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 1919 
 
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Copyright International Film Service, Inc. 
 
The 
 
 Hybrid Economic 
 Situation 
 
 ADDRESS OF 
 
 HERBERT HOOVER 
 
 BEFORE THE 
 
 SAN FRANCISCO COMMERCIAL CLUB 
 OCTOBER 9, 1919 
 

 Iritr6du5t6ryremaft(s of MR. FREDERICK WHITTON 
 president of SAN FRANCISCO COMMERCIAL CLUB 
 
 E ARE meeting today with a man who has been in the war from 
 the beginning. At the first alarm his service began, and not for nearly 
 a year after the armistice was he able to throw off, even briefly, 
 the heavy burden of his world duties. There is no other man, cer- 
 tainly no other American, of whom that can be said. He stands 
 alone in a world of men. 
 
 There is something inevitably trifling and tinkling in the effort 
 among the few of us here today to put into words the thoughts that 
 are in our minds toward our guest, for we are conscious that he is 
 known and loved by millions. In uncounted languages the prayers of 
 little children go up for Him as greater and more dear than any army 
 chief or king or saint. And yet, unavailing and ineffective as it is, we 
 must express to Mr. Hoover something of the thought that we, who 
 live in America, hold for him. (Applause.) 
 
 We rejoice in him as a Californian. We exult in him as a great 
 American among the greatest. But together with that exultation 
 and that rejoicing there is a deeper and a greater feeling a recogni- 
 tion, may I say, solemn and deeply moving, that in him we have one 
 of history's great figures, one of those rare and radiant few whose 
 feet are upon the heights, and whose names are written among the 
 stars. For it has been his work to ennoble humanity, and to give to 
 human life something of that spirit and essence which links it with 
 the divine. (Applause.) 
 
 Only a great poet can phrase Herbert Hoover. Kipling must have 
 had in mind such a man as he when he said: 
 
 "If you can dream and not make dreams your master; 
 
 If you can think and not make thoughts your aim; 
 
 If you can meet with triumph and disaster, 
 
 And treat those two imposters just the same; 
 
 If you can talk with crowds, but keep your virtue, 
 
 Or walk with kings nor lose the common touch; 
 
 If neither foes nor loving friends can hurt you; 
 
 If all men count with you, but none too much; 
 
 If you can fill the unforgiving minute, 
 
 With sixty seconds' worth of distance run, 
 
 Tours is the earth and everything that's in it, 
 
 And which is more, you'll be a man" 
 
 [4] 
 
i Y r 
 
 of MR. HERBERT HOOVER <^ , 
 
 R. CHAIRMAN AND GENTLEMEN: 
 I would be a poor mind if I were not 
 greatly embarrassed at this moment. To 
 merit the title of a great Californian would 
 be merit beyond that that could be con- 
 ferred in any community in this world, because there is 
 no community of the intelligence and character of this 
 State of California. After what we have heard, it is per- 
 haps a little difficult to come down to the subject that I 
 have chosen to worry you with for a moment today. It is 
 not the League of Nations. (Laughter.) 
 
 It has been my duty, especially during the last ten 
 months, to make a systematic study of certain social 
 and economic currents throughout the world, in order 
 that those gentlemen engaged in an endeavor to make 
 peace could be as well advised as possible. I have re- 
 tained some of the notes made on those occasions, and I 
 have thrown a few of them together with the hope that 
 perhaps it might be of some assistance to you in formu- 
 lating your own minds about certain problems with 
 which this country is confronted. 
 
 In entering upon a discussion of some issues in the 
 world's economic situation I wish to make an immediate 
 differentiation in two widely separated economic phe- 
 
 [s] 
 
^Address ofM.R. HERBERT HOOVER 
 
 nomena today. That lies in the difference of the eco- 
 nomic situation, of the agricultural populations of the 
 world, as distinguished from the industrial populations 
 -and in the industrial population, for lack of a better 
 term, I include the production of non-agricultural raw 
 material, manufacturing and transportation generally 
 that is, chiefly, those agencies concerned with paid 
 labor. That is, in the main, a division of town and 
 country. Practically all of the worst of our economic and 
 social ills today center in the towns. 
 
