Address at the Re-Union of the Members of the War Industries Board, at Washington, DC


Address at the Re-Union of the Members of the War Industries Board, at Washington, DC


Baruch, Bernard M. (Bernard Mannes), 1870-1965




1920 December 10


Cary T. Grayson Papers, Woodrow Wilson Presidential Library, Staunton, Virginia




Washington, DC

My Comrades and Friends

Although but two years have elapsed since our group of workers dispersed, momentous changes have come over the affairs of our own land and of the world. With the dark though inspiring days of the war behind us we went to our homes with visions of golden days of peace before us. We knew that the world was bled white and staggering under its war wastes and wounds, but after the black night of that engulfing war we could see only the dawn of a busy, peaceful world, prospering as it worked with a will to undo the terrible things it had done.

But now after a time of surging though factitious prosperity we are come again into troubled days. The war clouds darken the sky no more, but clouds of business depression and stagnation obscure the sun. Because we worked and strove together in the molding and directing of the economic affairs of the nation and, to a considerable degree of the world, in the tense days of the war, some of our associates have suggested that tonight it would be well to discuss the quite different economic crisis that has now overtaken us.

We all remember clearly and, perhaps, with a twinge what happened when the war drums began their deadly roll in the summer of 1914; the panic and tremendous drop in prices of commodities and securities; the gradual resumption of business activity, later stimulated into a lively pace by the frantic demands for all our goods by the warring nations; then, how when we, too, plunged into the maelstrom, supply was overwhelmed by demand.

What transpired then was the causal forerunner of what is transpiring now. Let us consider that controlling cause of our present woes and its unfolding; then, let us examine the present position and conditions in the clear light of actuality rather than in the dim and confused light of present-day pessimism, and, finally, the remedy or remedies—for there must be always a way out.

War’s Diversion of Materials

With our entrance into the war, the last great reservoir of men, materials and credit was opened to the pent-up, war-purpose demands of pretty much the whole civilized world outside the central empires. We were called upon to deliver products beyond even our great normal capacity at the very moment that we were required to withdraw from their accustomed activities the flower of our superb young manhood and much of our industrial and commercial leadership. We alone gave 5,000,000 men to this conversion from production to destruction, and it would not be too high an estimate to say that all the armies withdrew 45,000,000 men from production and distribution. Moreover, at least 125,000,000 workers throughout the world were diverted to the production solely of material the major portion of which was doomed to destruction or to non-economic utilization by the armies. Within 18 months some thirty billion dollars of financial stimulants were injected into the American business organism, not to mention the intense stimulus of patriotic purpose.

Agriculture and industry were speeded up to hitherto unknown velocities. Produce the goods and win the war was the cry. Considerations of economical production were necessarily relegated to a secondary place. Availability was the essential thing. Because of lack of sufficient shipping and, above all, the lack of time, great stores of materials such as sugar, wheat, rubber, wool and hides were backed up at external sources just when extraordinary demands were concentrated on American resources. Governmental regulation and allocation of labor and materials further stimulated here and curtailed there. Thus the streams of external supplies that ordinarily flowed into the American reservoir were cut off simultaneously with the opening of the flood-gates.

But that is not all. Vast quantities of supplies were necessarily accumulated and transported far in advance of immediate need. The exigencies of governmental financing compelled an expansion of currency and credits. As the available sources of supplies decreased and the volume of money augmented, prices tended to mount. Here we met the situation by continually broadening price fixing and by the restriction of the use of materials and services to needs and not to wants.

The Situation After the Armistice

With the signing of the armistice, destruction terminated and the stimulus of wholesale governmental buying with the treasuries of the world behind it ceased. At the same time, governmental price-fixing and restrictions on civilian consumption were largely removed. There followed a popular rush to buy and a soaring of prices. Even if there had been plenty of goods prices would have remained temporarily high or become higher because of the psychology of the situation. For a long time people had been educated to the conception of a dearth of goods and there had developed a baseless belief in a continuation of this scarcity. They hungered for the comforts and luxuries they had so long gone without. The rebound from restraint to extravagance was violent, and, as always at times like these, there were large flotations, many indiscriminate promotions and wild speculation—absorbing capital and freezing credits.

