DURING the past two years the munitions industry has been under investigation in both Great Britain and the United States. The report on the results of the British inquiry was published as recently as October 31, 1936; the last section of the more voluminous American report had been published on June 19. The investigations were due in both cases to an aroused public opinion resulting from revelations made in course of the disarmament discussions at Geneva, as well as from books and articles published in this country describing some of the grosser aspects of the traffic in arms and armament. Among these was an article entitled "Arms and the Man," appearing in the magazine Fortune and depicting the financial interlockings, political ramifications, propaganda activities, and vast earning power of the armament makers of Europe. This article, published in March, 1934, was shortly afterward reprinted in the Congressional Record. On April 12 following, the United States Senate adopted a resolution directing an investigation by a special committee of seven Senators into the activities of munitions makers and dealers in the United States.

About ten months later, after the Senate investigation had begun to bring out evidence in which British concerns were frequently mentioned, the British Government decided to follow the American example, and on February 19, 1935, it set up a Royal Commission on the Private Manufacturing of and Trade in Arms. This commission also consisted of seven members but, unlike the American group, they did not hold public office. The Chairman, Sir John Eldon Bankes, was a retired judge, eighty-one years of age. Two members (one a coöperator and one a retired magazine editor) were well over seventy. The other members were a professor of comparative law, a journalist, a business man, and a woman who was formerly an official of the League. The personnel did not offer much promise of an aggressive inquiry; the members themselves had no first-hand knowledge of the problems with which they were to deal, and they were not authorized, as the Senate committee was, to employ experts to direct the investigation and examine the witnesses.

The terms of reference of the American and British investigators were similar in two respects. Both bodies were instructed to consider and report upon the desirability of converting the munitions industry into a government monopoly and also to inquire into the adequacy of existing legislation for the control of the export trade in munitions. The American committee, however, was further instructed "to investigate the activities of individuals, firms, associations, and of corporations and all other agencies in the United States engaged in the manufacture, sale, distribution, import, or export of arms, munitions, or other implements of war." Under this mandate it was to inquire specifically into the nature of the industrial and commercial organizations engaged in the munitions business, into their methods of promoting sales, and into the details of their export and import trade in war materials.

The British commission's instructions were less sweeping. It was not required to dig into past and present records of the munitions concerns, but only "to consider and report whether there are any steps which can usefully be taken to remove or minimize the kinds of objections to which private manufacture is stated in Article 8 (5) of the Covenant of the League of Nations to be open." The article of the Covenant here referred to merely says that "the manufacture by private enterprise of munitions and implements of war is open to grave objections" and stipulates that the League Council shall "advise how the evil effects attendant upon such manufacture can be prevented," while giving due regard to the needs of the League members who cannot manufacture the implements of war needed for their own safety.

While the British commission was generally expected to soft-pedal its operations, or even finally to apply a coat of whitewash to the munitions industry, the more aggressive Senate committee, composed of experienced politicians and armed with greater power, was expected to go in the opposite direction, perhaps to indulge in "fishing expeditions." These expectations were realized, but only in part; for the work of each body had its redeeming features.

The Senate committee made full use of its power to subpoena witnesses and records. It employed a large staff of investigators to comb through the correspondence and documents in the files of armament companies, international bankers and the Departments of State, War, Navy and Commerce. After about five months of this "spade work," the committee began to examine witnesses at public hearings. The testimony filled many thousands of pages, and the committee's findings and recommendations alone filled more than 1,400 closely printed pages. Wide publicity was obtained for the proceedings by the Chairman, Senator Nye of North Dakota, who contrived almost daily to develop some sensational bit of testimony which would assure a news story on the front pages of the metropolitan newspapers. Senator Nye also made full use of the radio and the lecture platform. The total cost of the investigation was approximately $200,000. While this expenditure was criticized as extravagant, it was not too much to pay for the formulation of any practicable plan for lessening the likelihood of war.

Senator Nye was convinced that the way to prevent international conflict was to take the profits out of war, and he directed the course of investigation chiefly with the aim of supplying evidence in support of this thesis. There are indications throughout the proceedings that the case was prejudged in so far as the Chairman and a majority of the committee were concerned. The inquiry touched on every phase of the traffic in war materials since 1914. Senator Nye presented evidence tending to show that private munitions and armament companies had obtained excessive profits during and after the World War; that the efforts of the government to prevent profiteering had been ineffective; and that they could not be made effective without at least three amendments to the Constitution of the United States.