 Now any casual survey of the world's economic situa- 
 tion at this moment will display two extraordinary 
 perhaps not extraordinary but two very pertinent facts. 
 One of them is the depth to which production has 
 >^/dropped in industry, and the other is the volume to 
 which production has increased in agriculture. The in- 
 dustrial classes all over the world have slackened effort; 
 the agricultural classes all over the world have redoubled 
 their efforts. 
 
 I wish, first, to deal a moment with the industrial sit- 
 uation. I take it that there is one thesis on which every 
 business man and every economist, no matter what the 
 bent of his mind, can agree and that is, "That the very 
 foundation of the maintenance and the improvement in 
 the standard of living lies in securing the maximum pro- 
 ductivity of the human being." 
 
 It follows from this that the maximum productivity 
 cannot be obtained without the elimination of waste. 
 It further follows that the application of such a proposi- 
 
 [6] 
 
"The World Economic Situation" 
 
 tion must stand several tests, and the principal one of 
 these is that the maximum production can only be ob- 
 tained under conditions that protect and stimulate the 
 well-being of the individual producer. 
 
 Now, the causes of the present decreased productivity 
 are to some extent the same throughout the world. 
 There was a great mobilization of industry during the 
 war on new lines of endeavor. There was a new distribu- 
 tion of commodities, and a distorted purpose in com- 
 merce. With the cessation of hostilities a large part of 
 the industries of the world have had to be redirected 
 back to peace work, and there has, of necessity, been 
 some disruption in production. 
 
 The struggle for political rearrangements during the 
 armistice has had a stifling effect on production. We 
 have to bear in mind that five old empires have been 
 split into twenty different states. The old empires were, 
 each of them, economic units, and we thus have them j 
 broken into twenty economic fragments, and the result I 
 could not be other than a decrease in production. 
 
 There has been a physical exhaustion of a large sec- 
 tion of the population, particularly in Europe. Privation 
 from war, and under-feeding, all have contributed to 
 create a great reflex against renewed exertion. 
 
 To a minor degree, considering the whole, there has 
 been a destruction of equipment and tools. There has 
 been some loss of organization and skill, due to diversion 
 to war. 
 
 The delay in peace has, particularly in Europe, de- 
 
 [7] 
 
^Address of MR. HERBERT HOOVER 
 
 layed the import of raw materials, for until peace is 
 made credits cannot be arranged and factories cannot 
 be reopened. Europe has exhausted practically the 
 whole of its movable securities. It must borrow working 
 capital with which to secure raw material and that work- 
 ing capital cannot be available until we have peace. 
 
 There is also a large factor in the social ferment that 
 arises primarily out of the necessity of economic re- 
 adjustment of wages in an endeavor to continually meet 
 the rise in prices that are themselves the result of the 
 vicious circle of inflation in money and credits during 
 the war. 
 
 There is a further note in all this turmoil and tumult, 
 and that is the insistent demand of labor for higher 
 standards of living and a voice in the administration of 
 its own effort. Unfortunately, these demands have, in 
 many places, become impregnated with notions of 
 socialism, this being believed by many millions of people 
 as the panacea for all ills; and in some countries also, 
 labor has become infected with the notion that it in- 
 creases the total sum of labor as it limits the effort of the 
 individual. Thus we have the demand for a six-hour day. 
 
 From all these causes, accumulating in different coun- 
 tries in different intensity, there is one essential fact, and 
 that is that the industrial productivity of the world has 
 reached so low an ebb that nothing but political and 
 moral economic chaos, finally interpreting itself into a 
 loss of life on a scale hitherto undreamed of, is upon us, 
 
 unless constructive measures can be set up by which the 
 
 < \> 
 
 [8] 
 
"The World economic Situation" 
 
 world, and more particularly Europe, is to return to 
 work. 
 
 Some items in the present situation illustrate the ex- 
 tent to which productivity has fallen. An inquiry which 
 I carried out in the month of August showed that there 
 were fifteen million families receiving unemployment 
 allowances in Europe practically a population of sev- 
 enty-five millions being carried on charity by govern- 
 ments, and being paid almost wholly by the sheer issue 
 of paper currency. 
 
