present year was $41,' in the "open-shop" cities the figure was $48.* In other words those uneconomic policies which we condemn in theory are shown in practice to decrease the amount of building construction and to delay the ending of the present structural shortage. Less building naturally means less employment. This fact is extremely important since the building industry is one of the key industries of the country. A report issued by the Committee on Statistics and Standards of the United States Chamber of Commerce, the committee including many eminent economists, declared: "Construction would seem to be the barometer of our industrial life. When depression strikes construction, it rocks the entire industrial structure and 'good times' undergo a process of metamorphosis which is conducive to acute conditions. But when the tide turns, construction is the first to be carried with the rising flood, and other industries follow in its wake." The emergency program for the immediate relief of idle workers promulgated by the National Conference on Unemployment, September 30, also declared (section 11): "The greatest area for immediate relief of unemployment is in the construction industry, which has been artificially restricted during and since the war." The building industry, therefore, is the key of the unemployment situation. It is not maintained that the closed shop is the chief cause of unemployment, or that the universal adoption of the open shop would bring universal employment. But it is maintained that closedshop conditions tend to greatly increase the extent of unemployment. Much as I favor the open shop it is perhaps pertinent to say that I do not favor its attempted establishment by legislation. The Department of Labor presented to the National Conference on Unemployment figures as to the number of those unemployed in our cities. Taking the cities for which the previous comparison was made we find that where building, the key industry, is on an "openshop" basis 3.4 per cent of the population was unemployed; where building was on a "closed-shop" basis 7.4 per cent were unemployed. That is to say, unemployment was 117.6 per cent greater where closed-shop conditions prevailed in the building industry. Dicta do not succeed. Until sound economic principles are fully recognized by both capital and labor, individually and in groups, our industrial efficiency will remain impaired. "The inclusion of New York, with an average of $55, makes the closed-shop figure much higher than real comparative conditions between the two groups warrants, as New York has over a third of the group population. The comparatively high New York figure is the result of tax exemption ordinances, and exists despite very restrictive practices by unions and builders. "For eight of the cities-Indianapolis, St. Louis, Scranton, Butte, Duluth, Oklahoma City, Nashville, and San Antonio-figures for only eight months were available and the ninth month was considered as one-eighth of the total of the other months. Building in McKeesport was estimated as being at the same ratio to that in Pittsburgh as its population bears-7.8 per cent. These figures appeared in the New York Herald of October 5, 1921. Professor Hollander in his presidental address pointed out the absolute necessity of "abandonment of unsound practices" in our economic system, and the responsibilities resting upon American economists to take the lead in the creation and maintenance of sound industrial policies and methods. Economists must point out clearly the fallacy of and harm resulting to the public, to industry, and to the worker from dicta such as we have mentioned. They must do this, if they are to best represent the highest meaning of their science, to a greater extent and in a more forceful manner than ever before; this is a paramount duty in the interest of national prosperity. Professors Barnett and Hollander deserve hearty congratulations for indicating a new line of duty which economists, if they have not overlooked it, may possibly have neglected to develop. Having been so fortunate as to have had especial advantages for the study of the "open-shop" discussion of the past two years, particularly in certain of its phases, I shall now mention briefly a few of the features of the "conspiracy," "campaign," "discussion," or "movement," as it has been variously called. 1. The most important fact, it seems to me, is the extent to which the advocates of the open shop have addressed their chief argument to the public. They maintain that the chief test to apply to any industrial principle is whether it harms or benefits the general public. The closed-shop protagonists, on the other hand, have almost unanimously refused to discuss the question upon that basis, preferring to rely upon arguments of class advantage, with particular emphasis upon alleged benefits to the minority of workers who are members of labor organizations. And my personal opinion is that these organizations have already lost much more than the 10 per cent figures mentioned by Professor Barnett. With the present type of leadership, and with the prevailing union refusal to urge individual members to increase their earnings by individual merit, a further decline in real membership will be experienced, particularly as to the percentage of skilled workers organized. But to return from our digression. This reluctance and refusal to argue from the standpoint of public welfare, coupled with a general knowledge of uneconomic union practices during and since the war, and actual or potential strikes which, rightly or wrongly, the public believed inimical to its interests have caused public opinion actively to support the industrial advocates of the open shop. These advocates recognize that nothing can permanently benefit industry which harms the public; they believe also that policies and methods which impair the true efficiency of industry are detrimental to the public welfare and that these detriments should be vigorously set forth for general inspection. 