Chapter XI: Part 11

As a conservation congress for child welfare, we offer you, gentlemen, our experience and our organization in any efforts which you may put forth for the betterment of childhood whether in city or country. (Applause)

President WALLACE—I take pleasure in introducing to you Congressman Fred S. Jackson, former Attorney General of Kansas.

MR. JACKSON—As soils may be exhausted, it is even possible to exhaust the conservation of soils—by discussion. We have listened to several papers, each of which has been not only intensely interesting but exhaustive on the subject of restoring and conserving exhausted soils. I may be pardoned, therefore, in asking your attention to another great national subject of conservation; that of conserving our lives and millions of property from loss by fire. This subject has been already partially discussed, before this Congress, through and by means of a report of the National Board of Fire Underwriters, a national organization of fire insurance companies.

This report, though good in the main, is one-sided. It calls attention to the public duty of citizens in general in preventing fire losses. We desire by means of a national investigation under national supervision to remind insurance companies of certain of their own public duties, relative to the causes of fire losses.

All agree that these losses are enormous and when compared with that of any other country are excessive and abnormal. In the last decade the amount of property insured has doubled and in spite of a campaign for fire prevention by the insurance companies, fire losses have also doubled.

This disappointing result has led many of the best informed insurance experts of the country to conclude that the real “bug under the chip” in our fast increasing excessive and abnormal fire losses is the insurance rate, for which our insurance companies are responsible.

I hold no brief in this matter against the insurance companies. I became interested in the subject merely as a state officer in an attempt to enforce state laws and to secure state supervision of rates in the interest of the public. Such laws are now in force in at least four states of the Union, and are sustained by our courts on the theory of the state’s right to protect the life and property of the citizens against loss from fire.

POWELL EVANS’ VIEWS.

The importance of this subject has not been better or more strongly stated than by Mr. Powell Evans, of Philadelphia, one of the leading business men of the country, who spoke before this Congress in its first session, in May, 1908. In a recent magazine article, Mr. Evans says:

Fire waste in the United States and Canada is about ten times
that of western Europe. It averages broadly $250,000,000
yearly with $150,000,000 added expense for protective measures
imperatively demanded by this great, continuous, and increasing
loss.

The 1910 fire waste would pay the total interest-bearing debt
of the country in four years; or would build the Panama Canal
in less than two years. In other terms, it exceeds the combined
cost of the United States Army and Navy and the interest on the
National debt; or nearly equals the combined annual failure and
pension payments in the United States; or exceeds the combined
United States gold and silver production and Post Office
Department receipts—these all annual figures.

It represents about 40 per cent of either the total unused
United States government receipts or total expenditures, or the
net earnings of American railways; it represents about 80 per
cent of either the United States Internal Revenue receipts or
the United States Customs or the interest paid on the railways
in the country. It exceeds the combined annual value of wheat,
hay, oats, and rye crops, and is twice that of the cotton crop.
It costs about $30,000 for each hour in the Year, or $500 for
each minute. It costs, moreover, more than 1,500 lives and
5,000 serious injuries annually.

If all buildings burned last year in the United States were
placed together on both sides of a street, they would make
an avenue of desolation reaching from Chicago to New York,
and although one seriously injured person were rescued every
thousand feet, at every three-quarters of a mile a man, woman,
or child would nevertheless be found burned to death.

This fire loss averages three dollars per capita in America
each year as against thirty cents in Europe. It is absolute
loss, and not ever transferrence of value. It positively does
no good to anyone. About two-thirds of this waste in life and
property in this country could easily be avoided by means
similar to those employed in western Europe, where the loss is
about one-tenth of ours.

INSURANCE COMPANIES IN CONTROL.

Let me now tax your attention with a consideration a little more in detail of the part played by the insurance system and the rate in the fire waste of the country.

By common consent the control of fire has been left almost entirely to the care of the fire insurance company. The average man considers that the company pays the loss and suffers loss in the payment. In his opinion the company is impelled by fear of loss to exact a high state of efficiency from all engaged in stopping loss, and that it is also in position to know what ought to be done at any time to prevent loss or strengthen the forces that fight fire. From the point of view of the average man, to pay the insurance premium is to discharge his whole duty as a citizen. All else is a detail of the business of fire insurance and none of his business.

The prevalence of this conception of the interest of the fire insurance company explains the apathy of the public and prominence of the company in all questions of public safety against fire. Nevertheless, it is a misconception, and until the public bestirs itself in its own behalf, fire waste will never be subdued. While the company pays the loss, payment is made out of a fund taken from the public in advance. This premium fund covers not only the loss but about as much more in addition for the use and profit of the company. Up to the limit of price that the public will stand for, the higher the losses, the more the premiums and profits to be collected by the company. Thus the doubling of the loss, in the face of a ten-year campaign for reduction led by underwriters, is not the reflection on the leadership that it seems. If losses doubled, so also did premiums and profits.

