Herbert Hoover to Woodrow Wilson

Herbert Hoover to Woodrow Wilson

Hoover, Herbert, 1874-1964

WWP19472

1918 September 3

Herbert Hoover writes to Woodrow Wilson about the “growing and dangerous domination of the handling of the Nation’s food stuffs” due to the switch from slaughtering and distributing animal products locally to an industrial model.

Hoover-Wilson Correspondence, Hoover Institution, Hoover Institution Archives, Stanford, California

Woodrow Wilson Presidential Library & Museum

Wilson, Woodrow, 1856-1924--Correspondence

Hoover, Herbert, 1874-1964--Correspondence

English

Dear Mr. President

in reply refer toIn response to your request I beg to set out my observations on the recommendations of the Federal Trade Commission as to certain line of action in connection with the five large Packing Firms.As I expressed to you nearly a year ago, I am convinced that there is here a growing and dangerous domination of the handling of the Nation's food stuffs.In any understanding of this situation it is necessary to consider the principal economic causes of this growth. At one time, our food animals were wholly slaughtered and distributed locallhy. The ingenious turning to account of the bye-products from slaughtering when dealt with on a large scale gave the foundation for consolidation of slaughtering into larger centers. From this grew the necessity for special cars for live stock transport and the large stock yards at terminals. Added to this, was the application of freezing and cooling refrigerative processes for the preservation of meat which at once extended the period of preservation and the radius of distribution from the slaughter centers and enabled the slaughtering nearer the great producing area. The recovery of by-products, and the application of freezing and cooling refrigeration, necessitated large equipment and consequently larger capital. And pParticularly the freezing and chilling refrigeration operations require not only the extensive primary equipment, but a net work of refrigerator cars, icing stations and cold storage at distribution points. This special car service in animals and their products is of the nature of the Pullman Service; it must traverse railroad lines independent of ownership, and moreover it is seasonal and varies regionally in different seasons. For each Railway to have foreseen and to have provided sufficient of this highly specialized equipment is asking the impossible and in any event no particular Railway could be expected to provide sufficient stock of these cars to answer seasonal and regional demands. Therefore, the provision of a large part of this car service has naturally fallen to the larger and more wealthy Packers who have used its advantages as in effect a special definite and largely exclusive railway privilege with which to build up their own business.These Firms have in the main, since Federal Inspection was initiated, co-operated with the Government in this matter and have striven to build up the quality and the brands of their products.Through the establishment of a multiplicity of branch stations and through their practical railway privilege, they have found themselves in position, not only to dominate the distribution of interstate animal products but by the use of the same equipment and organization, and their accruing capital, and the same good will of their brands to successfully invade many other lines of food and other commodity preparation, preservation and distribution. Theyir now excellence of organization and control of facilities now threaten many other lines of even further inroads against independent manufacturers and distributors. They now vend over 1,000 different articles and the list grows constantly increases and now comprises a major dominating proportion of the interstate business in many commodities. This tendency I view with the greatest possible alarm.Practically five Firms have become predominant in this interstate business. It is a matter of great contention as to whether these five Firms compete amongst themselves, and the records of our Courts and public bodies are monuments to this contention. Entirely aside from any question of conspiracy to eliminate competition amongst themselves and against outsiders, it appears to me that these five Firms, exactly paralleling each other's business as they do, with their wide knowledge of business conditions in every section, must at least follow co-incident lines of action and must naturally refrain from persistent sharp competitive action towards each other. I think it can be taken that there is an entire avoidance of war in such competition as does exists Their hold on the meat and many other trades has become so large through the vast equipment of slaughter houses, cars and distributing branches, which each of the five controls, that it is practically inconceivable that any new Firms can appear rise to their class, and in any event even sharp competition between the few can only tend to reduce the number of five and not increase it.Beyond this it is positive Of equal public importance is the fact that their strategic advantage in its marketing equipment and organization must tend to further increase the area of their invasion into trades outside of animal products.It believe it I believe it can be contended that these Concerns have developed great economic efficiency that their costs of manufacture and profits are made from the wastes of forty years ago. They are giving the public a service at a greatly less remuneration per unit to themselves than that which maintained by similar packers before their present great extension. The problem we have to consider, however, is social in the the ultimate social results of this expanding dominiation, and whether it can be replaced by a system of better social character and of at least equal economic present efficiency for the present and of greater promise for the future. It is certain to my mind that while these businesses have been economically efficient in their period of competitive up-growth but as time goes on this efficiency cannot fail to diminish and in the end like all monopolies to defend itself by repression rather than by efficiency. This