Chapter XVI: Appendix: II

ADDRESS OF MR. HOOVER AT HIS INAUGURATION AS PRESIDENT OF THE AMERICAN INSTITUTE OF MINING ENGINEERS (NEW YORK CITY, FEBRUARY 17, 1920)

I have been greatly honored as your unanimous choice for President of this Institute with which I have been associated during my entire professional life. It is customary for your new President, on these occasions, to make some observation on matters of general interest from the engineer's standpoint.

The profession of engineering in the United States comprises not alone scientific advisers on industry, but is in great majority composed of men in administrative positions. In such positions they stand midway between capital and labor. The character of your training and experience leads you to exact and quantitative thought. This basis of training in a great group of Americans furnished a wonderful recruiting ground for service in these last years of tribulation. Many thousands of engineers were called into the army, the navy, and civilian service for the Government. Thousands of high offices were discharged by them with credit to the profession and the nation.

We have in this country probably one hundred thousand professional engineers. The events of the past few years have greatly stirred their interest in national problems. This has taken practical form in the maintenance of joint committees for discussion of these problems and support to a free advisory bureau in Washington. The engineers want nothing for themselves from Congress. They want efficiency in government, and you contribute to the maintenance of this bureau out of sheer idealism. This organization for consideration of national problems has had many subjects before it and I propose to touch on some of them this evening.

Even more than ever before is there necessity for your continued interest in this vast complex of problems that must be met by our Government. We are faced with a new orientation of our country to world problems. We face a Europe still at war; still amid social revolutions; some of its peoples still slacking on production; millions starving; and therefore the safety of its civilization is still hanging by a slender thread. Every wind that blows carries to our shores an infection of social diseases from this great ferment; every convulsion there has an economic reaction upon our own people. If we needed further proof of the interdependence of the world, we have it today in the practical blockade of our export market. The world is asking us to ratify long delayed peace in the hope that such confidence will be restored as will enable her to reconstruct her economic life. We are today contemplating maintenance of an enlarged army and navy in preparedness for further upheavals in the world, and failing to provide even some insurance against war by a league to promote peace.

Out of the strain of war, weaknesses have become ever more evident in our administrative organization, in our legislative machinery. Our federal government is still overcentralized, for we have upon the hands of our government enormous industrial activities which have yet to be demobilized. We are swamped with debt and burdened with taxation. Credit is woefully inflated; speculation and waste are rampant. Our own productivity is decreasing. Our industrial population is crying for remedies for the increasing cost of living and aspiring to better conditions of life and labor. But beyond all this, great hopes and aspirations are abroad; great moral and social forces have been stimulated by the war and will not be quieted by the ratification of peace. These are but some of the problems with which we must deal. I have no fear that our people will not find solutions. But progress is sometimes like the old-fashioned rail fence--some rails are perhaps misshapen and all look to point the wrong way; but in the end, the fence progresses.

Your committees, jointly with those of other engineering societies, have had before them and expressed their views on many matters concerning the handling of the railways, shipping, the reorganization of the government engineering work, the national budget, and other practical items.

The war nationalization of railways and shipping are our two greatest problems in governmental control awaiting demobilization. There are many fundamental objections to continuation of these experiments in socialism necessitated by the war. They lie chiefly in their destruction of initiative in our people and the dangers of political domination that can grow from governmental operation. Beyond this, the engineers will hold that the successful conduct of great industries is to a transcendant degree dependent upon the personal abilities and character of their employees and staff. No scheme of political appointment has ever yet been devised that will replace competition in its selection of ability and character. Both shipping and railways have today the advantage of many skilled persons sifted out in the hard school of competition, and even then the government operation of these enterprises is not proving satisfactory. Therefore, the ultimate inefficiency that would arise from the deadening paralysis of bureaucracy has not yet had full opportunity for development. Already we can show that no government under pressure of ever-present political or sectional interests can properly conduct the risks of extension and improvement, or can be free from local pressure to conduct unwarranted services in industrial enterprise. On the other hand, our people have long since recognized that we cannot turn monopoly over to unrestrained operation for profit nor that the human rights of employees can ever be dominated by dividends.

