The Nonpartisan Leader Newspaper, July 22, 1918, Page 11

ter of January 17, 1917, by the Eastern Leather com- pany, an Armour selling subsidiary, to F. W. Croll of Armour & Co.: “‘We are enclosing our check on the National City: bank, New York City, payable to J. Ogden Armour, for $915,787, same being a dividend of 53 per cent on the 17,279 shares of common stock standing in his name. In addition to this and, in ac- cordance with our conver- sation when in Chicago, we have set aside as a surplus $250,000, which represents 10 per cent on the common stock.’ ” Besides his earnings as a packer, J. Ogden Armour, as shown by the above - letter; received a check of nearly one million dollars as one year’s profit of one leather' company in which he is a stockholder. While farmers are having a hard time to make costs or a small margin of profit, and while the cost of living for the ordinary citizen has soared to such an extent that the new high' level of wages fails to give him an even break, Mr. Armour pockets a 53 per cent dividend on over 17,000 shares of stock he owns in the East- ern Leather company, which is in addition to the profits he makes as a packer. But- there is also a leather company known as the Armour Leather company. The. Fed- eral Trade commission makes public a letter written May 15, 1817, by J. D. Murphy to H. W. Boyd, president of the Ar- mour Leather company. This report shows the net earnings of this company to have been $1,604,000 for the three months ending April 28, 1917. The & & @ very slgmficant part of this letter is that total earnings for three months are reported at $1,964,000. However, from that Mr. Murphy SUBTRACTS THE INCOME AND EX- CESS PROFITS TAXES which this company had to pay for those three months. These taxes amoynt to a little more than $460,000, leaving the NET EARNINGS FOR THREE MONTHS OVER A MILLION AND A HALF. N If this does not show the need of hlgher excess profits taxes, no evidence could be produced that would show it. HOW THE MILLERS GOUGED THE PEOPLE In regard to flour, the Federal Trade commis- sion reports as follows: “The flour millers have had unusual profits for considerably more than a year. Information col- lected and verified by the commission shows for the four years ending June 30, 1916, a profit of 13% cents on each barrel of flour and 12 per cent on the capital investment. These figures came from accounts covering nearly 40,000,000 barrels output annually. This is somewhat less than 40 per cent of the annual output of the whole country, but a very much larger part of the flour sold in the .. regular commercial-market. - i © “In other words, these figures apply to mills that in large part supply the demand for flour in interstate ‘commerce and for export. The years covered, 1913-14-15-16, should probably be accepted as fau‘ly representatlve in spite of the fact that the war demand in 1915 and 1916 would lead one to expect them to show an abnormally high profit. “In the year ending J une 30, 1917, these same mills made an average of 52 cents on each barrel of flour sold, and nearly 38 per cent on their investment—profits that are indefensible, consxdenng that an average of the profit of one mill for six months of the year shows as high as $2 per barrel. “The commxsslon has tabulated returns covering " the sale of something over 4,000,000 barrels of flour made and sold under the !ood administra- tion’s regulations from September, 1917, to March, 1918, inclusive. In face of the regulatlon of 25 cents barrel on this flour was about 45 cents or over three barrel maximum, the average profit per, ORTH DAKOTA is to have a new daily newspaper, to be published in the city of Grand Forks, where Jerry Bacon, publisher of the Grand Forks Herald and active enemy of the League, holds forth. The new paper is to be the Grand Forks American, and it is to be known as ‘“the people’s paper.” name will mean something is proved by the fact that nearly a thousand citi- zens of northern North Dakota, most of them farmers and members of the Nonpartisan league, are the stockholders. The president of the company is John N. Hagan, the commissioner of agriculture and labor of the state of North Dakcta. Others of the officers and directors are Harry A. Bron- son, assistant attorney general and indorsed by the League for judge of the supreme court; Nels Groven of Park River and O. H. Olson of New Rockford, both League mem- bers; Ole Knudson, vice-president of the People’s State bank, the new farmers’ bank at Grand Forks, and A. G. Sorlie, a Grand Forks business man who is friendly to the League. The picture shows the pouring of the concrete on the mew brick and concrete build- ing being erected by the company, which is to house the new $50,000 newspaper plant. This plant is to be the most modern and one of the finest in the West. Governor Frazier will lay the cornerstone July 28. Thousands of farmers will attend the celebration. Most of the business men of Grand Forks welcome the coming of the new paper, which they hope will restore to them the farmers’ trade lost through the hostility to the farmers of Jerry Bacon and his publication. ® O @ times the normal profit per barrel referred to above. - The return on investment was apparently between 25 and 30 per cent. However, with prices maintained at the same level, cost would probably have increased and profit would. have been some- what reduced in April, May and June, 1918, be- cause