2. Recognizing that public welfare is superior to the welfare of either employer or laborer and that no industrial system can permanently succeed without the support of the public, the open-shop advocates have particularly endeavored to make their position known to the chief molders of public opinion-the educators and the clergy. Special efforts have also been made to present their arguments to high school and college debaters, an important feature in the formation of public opinion, when we consider, for instance, that in Texas alone last year over 1,000,000 people heard debates on the open shop. 3. While we all have a general knowledge of what the "open shop" is, it may be well here to know the employers' definition. The Open Shop Committee of the National Association of Manufacturers is composed of prominent American business men and defines an open shop as "one in which there is no discrimination against workers on account of either membership or non-membership in any lawful organization operating in a lawful manner." This definition, it will be noted, does not oppose discrimination in employment which is not based upon mere possession or non-possession of a certificate of membership in a private society; it justifies discrimination against organizations such as the I. W. W. and the United Mine Workers. The most repeated public claim of the closed-shop leaders is that the term "open shop" is in reality only a camouflage for the "non-union" shop. Yet a nation-wide survey in the Philadelphia Public Ledger of July 3, 1921, gives a very impressive list of leading American firms which actually have in their pay rolls both union and non-union men. This investigation made by the Public Ledger is of extreme importance, since it conclusively demonstrates the falsity of the claims that there is no such thing as an "open shop" and that unions cannot exist without the "closed shop." 4. The open shop discussion of the past two years has also been marked by the great amount of newspaper advertising resorted to by local employers' associations and union bodies. 5. The opponents of the closed shop have not confined their opposition by any means to the activities of union organizations. The "exclusive agreement" is the ultimate evil of the closed shop, as has been amply demonstrated in the clothing situation in New York City and the building trade conditions in New York, Chicago, Cincinnati, and elsewhere. Under such agreements all competition is eliminated, the unions, through their leaders, agreeing to work only for members of a particular employers' combination, to which employers who will not accept its policies are refused admission. In the building trades such agreements have enormously raised construction costs. They are possible only because of the power the closed shop places in the union leaders; but the employers' groups which make such monopoly agreements merit condemnation. 6. There has been no attempt by open-shop advocates to deny that the open shop benefits the employer by increasing his profits. If investment is justified so are profits, and unless profits are made capital will be withdrawn. National prosperity needs prosperous business. The employers consider the open-shop problem as a fundamental question of whether the determination of important policies of industrial management shall be granted to organizations whose rules, which must apply where closed-shop agreements are signed, are made by men the great majority of whom are not employed in the establishments. Like all fundamental questions, however, we find "hot and cold" periods in its discussion, periods when it has greater or less immediate national interest, bearing in mind that there are always local controversies. Our first major period in this century occurred from 1903 to 1905, when, following the Anthracite Coal Strike Award, many employers' associations took a stand for the open shop. The American Economic Association in 1903 and 1905 devoted special sessions to the subject. From 1912 to 1914 we had another period of great discussion. The third period has been from 1919 to the present time. In the second of these periods public sentiment seems to have been pretty much divided; in the first and present periods it has been markedly with the advocates of the open shop. It will appear that in order to prevent any reaction of public sentiment the employers must do three things and do them consistently and not sporadically: (1) demonstrate that the worker fares best under the open shop; (2) let the public know the facts concerning industrial conditions, and (3) answer, instead of neglecting, the oftrepeated union claims. There are indications that employers will do this. Mr. Mason, then president of the National Association of Manufacturers, and the Open Shop Committee of the same organization emphasized in the spring of the present year (1921) the importance of selection and training of foremen and plant executives, of giving information to employees as to business principles and methods, and of better methods of industrial employment and allocation. During the next few years we may expect to see ever greater attention given to such questions by our industrial leaders. THE RAILROAD SITUATION BY WALKER D. HINES Formerly Director General of the Railroads There was never a time in the history of our country when the railroad situation was as difficult to appraise as it is today. Since the World War, few, if any, lines of industry have returned to a normal status, and throughout the world I believe the only great industries which admit of reasonably confident treatment are those which were fortunate enough to make extraordinary profits during the war and which were farsighted and prudent enough to conserve their profits so as to have a large reserve to carry them sucessfully through the long and trying period of readjustment. But this fortunate class does not embrace the public service enterprises of the world, whose profits are limited, and which are unable to shut down their plants in periods of difficulty. Our railroads are no exception to this statement. They had no opportunity prior to federal control to make vast profits out of the war, they had comparatively small reserves at the beginning of the war, and they had no chance to build up their reserves to any large extent out of the government rental accruing to them during the war. There are at this time two special difficulties in getting a satisfactory idea as to the present or prospective situation of our railroads. One difficulty grows out of a state of mind and the other difficulty grows out of the facts. The state of mind of railroad officers and of the public in general has not been favorable to obtaining a well proportioned and accurate estimate of the railroad situation. In order to win the war the government took possession of the railroads and operated them as a unified system and then terminated the unified operation as soon as a scheme of legislation for their further regulation and protection could be adopted. This unified governmental possession and control, suddenly entered upon to meet a paramount emergency and provisionally continued only long enough to secure legislation, constituted a fact so unprecedented and so striking as to dominate the thought on the railroad problem and displace nearly all other thoughts on the subject. Consequently undue attention has been given to exaggerated and poorly balanced impressions as to the influence of federal control, when the time and energy could have been more profitably spent on a |