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NATIONAL DEFENSE ADVISORY COKMIbwxOlTf "
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HOT TO BE RELEASED BEFORE
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2:00 p.m., December 10, 15^0
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Address "by Chester C. Davis,
Comnissioner in charge of the Agricultural Division of the
National Defense Advisory Commission, delivered "before the
Twenty-second Annual Meeting of the American Farm Bureau
Federation, Lord Baltimore Hotel, Baltimore, Maryland, at
2:00 p.m., Tuesday afternoon, December 10, 19H0
AGRICULTURE AMD THE DEFENSE PROGRAM
The American Farm Bureau was "born out of the travail of the last tforld
War.
You are meeting today in your twenty-second annual convention with the
old world falling to pieces about you.
Even from our comparatively safe
vantage point 3OOO miles away from visible dissolution the outlook is unspeakably grim.
Unbelievable events have come to pass in the last year, and other
incredible things are ahead of us.
The United States is not escaping and cannot hope to escape the profound
consequences in our way of life which must follow the chaos abroad.
Hot in
our time will the old comfortable habits of thought and action return to serve
us.
Two years ago we were certain of many things.
things that weren't true.
In fact, we knew too many
Since then the keystone of our thinking on inter-
national affairs has dissolved.
That was our conviction that a nation which
minded its own business and respected the rights of its neighbors would be
left free to develop its way of life in its own sphere.
That rule hasn't worked in Europe and Asia.
are certain that it will continue to work here.
is proclaimed and is being demonstrated.
count —
Few can be found today who
On the contrary, another rule
In its force and power are all that
and the demonstration hasn't been ended yet.
There is no limit to
it except the limit imposed by fear of another and a greater force.
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Wealth and resources, mountains of gold and millions of acres of
factories, are not power in the equation that is known, over three-quarters
of the world today.
They can "be organised into power; until then they are
just "baits
We can honestly disagree over the likelihood of serious war "being
launched against the United States at home from eitlierEurope or Asia; "but
we cannot disagree with the proposition that the likelihood recedes as our
armament advances.
This is a new concept for many of us.
and women are confused and "baffled.
At home we common everyday men
Many of us sxe gripped by a growing
pessimism as to man's ability to run the machine he has created,
Our indi-
vidual troubles are coming to seem petty to us, compared with the collossal
horror that is astride the world.
Its swift growth did more than blot out
the peaceful Scandinavian democracies and the well-ordered life of the Low
Countries.
It inevitably has changed the pattern of our own life now and
for the future,
I am speaking today on the assumption that the United States will not
enter the war in Europe but that, short of sending men to fight, our physical
resources will bo made available to those who still resist aggression.
I am
speaking on the assumption that we will really mobilise car resources to the
full4 so that we will bo entirely unassailable in this hemisphere.
done it yet.
We haven'
I do not believe most of us have realized what the syllables
"total defense," "total effort," and "complete mobilization" actually mean.
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We uso the words, but their significance in terns of our own activities
and prejudices hasn't struck home to us yet.
Men arc going to work as the armament effort spreads, tut vs 3till hare
millions of men unemployed.
We haven't even'developed plans that .will
put them to work without uprooting them and shifting them into areas
which will inevitably become crowded beehives when the nation hits its
stride in maximum production.
We can make the plans that will make full use of our manpower and
our material resources and we can put them into effect.
a democracy.
We can do.it in
We can organise and execute an armament program beyond any-
thing the world has ever seen in any country and still produce for our
civilian needs.
But we cannot do it without sacrifice and without changing
our. point of view on many things.
It will not be possible to have full
production for both defense and the maintenance of our standard of living
if the important elements in our economy - industrial management, capital,
labor and agriculture - successfully resist any modification of their
traditional platitudes..
If there is likelihood that more capacity will be needed to produce
essential industrial raw materials to meet both defense and normal requirements, then additional plant capacity must be provided regardless of the
quite understandable apprehension of industrial management over the peacetime
use of such facilities.