The actual control of the situation lies with the insurance rate. However, the companies may protest and exhort, little will be doing unless their admonitions find concrete embodiment in the rate. It was the rate that doubled premiums during the last ten years, and it was the rate which maintained the conditions of risk implicated in doubling the losses. It is axiomatic that premiums cannot be doubled unless losses double, and that losses will not double unless there is hazard to produce them. A true rate could have been promulgated ten years ago, which would have sent much hazard to the discard as no longer profitable and much of the subsequent loss would not have transpired. But premiums would have suffered a like shrinkage.

Mr. Evans’ address before the first Conservation Congress, to which I have already referred, became the basis of an official utterance by the National Board of Underwriters, and the public therefore must regard him as a creditable witness.

INSURANCE RATES.

Here is what he says of the part of the insurance companies and insurance rates in this great national calamity:

The world’s insurance bill is the measure of its fire waste. In
the United States insurance costs, on the average, about 1 per
cent of the policy value or one dollar per one hundred, with
three dollars per capita fire waste; whereas, in western Europe
insurance costs on the average one-tenth of one per cent of the
policy value or ten cents per hundred, with thirty cents per
capita fire waste.

The sound rule follows that, as fire waste is reduced, the cost
of insurance automatically falls in proportion, and from this
cause only. Insurance is not a commodity in the usual term; it
is a tax which distributes the fire waste of the country over
its population. It is fundamentally a nation-wide average.
About one-half of all insurance premiums collected are returned
to the insured for fire losses, and the remaining one-half
goes for expense and profits in the insurance business. Unduly
numerous or large fires, or conflagrations, swell the total
waste bill, and automatically rates rise everywhere within
the national boundaries, until the half of all collections
is great enough to pay these losses. Every inhabitant of the
country contributes an average share of these insurance bills;
higher rents, clothing, and food bills; and through them higher
credit rates and interest on loans. No one can escape. In the
aggregate, it can safely be said that every workman pays this
three dollars yearly for every member of his family, through
either one or all of these channels.

The insurance interests have limited influence; no power other
than imposing a high rate; and are in a measure, because of
their own commercial interest, indifferent to present fire
waste. It would appear to the layman at first glance that less
fire waste would be welcome to the insurance business, yet
the insurance influence is far from making a united effort to
reduce it. So long as an insurance company does not have to pay
out more than fifty per cent of its premiums for fire loss the
unit profit is good. Therefore one-half of a high rate nets a
greater final profit than the same proportion of a low one.
Hence the automatic yard-stick rate schedule which companies
apply to any property, which totals up the final rate in each
case—having regard to the building, contents, and location
(exposure hazard). This might result in a premium as low as ten
cents on new mills, and stores (not contents); or as high as
ten dollars per one hundred dollars on Southern wood-working
mills. Many insurance managers actually prefer the higher rate
and risk as making higher possible earnings for the company
and permitting a higher absolute payment to the broker, thus
enabling the manager to produce a larger net annual profit, and
to interest and hold a better line of brokers through whom to
distribute his contracts of insurance.

The broker, who gets from ten per cent to thirty per cent of
the premium, objects even less to the higher rate—although,
as we have seen, it inevitably means higher risk and more
chance of fire, and in fact more fire waste; so the destruction
continues.

There’s a siamese twinship between premiums and losses that forbids a knockout. Packing houses afford an apt illustration of the control of the situation wielded by the insurance rate. Public attention was attracted last winter by a large loss in the Chicago stockyards which was accompanied by the death of many firemen. This loss involves a paradox which few observed. Why should appliances which would have prevented this loss and catastrophe be absent in the congested Chicago yards, and yet present in similar outlying plants owned by the same men? No spot on earth needs precaution against fire more than the Chicago stockyards, and in none is there a more profitable opening for investment in the means of safety.

SAFETY NOT SOUGHT FOR ITS OWN SAKE.

The answer lies in the fact that safety is not sought for its own sake by the average business man. From the small dealer to the board of trustees of a great university, no more is appropriated for safety against fire than will pan out profit from the insurance rate. The rate makes safety pay in the outlying packing house and makes hazard pay in Chicago, and the packers are governed accordingly. Inquiry would probably develop that competitive conditions made a reasonable rate possible in the locations where the plants have been made safe, whereas, in the Chicago yards, competition does not operate and the rate is made by a board having only commissions at stake.

How is this rate, so loaded with import to life and property, made? This question assumed prominence when regulation of rates was undertaken by certain states. Inquiries conducted by these states show that rate-making is neither what it purports to be nor what the public imagines. What it purports to be is indicated by the title given to schedules promulgated by associated insurance companies for the formation of rates throughout the West, namely, an “Analytical System for the Measurement of Relative Fire Hazard.” It is claimed to be a system of measurement. Something scientific, accurate and just is indicated by this title. The public accepts the schedule at the valuation fixed by the title, and believes that back of its provisions is a great fund of digested information bearing upon every angle of the problem. It suggests information collected by the companies with infinite patience and given freely, so that the making of rates might be done with exact justice to all, charging to none the burden that rightfully should be borne by another. What rate-making really is may be inferred from the inquiry of Missouri as to the reasonableness of the important schedule filed under the rating law of that state for the formation of rates for fireproof buildings and contents. Some knowledge of premiums and losses in this class of property is clearly essential for the making of reasonable rates.