We had become so accustomed to think of materials, shipping and railway transportation in terms of war restrictions and regulations that we had a false criterion of values when the war was over and the real conditions began to change. In the meantime the soldiers returned and began to go to work, shipping was released to commerce, the railroads stopped hauling munitions and began delivering civilian commodities, and production of economic goods was resumed; but we went on buying at any price with the persistent war belief in scarcity. The seas were again open to commerce, shut-off sources of supply were reopened, vast stores of materials intended for war purposes but usable by civilians, were put on the market, and millions who had been engaged in war and war-purpose production gradually turned to economic production. But still the world was high-price minded.

Re-action from High Prices

The prevalence of such prices, as is always the case, stimulated production; but presently the people began to break away from the high-price thought and consumption was curtailed. The law of supply and demand was beginning to reassert itself. As home buying lessened, the allied Governments and their peoples, who had been expending their remaining credits here in competition with domestic consumers, began to reduce their purchases. Their depreciated currencies caused them to husband their resources, and, wherever possible, increase home production. The fact that their actual importations from the United States are still large is chiefly due to past orders against the balance of their credits, to meet accumulated necessitous wants.

The conditions of the former enemy countries and of Russia with respect to trade relations with us were infinitely worse. The old structure of international trade and finance which the world has slowly built up through the decades and the centuries had become entangled or broken down. This was especially true of that important section of it that rested on the great and involved system and ramifying net-work of industry, commerce and finance that focussed in central Europe, particularly in Germany. That means that this great outlet for the normal flow of goods is almost as completely cut off as if some cosmic catastrophe had annihilated the old enemy countries and their commercial tributaries. And this economic elimination of a vast part of the world means far more than the loss of its products and markets, for with the paralysis of that center, its commercial nerves that ramified throughout the world are dead, and everywhere there is less business and enterprise because in Germany, in Russia, in Austria and elsewhere there is less.

Distress of Former Enemies Disastrously Affects Us

Thus we find that, among other factors affecting our economic position, are these items: The diminished buying power of our former customers, whose business life has been dislocated and grievously crippled by the war; the return to normal availability of many of the usual foreign supplies for our markets, with the consequent effect upon our price levels; the temporary stoppage of buying here, and finally the loss of many of our export markets through the cutting off of whole communities almost isolated from commercial relations because of financial and political barriers. And over and above all, it must be remembered that the whole world is staggering under a paralyzing debt, while hundreds of millions of people are still unable to swing back into productivity who, were they working, would help to carry the load.

The 120,000,000 people of the Central Empires constituted a far more important part of the industrial arterial system of the world than was formerly generally recognized. They controlled and operated a large and highly efficient part of the world’s merchant marine. They were an important organizing, financing and commercially directing factor in all that vast area that was Russia and in the Balkans and Turkey, Their merchants had penetrated Mexico, Central and South America, China, Africa, Australia—everywhere.

World Team Work the Remedy

Now let us consider the remedy for the grave situation in which we find ourselves. In the first place the malady will largely generate its own anti-toxin, as so often happens in the natural body. As abnormally high prices stimulated production and reduced consumption, so low prices will stimulate consumption and reduce production. Thus, in turn, will come about an equilibrium between supply and demand that will restore the bases of stable prosperity. But as an international process the beneficent tendency will be delayed if not stopped unless the wounded members of the world body be restored to function—and of the wounded members that are not now on the way to renewal of commercial vitality, Germany is the most important and the very one for whose wounds there is a remedy that can be applied consciously by the rest of the world body.

Germany precipitated the present distress of the world by quitting work to go to war. She can only undo the evil she has done by returning to work. The supreme need of troubled mankind is to go back to work and yet so complex and delicate is the machinery of modern production and distribution that it is not possible for all the world to work normally and effectively until all resume their places in the organization. We will not have peace in the fullest sense until a revived Germany again takes her part in the economic system and reopens the sources of production and distribution and the channels of trade that formerly so effectually complemented those of other commercial nations. Without central Europe the world is incomplete and cannot work to its maximum. Yet to pay those staggering war debts, meet oppressive current budgets, and have a margin for savings and new capital, the world must work, and work and save as never before. Now let us see how we can all work, tune up the whole world machine and create the necessary new wealth.