Under the lure of profits, American companies were alleged to have brought pressure upon both their own and foreign governments. Shipbuilders and purveyors of military supplies maintained elaborate organizations in the capital to lobby in behalf of larger appropriations for the army and navy. In obtaining contracts from other governments, American concerns were compelled to compete on a very low plane with foreign companies. Officials of the lesser military Powers, through whom most of such sales were made, were not always sea-green and incorruptible, and there was at times much greasing of palms to obtain a contract.

The committee found that, notwithstanding the abuses which attended this business, foreign sales were encouraged as a matter of policy by the War and Navy Departments. It was assumed that the more foreign business the munitions companies could obtain the greater would be their productive capacity and efficiency and the greater would be the country's preparedness for national defense. Departmental bureaus often supplied technical information and advice to private companies and aided them in promoting their sales. Several American companies were reported to have sold airplane engines of possible military use to Germany with the permission of the War and Navy Departments, in spite of the fact that the treaty of peace between Germany and the United States embodied the Versailles prohibitions of imports of war materials of any kind by the Reich. Evidence was presented also to show that American companies had violated both the Chinese arms embargo of 1919 and the Chaco arms embargo of 1934.

The committee attached much importance to the existence of a world armaments ring. The principal American munitions concerns were found to have made extensive agreements with foreign producers for the division of markets, the fixing of prices, and the exchange of information concerning new inventions and processes. In the committee's opinion, the violation of the disarmament clauses of the Treaty of Versailles was due in no small degree to the close relations existing between the German munitions companies and those of other countries. All such abuses were committed in quest of profits, and they were denounced as carrying "the seeds of disturbance to the peace and stability of the nations in which they took place."

These abuses, in the opinion of Senator Nye and his colleagues, also attested the inadequacy of existing legislation. To prevent their repetition, the committee recommended: (1) that export licenses for war materials should not be issued unless the government of the importing country gave permission for their importation; (2) that the penalties for false labeling, false manifests and false destination should be increased; (3) that the Munitions Control Board, created in 1935, should be empowered to examine all correspondence as well as records concerning orders whenever embargoes were in effect; (4) that licenses for exports of articles adaptable to either civilian or military use should be accompanied by a guarantee from the government of the importing country that they would not be employed for military purposes; (5) that the sale of arms should be confined to recognized governments; and (6) that the government should take steps for more effective international control of the munitions traffic and in particular should urge early consideration of its draft agreement submitted to Geneva in 1934.

Collectively, these various proposals would have prevented private sales of arms and munitions abroad, even in peace time, except with the approval of the government of the country of destination. Sales in time of war had already been prohibited by the neutrality legislation of 1935 and 1936.

Something besides this rigid control of the export of munitions was necessary if profits were to be taken out of war. The committee therefore made an examination of a plan which the War Department had drafted in accordance with the findings of the War Policies Commission, a body created by Congress in 1930 to study "methods of equalizing the burdens and removing the profits of war." The most important elements of the War Department's plan were: (1) the bestowal upon the President of general power to fix prices and wages in time of war and to regulate all manufacture and distribution; and (2) provision for a universal draft of male citizens over eighteen years of age, who might be inducted either into military service or into industry. The plan was designed to eliminate profiteering by all groups, including labor, and to obtain maximum production at reasonable cost. It was based on the assumption that war should be conducted on a basis of equal treatment for all, and with a view to individual justice as well as military effectiveness.

Although the idea of a profitless war was in accord with the views of the committee, its verdict on these proposals was unfavorable. Since it would be easier in actual practice to fix wages than to eliminate profits, the committee believed that under this arrangement labor would make a greater sacrifice than capital. Furthermore, the drafting of labor to work in industrial plants under something like military discipline would not be conducive to its efficiency.

In preference to this plan, a majority of the committee recommended the nationalization of facilities for the construction of warships, gun forgings, projectiles, armor plate, rifles, pistols and machine guns.[i] Practically the only implements of war not included in the nationalization scheme were airplanes. The airplane industry was to be exempt because the construction of engines and planes was still in the developmental stage "and in that way different from the somewhat more standard articles for which it is proposed to have the government acquire facilities." These reasons seemed to many to be equally applicable to some of the other industries which the committee proposed to nationalize.