WHAT WAS ASKED OF COMPANIES.

The companies were first asked by the Insurance Department of Missouri to furnish their experience in fireproof buildings and contents. Companies like the Aetna, Hartford, Home and Royal replied that they had never kept a tabulation of this nature and were unable to furnish any information which would show what premiums and losses might be expected from such property. It was explained by these companies that it was their custom, in keeping track of bakeries, for example, to class together those of ordinary construction, improved construction and fireproof construction.

No useful information could be gleaned from such a source, and the experts who prepared the schedule were called to the witness stand and requested to justify their handiwork. It appeared on examination, however, that the provisions of this schedule were prepared without one iota of information showing what premiums and losses had been experienced in this class of property. It was not known whether the rates formerly used had proved unduly profitable or unprofitable, nor was it known with certainty whether the new rates would increase or diminish the premium charge as a whole.

All classes of property receive this arbitrary treatment. In none are statistics kept to show whether the schedule is producing too much or too little revenue in comparison with the losses. It is admitted that many classes pay too much, while others are being carried at a loss, but no schedule is made to rectify this abuse, although the schedule purports to be a system of measurement.

The companies do not keep faith with the public. We are promised that greater care to avoid fire will reduce the loss and lead to lower rates. But the rating system is conducted so that the public will neither know its just due nor receive it, except by resort to other forms of insurance. When some organized industry undertakes self-insurance, ratemakers soon find that conditions have improved and that reductions are in order.

It is evident, however, that the end of this system of false measurement is near. Four states are regulating rates under laws which call for rates in reasonable relation to losses, and the sustaining of the constitutionality of such regulation by the lower courts makes similar legislation certain in practically all states. There is urgent need, therefore, for accurate knowledge on all matters which affect the rate of burning in the several classes of property. This knowledge does not exist. It must be acquired by study of data yet to be gathered. The data in the hands of the companies is worthless. It has been gathered by plain business men engaged in the insurance business, and, whatever the purpose of the compilation, it certainly has had no reference to the formation of reasonable rates.

NEED FOR FEDERAL INVESTIGATION.

Faulty treatment, and not incurability, is indicated by the persistence of the high level of destruction by fire in this country. The treatment is vague and characterized by irresponsibility. Diagnosis is wholly lacking; the location of the trouble is not known, and the remedies are applied haphazard in ignorance of the possible effect. No person connected with the treatment has a definite result to produce, or is even asked to prove that any result has been produced. The premiums and losses are reported in bulk to each state. The summation of these reports into one huge total constitutes all that is done by the insurance company or the insurance rater or the public to discover the workings of this great waste.

Such blind methods can accomplish nothing. Risks must be enumerated. Those in need of treatment must be singled out and something economically appropriate be prescribed for each. To find out where and how effort can be put forth to economic advantage—to define what can be done wisely by the class and individual to reach the low economic level of loss—to keep watch of results and register the efficiencies of fire alarms, fire patrols, fire departments and fire resistants—these are details which must be wrought out before fire waste can be attacked with definite aim and for the perfecting of which the Federal investigation and bureau is proposed.

The states appeal to the Federal Government to standardize the schedule for the formation of rates so that it shall become a true measure of the conditions to which it is applied. Leaving this measurement to the dictates of the “best underwriting judgment” has proved a costly error to the people. The underwriter escapes the common lot; the cost of his “error,” with a substantial addition for his profit, is borne by the people.

When the fog that envelops this waste shall become dispersed by the Federal analysis, the way to its speedy removal will become clearly visible to the individual states.

I lay no claim to originality in the presentation of this subject. I have given you facts and for the most part the comparisons and expressions of the experts who compiled these facts. They are original only in the sense that the testimony of witnesses recited in a brief or argument in a trial are original.

I have asked the assistance of the Congress of the United States to secure an investigation of this important subject to the end that power may be added to the arms of the states to restore natural conditions as to fire losses in our modern business world.

President WALLACE—You will now hear the great highway engineer of Missouri, Hon. Curtis Hill, on the subject of how good roads help the farmer.

Mr. HILL—Mr. Chairman, Ladies and Gentlemen: There is no question but that we have been making as much progress in road work during the last few years as we have and as we are in other lines of work, and still in many places we are not making the progress that we road-making enthusiasts, and I might say road cranks, would like to see made. Still I do not believe that we can now apply to our highways over the large part of the Mississippi and Missouri valleys that little poem which, or a few verses of which, Robert Burns is said to have written upon his arrival at a little town in Scotland, illustrating that the highways of Scotland at one time were not much better than they are today of Missouri, I might say. Speaking of those highways, he left two verses, which run something like this:

I am now arrived, thanks to the gods,
Over pathways rough and muddy;
A certain sign that making roads
Is not these people’s study.