Bearing of the German Reparations

By the terms of the Treaty of Versailles Germany was adjudged liable to payment for a large part of the damages she had wrought by her wanton upsetting of the peace of the world. And parenthetically, I wish to say that never was there a more insensate act than that of the rulers who plunged Germany and the world into the abyss from which we are now trying to climb. Her industrial progress was the feature of our age, and her commercial penetration of neighboring states and, indeed, of the world, was rapidly giving her the substance, if not the form, of all that she could hope to gain by victorious arms.

Now, the bill against Germany was left indeterminate, but it can be definitely fixed by the Reparation Commission, in which there is a place reserved for the United States. What Germany must pay is beyond anything in the way of indemnities or reparations that the world has ever known, just as the offense and its ruinous consequences were likewise exceptional. Germany is like a debtor who owes more than he can possibly pay, but yet does not know even approximately how much; and, therefore, declines to resume business. She will not work hard to fill a bottomless pit. I am firmly of the opinion that the one great obstacle to her early return to her place in what you might call the industrial concert of the world, with the helpful effect to her former associates is the dismaying uncertainty of the amount of the reparations she must make. At the same time there is nothing else so important to the whole world’s return to business normality and prosperity as the resumption of economic functioning by Germany.

Fixing of the Reparation Amount Essential

Hence, it is not too much to say, as I do say, that the crux of the world industrial and commercial problem lies in the fixing of the reparations that Germany must pay. The Allies must eventually come to see this; for they are under heavy burdens and are looking to the German reparations for their own rehabilitation. Germany must work to produce the wealth with which to pay reparation. In helping herself she will do what is more important—she will be helping us all.

Until Central Europe is again going full speed ahead the rest of the world will lag. We may not like it, but that is the cold fact. The question of the inter-indebtedness of the allies and even the sane rehabilitation of our own taxation can not be disposed of until the world is again humming with industry and every route and channel of commerce is reopenedUnder the terms of the Treaty, the amount of the reparations must be determined before May, 1921; and it should be established within Germany’s reasonable capacity to pay. We should be represented in this determination, not only because of intimate relation to our own industrial welfare and prosperity, but because we owe it to our former associates to aid them in disposing of a vexed matter, which if not practically and sensibly resolved will return to disturb them and us again and again.

If France and the other Allies are to be compensated, Germany must get to work.If Germany is not to go into decay and dissolution, into political and economic degeneration with all its international reflexes, she must be started aright now.

If we are to dispose of our surplus products, Germany and the rest of Europe must resume commercial and industrial activity so they can be the customers of old.

Whatever the final arrangements they must be just to France, Belgium, Italy and the other countries Germany ravaged and robbed. On the other hand the burden placed on her must not be such as to enslave her people, though it must be up to the very limit of her ability to pay.

France Must Have Guarantees

France, which is more interested in the early settlement of this question, than any other nation, is also the stumbling block to its realization. Nevertheless the attitude of France is not unreasonable. Remember that France through the agony of four years’ defense of civilization sacrificed 1,350,000 of her sons and endured the sufferings of 1,700,000 of wounded. Her northern provinces were ravaged and their wealth wiped out, terrible gaps were blown in her industrial life, her social life was upset and broken and she was overwhelmed with the enormous debt of defense. Above all things else France is determined, and, we must all agree, justly so, that she shall not again be put in peril of felonous assault by Germany. She trusts not in Germany and is even dubious about some of her former allies. The poilu on the Rhine and a demoralized and powerless Germany seem to France, under present conditions, to be the only way out. France must first be guaranteed that Germany shall keep the peace. Then the question will be open to settlement with due regard to economic conditions.

Although no part of the reparations may be ours, our interest in the sealing of the peace by terminating this open question is profound and vital. Much as other nations will gain none will gain more than ourselves from taking this step towards peace and ending the present disintegrating uncertainty. The present moving call for help for the poor, starving children of the Central Empires, with which we are all in deepest sympathy, is a case in point. How much better for them and for us it would be if we could assist them by giving their fathers an opportunity to work. Humanitarian considerations as well as enlightened selfishness demand the industrial rehabilitation of the former enemy countries.