stage has, I believe, already set in so that while I believe that at the present moment with the restrictions on Packers’ profits now existing, the public is receiving an economic service at low unit remuneration for the service to the packers charge between the producer and consumer, this will, in my view not maintain over a long term of years. The worst social result of this whole growth in domination of trades is the under-mining of the initiative and the equal opportunity of our people and the tyranny which necessarily follows in the commercial world.The Federal Trade Commission has recommended that the Railway Administration take over the Packers distribution equipment car service and the stock yard terminals. And they further recommend that the Federal Government itself take over the Packers’ branch houses cold storage warehouses etc with view I assume to the establishing of equal opportunity of entrance in distribution among all manufacturers and traders.While I am in full agreement that the car service and the stock yards should be entirely disassociated from the control of the packing industry, I am in considerable doubt as to whether the Government in its temporary relationship to the railroads, should undertake this matter through the Railroad Administration and a purely war agency. I may say that at present all refrigerator cars are being used as pressure demands without regard to ownership and the stock yards are under war regulation by the Dept of Agriculture. If the reforms proposed are to be of any value, they must be placed upon a permanent basis and not merely for the War. There can be no doubt that this special service, in order to obtain the greatest naturaltional economy, should be operated from a national point of view rather than from that of each individual Railway, but whether by the Government or by private enterprise, under control as a public utility, seems to me to require further thought, and in any event to depend upon the ultimate disposal of the railway question.As to the recommendation that the Federal Government should at once take over the Packers’ branch houses, cold storage and warehouse facilities, I also find much difficulty. The intention of this recommendation is apparently to lead toward the establishment of public wholesale market places in all important distributing centers. I am in agreement with the principle of such market places but I do not believe they would be provided adequately through taking over the branch houses of the packers. This country is almost wholly devoid of public market places adequately associated with the Railway and water terminals for the proper dealing and distribution not only of animal products but of many other perishables, such as vegetables, fruit and fish, and other lines of preserved food. I am convinced that we will never have an economic distributing system until we have established such free market places as adjuncts to the transportation system. Moreover, they must be general throughout the principal towns in the country and they must have the necessary equipment of cold storage and warehouse facilities.Beyond this we will never have an adequate and free distributing system until we have a much enlarged standardization of food products in order that producers and manufacturers and wholesalers of such commodities shall have a basis of equality in market for equality in good quality. Otherwise, the producer of even inferior qualities with large distributing machinery can dominate a given trade and stifle competition. The separate packers’ branch houses now located in each distributing center, each containing an amount of accommodation only for their own business, and aside from their scattered from each other locations do not finish furnish the physical foundation for a national equipment of wholesale market places. Much of their present property would have to be abandoned and a great deal of construction added to the balance, and even in the latter case the location in a given center might not be most advantageous. We are in no position to find the material and labor for such enterprise during the war, even if it were advisable that the government undertake it. In the first instance it does not appear to me that the individual separate and scattered branch houses of the packers furnish any proper physical basis for such free terminal wholesale market facilities. Any of the packers equipment in this particular would in any event require a great deal of extention and to to effect such objectives and we are in no position to find the material and labor during the war.We do need an absolute assurance to the food trades of such terminal facilities all will allow any manufacturer or dealer in any food product equal facilities to handle and store his goods pending its final distribution It seems to me that ultimate solution may as to the nature of such facilities, where they need extention, and as to whether they should be provided by the railways or by municipal enterprise or by Federal assistance to etc needs much further study before assuming that the packers branch houses will answer these purposes.Two One other problems choke cause also chokes the free marketing of food in the United states which which will One is the lackwill not be reached by the goods ultimate action on the above lines. One is the growing absorbtion of other trades by the shec and that is the sufficient standardization of our food products. My own instinct is against fFederal government ownership of such facilities and I feel that they would in the long run, work to the greatest public good if they are provided for by local enterprise or by municipalities, or by the combined action of Railway Companies at definite centers possibly with some form of Federal assistance to secure their inauguration, and in any case, under control as public utilities. Altogether, I do not consider that the prime object of maintaining the initiative of our individuals citizens and of our local communities is to be secured by the vast expansion of Federal activities.In summation, I believe that the ultimate solution of this problem is to be obtained by offering opportunities equal distribution and