And though I am not with Scripture crammed,
I am sure the Bible says
That you people shall be damned
Unless you mend your ways.

Now, how good roads help the farmer must always include others, and it can be best discussed in a short discussion, in a general way under two heads. First, transportation systems, and the importance of our social conditions. Referring to Robert Burns in Scotland, you will see that the road question has been hammered upon for years and years. Man has been considering it as a means, and as one means of transportation. Now, in fact man has been forever trying to overcome gravitation, from the first load that a man carried on his back, or put upon the back of a pack animal, he has been endeavoring to lighten his burdens by overcoming the laws of gravitation. And so it has been through all history. The galley, the sail boat, the steamship, automobile, and air-ship. The good roads is one line in the endeavor to overcome the laws of gravitation and to make easier one method of transportation. Transportation charges have entered more into the cost of living than any other one item. Food, clothing, building material, all the staple necessities of life have had to pay the freight. The freight is deducted from or added to the price of the article which forms the basis of the price which the producer receives or the consumer pays. The man who produces the commodity, or he who settles the bill, pays the freight. Neither the producer nor the consumer has gained by a high cost of transportation. The question of good roads is therefore at the present time one of the most vital with which we have to deal. There is no one internal improvement so absolutely necessary and essential to a state’s progress and prosperity as the betterment of the highways. (Applause) Good highways are necessary to a state’s progress and prosperity, as well as that of a community, because they involve the transportation problem. With transportation is involved the problem of life, the cost and pleasures of living, exchange of commodities, valuation of property and the social and moral and educational conditions. The problem of life is a study closely linked with the problem of transportation.

Our very existence as a social and commercial body as a state is dependent upon transportation to such an extent that without easy, quick and economic means of transportation we must rank as a second, third or fourth class state. The greatest assets of the most substantial nations are transportation and agriculture, neither one of which can be fully developed without the other. The transportation of the bulk of agricultural shipments begins at the farm when the raw material is hauled over the country roads. This country road is the farmer’s own road, which leads to the collecting points of transportation by rail and water, and over which he reaches his market. It is used one hundred times to every other time for all other means of transportation. The good road permits the farmer to watch his markets and not the road. Many a farmer markets his grain at harvest time because it is a season of good roads, at a less price than he would by storing the grain until the markets are better and less glutted, and when he would have more leisure time for hauling it to the market. The good road permits him to haul double the load that he would over a poor one, and he is thus enabled to move his crop in one-half the time. This, figuratively speaking, picks up the producer and sets him down one-half the distance closer to his market. You all know that distance in this age is measured in time and not in miles. The country road is the people’s own road, their own means of transportation, and it is the only transportation system that is owned, operated and controlled by the people themselves.

It is at the same time the most neglected system of transportation in the United States, and the most expensive over which to transport our produce, owing largely to this neglect. Many a pound of freight originating upon a farm, or destined to a farm, moves over a common country road at a cost three times as high as it would be if the road were first class. Often the haul between the farm and the railroad costs more than the remainder of the journey, and the railroad or any other means of rail transportation cannot be expected to reach every man’s farm, and it becomes necessary to provide means for transporting the commodities to the railroad. The wagon road then becomes a system of transportation, just as a line of boats or a railroad is a system of transportation. Water and rail are the means for long distance transportation; highways for local exchange. The highway serves the purpose for local transportation, and is a connecting link for local traffic with the railroads. The condition of this connecting link or highway may make transportation reasonable or costly. Too frequently, as I said before, the haul over the highway is the most expensive part of farm transportation. It requires a tractive force of 125 pounds per ton upon an ordinary country earth road, and only sixty pounds upon a rock road. The cost of transportation by water and rail seldom exceeds one cent per ton mile. That upon a good road is from seven to ten cents per ton mile. Upon our ordinary country highway, half kept roads, it is from twenty cents up to anything, depending upon the condition of the road. The railroad will haul a bushel of your grain thirty miles as cheaply as the farmer can bring it one mile. If the farmer is situated a few miles out of town on poor roads, the railroads will haul the produce and the commodities to cities like Kansas City rather, and the return merchandise from that city as cheaply as the farmer can haul it to and from the railroad and to the farm. Now this high cost of transportation can be decreased by increasing the size of the load. This can be done by improving the road surface. The high cost of transportation is not altogether due to the railroad. Good wagon roads are just as important a factor in the reduction of this high cost of transportation as are low rates by water or rail.

