Since war ceased to be a matter of the privy purse and began to demand the cooperation of every citizen and the coordination of every resource, a knowledge of the general, basic laws of economics has become a vital necessity to the education of the military services. When peace, with its constructive program, insists upon the conservation of the strength, resources and funds of the treasury, the Navy still has an economic mission to perform. Logistics is the science of preparedness; and preparedness is a matter of peace, not war. A naval officer’s career is normally a narrow, straight road of operation running through a wide country which is logistics. Without a knowledge of economics, the landmarks along the road are almost impossible to recognize in time to be of use.
An officer should naturally be familiar with all theories of government and governmental policy, but he should be an adherent of none. The form and policy of the government under which we serve are not ours to decide nor to influence. The people of our country decide these things, and we are their servants. We must understand their policy in order to carry out their orders; but we must be entirely impersonal about it. A naval officer who is a partisan of any specific doctrine has in a material degree missed perfection as an officer and is merely a politician disguised in a uniform.
Many theories of government have considerable following in the United States, and the present has greatly modified the original individualistic ideas of a century and a half ago. We have in our own lives witnessed far-reaching changes in policies. When such changes come about, nothing in our education or belief must hinder our loyal support of them.
Economics is one of the four so-called social sciences; the others being sociology, politics, and ethics. These four sciences are all studies of the causes of human conduct from different angles, of the effect of circumstances upon human well-being. The angle from which the economist views the world is briefly: How do men make a living? How can the labor of making it be lightened? How may a danger of shortage be avoided?
People are prone to consider economics as a development of civilization, a “highbrow,” academic study of little or no value to the average man. But you and I, in our daily living at home, prove its laws. In our daily work, we prove or disprove its theories—its laws we break at peril to ourselves and our service. Each lonely savage hunting for shell-fish, every rogue elephant in the jungle, is bound inexorably in his conduct by the laws of diminishing utility, of demand and supply, least social cost, capital, diminishing return. He knows nothing about them as laws, but as a living animal he obeys them or suffers. Economics antedate civilization.
As community life grows, men begin to learn by experience, driven by two forces, hunger and laziness, to do things by constantly improving methods. When civilization comes, the laws of economics, which are natural laws, grip men tightly. The history of the world with its vanished empires, wars, famines and epidemics, is a record of broken fundamental law. Only recently, however, have the stubborn white races accepted the impossibility of disobeying laws not made by themselves, and striven to learn the law and its correct application.
Now we must pause a moment to obtain a definition of “civilization.” This is one of the words so common that its meaning is taken for granted. It is one of those all- embracing words difficult to pin down. Some have called it density of population, which has forced some sort of community organization, but we have in our time seen the spectacle of tens of millions of people exhibiting the most primitive lack of civilization. Some say the industries make civilization; yet in backward China, civilization of a high order is apparent. Some say transportation, and some say law. All of these definitions can be proved right as far as they go; but all leave us convinced that they are incomplete. The lone hunter has his feet on the rock of human ambition. He cannot brook the humiliation of his inability to master the great beasts. He wants his children to be safe in his absence. For mutual protection, men drift together. At first, beast-law rules between them—the strong take while the weak give. We still exult when we get “something for nothing.” “Something for nothing” is the bait which lures tyrants, proletarians and “wobblies” to ultimate obliteration. The weak invariably grow stronger both in numbers and in self-respect, and demand value received for their contracts and services; so the first sign of emerging order is what is known as the "obligation of contracts” which all men except the noble aristocrats at one end and the laboring aristocrats at the other accept. This obligation becomes the immutable custom.
Once assured of the inviolability of a bargain, two more stones are laid in the mounting temple of civilization, side by side: The law under which business is carried on; and the transportation which makes commerce possible. As these are firmly laid, men gain confidence. They decide upon, use and confidently accept money. Inspired by confidence, they extend and accept credit. As capstone of the pyramid, they now find the essential incentive, hope for the future and assured comfort for posterity. Civilization is now established and complete, even though primitive and backward. The three sides of the triangle are the primal ambition, culture which follows the growth of the law, and progress, which outlines transportation and money.