 The coal consumption of Europe had, on the first of 
 August, fallen to a rate of 450,000,000 tons per annum, 
 as compared with 690,000,000 tons pre-war, and 600,- 
 000,000 tons at the day of the armistice. 
 
 Taking Europe as a whole, of the population of about 
 450,000,000, something less than 350,000,000 can be 
 supported on their own soil. Approximately one hundred 
 millions of these people must live by the manufacture 
 and marketing of products of their labor to other coun 
 tries, in exchange for their food. It is a sinister fact that- 
 the people today being supported on unemployment 
 allowances practically represent the surplus population 
 of Europe. Before the war these whole masses of popula-*-^ 
 tion produced from year to year only a small margin of 
 commodities over and above their necessary consump- 
 tion and the amounts they required for their exchange 
 abroad for vital necessities. It is true they managed 
 to support armies and navies, that they had a class of 
 non-producers, and that they did gain slightly in in- 
 
 [9] 
 
^Address of MR. HERBERT HOOVER 
 
 ternal improvements and investments abroad; but all 
 these surpluses were obtained at the cost of a danger- 
 ously low standard of living. 
 
 More particularly was this true in the case of Great 
 Britain where the largest volume of British production 
 was undoubtedly secured at a fearful cost in the stand- 
 ard of living and the ultimate physical demoralization 
 of an industrial population. 
 
 Now, in pre-war days, Europe had the advantage of 
 the enormous stimulus of individualism. It had also the 
 advantage of great economic discipline; and during the 
 war the patriotic impulse to production and a reduction 
 in consumption carried them on in spite of the diversion 
 of men to war and munitions. But during the war great 
 promises were held out in every country of Europe as to 
 economic betterment with peace. With the cessation of 
 hostilities the patriotic stimulus of war towards pro- 
 duction was lost, and an insistent demand for economic 
 change came from every quarter, with the armistice. 
 
 Now this social ferment is the most difficult problem 
 in front of the whole world. It grows fundamentally out 
 of a yearning for higher standards of living, demand for 
 economic change in the status of labor, and in Europe 
 for a greater equality of opportunity, or, to phrase it in 
 another way, for a better division of the products of in- 
 dustry. In very large areas this has resulted in actual 
 revolution and the imposition of radical ideas; and in 
 other areas it has taken a milder form of demands for 
 nationalization of certain industries. The economic im- 
 
 [10] 
 
"The World Sconomic Situation" 
 
 pulse of the French Revolution of a century and a half 
 ago was a better division of the land. The economic im- 
 pulse of these revolutions that we have had in the last V A 
 two years is for a better division of the products of 
 industry. 
 
 It is to be noted that these two movements are not 
 from the agricultural classes; that they are town ^ 
 phenomena. 
 
 Now, all this ferment, whether it is in the form of de- 
 mands for an equalization of wage with the cost of liv- 
 ing, or whether it is in the form of restriction of individ- 
 ual output in an endeavor to increase the total volume 
 of employment, or whether it is in the nature of sociali- 
 zation with the hallucination that men will work for 
 altruism alone, or whether it takes the form of strikes or 
 lockouts, or whether it takes any other form all have 
 one concrete result, and that is that we have a decreased 
 productivity that has placed all Europe in jeopardy and 
 that has come to invade this country. 
 
 These phenomena until recently had not penetrated 
 the United States to any great degree, but no man can 
 say, in the face of the enormous strikes that we are con- 
 fronted with, that we are at all free from the Europeani-\ 
 zation of the United States. There will be no use of tears/ 
 over rising prices if our productivity maintains its present 
 level, for rising prices are simply the visualization of in- v 
 sufficient production. When production breaks down 
 prices must rise, and the richer are supplied and the 
 poorer do without. Right here is the origin of class dis- 
 
^Address of MR. HERBERT HOOVER 
 
 tinctions and the origin of violence. We want no classes 
 in this country; we wish to maintain the equality of 
 opportunity which we now have and the opportunity for 
 every man, by exertion, to participate in all that we 
 possess. 
 