By social conditions, in my opening remarks, I meant the pleasures of community life, the exchange of visits and social courtesies, neighborhood gatherings, social association, fellowship, and the home, the school and the church. The roads should be built for some of the pleasures and comforts of life as well as for their pecuniary interest. It has been said that the pecuniary benefits of good roads sink into insignificance when compared with their social, moral and educational advantages. Man after all is only a social being, and is influenced by his surroundings. The maintenance of a seat of learning, or of a good church in and by a neighborhood has its influence upon the people of that community. The maintenance of anything tending towards better living has a good influence. The maintenance of a good road or improved road has a good influence by permitting easier intercourse between the people of country communities, between rural and urban population, and unifies social and commercial interests. The rural mail delivery is one of the greatest means of education today. Good roads facilitate rural mail delivery, and therefore tend to improve educational conditions. The improvement of our roads would also facilitate the central high school idea for country districts, for while our roads are not an impassable barrier in all of the districts, in some they are, and in many they are obstacles. If our country churches are to be supplied with good pastors and our country schools with able teachers, better libraries and other facilities, it must be by the support of greater wealth therefor, by the consolidation of the districts being possible only where good roads exist, where people can be easily and safely transported. The schools and the churches in many sections of our best land have a decayed, run-down, neglected appearance. Churches which are practically abandoned certain seasons of the year because of the condition of the roads, country schools not accessible in seasons of bad roads, little children plodding through mud and water and compelled to sit all day in the school room with wet feet and damp clothing—this may not apparently affect the children today, but for all the parents know it may be instrumental in undermining otherwise strong constitutions and laying up many aches and pains for future life. As someone has appropriately asked, “Why should a Christian people have heathen roads and a civilized people barbarous ones?” One thought which possibly you have heard brought out time and time again at these congresses for several years is that the trend of population has been from the farms to the cities and the towns. A large part of the best blood and sinew of the country has been trying to get away from the farm. If this continues, it is going to sap the farm industry of its best blood and its best energy. There is something wrong today with our country conditions, when so many of our best farmers leave the farms and seek homes elsewhere in order to give their families better social and educational advantages and when so many of the brightest youths from the country become discouraged with country life and endeavor to escape from the farm. A fair percentage of the men and women, boys and girls must be kept on the farm. This can be done by making farm life worth living. Good roads will help to do it. Will the best, most progressive farm ever be developed without these young men and women, boys and girls to grow into intelligent farmers? Will the increased yield per acre by means of better farming become fully effectual without bettering the means for marketing that yield? Can you incite better farming and maintain a higher order of intelligence and social conditions in country life without easy means of communication? Can country life be supplied with the necessary association and good fellowship, without good roads?

In conclusion, Mr. Chairman, let me state that I do not contend that good roads is the whole solution for happiness and prosperity of country life, but I do contend that a very necessary and important part of it is the relation which our public roads bear to our social and moral and our educational life. The home and the school are the nucleus around which our social life exists, and this is especially true of country life.

Neglect your public road conditions and you will not only neglect your transportation facilities, but you will neglect your social and your educational environments.

The articles that we eat and wear must come from the farm, and the growth and the development of agriculture and the life connected therewith, no matter how we may view this question of the development of the farm, the betterment of life and the development of the country community life, its transportation, exchange of commodities, the basis upon which it rests will be found a question of good roads. No proposition for the betterment of country conditions, no proposition for the good country life is an assured success until good roads are assured. It all rests upon the question of transportation, and communication, and the basis of transportation is the public wagon road. (Applause)

Professor CONDRA—I beg leave to submit the report of the committee on credentials.

The Chair announces the appointment of the following committee on credentials:

Prof. Geo. E. Condra, of Nebraska.
Dr. H. E. Barnard, of Indiana.
Mr. Ralph H. Faxon, of Kansas.
Mr. E. T. Allen, of Oregon.
Mr. W. E. Barns, of Missouri.

President WALLACE—If you want to get the proceedings of the Congress, which will be worth their weight in gold, give your name and a dollar to the secretary.

Professor CONDRA—I move that the report be received and the committee discharged.

President WALLACE—We will now hear the Hon. J. B. White, of Kansas City, who will tell us what he knows about lumber in Europe.

MR. WHITE—In Europe the experience of more than a hundred years in forest management has resulted in a more or less scientific and practical policy, although it cannot be said that a well defined, universal policy has yet obtained. This is largely due to conditions of ownership, with consequent variance in ideas as applying to various local conditions, as well as the difference in necessities and financial ability of individual owners to carry out in successful practice the best approved methods. Hence there is a growing tendency towards greater governmental control, whereunder the most economic working system, suited to different conditions of soil, climate and kind of forestry, would be intelligently considered and properly installed.

In the German Empire 47 per cent of the entire forest area is privately owned, and 32 per cent by the state, 19 per cent by institutions, communities and associations, and 21 per cent by the crown. Thirty-three per cent is hardwood and 67 per cent conifers. They are now cutting about their annual growth, taking an average of hardwood and conifers.