Government-owned plants, as contemplated by the committee majority, would be equipped to supply only the peace-time requirements of the army and the navy. It was realized that factories large enough to meet war-time needs would stand idle most of the time and that the huge investment required for them would be wasteful. In admitting that private plants would be necessary for the bulk of a country's war requirements, the committee majority obviously weakened its stand for the complete elimination of war profits. It proposed, however, that the government should hold a whip-hand by acquiring all necessary tools and equipment for munitions-making during peace time and installing these, presumably on its own terms, in private plants in the event of war.

The minority members of the committee opposed nationalization for three reasons. They claimed that it would be followed by local political pressure for keeping the plants operating at capacity, and that this would increase military expenditures and create opposition to disarmament. They pointed out that state ownership would destroy the "corollary facilities," upon which the government had always relied, and that this would weaken national defense unless the government built plants adequate for its war-time needs. They argued, finally, that unless the government plants were operated at full capacity, the cost of production would exceed that of private establishments. In lieu of public ownership, therefore, they favored rigid control.

This, in brief, is the substance of the relevant portions of the Senate committee's findings and recommendations. But the majority in favor of nationalization wished to strengthen their case by proving that private manufacturers of arms and ammunition played a predominant part in forcing the United States into the World War. In order to develop this thesis, Senator Nye embodied in the committee's report a memorandum on the foreign policy of the United States from 1914 to 1917, prepared by one of the committee's staff, which is in effect an indictment of his own country and its whole people and a justification of the ruthless submarine warfare of Germany. The document accuses the United States of "complete lack of neutrality," and the Allies of "selfish and materialistic aspirations." The United States is adjudged guilty of supplying "materials of murder" to the Allies "in unlimited quantities," while Germany's unrestricted submarine warfare is justified as "her only chance of success," and for its ruthlessness "America's complete lack of neutrality was responsible."

These few extracts will suffice to indicate why the Chairman was considered to be biassed, and why the committee suffered severely in public estimation during the last stage of its investigation. Resentment reached its climax when Senator Nye undertook to show, quite irrelevantly to the purpose for which the investigation had been instituted, that President Wilson and Secretary Lansing had "falsified" when they denied knowledge of certain secret treaties negotiated by the Allies before the United States entered the war. Members of the Senate loyal to the Wilson Administration denounced the Chairman on the floor for going out of his way to defame statesmen long dead and unable to defend themselves. Senator Connally of Texas declared that the committee's activities had reached "their, so far, lowest depth of performance."

Having launched his investigation with the blare of trumpets and predictions of startling disclosures, Senator Nye could hardly avoid something like an anticlimax at its close. His efforts to startle the country may be granted to have been inspired by a desire to safeguard the peace of the nation; but the Senator overplayed his hand, and in the end weakened whatever beneficial results might have been attained had the committee's findings been restricted to matters connected directly with the subject assigned to it for study and report.

In the meantime the British commission was proceeding with its investigation in a more modest way. It had no authority to summon witnesses or compel the production of papers, and it had merely issued a general invitation through the press to all persons and representative bodies who might wish to be heard. It departed from this procedure to the extent of issuing special invitations to Mr. Lloyd George, who had been Minister of Munitions during the World War, to Sir Eric Geddes, who was Deputy Director of Munitions Supplies during the war and is now Chairman of Imperial Airways and of the Dunlop Rubber Company, and to Mr. P. J. Noel Baker, who had served with the Disarmament Conference and other important bodies in Geneva. Invitations were also sent to the National Peace Council, the League of Nations Union, and the Union of Democratic Control, because of their special interest in the subject of inquiry. Twenty-seven witnesses appeared voluntarily on behalf of armament and airplane companies, and almost as many on behalf of various peace societies and liberal political organizations.

The witnesses were required to submit in advance written statements of the evidence they intended to offer. Though the preparation of these statements probably slowed up the progress of the investigation, the commission was of the opinion that it added immensely to its value. The commission held twenty-two public sessions. Its hearings, including both the written statements and the oral testimony, comprised only 750 folio pages, and its final report is a pamphlet of 101 pages. The total cost of the inquiry was approximately $36,700. The American investigation produced about ten times as much printed matter at about six times the cost, but it went behind the testimony of witnesses and delved into the records, though more often, it seems, with a desire to prove a thesis than to weigh all obtainable facts.