equal transportation facilities to the manufactureing and wholesaler food trades of the country. In this situation, I believe that the fifty minor meat packing establishments and the hundreds of other food preservers could successfully defend themselves in competition, expand their activities without economic loss to the community, and by competition constantly improve our manufacturing and distributing processes.I also would separate the whole problem into a question as to what should be done as a war emergency and what should be done as an ultimate solution of the whole question. I do not feel that the Government should undertake the solution of the problem by the temporary authority conferred under the war powers of the Railway and Food Administrations, which must terminate with peace, but rather that it should be laid before Congress for searching consideration, exhaustive debate and development of public opinion just as has been necessary in the development of the public interest in our Banks, Insurance Companies, and Railways.The activities of the Railway and Food Administrations are necessarily founded on securing the largest service and the least disruption and danger to distribution during this period of national strain. The Packers are today performing their economic duties as distinguished from the social results of their organization, and the only outstanding question from a purely Win-the-War point of view, is whether the remuneration for their services is exhorbitant. This is a matter which can be remedied during the war by regulation and taxation.Herbert C. HooverPage 3.stations, and through their practical railway privilege, they have found themselves in position, not only to dominate the distribution of interstate animal products, but by the use of the same equipment and organization, their accruing capital, and the same good will of their brands sto successfully invade many other lines of food and other commodity preparation, and distribution. Their excellence of organization and control of facilities now threaten even further inroads against independent manufacturers and distributors. They vend over 1,000 different articles, and the list constantly increases, and now comprises a dominating proportion of the interstate business in many commodities. This tendency I view with the greatest possible alarm.Practically these five Firms have become predominant in this interstate business. It is a matter of great contention as to whether these five Firms compete amongst themselves, and the records of our Courts and public bodies are monuments to this contention. Entirely aside from any question of conspiracy to eliminate competition amongst themselves and against outsiders, it appears to me that these five Firms, exactly paralleling each other’s business as they do, with their wide knowledge of business conditions in every section, must at least follow co-incident lines of action and must naturally refrain from persistent, sharp, competitive action towards each other. I think it can be taken that there is an entire avoidance of war in such competition as Page 5.the public is receiving an low economic service at low unit remuneration for the charge service between the producer and consumer, this will, in my view, not maintain over a long period of years. The worst social result of this whole growth in domination of trades is the under-mining of the initiative and the equal opportunity of our people and the tyranny which necessarily follows in the commercial world.The Federal Trade Commission has recommended that the Railway Administration take over the Packers’ car service and the stock yard terminals. And they further recommend that the Federal Government itself take over the Packers’ branch houses, cold storage, warehouses, etc., with view I assume to the establishing of equal opportunity of entrance into distribution among all manufacturers and traders.While I am in full agreement that the car service and the stock yards should be entirely disassociated from the control of the packing industry, I am in considerable doubt as to whether the Government in its temporary relationship to the railroads, should undertake this matter through the Railroad Administration, a purely war agency. I may say that at present all refrigerator cars are being used as pressure demands without regard to ownership, and the stsock yards are under war regulation by the Department of Agriculture. If the reforms proposed are to be of any value, they must be placed upon a permanent basis and not merely for the war. There can be no doubt that this special service, inPage 7.enterprise or by municipalities, or by the action of Railway Companies, possibly with some form of Federal assistance to secure their inauguration, and in any case, under control as public utilities. Altogether, I do not consider that the prime object of maintaining the initiative of our citizens and of our local communities is to be secured by the vast expansion of Federal activities.One other cause also chokes the free marketing of food in the United States, which will not be reached by the ultimate action on the above lines, and that is, sufficient the present insufficient standardization of our food products. Nor do I feelIn summation, I believe that the ultimate solution of this problem is to be obtained by offering compelling equal assuring equal opportunitiesy, equal distribution and equal transportation facilities to the manufacturing and wholesale food trades of the country. In this situation, I believe that the fifty minor meat packing establishments, and the hundreds of other food preservers, could successfully expsand their activities without economic loss to the community, and by competition constantly improve our manufacturing and distributing processes.I also would separate the whole problem into a question as to what should be done as a war emergency, and what should be done as an ultimate solution of the whole question. I do not feel that the Government should undertake the solution of the problem by the temporary authority conferred under the war powers of the Railway and Food Administrations, which must

Faithfully yours,

Letter

Wilson, Woodrow, 1856-1924