Austria-Hungary exports more lumber than any other nation in the world. It covers 46,500,000 acres, or a little over 30 per cent of the total land area. In Austria the forests are composed principally of conifers, spruce, pine and fir, only 15 per cent of the acreage being of hardwood. Sixty-one per cent is in the hands of private owners, and one-half of this, or 30 per cent of the entire forest, in the hands of small owners. The state owns less than 11 per cent of the forests; the balance belongs to churches and communities. The average yearly growth of all the Austrian forests is said to be about forty-two cubic feet per acre, or an annual growth of about 1,100,000,000 cubic feet. They are now cutting annually 250,000,000 cubic feet more than this, or 20 per cent faster than it is growing. This excess of cut, over the growth, will in large measure regulate itself, as the increasing demand makes the industry more profitable and encourages the planting of greater forest area.

In Hungary about 75 per cent of the total forest area is oak, beech, maple and other hardwood species, and only 25 per cent of conifers. The annual yield of conifers is about fifty-eight cubic feet per acre, and that of oak about forty-one cubic feet per acre. Thus the conifers yield the largest percentage of commercial lumber and are most valuable as a crop because of more rapid growth, and because of their larger demand for building purposes. Sixty per cent of the total acreage in Hungary is private forests, about 18 per cent is state forest, and 22 per cent communal and church forests. The annual cut in Hungary is estimated to be less than the annual growth.

England has not until very recently deemed forestry profitable, preferring to buy her supply. Of her 3,000,000 acres of woodlands, mostly devoted to parks and the chase, the state only owns 2 per cent. France has 24,000,000 acres of forest, or 18 per cent of its land area, of which only 12 per cent of its wooded area belongs to the state.

Switzerland has about 25 per cent of her total area under forest. The Zurich forest, known as the Sihlwald, containing 2,760 acres, is 85 per cent hardwood, and is worked on a rotation period of 100 to 110 years. The forest director claims an annual growth for the Zurich forest of sixty-five cubic feet per acre, while the general average of all the forests is only fifty cubic feet per acre. This means the entire growth—wood, poles, limbs and all. Only 40 per cent of the total cut is saw timber for building purposes. The net income from this forest for the past twenty-five years has been from $4.00 to $7.00 per acre, not including interest charges. It was $4.40 in 1890 and $7.69 in 1907. This forest has its own mills and saves all profits.

In Switzerland one pays taxes when the crop is harvested. In Germany and Austria the method of taxation varies in different states, but laws are always favorable to encourage private forestry. In some cases one pays no taxes for twenty years. Then one begins to thin out the poles for use of telegraph and telephone companies, etc., and get a revenue, and leaving a stand in destructive forestry which, when sixty years old, will yield in many cases 20,000 feet of lumber, board measure, per acre. In fact, the average is 4,190 cubic feet per acre of timber and fuel, which, according to values prevailing in England and Germany, amounts to about $200.00 per acre.

CUTTING METHODS IN EUROPE.

It was pointed out to us that mixed growth or conservative forestry is expensive. The most economical and profitable plan is the destructive method. That is, a forest is planted and grown like any other crop, and whenever interest, carrying charges and total cost meet the market value at age and time of greatest profit, then trees are cut and they are all about of a size. The entire acreage is cut clean and the cost of logging is cheap. Trees are again planted and another crop grown. Under the old plan of conservation of mixed growth and mixed sizes, or the shelter-wood system, not as much can be grown per acre, and the cost of logging out the large trees is vastly more expensive, and damage is done to other timber in falling them, while in the destructive method all is taken and a large crop harvested. It is nice to view these stands of timber in strips, side by side, ranging in years from baby trees to stands of ten, twenty, thirty, forty, fifty and up to sixty and eighty years of age, when they are ready to be harvested.

In growing forests in Europe, lands that are better adapted for agriculture are not used. The degree of utility is considered. And in determining the value of a forest property, one has to figure compound interest, as the crop may not be harvested and the capital returned for sixty or eighty years. Because of absolute protection from forest fires, capital is regarded as safe, and investors in forests are satisfied with a low rate. As an investment, forests require less labor than other crops, if one practices the most economical method of what is called destructive forestry. In times of temporary high prices, one can take advantage of the situation and harvest more than the annual growth, and can then wait and let the trees grow when prices are low, and this is the usual practice. The rate of interest generally charged to the forests, and compounded, is sometimes determined by rate yielded by government securities, which is usually about 2½ per cent.

THE ROTATION METHOD.

It has been ascertained by careful observations that Scotch pine (which grows rapidly, like our short leaf yellow pine) yields, on medium soil in every sixty-year rotation in best quality of location, 5,255 cubic feet per acre, of which an average of 565 cubic feet have been removed in thinning as the forest has been growing, figuring the thinning out being done on an average of about every ten years, leaving at the end of sixty years an average of 4,690 cubic feet per acre. If allowed to remain, this has increased in ten years to 5,250 cubic feet per acre, besides 536 cubic feet that have been profitably taken out in thinning in the last ten years, leaving at seventy years 5,250 cubic feet. Now in the next ten years there will profitably be taken an average of 493 cubic feet in thinning as against the 536 cubic feet taken out the ten years before, leaving at the end of eighty years standing on each acre an average amount of 5,720 cubic feet per acre.