In the.beginning the English steel industry and the
English machine tool industry were unwilling to sacrifice profits and security
by increasing capacity and taking advantage of nev; production methods.
experience should be all the warning we need on that point.
This
As long as supply
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can keep up with the dor.and, general price increases are not necessary*
Labor confronts the serious challenge of supplying the manpower
which this effort requires and doing it without contributing substantially
to the vicious spiral of rising wages, costs, profits, and prices, which
could work deadly impairment of national efficiency in the job at hand.
That means that future needs for skilled and semi-skilled workers must bo
anticipated and met.
Untrained or semi-trained, workers must become skilled
notwithstanding the fact that at some future time all these trained workmen
may not bo required in their particular lines.
The task is to use these
millions of unemployed in productive work when and where need for them arises
As long as the supply can keep up with the demand and as general price
increases are avoided, general wage increases are not necessary,
Neither,
so long as there is an unimpeded flow of idle workers to jobs, is there any
present necessity to increase working hours.
Farmers will have their own and very serious adjustments to make.
Defense needs may require that domestic production be supplemented by increased imports, as wo see happening in the case of some grades of wool.
Cooperation with Latin America may require farmers to re-examine most critically some of their traditional patterns and prejudices.
These are only a few examples, far from complete, of the areas in,which
national and group patterns will have to change if the defense effort is to
meet the challenge we have taken up.
I repeat —
we use the words "total
defense" and "total mobilization" rather carelessly.
On the whole, we in
America haven't even stopped to think what they really moan.
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Six months ago I was appointed to membership on the civilian •bodyintended to assist in the speedy and orderly development of the defense
program.
My particular .interests are to see that the effect of the defense
moves are interpreted to farmers and to the institutions that serve them;
to help see that agriculture is organized to do its part; that its viewpoint is understood and considered in the steps that are taken; and
finally, that defense industries and the vast volume of new business that
supplies them are planned and guided so as to reach reservoirs of unemployment and avoid overconcent.rat ion in areas that are certain to "become overcrowdedwhen the heavy industries reach full production.
On that last point it has seemed to me to be vitally important that
the unemployed in rural areas and the millions of ineffectively and unsatisfactorily employed men and "boys on the farm have the same opportunities for
employment as thoee who are listed on the rolls of unemployed in the cities
and towns
X want to take a little time to discu-ss this last lino of interest - the
location of defense industries.
It sounds very simple to say that these
industries should "be located throughout the interior of the United States
avoiding areas whose workmen and facilities are certain to be fully employed
anyway.
In fact, it is anything but simple.
The location of new plants and
the placing of orders for the first stage of,the program is nearly completed.
That first stage aims to provide facilities and equipment for an
army of
1,200,000 men and at the same time maintain and increase the flow of supplies
to Britain,
The fact that in some respects location of plants has been so
poorly done from the standpoint of industrial decentralization is not due to
any lack of interest or' sympathy on the part of the Army or the Navy or the
National Defense Commission.
.is? 1
The trouble lies in the lack of planning for
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the situation, that has developed.
For 2.2 years the "business of the United States has been peace, not
war.
Even planning and preparation for war has "been discredited.
Wow
the whip of speed forces decisions which might have "been avoided had plans
to that end been made in advance.
I am hopeful that if and when new stages
of preparation involving new facilities and now production are authorized
for the Unitc-d States and for England, we will be in better shape to do a
better job than we have done heretofore.
By bettervshape I do not mean
that the plants and facilities that have been located heretofore will not
produce efficiently the materials end the implements they are designed to
turn out.
I mean that the additional units would be located where they can
tap resources of materials, facilities and men heretofore untouched.
On the human side and to minimize the aftermath, it is important that
we avoid so far as possible drawing men from the mountains and the prairie,
from farms and interior cities and towns to crowd them into industrial centers
hundreds if miles away.
It is far better to leave as many as possible on
forms but give those with low incomes opportunities for employment in industry.
