have not included the wood industries, but if they had been included we should have had similar facts in regard to the enormous incease in production, increased exportation, and greatly enhanced prices for the wood products; indeed, the enhancement of prices has been so great in the case of paper and the situation so acute that the Federal Trade Commission has stated that the production of paper, both for print and book, "is vested with a public interest."

The Federal Trade Commission, in a letter dated June 13, 1917, to the President of the Senate, recommended governmental control of the production of print and book paper. The letter stated that if in 1917 the same tonnage is produced as in 1916, at the price prevailing in June, the 1917 output would cost $105,000,000, whereas the cost of this amount in 1916 was $70,000,000. It said further that at least 50 per cent of this increase of $30,000,000 would be excess profits over those of 1916. It was also stated that for the second half of 1916 the prices for print and book paper were from 65 to 84 per cent higher than in 1915. The average profits of 41 of the book-making paper mills for 1916 were 100 per cent more than for the previous year.