Business: Industrial Cannibalism

The U. S. anthracite (hard coal) industry is a $400,000,000 investment 99?% concentrated in Pennsylvania. It has been so long on the verge of ruin that last week there was no particular reason why Pennsylvania’s Governor George Earle should bustle to Washington to ask Franklin Roosevelt to do something drastic— but he did.

In 1937, among anthracite firms which went into the courts were the $94,000,000 Philadelphia & Reading Coal & Iron Co. and the $10,000,000 Madeira, Hill & Co. The former, a protege of Philadelphia’s Drexel interests, has been historically associated with the Reading Railroad. Incensed over Philadelphia & Reading’s record of losing $24,000,000 in surplus since 1932, Federal Judge Oliver Booth Dickinson cracked: “There is something radically wrong with the Pennsylvania anthracite industry that it can run up … inordinately high prices of coal to consumers. The tendency has been for management to take far more than its fair share of the receipts. . . .”

This has long been the contention of Pennsylvania’s ambitious New Deal Governor Earle, who was elected with the support of potent United Mine Workers Union. Year ago he appointed an Anthracite Commission to investigate. The Commission, headed by C. I. O.’s Economic

Adviser William Jett Lauck, has been something less than successful. Unable for eight months to agree on recommendations, it finally issued a series of reports, most of which failed to make headlines though they did establish pretty thoroughly the basic troubles besetting hard coal. Among them:

Bootlegging. In Philadelphia & Reading’s petition under the Bankruptcy Act it cited the loss by ‘legging of 4,000,000 tons annually. But this highly publicized illicit trade is no longer what it was. Several States have legislated against bootleg coal, leaving Philadelphia almost the sole market; surface outcrops suitable for bootleg mining are approaching exhaustion. Bootlegging never accounted for more than 8% of the total anthracite output, probably employed only 20,000 men at its peak. Last week the Commission guessed that it now employs but 6,500.

Other Fuels. In 1899 hard coal accounted for 22.1% of fuel-produced energy, oil and gas 7.9%. In 1935, anthra-city provided 7.9%, oil and gas 38.1%. Only lately have hard-coal men bestirred themselves to fight this trend. Anthracite Industries, Inc., supported by $1.000,000 contributed yearly by 70% of the industry, is now at work on improved furnaces, stokers, plastic cement from coal ashes, etc. Anthracite equipment dealers claim a 50% increase in sales in the first nine months of 1937 in 21 eastern cities against a 7% gain in oil burners.

Freight Rates. From Pottsville, Pa. iron ore can be shipped to New York harbor for $1.21 a ton, but the rate on a ton of anthracite is $2.39. Fuel oil shipped from Harrisburg to Philadelphia goes for 62¢ a ton, 24¢ cheaper than coal. This difference must be covered in anthracite prices.

Having mentioned all these facts without stirring the public, Governor Earle’s Anthracite Commission finally resorted to an old standby, blamed it all on J. P. Morgan & Co. (TIME, Nov. 8). Essence of the idea was that Morgan & Co. kept the coal companies going only because they put cash into the pockets of Morgan-controlled railroads. Though the public remained unimpressed, Governor Earle took this idea to heart and has gone around ever since talking about “industrial cannibalism” and “the disintegration of a great monopoly.”

Monopoly. Such talk found new vigor last month when New Deal bigwigs in Washington began talking in similar vein about industry as a whole. Last week, after a conference between President Roosevelt, Governor Earle and Attorney General Cummings. the U. S. Department of Justice announced that it would seek to put into effect literally a 1920 Supreme Court decree directing coal-carrying railroads to give up control of anthracite mines.

This news was eclipsed next day when Governor Earle announced that he would ask the national Government to buy the anthracite mines, that his proposal had the support not only of United Mine Workers, who have long favored nationalization, but also of certain operators. “What is more,” smiled Governor Earle, “the President . . . said to me that he was back of me wholeheartedly in any constructive program I should evolve.”

Governor Earle’s program had apparently blossomed overnight in his agile mind. Last September, returning from Europe “full of ideas about coal,” he ordered the operators to submit a workable plan by January 1. The operators, represented by Reading’s Ralph Enos Taggart, President Jesse B. Warriner of Lehigh Navigation Coal Co. and Attorney Walter Gordon Merritt, sat down with the miners, represented by Lieut.-Governor Tom Kennedy and Attorney Henry Warrum, in a “joint committee” to choose between State regulation, Federal regulation and self-regulation. At this point the Governor’s Anthracite Commission came out for State regulation. Promptly the operators declared that Federal regulation was “less objectionable.” Governor Earle snapped: “They know that Federal action is practically impossible. It means they want no control at all.”

Abruptly changing front to favor Federal ownership, the Governor explained last week that it would take four or five years to effect State control: it would be much simpler for the Government to buy the anthracite mines outright and lease them to private operators after ordering the railroads to cut freight rates so coal could compete with oil on more equal terms. When he broached this idea to the joint committee, the operators were apparently too surprised to object. Speaking as individuals, Messrs. Warriner and Taggart were willing to sell “at a fair price.”

Said the New York Times plaintively: “The sickness of the soft coal industry was attributed by the Government to too much competition and so it forced monopoly. The sickness of the hard-coal industry is now being attributed to monopoly, and so the Government is asked to force competition. Can the public be blamed if it is becoming just a trifle bewildered?”

In answer to several questions, Governor Earle said: “I would rather leave that to President Roosevelt.” That appeared to be his feeling about the anthracite problem.