 This, to my mind, is the primary and pressing prob- 
 lem of this moment, and the first step in its solution is to 
 get peace. Peace, is, however, but a single step, and the 
 fundamental fact is that the world is producing less in- 
 dustrial material than it requires to maintain its total 
 population. Therefore, the business of the whole world 
 the business of every thinking man is, as soon as it can 
 j dispose of this incidental question of peace, to find some 
 solution of the much greater problem that we are con- 
 fronted with. There is no royal road to its solution. 
 There is no bright intellectual formula that will end all 
 this kind of trouble. The beautiful formulae of Bolshe- 
 vism and Socialism have already wrecked themselves on 
 the rock of production. For such reduced production 
 they have caused the death and misery of millions of 
 people. They have been abandoned even by their 
 leaders. We need some definite substitute, some plan for 
 solving this problem. The solution must be found by 
 Americans in the practical American way, based upon 
 American ideas, on American philosophy of life. And, 
 further, it must be founded upon our own national in- 
 stincts, and in harmony with our own national institu- 
 I tions. It cannot be founded by creating class feeling of 
 [workers and capitalists. Unless we can find such a plan 
 
 [12] 
 
. " The World economic Situation " 
 
 we shall be subjected to the disintegrating theories of 
 Europe. We have gone far apart from Europe; we lead 
 Europe in every social and moral aspect by fifty years. 
 ,It is for us to lead in this problem, also. 
 
 It appears to me that any solution of this problem 
 must go deeper than questions of. strikes, lockouts or 
 arbitration, for these presuppose a conflict of interest. 
 We have got to go sooner or later to the root of this 
 difficulty. There is no solution short of community of 
 interest. We must begin by creating, somehow and *? 
 somewhere, a solidarity of interest in every section of the 
 people conducting our industrial machine. The worker, 
 the administrator and the employer are absolutely inter- 4 
 ' dependent on one another in this task of securing the 
 maximum production and a better division of its results. 
 It is hopeless to secure a solution if we are to set these 1 
 people up as different classes fighting with each other. 
 Maximum production must be founded on the maxi- 
 mum exertion of every individual within his physical 
 ability, and upon the reduction of waste, not only in-j 
 dividual but national. Unless we are going to secure this 
 maximum production through the combined effort and 
 intelligence of our entire economic machine, we will have 
 destroyed the very foundations upon which we build the 
 higher activities of life. 
 
 One of the most important actions taken by our Pres- 
 ident was the summoning of the Industrial Conference 
 at Washington. If that conference can evolve some 
 method by which we can obtain industrial peace, it will 
 
 [13] 
 
^Address of MR. HERBERT HOOVER 
 
 f 
 
 have done more for the world in the next two years than 
 
 ; the League of Nations can possibly do during the same 
 time. 
 
 In the last seventy-five years industry has developed 
 into large units. We have in a great degree lost the 
 interest of the individual worker in the produce of his 
 hands. In the specialization of industry we have dulled 
 the worker by intense production without giving him 
 any other interest, and we have widened the space be- 
 tween the employer and the employee. We have de- 
 stroyed all the old intimacy between the employer and 
 the employed, which bore within it mutual responsi- 
 bility. So we must search deeper for a solution than lies 
 in mere superficial agreement, if we are to find an end of 
 this constant struggle. We must find in the relationship 
 of employer and employee some common bridge of 
 actual, individual, self-interest in the maintenance of 
 production and the elimination of waste. We must have 
 a contribution on both sides of their full energy, their 
 full intelligence, and their full responsibility. To do this, 
 we must secure a better basis of distribution of the re- 
 sults from labor, from skill and intelligence, if we are 
 going to secure this larger interest in production. 
 
 Now the human race has increased its standard of 
 productivity and therefore its standard of living, 
 through a thousand years of growth of an extremely 
 intricate organization of production and distribution. 
 This organization contains within itself a great stimula- 
 tion to skill, to invention and to industry. We cannot 
 
"The World Sconomic Situation" 
 
 maintain the production which we now have by the 
 destruction or sudden disturbance of this delicate organ- 
 ization. The margins upon which the human race is liv- 
 ing today are too small to warrant a drop of only ten per 
 cent, in our productivity. The maximum production 
 does not lie in the abandonment of the individual reward, 
 for effort and intelligence. It lies in a proper stimulation 
 of these qualities of skill and effort, and their stimulation - ; 
 by the only stimulant that is constant in the human ; 
 character, and that is, his own self-interest. 
 