The British hearings revealed the existence of a well-organized campaign against the private traffic in munitions. The commission received memoranda, petitions and resolutions from religious, civic and peace organizations in all parts of the country urging the suppression of the traffic. A "representation" signed by the Archbishops of Canterbury, York, Dublin and Wales, by the Moderator of the Church of Scotland, and by the heads of various evangelical free churches declared that "it is repugnant to Christian morality that the profits of an organization should depend on the degree of suspicion and hostility which exists between nations" and urged the elimination of private profits either by "appropriate measures of restriction and control, or, if such measures proved to be inadequate, by the transfer of the industry to some public authority." Few of the petitions or resolutions were so conservative as this, and they seldom suggested an alternative to public ownership. A number of them cited the disclosures of the American investigation as one of the reasons for action.

Since the commission was dependent upon the initiative of witnesses for the information obtained, it produced no effects which could be described as sensational. Such an effect, indeed, was not its purpose. Its printed hearings consisted mainly of arguments for and against the continuance of the private manufacture and trade in arms and munitions of war. It was not authorized, under its terms of reference, to undertake a detailed investigation of the evils ascribed to the munitions traffic, and consequently only three instances of alleged abuse were brought to its attention. On the whole, the argument for nationalization as presented to the commission was, in its own words, "purely speculative in character and unsupported by evidence." But under the commission's mode of procedure it was impossible for the advocates of nationalization to present anything more than a speculative case. Possible evils could be cited, but no opportunity was provided to prove the existence of actual evils.

The commission's conclusions and recommendations were exactly what was to be expected under such circumstances. It found that the limitation of arms by international agreement would be the most effective method of eliminating or abating any evils incident to the private traffic in arms, but that in the present state of the world such an agreement was "likely to be impracticable." Furthermore, with the world in so disturbed a condition, public ownership in Great Britain would be undesirable even if it were practicable. In lieu of nationalization the commission recommended the restriction of the profits of armament firms in peace time to a reasonable scale.

As a further step toward removing any existing evils, the commission favored the regulation of the industry through something like a Minister of Munitions directly responsible to Parliament. It recommended more rigid control over arms exports, very much as proposed by the American committee, with shipments restricted to foreign governments and under licenses granted only to specifically authorized exporting firms. The commission's conclusion that the export trade in armaments did not provide sufficient expansion of productive capacity to justify its encouragement by the government was of special interest in view of the policies reported to have been pursued by the War and Navy Departments in Washington.

A final evaluation of the work of the American committee and of the British commission is not yet possible. They have made their reports, and the next steps lie with Congress and Parliament. The American committee added many details relating to the history of the munitions traffic as well as regarding the financing of the Allies during the World War; it did not bring out any general facts which were not known to informed citizens during the war period. The British commission, as has already been shown, was not directly concerned with the assembling of new facts.

While both investigating bodies favored the elimination of war profits, they made no reference to the fact that the totalitarian states, where war profits are apparently in the process of elimination, are precisely the states which today offer the greatest threat to peace. None of the advocates of government ownership of munitions plants saw fit to call attention to the enormous military equipment of the Soviet Union, where the profit motive does not exist. If the nationalization of armaments is a preventive of war, Soviet Russia should be the shining example to which all peace advocates point with pride. If complete national control is the solution, then Germany and Italy should be the model for all peace-loving nations to follow. Neither investigating body appears to have given consideration to the possible effects on smaller nations of complete government ownership in the large industrial countries. If the weaker nations cannot obtain arms from private manufacturers in these countries, they must either build munitions plants of their own or risk falling a prey to some covetous aggressor.

In short, the problem confronting the American and British people was not revealed to be the simple one of choosing between war profits and peace. Their investigating bodies could point out ways to remove or minimize some of the admitted evils in the traffic in implements of war; but neither group found a way to take the profits out of war. And even if they had succeeded in doing so, and if their recommendations had been adopted, the old hates, rivalries and ambitions which cause nations to fight would still have remained to torment the world.

[i] The members advocating nationalization were Senators Nye, Bone, Clark and Pope, all representing states west of the Mississippi. The dissenting majority were Senators Barbour, George and Vandenberg, representing states east of the Mississippi.

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  • WILLIAM O. SCROGGS, Director of Information, Council on Foreign Relations; joint author of "The United States in World Affairs"
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