of the smaller output in those months. The average net profit of jobbers reporting to the com- mission was about 15 cents per barrel for 1913 and 1914, but increased to nearly 50 cents in the first half Qf 1917. These profits include all the pay re- ceived by the proprietors of the business for their services. pay was reasonably high in 1913 and 1914, it was exhorbitant in the first half of 1917. The food administration has succeeded in reducing the profit of these concerns, but for the year 1917 it was still twice as hlgh as in the earlier years.” The commission cites the case of a Kansas City milling company to show how, in some mstances, the flour millers padded their expense accounts in order ° to conceal huge excess profits. The report says: “INORDINATE GREED AND : " BARE-FACED FRAUD” ““The Federal Trade commission has been _vigilant and untiring in its exclusion of these practices.. An instance-of this practlee was af- forded. by the .Ismert-Hincke Milling company of Kansas City, Mo. . This company padded its costs by heavily increasing all its officers’ sal- aries and manipulating the inventory value of flour bags on hand. As evidence of the length to which padding can be carried, it- may be added that this company even included in its costs the gift of an automobile which it charged to advertising expense. . This case was heard by the commission for the food administration. The commission recommended revocation of license and the recommendation was followed.” Concerning the profiteermg situation in general, the trade commission says:: “The commission has reason to know that profiteering exists. ‘Much of it is due to advan- . tages taken of the necessities of the times as evidenced in the war pressure for heavy produc- tion. Some of it is attributable to inordinate greed and bare-faced fraud. “In summarizing the information at hand, cer- It is clear that if the profit above such- tain features appear which it is well to note. “In the case of basic metals, as in steel, when the govern- ment announced a fixed price, it was made so high that it would insure and stimulate production. This has resulted in giving a wide range of profits. Under the device of cost plus a margin of profit, these profits are necessarily great in the case of the low cost mills. Thus while the market was prevented from running away, as it would have done undoubtedly if it had not been regulated by a fixed price, the stronger factors in the industry are further strengthened in their position and enriched by profits which are without precedent. “Again, in the case of flour-milling, it is appar- ent that while a govern- ment fixed price for wheat and an allowance of max- imum margin of profit over cost on flour have had the virtue of stabiliza- tion, nevertheless the profits resulting are heavy. Before the government interfered flour sold in 1917 with an average profit as high as 52 cents a barrel. After the fixa- tion of the price of wheat and the determination of a maximum profit of 25 cents per barrel of flour, the very high average profit per barrel dropped toward the maximum. Where this decline in price did not bring the price down to the maxi- mum, that is where the millers continued to ex- ceed the government maximum, as they did in many instances, many of ® ©® & the millers were actuated ; by the hope that they would be allowed to include income and excess profit ‘taxes in their costs and pass these taxes on to the consumer. However, if there had been a fairly general compliance with the maximum of 25 cents the profits of the least efficient mills would have been considerable and those of the most efficient mills proportion- ally heavier. To the extent that the maximum price was exceeded, the profits were larger and in general were in fact very great. LOOKING INTO COAL SITUATION “The situation in coal gives still another angle of view to thé same problem. Maximum prices were fixed by territorial divisions. coal producers have not taken the maximum, but due to the fact that in a given field there is a very wide range in the: cost of the coal produced in that field, it follows that certain low cost producers have made very large margins under the system of gov- ernmental fixed prices for the field. Many high cost producers have made small margms of the production, of course, enjoys the large mar- \gin. Information on the return on the investment, now being collated, will reveal the exact amount of profit. Percentages of profit worked upon invest- That this . ‘ment will obvmusl’y be very large m the case of RS . low-cost companies. “The experience with steel, flour and coal showa that a high stimulating fixed price, while stabiliz- ing an ascending market, produces an economic situation which is fraught with hardship to the consuming public and with ultimate peril to the high-cost companies through increasing the power of their low-cost competitors. SOME UNFAIR BUSINESS PRACTICES “Concerns bottling or canning vegetables, which made contracts for future deliveries during the year 1917, in some instances, meeting a condition - of inadequate crops and seduced by rising prices; withheld portions of their contract deliveries and sold spot on the market at the higher price. were varying degrees in' this practice. Some of the instances were flagrant and in those cases the commission recommended the revocation of license | (Continued on page 15) Many of the" There: e The bulk | |-