This would lessen the immediete hoed for housing and provide a measure cf
security when the emergency has passed.
Let me illustrate what I mean by lack of planning.
Two of the important
elements of modern explosives, of TNT and smokeless nowder, are ammonia and
sulphuric acid.
Ammonia can be fixed from the air.
Its first stage in large-
scale production requires the use of large quantities 0- c":ke.
The only two
large commercial plants manufacturing synthetic ammonia from coke are located
in the East and they use hirh-grade metallurgical coke from the coal fields
of one limited section of the country;
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That is, therefore, tne only kind of
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coke with which we have had "big-scale experience in the United State?.
Practically nothing has been done to determine whether, in the practical
operation of a large ammonia plant, coke from western coal or lignite
fields can "be used satisfactorily.
Until tests have "been made the War Department, facing immediate need
for ammonia to convert into nitric acid or ammonium nitrate, naturally
turns to plants that can draw coke from these same areas.
Unless these
tests are made, no matter how much ammonia is required, the new plants
will cluster around the West Virginia and east Kentucky coal fields.
Ar-
rangements have "been mo.de with the Bureau of Mines to go ahead with comprehensive tests of other coal.
From the standpoint of decentralization
much depends on what their research discloses.
It would have been for-
tunate if these experiments had been made long ago.
The location of a TNT plant is largely determined by the existence of
an adequate supply of highly concentrated sulphuric acid, and a nearby marke
or use for the spent acid from the process.
Conspicuous points where supply
and spent acid market exist are Cleveland, Chicago, St. Louis and Buffalo.
Sulphuric acid, however, can be easily produced anywhere if supplies of sulphur or certain substitute materials are available.
Gulf Southwest.
Sulphur comes from the
The largest use for sulphuric acid in the United States is
in the manufacture of super-phosphate fertilizer for agriculture, and plants
that use it are scattered thickly through the area of fertilizer's heaviest
use from Texas to Virginia.
When the need for T2TT hit the Army, it was natural that its officers
should turn to the points where the specified condition with respect to sul'xEROj
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I am satisfied that
sufficient thought and planning have not "been given to determine in advance
whether or not arrangements can be made in connection with fertilizer manufacture which will vastly extend the areas in which these explosives plants
could be located.
When the ammonia, ammonium nitrate and ©IT sites are chosen, their
location in turn influences the choice of bomb and shell loading plants,
smokeless powder plants and factories for these secondary operations.
I
mention these things in some detail not because they are' interesting in
themselves but because they throw some light on the complexities of the
problem of site selection.
I believe they illustrate another need.
I believe that provision
should be made for building tip within the Army, with adequate rank and compensation, a strong body of scientists drawn from civilian life, technically
trained men who know the problems that have arisen in this new kind of warfare even though they haven't been trained to direct men to march and shoot.
Modern warfare is no longer a question of numbers of men and numbers of guns.
It is a question of industrial organization, of technical and scientific
skill.
Private industry naturally develops on lines applicable to present-
day manufacturing and commerce.
modern armament.
They do not necessarily meet the needs of
On the other hand, the Army at its arsenals carries on
limited experimental work in peacetime devoted mainly to the old type of
warfare.
There is an ever-widening gap between them which needs to be filled.
To direct this work the Army needs within its own organization a.large number
of the best men who can be drawn from civilian life into its service, organized
on the scale so admirably attained in the Army Engineering Corps and the Army
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I "believe provision should "be made now and never abandoned
for such a dignified carocr branch of the Army, to work in advance on
problems of this character sc that the country need not again be caught
with inadequate plans.
There are oth-r kinds of planning to which the people of the United
States must be giving thought.
Under the impulse of vast appropriations
and expenditures this country is going to move forward toward a period of
comparatively full employment of its resources and its manpower.
finite number of problems surround us as we move along that path.
An inI want
to mention a few of them.
We hear a great deal of talk about the dangers of inflation.
that the definitions of that term are numerous and varied.
about two kinds.