These interesting results follow: With average values of lumber products as in the year 1910, an eighty-year rotation period with Scotch pine would pay 2½ per cent compound interest on soil value of $97.00 per acre. With a ninety-year rotation period it would pay this interest rate on land worth only $94.00 per acre. On a seventy-year rotation period it would pay such interest rate on land worth $94.60 per acre, and on sixty-year rotation it would pay such rate of interest on land worth $85.00 per acre. This shows that the maximum profits at this low rate of interest come from cutting the forests at eighty years’ growth. The greater the variation from this eighty-year period the less favorable the financial results. The maximum age for hardwood trees for best profit is said to be rotation periods of about 100 years with a low rate of interest suited to the safety of the investment. These statistics were prepared by Sir William Schlich, professor of forestry at the University of Oxford, and published by him this year, and are undoubtedly reliable.

But it is safer to figure at a compound interest rate of 4 per cent. A high rate of interest demands a low value of soil, and _vice versa_. And as Sir William points out, the value is, however, not in inverse proportion to the rate of interest, as the value of the soil rises more rapidly than the interest falls. Under a low rate of interest, the expectation value of soil culminates later than under a high rate of interest. So that under a 2½ per cent interest rate, the timber could stand about eighty years; under a 3 per cent rate, about seventy years, and under a 4 per cent rate it should be cut every sixty years. Or, to further illustrate, if a party is satisfied with 2½ per cent compound interest on his investment in European forestry, he could pay $97.00 per acre for his land, and must cut it at eighty years of age.

If he desires 3 per cent interest he must not pay over $55.50 per acre, and must cut his timber when seventy years of age. And if he demands 4 per cent interest rate he cannot pay quite $15.00 per acre for his soil, and must cut his trees when sixty years old.

PERIODS OF PINE TREE GROWTH.

Now this is the best than can be done in Europe (which, according to statistics, is 37 per cent above the average yield), with the best results as to soil and favorable location, with low-priced labor, with most favorable consideration by the government as to taxation, and with the most approved economical methods, where the limbs and twigs are sold for fuel, and forest products are fully 50 per cent higher than they are in the United States. So it is fairly well established that from sixty to eighty years is the most profitable rotation period for growing Scotch pine forests in Europe. The higher the rate of interest demanded, the shorter the rotation.

With advancing age the value of the stumpage increases so that the value of the soil for forestry becomes nearly positive. But in time a maximum is reached, and it falls again. This maximum, with 2½ per cent money, is eighty years growth, and with 4 per cent money only sixty years growth. The value of the soil under a very brief rotation would be negative, so that the yield might not even cover the cost of harvesting. And under a very long rotation, the value of the soil would again become negative, because it could not stand the compound interest and other expenses for an excessively long term of years.

It follows that the expenses during the early part of the rotation affects the expectation value disastrously, for compound interest is running against this expense for a long term of years, lessened only by sale of the thinnings in about ten-year periods. Of course a sudden and heavy increase in the value of stumpage, at any given period after trees are large enough to cut, may create a second maximum, differing from the normal average because of an unexpectedly great demand, causing an abnormally and temporarily high price. But the cost one has to pay for the soil is really the true value, chiefly determined by its value for ordinary purposes of agriculture; and as trees will thrive on land not so well suited for farm crops, such lands are nearly always selected for forestry. But if the soil can be more profitably used for agriculture in the examples just mentioned, then the increased value will enter into the account to change the length period of rotation of forest crop. And where the acreage is not stocked to its full capacity (on account of poor soil, or for any other reason), the rotation, for which the highest probable value of the growing stock is obtained, can, as Sir William states, only be determined by experimental calculations based on these special cases.

THE YIELD OF FORESTS.

But this method of calculation is absolutely logical, and shows under the most normal conditions what we can expect, and it has been proved by experience. The abnormal conditions that may occasionally present themselves are governed by these same financial methods of reasoning, differing only in degree of application, by reason of change of basic conditions in each special case. A normal yield is what the forest can permanently be depended upon to produce. It is a permanent interest investment of greater or lesser rate, where the principal will never be returned, while the land is kept in forest crops. These figures are based upon the best yields in the clear cutting of destructive forest system, which, as has been stated, is 37 per cent above the average. But the principle of calculation applies equally as well in the shelter-wood system of different age trees; but the average volume per tree in each age class in the latter system has to be taken into consideration. On the whole, it has been admitted by the best foresters that the system of clear cutting, then pulling the stumps, fallowing or planting other crops for a couple of years, and replanting again, gives the best financial results.