Our business is handicapped on every side by the failure of our transportation facilities to grow with the country. It is useless to talk about increased production to meet an increased standard of living in an increasing population without a greatly increased transport equipment. Moreover, there are very great social problems underlying our transport system; today their contraction is forcing a congestion of our population around the great cities with all that these overswollen settlements import. Even such great disturbances as the coal strike have a minor root in our inadequate transportation facilities and their responsibility for intermittent operation of the mines.

We are all hoping that Congress will find a solution to this problem that will be an advanced step toward the combined stimulation of the initiative of the owners, the efficiency of operation, the enlistment of the good will of the employees, and the protection of the public. The problem is easy to state. Its solution is almost overwhelming in complexity. It must develop with experience, step by step, toward a real working partnership of its three elements.

The return of the railways to the owners places predominant private operation upon its final trial. If instant energy, courage and large vision in the owners should prove lacking in meeting the immediate situation we shall be faced with a reaction that will drive the country to some other form of control. Energetic enlargement of equipment, better service, coöperation with employees, and the least possible advance in rates, together with freedom from political interest, will be the scales upon which the public will weigh these results.

Important phases of our shipping problem that have come before you should receive wider discussion by the country. As the result of war pressure, we shall spend over $2,800,000,000 in the completion of a fleet of nineteen hundred ships of a total of 111,000,000 tons--nearly one quarter of the world's cargo shipping. We are proud of this great expansion of our marine, and we wish to retain it under the American flag. Our shipping problem has one large point of departure from the railway problem, for there is no element of natural monopoly. Anyone with a water-tight vehicle can enter upon the seas today, and our government is now engaged upon the conduct of a nationalized industry in competition with our own people and all the world besides. While in the railways government inefficiency could be passed on to the consumer, on the seas we will sooner or later find it translated to the national Treasury.

Until the present time, there has been a shortage in the world's shipping, but this is being rapidly overtaken and we shall soon be met with fierce competition of private industry. If the government continues in the shipping business, we shall be disappointed from the point of view of profits. For we shall be faced with the ability of private enterprise to make profits from the margins of higher cost of government operation alone. Aside from those losses inherent in bureaucracy and political pressure, there are others special to this case. The largest successfully managed cargo fleet in the world comprises about one hundred and twenty ships and yet we are attempting to manage nineteen hundred ships at the hands of a government bureau. In normal times the question of profit or loss in a ship is measured by a few hundred tons of coal wasted, by a little extravagance in repairs, or by four or five days on a round trip. Beyond this, private shipping has a free hand to set up such give-and-take relationships with merchants all over the world as will provide sufficient cargo for all legs of a voyage, and these arrangements of coöperation cannot be created by government employees without charge or danger of favoritism. Lest fault be found, our government officials are unable to enter upon the detailed higgling in fixing rates required by every cargo and charter. Therefore they must take refuge in rigid regulations and in fixed rates. In result, their competitors underbid by the smallest margins necessary to get the cargoes. The effect of our large fleet in the world's markets is thus to hold up rates, for so long as this great fleet in one hand holds a fixed rate others will only barely underbid. If we hold up rates an increasing number of our ships will be idle as the private fleet grows. On the other hand, if we reduce rates we shall be underbid until the government margin of larger operation cost causes us to lose money.

We shall yet be faced with the question of demobilizing a considerable part of this fleet into private hands, or frankly acknowledging that we operate it for other reasons than interest on our investment. In this whole problem there are the most difficult considerations requiring the best business thought in the country. In the first instance, our national progress requires that we retain a large fleet under our flag to protect our national commercial expansion overseas. Secondly, we may find it desirable to hold a considerable government fleet to build up trade routes in expansion of our trade, even at some loss in operation. Thirdly, in order to create this fleet, we have built up an enormous ship-building industry. Fifty per cent of the capacity of our ship yards will more than provide any necessary construction for American account. Therefore there is a need of obtaining foreign orders, or the reduction of capacity, or both. I believe, with most engineers, that, with our skill in repetition manufacture, we can compete with any ship builders in the world and maintain our American wage standards; but this repetition manufacture implies a constant flow of orders. It would seem highly desirable, in order to maintain the most efficient yards until they can establish themselves firmly in the world's industrial fabric, that the Government should continue to let some ship construction contracts to the lowest bidders, these contracts to supplement private building in such a way as to maintain the continuous operation of the most economical yards and the steady employment of our large number of skilled workers engaged therein.

