Chapter XV: Appendix: I

STATEMENT GIVEN TO THE PRESS BY U. S. FOOD ADMINISTRATOR HOOVER ON NOVEMBER 12, 1918 (THE DAY AFTER THE ARMISTICE BEGAN), CONCERNING THE RESULTS OF FIFTEEN MONTHS OF FOOD ADMINISTRATION

With the war effectually over we enter a new economic era, and its immediate effect on prices is difficult to anticipate. The maintenance of the embargo will prevent depletion of our stocks by hungry Europe to any point below our necessities, and anyone who contemplates speculation in food against the needs of these people can well be warned of the prompt action of the government. The prices of some food commodities may increase, but others will decrease, because with liberated shipping accumulated stocks in the Southern hemisphere and the Far East will be available. The demands upon the United States will change in character but not in volume.

The course of food prices in the United States during the last fifteen months is of interest. In general, for the first twelve months of the Food Administration the prices to the farmer increased, but decreased to the consumer by the elimination of profiteering and speculation. Due to increases in wages, transportation, etc., the prices have been increasing during the last four months.

The currents which affect food prices in the United States are much less controlled than in the other countries at war. The powers of the Food Administration in these matters extend:

First, to the control of profits by manufacturers, wholesalers and dealers, and the control of speculation in foodstuffs. They do not extend to the control of the great majority of retailers, to public eating places, or the farmer, except so far as this can be accomplished on a voluntary basis.

Second, the controlled buying for the Allied civil populations and armies, the neutrals and the American army and navy, dominates the market in certain commodities at all times, and in other commodities part of the time. In these cases it is possible to effect, in coöperation with producers and manufacturers, a certain amount of stability in price. I have never favored attempts to fix maximum prices by law; the universal history of these devices in Europe has been that they worked against the true interests of both producer and consumer.

The course of prices during the first year of the Food Administration, that is, practically the period ending July 1,1918, is clearly shown by the price indexes of the Department of Agriculture and the Department of Labor. Taking 1913 prices as the basis, the average prices of farm produce for the three months ending July 1, 1917, were, according to the Department of Agriculture's price index, 115 per cent more than the average of 1913 prices, and according to the Department of Labor index, it was 91 per cent over 1913 prices. The two departments use somewhat different bases of calculation. The average of farmers' prices one year later--that is, the three months ending July 1,1918, was, according to the Department of Agriculture indexes, 127 per cent over the 1913 basis and, according to the Department of Labor index, was 114 per cent over the 1913 average. Thus farm prices increased 12 per cent on the Department of Agriculture calculations and 23 per cent upon the Department of Labor basis.

An examination of wholesale prices, that is, of prepared foods, shows a different story:

The Department of Agriculture does not maintain an index of wholesale prices, but the Department of Labor does, and this index shows a decrease in wholesale prices from 87 per cent over 1913 basis to 79 per cent over the 1913 basis for the three months ending July 1, 1917, and July 1, 1918, respectively. The Food Administration price index of wholesale prices calculated upon still another basis shows a decrease of from 84 per cent to 80 per cent between these periods one year apart.

Thus all indexes show an increase in farmers' prices and a decrease in wholesale prices of food during the year ending July 1, 1918. In other words, a great reduction took place in middlemen's charges, amounting to between 15 per cent and 30 per cent depending upon the basis of calculation adopted. These decreases have come out of the elimination of speculation and profiteering.

The course of retail prices corroborates these results also. Since October, 1917, the Food Administration has had the services of 2,500 weekly, voluntary retail price reporters throughout the United States. These combined reports show that the combined prices per unit of 24 most important foodstuffs were $6.62 in October, 1917. The same quantities and commodities could be bought for $6.55 average for the spring quarter, 1918--that is, a small drop had taken place. During this same period of quarters ending July 1, 1917, to July 1, 1918, the prices of clothing rose from 74 per cent to 136 per cent over 1913, or a rise of about 62 per cent, according to the Department of Labor indexes.

Since the spring quarter, ending July 1, 1918, there has been a rise in prices, the Department of Agriculture index for September showing that farm price averages were 138 per cent over the 1913 basis, and the Department of Labor index showing 136 per cent, or a rise from the average of the spring quarter this year of 11 per cent and 22 per cent respectively to the farmer. The wholesale price index of the Department of Labor shows a rise from 79 per cent average of the spring quarter, 1918, to 99 per cent for September, or a rise of 20 per cent. The Food Administration wholesale index shows an increase from 80 per cent to 100 per cent, or 20 per cent for the same period.

In October, 1918, the Food Administration retail price reports show that the retail cost of the same quantity of the 24 principal foodstuffs was $7.58 against an average of $6.55 for the spring quarter 1918, or a rise of about 18 per cent.

It is obvious enough that prices have risen during the last three months both to the farmer and to the wholesaler and retailer. On the other hand, these rising prices have only kept pace with the farmers' prices.

Since the first of July this year, many economic forces have caused a situation adverse to the consumer. There has been a steady increase in wages, a steady increase in cost of the materials which go into food production and manufacture, and in containers and supplies of all kinds. There has been an increase of 25 per cent in freight rates. The rents of the country are increasing and therefore costs of manufacturing, distribution and transportation are steadily increasing and should inevitably affect prices. The public should distinguish between a rise in prices and profiteering, for with increasing prices to the farmer--who is himself paying higher wages and cost--and with higher wages and transport, prices simply must rise. An example of what this may come to can be shown in the matter of flour. The increased cost of transportation from the wheat-producing regions to New York City amounts to about forty cents per barrel. The increased cost of cotton bags during the last fourteen months amounts to thirty cents per barrel of flour. The increase in wholesalers' costs of drayage, rents, etc., amounts to ten cents, or a total of eighty cents without including the increased costs of the miller or retailer.

Such changes do not come under the category of profiteering. They are the necessary changes involved by the economic differences in the situation. We cannot "have our cake and eat it." In other words, we cannot raise wages, railway rates, expand our credits and currency, and hope to maintain the same level of prices of foods. All that the Food Administration can do is to see as far as is humanly possible that these alterations take place without speculation or profiteering, and that such readjustments are conducted in an orderly manner. Even though it were in the power of the Food Administration to repress prices, the effect of maintaining the same price level in the face of such increases in costs of manufacture, transportation and distribution, would be ultimately to curtail production itself. We are in a period of inflation and we cannot avoid the results.

We have had a large measure of voluntary coöperation both from producers, manufacturers and wholesalers, in suppression of profiteering and speculation. There are cases that have required stern measures, and some millions of dollars have been refunded in one way or another to the public. The number of firms penalized is proportionately not large to the total firms engaged.

In the matter of voluntary control of retailers we have had more difficulty, but in the publication from week to week in every town in the country of "fair prices" based upon wholesale costs and type of service, there has been a considerable check made upon overcharges. The Food Administration continues through the armistice until legal peace and there will be no relaxation of efforts to keep down profiteering and speculation to the last moment.