So much for European forestry. Now how will this system apply to us, under our conditions of taxation, high-priced labor, and low-priced forest products, and considering the fact that there is little or no demand for the thinnings until large enough for telegraph poles, and no market for the tops and necessary waste in manufacturing? We are lacking in statistics, because we have not sufficient experience along the lines of growing new forests, at either private or public expense. But we are soon to be interested in what it will cost to reforest and grow commercial timber in the United States. And surely our present supply of old growth timber from 150 to 300 years old is worth more than the cost of growing timber sixty to eighty years old. The United States owns in national forests 192,931,197 acres. The state forest reserves of 3,253,185 acres, the national parks of 4,562,265 acres, and the Indian forests of approximately 10,000,000 acres, make the total of public forests over 210,000,000 acres. Chief Forester Graves estimates the area of private forests as over three times that of the public forests, and containing five times the timber that is on the public lands.

The countries whose wood exports exceed their imports are: Austria-Hungary, Canada, Sweden, Russia, Finland, the United States of America, Norway, Bosnia-Herzgovina, Roumania, and Japan. The countries whose wood imports exceed their exports are: The United Kingdom, Germany, France, Belgium, Spain, Italy, Holland, Denmark, Switzerland, Australian colonies, China, Greece, West Indies, Bulgaria, Servia, and British possessions in Africa.

CONDITIONS TO BE CONSIDERED.

The climate and other conditions in some countries render them not so well adapted to growing trees as for growing other crops; and they find it more profitable to exchange their products for the wood products of other countries that either have a present surplus, or whose climate, soil and land values enable them to grow trees at lower cost. This is true with the different states in our own country. Illinois and Iowa, for instance, will never grow what timber they require. They can more profitably grow corn, and exchange for lumber products with those states which have low-priced and mountainous land with plenty of moisture, so that trees will grow twice as fast as in those prairie states where land is very expensive and climate not so well adapted. Trees will be grown here, as in Europe, where they can be grown cheapest, and they will be harvested at an age which will bring the greatest net profit. The market price of the product will be finally and surely governed by the cost of growth and manufacture, insurance, and risk, and the price of money used in the business.

If the Government of the United States itself can get money at 2½ per cent, as it can, while private owners have to pay 5 per cent or 6 per cent, then it follows that the states and the Government can, for this very important reason alone, grow commercial trees cheaper than private individuals, and can remove the maximum rotation period to a more mature age, giving better lumber from older trees at the same cost at which private owners would have to furnish poorer lumber, because coming from younger trees. But the people pay the cost, whatever it may be, whether the Government or private interests grow the trees. The consumer is interested that they be grown as cheaply as possible. It is likely true here, as in Europe, that forestry will be a more general success with private owners, if they are in some important methods placed under the practical rules of government forestry. It will be found here, as over there, that private forests will not prove so generally productive, or, as a rule, so economically administered, as the government or state forests under the management of expert foresters. And parenthetically, is it not equally true that many farms and farmers would be better off if directed by government or state experts?

In Europe they have no forest losses from fire for the reason that fires are prevented from starting. The railroad locomotive has been the cause of most forest fires in the West, and I observe that these Western roads are now equipping hundreds of their locomotives with spark arresters, so as to prevent the starting of these fires in the future. United States Chief Forester Graves very truly says: “Private owners do not practice forestry for one or more of three reasons: First, the risk of fire; second, burdensome taxation; third, low price of products.” Forester E. T. Allen has pointedly said: “Forest protection is the cheapest form of prosperity insurance a timbered state can buy.” It is not the present generation so much as it is the future generations that will be affected disastrously by our neglect. The principles of agriculture, horticulture, forestry, and the science of conservation of soil and trees, and of life itself, should be taught in our public schools.

THE EXAMPLE OF DENMARK.

In Denmark, a country which fifty years ago was one of the poorest in Europe, they have erected a statue to Captain Dalgas, who reforested Denmark and changed a desert heath into a rich farming country. So now Denmark is said to be, according to its size, one of the most prosperous nations in the world. It was the patriotism and inspiration of Captain Dalgas that enthused the citizens. He lectured to the people, and talked to the children in the schools, and made converts everywhere. He gave all he had, and begged and pleaded against doubt and opposition of the most discouraging character, until success crowned his efforts. He will be loved and his memory cherished by all the people of Denmark through all future years as one who saved the nation. In many vital respects, for energy and self-sacrifice, his work reminds us of our Gifford Pinchot.

We are, as a nation, too young to understand the dangers before us; for we are just emerging from a condition of burning log heaps to make farms, from a condition of too much timber for a small population to a condition of too little timber for a large population. Yet we have enough if we will now conserve and reforest. Our ancestors did the best they could under conditions and the light that they had—what now seems waste, had then no market and was unavoidable. As a nation we are proud of our past and we should also be more proud of what we expect to become. As was said not long ago by one of our greatest statesmen, “Conservation of our resources does not mean that we shall become great in the present at the expense of the future, but that we shall show ourselves truly great by striving to make the Nation’s future as great as the present.” (Applause)

President WALLACE—The committee on nominations is ready to make its report.