I realise
I want to talk
The first results when, even though we have idle men and
idle plants, supply is permitted to lag behind demand, bottlenecks develop,
and prices start their spiral.
The second is a tj'pe of monetary inflation
which manifests itself when comparatively full production has been reached,
but the:rate of business activity is such that the creation of money through
credit expansion continues uncontrolled and unchecked.
A price inflation of the first sort is due to non-monetary causes.
It
might result.from monopolistic practices on the part of industrial management
and labor, short-sighted price and ware policies and related causes which give
rise to bottlenecks of one sort ancl another.
These bottlenecks do not neces-
sarily result from n shortage of manpower or from a shortage of facilities
that exist or can be constructed.
The cure for a condition like that is not less, but more production.
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Monetary action cannot relieve or affect it, except perhaps adversely.
As I see it, the risk we run is that conditions of this sort may
develop
and that an upward surge of prices in some parts of the economy
will throw heavy disadvantages upon other parts.
I "believe if these con-
ditions come thev would operate to the particular detriment of agriculture;
also, they would adversely affect unorganized labor and the low and fixed
income groups.
To prevent them it is essential that we anticipate where facilities
need to be exoanded and that, if we make mistakes, we make them on the side
of too much capacity.
It is essential that business and labor avoid strikes
and lock-outs that interfere with the flow of production; that forward buying and excessive inventory hoarding due to fear of higher prices be discouraged.
At interim periods before new facilities can be brought into
production it may become necessary to substitute allocations and priorities
for the free operation of prices.
These can be avoided if production is
increased to keep pace with expanding demand.
This will involve construction of new plants that may not necessarily
be required in peacetime; it will involve speeding up widespread apprentice
and vocational training of labor, and the maintenance of the already expanded
farm plant with management that is alert to changing needs.
Before considering the second type of inflation, where full production
has been-reached but the creation of money continues, it is important that
we take a look at the monetary background.
We have at the present time in
the United States by far the largest supply of money, no matter how that term
is defined, wo ever had.
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The amount of currency in circulation is double the
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The total of demand deposits and currency now amounts to
Ul.5 "billions of dollars, or nearly 15 "billion above the peak of the boom
period in the 'twenties.
As a result largely of continued inflow of gold
into the .United States, the volume of excess reserves in the banking system
has mounted to J billion dollars, which is capable of supporting a bank
credit expansion of fully 60 billion dollars in addition to the present
v l u m e ^f deposits.
As long as these funds remain relatively inactive, they present only
a potential problem.
Nevertheless, looking ahead to a time when these large
cash and credit resources may be turned into speculative channels under the
rapid business, expansion generated by the defense program, any successful
control requires that new authority be lodged in those monetary authorities
which will be looked to for prompt action when need develops.
You may balk at the suggestion of further governmental powers.
I say
to you that I see no chance that the government's share in our economic and
financial life will not expand both during this crisis and in the years that
follow.
For the world that emerges is not going to be the world we have known.
These limited suggestions I have made do not constitute a complete program.
It is essential that production and monetary policies be synchronized
with government taxation and borrowing.
The government must borrow heavily
during the lag between the time of huge defense disbursements and the subsequent rise in national income which will yield increased tax revenues.
It
must tax heavily when production is full, but care .must be taken as to the
form and timing of taxation if it is to promote and not upset economic progress
and stability.
Additional consumer and sales taxes do not fit the nation's
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needs as long as widespread unemployment prevails and while we are striving to speed up production.
And in taxation above all else, every element
in our economy must recognize this one fact - no one is entitled to get
rich as a result of this nation's expenditure for its defense.
Beyond all this it is of vital importance that we get ready for the
aftermath that will follow this war and the cessation of defense expend!fore,
We cannot afford to go into-that period planless.
We can't turn men out
from the armed forces and defense production into the breadlines.
It is
important to perfect plans now for useful projects which contribute to the
general wealth of the nation to which these men can turn.