The Domestic Business Situation

The fixing of the reparation amount would be followed, in my opinion, by a gradual reëstablishment of German credit, by an immediate rise in world exchange, by an increase in the purchasing power of all the nations and in a world-wide resumption of commerce. The balance of the German obligation should be put in the form of bonds, the interest on, and gradual amortization of which Germany could promptly pay, thus establishing their value. The French and other recipients of these bonds could use them as the basis of credit for their much needed purchases of raw materials and other things in foreign lands. Thus the settlement of the reparation question would favorably affect the whole world through the financial and commercial channels that radiate from the allied nations.

Now, in closing let us survey our own internal affairs, which from the standpoint of business are in much the same condition as those of the other great nations. You all know what has taken place recently and how different our present position is from that of only a few months ago and how we have descended rapidly from heights of optimism and courage to depths of pessimism and fear of impending disaster. Some of the most incorrigible optimists of last winter are the most confirmed of pessimists now. Gone are the courage and the confidence they so bravely flaunted then—now that they are needed. It is a curious fact that capital is generally most fearful when prices of commodities and securities are low and safe, and boldest at the heights where there is danger.

I would not belittle the very real distress of the moment, I have only sympathy for the men of affairs who are struggling so valiantly with the cross-currents and whirlpools of business that the cloud-burst of falling prices and curtailed buying has occasioned. Things are bad but not so bad as our fears are prone to paint them. We are adjusting ourselves to restricted world markets and domestic price alterations. Losses and shrinkages have to some extent been discounted or neutralized already. There may be some more failures and further readjustments, but I see that profound curative, though at times convulsive, processes are setting in. It will not be a quick cure but it will be sure.

The Duty of Financiers and Public Men

While automatic processes are working in the direction of economic cure, let us not forget that it is the duty and obligation of the leaders of finance both in bank and government to ease the painful process of present readjustments in every sound and proper manner. The hardships of deflation are necessarily great, in spite of all that can be done to alleviate them. Our financial leadership has as its greatest obligation at this time the duty of minimizing them, and of preventing unnecessary suffering.

All of us can accelerate the curative movement by practicing and preaching the doctrine of work and saving, by revising our burdensome and paralyzing wartime taxation—which is no longer necessary—by contenting ourselves with returns more nearly commensurate than recently with the service performed—and that applies equally to capital and labor. We must look for profits from big production, not from limitation of production. We must see to it that the present mass readjustments of prices are carried through to the ultimate consumer.

The Future Is Bright

Business undertaken now is on a sound deflated instead of on an unsound inflated basis. Merely the return to real values from those born of pessimistic feeling will work a rapid change for the better. The times bristle with opportunities for enterprise although it is true that the rewards are still subject to heavy taxation. Building has been restricted, commerce throttled, upbuilding of the railroads and the development of mines and other natural resources held back. We have a vast opportunity in making up for the work that has been long left undone, as well as in the performance of the profitable current tasks that await us. These tremendous works will require labor, capital, brains and materials in ever increasing volume. We have scarcely scratched the resources of our own country as yet, and there are limitless fields in foreign lands for our enterprise and our capital. The world is ours in a wealth-making sense.

Let us look courageously at facts as they are, let us cast off the blindfold of pessimism, let us set our house in order, let us cut the Gordian knot of the German reparations impasse, and put the whole world back to work, realize peace in the fullest measure, face the future with American dauntlessness and look with confidence for the certain dawn of a great and enduring industrial renaissance, always bearing in mind the predominating fact that the economic, political, and social elements are so interwoven that one cannot survive without the others.



Baruch, Bernard M. (Bernard Mannes), 1870-1965, “Address at the Re-Union of the Members of the War Industries Board, at Washington, DC,” 1920 December 10, WWP16320, Cary T. Grayson Papers, Woodrow Wilson Presidential Library & Museum, Staunton, Virginia.