When we consider giving orders for new ships, we must at the same time consider the sale of ships, as we cannot go on increasing this fleet. When we consider sale, we are confronted with the fact that our present ships were built under expensive conditions of war, costing from three to four times per ton the pre-war amount, and that already any merchant, subject to the long time of delivery, can build a ship for seventy-five per cent of their cost. It would at least seem good national policy to sell ships today for the price we can contract for delivery a year or two hence, thus making the government a reservoir for continuous construction.

We could thus stabilize building industry to some degree and also bring the American-owned fleet into better balance, if each time that the government sold three or four emergency constructed cargo vessels it gave an order for one ship of a better and faster type. This would make reduction in our ship-building steadier and would give the country the type of ships we need.

Our joint engineering committees have examined with a great deal of care into the organization of and our expenditure on public works and technical services. These committees have consistently and strongly urged the appalling inefficiency in the government organization of these matters. They report to you that the annual expenditure on such works and services now amounts to over $250,000,000 per annum, and that they are carried out today in nine different governmental departments. They report that there is a great waste by lack of national policy of coördination, in overlapping with different departments, in competition with each other in the purchase of supplies and materials, and in the support of many engineering staffs.

They recommend the solution that almost every civilized government has long since adopted, that is, the coördination of these measures into one department under which all such undertakings should be conducted and controlled. As a measure practical to our government, they have advocated that all such bureaus should be transferred to the Interior Department, and all the bureaus not relating to those matters should be transferred from the Interior to other departments. The Committee concludes that no properly organized and directed saving in public works can be made until such a re-grouping and consolidation is carried out, and that all of the cheeseparing that normally goes on in the honest effort of Congressional committees to control departmental expenditure is but a tithe of that which could be effected if there were some concentration of administration along the lines long since demonstrated as necessary to the success of private business.

Another matter of government organization to which our engineers have given adhesion is in the matter of the national budget. To minds charged with the primary necessity of advance planning, coördination, provision of synchronizing parts in organization, the whole notion of our hit-or-miss system is repugnant. A budget system is not the remedy for all administrative ills, but it provides a basis of organization that at least does not paralyze administrative efficiency as our system does today. Through it, the coördination of expenditure in government department, the prevention of waste and overlapping in government bureaus, the exposure of the "pork barrel," and the balancing of the relative importance of different national activities in the allocation of our national income can all be greatly promoted. Legislation would also be expedited. No budget that does not cover all government expenditure is worth enactment. Furthermore, without such reorganization as the grouping of construction departments, the proper formulation of a budget would be hopeless. The budget system in some form is so nearly universal in civilized governments and in completely conducted business enterprise, and has been adopted in thirty of our States, that its absence in our federal government is most extraordinary. It is, however, but a further testimony that it is always a far cry of our citizens from the efficiency in their business to interest in the efficiency of their government.

Another great national problem to which every engineer in the United States is giving earnest thought, and with which he comes in daily contact, is that of the relationship of employer and employee in industry. In this, as in many other national problems today, we are faced with a realization that the science of economics has altered from a science of wealth to a science of human relationships to wealth. We have gone on for many years throwing the greatest of our ingenuity and ability into the improvement of processes and tools of production. We have until recently greatly neglected the human factor that is so large an element in our very productivity. The development of vast repetition in the process of industry has deadened the sense of craftsmanship, and the great extension of industry has divorced the employer and his employee from that contact that carried responsibility for the human problem. This neglect of the human factor has accumulated much of the discontent and unrest throughout our great industrial population and has reacted in a decrease of production. Yet our very standards of living are dependent on a maximum productivity up to the total necessities of our population.

Another economic result is, or will be yet, a repercussion upon the fundamental industry of the United States, that is, agriculture. For the farmer will be unable to maintain his production in the face of a constant increase in the cost of his supplies and labor through shrinkage in production in other industries. The penalty of this disparity of effort comes mainly out of the farmer's own earnings.

I am daily impressed with the fact that there is but one way out, and that is again to reestablish through organized representation that personal coöperation between employer and employee in production that was a binding force when our industries were smaller of unit and of less specialization. Through this, the sense of craftsmanship and the interest in production can be re-created and the proper establishment of conditions of labor and its participation in a more skilled administration can be worked out. The attitude of refusal to participate in collective bargaining with representatives of the employees' own choosing is the negation of this bridge to better relationship. On the other hand, a complete sense of obligation to bargains entered upon is fundamental to the process itself. The interests of employee and employer are not necessarily antagonistic; they have a great common ground of mutuality and if we could secure emphasis upon these common interests we would greatly mitigate conflict. Our government can stimulate these forces, but the new relationship of employer and employee must be a matter of deliberate organization within industry itself. I am convinced that the vast majority of American labor fundamentally wishes to coöperate in production, and that this basis of goodwill can be organized and the vitality of production re-created.