 I mentioned the question of waste, and THo not mean J./ 
 alone the waste of strikes and of unemployment and the 
 lack of interest in labor, but also national wagte^ " ^ 
 National waste contributes to decrease the efficiency of ^ i 
 the entire industrial machine and thus to decrease the 
 available commodities for distribution. We have in this 
 country a government, the administrative organs of 
 which we set up before we had gained our complex eco- 
 nomic organization, and we further distorted that gov- 
 ernment by the measures we were compelled to take in 
 war time. There lies a wide field for adjustment in our 
 present processes, both as to taxes, to expenditure, to 
 our railways and a control of dominant enterprises, and 
 to the actual administration of the government 
 generally. + 
 
 I have no panacea for any of these problems. I believe \rfp 
 that these are the lines of advance. This requires that 
 the constructive devotion of the officials of this country 
 and the intelligence of the entire people should be 
 
^Address of MR. HERBERT HOOVER 
 
 directed to these issues, instead of to issues that are now 
 exhausted and are practically accepted. 
 
 Agriculture has had but a minor penetration of these 
 difficulties that permeate the town populations. It was 
 never so prosperous nor in so high a state of productivity 
 as today. Even in Europe, there is not an acre for which 
 seed could be obtained, or agricultural implements 
 found, that has not been planted. The food situation in 
 the world today is therefore not a question of supply. 
 There are ample supplies of the most essential commod- 
 ities to feed the whole of civilization until the next 
 harvest. The problems of this division of life are, there- 
 fore, not the reflex of the currents that dominate indus- 
 trialism. There is, however, in this calling a very large 
 and difficult problem. It arises from the fact that the 
 season of the flood delivery of the result of our American 
 farmers' labor is now upon us. We shall have a large 
 surplus over our own consumption probably between 
 fifteen and twenty million tons of food that we wish to 
 market abroad. 
 
 Europe is our only customer for eighty to ninety per 
 cent, of this produce. The belligerent countries have, to 
 all practical purposes, exhausted their transferable 
 securities. Their production of industrial commodities 
 to exchange for this food cannot begin until they have 
 had raw materials. They cannot obtain raw materials 
 until they have had credits, and they cannot get credits 
 until we have peace. Therefore, we are holding 'Europe 
 idle today, we are preventing ourselves from finding a 
 
 [16] 
 
"The World conomic Situation" 
 
 market for our major produce, and we are projecting on 
 our agricultural community a danger that we must yet 
 take into account. Already we see the preliminary signs 
 of these events. The drop of thirty-five per cent, in the 
 price of hogs, with the fall in corn and oats, is the pre- 
 monitory symptom, and the fall of this one brick in a 
 row will yet react in a hundred other American products. 
 Some fall of price of foodstuffs in the United States is 
 essential, in justice to the consumer. No one will deny 
 that. And yet prices can fall to a point that will do in- 
 justice to the producer as well, and will curtail our pro- / 
 duction for the next season. This particular problem is * 
 also complicated by the fact that many countries of 
 Europe are again today consolidating their buying 
 agencies in the hands of groups of governments in order 
 to purchase our food supply through one hand. These 
 consolidated agencies possess a power over prices in the 
 United States that requires careful safeguarding from 
 our side. 
 
 It is possible that if we take no measures to meet these 
 problems of the agricultural industry, we may have 
 economic reactions that will affect the entire commercial 
 community of the United States. It is to be borne in 
 mind that the wealth of this country is sixty per cent, 
 agricultural; that pur agricultural community is also the\ 
 absolute sheet-anchor of stability in our social institu- 
 tions and while we pray for lower prices we must have an-* 
 equal regard for justice to the American farmer, not only in 
 his interest but in the interest of the entire community. 
 