Blueprints of
completed projects can be drawn and tucked away to be called into use when
need develops.
The President of the United States has announced his deter-
mination to follow just that policy.
I do not moan to imply that the government must contribute all and
private industry nothing in meeting these problems.
<*xite the contrary.
Because I do not think I could myself say it as well, I want to quote
briefly on that point from a recent address by my associate, Marriner S.
Eccles, Chairman of the Board of Governors of the Federal Reserve System.
He said:
"Underlying my approach to all of these problems Is my belief that
democracy and the system of free enterprise can function to provide reasonably full and sustained employment for all of our available man power, in
peace as well as in war times.
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The great bulk of that employment is and
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Public policy» therefore, should
be directed to creating an economic climate that will give the greatest
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possible encouragement to private initiative and private enterprise that
is consistent with orderly and continuous national progress."
Let me turn briefly to the situation of agriculture.
That is one
segment of our economy which is producing and has continuously produced
all that the nation requires of it of the commodities it normally yields.
Our storehouses and bins are full.
It is well that that is so.
We are the
envy of the other industrial nations of the world in that respect.
Some branches of farm production will bo stimulated both in demand and
price as consumer employment and payrolls increase.
Other important crops
which have depended largely, on foreign markets now almost wholly destroyed
will suffer.
Under present and prospective conditions there are too many
people trying to grow cotton and tobacco and in some areas wheat.
them cannot earn a decent standard of living at it.
Many of
The real job is to pro-
vide new sources of incomc for them.. Industrial employment near their homes
would help.
I hope no one, whether he live on the farm or in the city, will get
the idea that we are facing a war boom for agriculture as a result of war
markets for farm products.
I say to you that after a generation we ha.ve not
liquidated the disaster of the last world war ar.d that* we cannot emerge comfortably from this one.
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Early in my remarks I said that cooperation with Latin America may
require farmers to re-examine most critically some Of their traditional
patterns and prejudices.
Our hemispheric relationships and problems ought
to be looked at clearly and courageously by every organized farm group in
America.
We cannot be military friends end economic enemies with Latin
America at one and the same time.
Obviously we cannot import from the
southern temperate zone for consumption in this country agricultural commodities of which we already have large surpluses.
But with our vast re-
sources we can help them through their critical times.
We can assist in the
development of many things which we need to import but which we are not getting in volume from the tropical countries to the South.
The Department of
Agriculture is cooperating in the long-time effort to develop rubber production on this hemisphere for this the greatest rubber market in the world.
We can help develop sources of supply*of tin, quinine, tropical hard woods,
cocoa, course fibers and many other things our southern neighbors now grow
or can produce and which do not compete with our own production.
Even in the field where some competition exists farmers must not let
their prejudices run away with their common sense.
Through their organiza-
tions they must study this problem at once and with cars.
Economic and mil-
itary dictatorships are sweeping most of the world's area into their systems.
If we are to keep the western hemisphere free from their grasp, the United
States and Latin America must learn to work together, to trade together, and
to develop together.
I hope that the farmer's voice at the council table
when plans to that end are being studied will be constructive, not obstructive.
I cannot go into it further, but I do want to urge that the local and national
farm bureaus give it real study this winter.
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X am sorry that this address to you has been so sketchy and incomplete.
Perhaps it may even sound gloomy.
now or later.
earth.
There is no excuse for- defeatism
We know we are blessed by living in the best country on
True, the clouds are heavy ahead.
We face the grim necessity of ac-
commodating ourselves to the world as it is.
We cannot see all the way;
we can only look ahead and plan ahead to the limit of our powers, and do
the .jobs at. hand to the very best .of our ability.
The world isn't what we would like it to'be.
as we thought it was.
than we can.
It isn't even as good
But the destiny that shapes our ends sees farther
As long as.the spark of freedom and dignity for individual
man 15ves, there is hope that todayfs pain is but a phase in the evolution*
of a new and better world - one in which freedom of thought and the institutions of free men have survived.
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