Many of the questions of this industrial relationship involve large engineering problems, as an instance of which I know of no better example than the issue you plan for discussion tomorrow in connection with the soft coal industry. Broadly, here is an industry functioning badly from an engineering and consequently from an economic and human standpoint. Owing to the intermittency of production, seasonal and local, this industry has been equipped to a peak load of twenty-five or thirty per cent over the average load. It has been provided with a twenty-five or thirty per cent larger labor complement than it would require if continuous operation could be brought about. I hope your discussion will throw some light on the possibilities of remedy. There lies in this intermittency not only a long train of human misery through intermittent employment, but the economic loss to the community of over a hundred thousand workers who could be applied to other production, and the cost of coal could be decreased to the consumer. This intermittency lies at the root of the last strike in the attempt of the employees to secure an equal division among themselves of this partial employment at a wage that could meet their view of a living return on full employment.

These are but a few of the problems that confront us. But in the formulating of measures of solution, we need a constant adherence to national ideal and our own social philosophy.

In the discussion of these ideals and this social philosophy, we hear much of radicalism and of reaction. They are, in fact, not an academic state of mind but realize into real groups and real forces influencing the solution of economic problems in this community. In their present-day practical aspects, they represent, on one hand, roughly, various degrees of exponents of socialism, who would directly or indirectly undermine the principle of private property and personal initiative, and, on the other hand, those exponents who in varying degrees desire to dominate the community for profit and privilege. They both represent attempts to introduce or preserve class privilege, either a moneyed or a bureaucratic aristocracy. We have, however, in American democracy an ideal and a social philosophy that sympathizes neither with radicalism nor reaction as they are manifested today.

For generations the American people have been steadily developing a social philosophy as part of their own democracy, and in these ideals, it differs from all other democracies. This philosophy has stood this period of test in the fire of common sense; it is, in substance, that there should be an equality of opportunity, an equal chance, to every citizen. This view that every individual should, within his lifetime, not be handicapped in securing that particular niche in the community to which his abilities and character entitle him, is itself the negation of class. Human beings are not equal in these qualities. But a society that is based upon a constant flux of individuals in the community, upon the basis of ability and character, is a moving virile mass; it is not a stratification of classes. Its inspiration is individual initiative. Its stimulus is competition. Its safeguard is education. Its greatest mentor is free speech and voluntary organization for public good. Its expression in legislation is the common sense and common will of the majority. It is the essence of this democracy that progress of the mass must arise from progress of the individual. It does not permit the presence in the community of those who would not give full meed of their service.

Its conception of the State is one that, representative of all the citizens, will in the region of economic activities apply itself mainly to the stimulation of knowledge, the undertaking only of works beyond the initiative of the individual or group, the prevention of economic domination of the few over the many, and the least entrance into commerce that government functions necessitate.

The method and measures by which we solve this accumulation of great problems will depend upon which of these three conceptions will reach the ascendancy amongst our people.

If we cling to our national ideals it will mean the final isolation and the political abandonment of the minor groups who hope for domination of the government, either by "interests" or by radical social theories through the control of our political machinery. I sometimes feel that lawful radicalism in politics is less dangerous than reaction, for radicalism is blatant and displays itself in the open. Unlawful radicalism can be handled by the police. Reaction too often fools the people through subtle channels of obstruction and progressive platitudes. There is little danger of radicalism's ever controlling a country with so large a farmer population, except in one contingency. That contingency is from a reflex of continued attempt to control this country by the "interests" and other forms of our domestic reactionaries.

The mighty upheaval following the world war has created turmoil and confusion in our own country no less than in all other lands. If America is to contribute to the advance of civilization, it must first solve its own problems, must first secure and maintain its own strength. The kind of problems that present themselves are more predominantly economic--national as well as international--than at any period in our history. They require quantitative and prospective thinking and a sense of organization. This is the sort of problems that your profession deals with as its daily toil. You have an obligation to continue the fine service you have initiated and to give it your united skill.