Address of MR. HERBERT HOOVER 
 
 While on agricultural subjects, a word for the con- 
 sumer may not be amiss. We hear a great deal of justi- 
 fiable complaint of speculation in the primary necessities 
 of life. There have been many men who have taken 
 unjustifiable advantage of the terrible economic disrup- 
 tion of the last twelve months. Some of this speculation 
 has been of an absolutely vicious order. By viciousness, 
 I mean men who give no service in distribution, who 
 have bought food, the prime necessities of life, with a 
 view to lifting their price out of the community. But the 
 great rise in prices this last seven months since the 
 demobilization of the Food Administration has been due 
 to other causes entirely. These causes are world-wide, 
 and they lie generally in the anticipation that was held 
 by the whole food producing and food marketing world, 
 that with the opening of two hundred million customers 
 in Central Europe, there would be a demand of such 
 dimensions as to make a world shortage. Therefore, 
 there was a large amount of buying, a large amount of 
 withholding from the market, of what one may term a 
 protective order, not with a view of speculating against 
 the community, but of safeguarding supplies. Even 
 governments have been engaged in this operation. To 
 put it in another way, many people have been increasing 
 their stocks out of a fear that there would be a scarcity 
 before the year was over. Thus we are able to witness 
 that before the beginning of the present harvest we had 
 larger stocks of food of many kinds in our public ware- 
 houses than we have had at any time during the past 
 
 ['8] 
 
"The World Economic Situation" 
 
 five years. Two conclusions can be drawn from this: 
 one is that we did not over-export foodstuffs from the 
 United States during the past year; the other is of more 
 importance, and that is that with these accumulated 
 stocks, and probably the largest harvest that we have ever 
 had, we have ample supplies to carryover the next year. 
 
 The demands from Central Europe will never amount 
 to the creation of such a shortage as has been anticipated 
 by the food trades, and the public may yet score off the 
 speculator. While Europe needs and will import most of 
 our surplus during the year, if they can find credits with 
 which to buy it, it has not the resources to import one 
 atom more than is absolutely necessary to preserve life, 
 and there is no justification today for the anticipation of 
 any over-demand upon the United States during the 
 next twelve months. There is, however, ample room for 
 anxiety that in the next five months of our maximum 
 production, through the delays in peace and in the set- 
 ting up of credits, Europe will not be in a position to 
 purchase her customary food supplies during the time of 
 our high production, and that it is now time for us to dis- 
 play some interest in what will happen to our agricultural 
 producers when our warehouses become overcharged. 
 
 There is one general fault with food prices in the 
 United States, and that is the ex^ensivejjessjrfo^ tf 
 
 tribution system. The margins between the farmer and 
 the consumer are larger in this country than in any other 
 country in the world, even eliminating the whole ques- 
 tion of speculation. The whole distribution system needs 
 
 [19] 
 
^Address of MR. HERBERT HOOVER 
 
 a careful analysis and study and some form of deliberate 
 remedy. Such remedies do not, however, take the form 
 of governmental interference except against monopoly 
 and vicious speculation. It would be amiss if I did not 
 mention that there are some articles in the world today 
 of which there is an actual world shortage. On some 
 textiles, clothing material and a few food stuffs, such as 
 sugar and coffee, and a few items of that character, the 
 price level is a level based on shortage. Nothing will 
 permanently correct such price levels but an increase in 
 production or a decrease in consumption, and a con- 
 tinued decrease in production in the manufacturing 
 community can only tend to lift the whole list of these 
 prices higher. 
 
 Now, these are a few of the problems that demand 
 immediate consideration in the nation. There are others 
 that I could impose on you for some hours. 
 f But we do need the deck cleared of this peace question 
 /and of politics, while we bring to bear the great intel- 
 Uigence of this country on its solution. These things mean 
 Wore to the welfare of our people and to the world than 
 even the League, great as I believe its aspirations and 
 its purposes are. We have spent two years in war, and 
 we have spent a year making peace, and now let us have 
 a year in economics, in order that we may not find our- 
 selves in a worse plight than we were before we entered 
 upon it. (Applause.) 
 
 Mr. Whitton: I propose three cheers for Mr. Herbert Hoover. 
 
 (Cheers]. 
 
 [20] 
 
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