Of the nine stones in this edifice, four are peculiarly the province of economics, i.e., law, transportation, money and credit. Thus, upon observance of the laws of economics, rest the confidence and the hope of mankind.
No civilization has ever been 100 per cent civilized. There is always a "something for nothing” minority, either at the top or the bottom of the social scale, to whom the obligation of contracts is meaningless. This is inevitable, for nothing alive can forever remain in balance, but must have swaying boundaries. At least one philosopher claims that this annoying fringe of aristocrats, poor and rich, is necessary as an incentive to progress,—that without it the great law-abiding mass of us would become soft and degenerate. At any rate, the predatory minority is there, and it forces the employment of police.
Nations, which are collections of individuals, follow the psychology of individuals. Nations, moreover, when compared to the individual men, are young and undeveloped entities with imperfect tradition. So, as civilization brings world communication, it also makes armed forces a necessity if there is to be any peace at all at any time. Navies in this day and age arc not the parasitic organizations some people prefer to believe them. They arc economic necessaries, and to a large extent, producers. Navies do what people wish to have done, and perform the duties for which they are paid. No sane reasoner can class them as parasites when viewed from that unchallengable angle. To thoroughly prove this point, however, we can be specific.
We can divide the economic life of the nation into two parts, roughly: national, in its relations with other countries, exterior or major economics; and individual, between citizens, cities and states, interior or minor economics.
The Navy is first concerned with major economics. Nations are not yet law-abiding. It is a short span of years since they began to try to be so; and lawful conduct is yet only too often inclined to depend upon expediency and strength. Even in peace, far- flung trade may be subject to duress and unfair treatment; so, although the Navy’s art is war, its work is trade.
Commodore Preble’s squadron was a small and inexpensive one. Before it was built, the commerce of the world, including our own, paid toll to the Barbary States. This toll was a dead loss, both in actual payment without return and in stifled trade. Africa itself was an economic drag on the rest of the world. In 1921, which was not a year of much world wide prosperity, Africa’s foreign trade, incoming and outgoing, totalled $9,648,380,914 in the first eleven months of the year. Preble's little, cheaply- built fleet produced every dollar of that trade.
Perry’s ships in 1854 represented an investment of perhaps a quarter of a million dollars. Between June, 1921, and May, 1922, a panic year, Japan’s foreign trade mounted to more than half a billion. Perry’s guns blew that trade into existence.
Similar instances might be multiplied— all for foreign commerce only, exterior figures. There are still many unthinking Americans who claim that to the United States foreign trade is not necessary,—who like to boast that we could shut up our country and prosper while the world starved. But we know in the Navy that foreign markets are indispensable to progress, vital to compliance with economic laws such as “least social cost,” and that without the export of the surplus of quantity production (itself largely inspired by foreign trade) living costs at home would climb beyond the reach of many and the little comforts and “niceties” of living would be impossible for most of us. At times, foreign trade at an actual loss can lower costs at home and still produce profits. A country without foreign trade has inevitably a low scale of living.
We also know that foreign trade is unstable unless we can handle it ourselves. We suffered in 1915 because we had business to transact and could hire no ships to do our hauling. A trading country must have a trading fleet. We find that while the rule in war time is “No Merchant Marine, no Navy,” in peace it becomes “No Navy, no Merchant Marine.” One cannot thrive without the other. We support the merchant fleet in commerce, they support us in war. Not a dollar of American freight and insurance has ever been collected that the Navy did not help earn.
As for the interior, or minor economics of the nation, no lengthy exposition of the Navy’s concern therein is needed. Aside from our disbursements of about a quarter- billion dollars a year, we turn out thousands of trained artisans who, without Navy training, would in large percentage have remained unskilled or semi-skilled labor. For one small instance, how many third and fourth- enlistment bakers are there in the Navy? Few—almost none. The demand for bakers in civil life is greater than we can fill.
Among the organizations of the country which have developed the science of purchasing to a high point the Navy stands second to none. Navy purchasing must be scientific, for its very bulk, if unwisely administered, is sufficient to upset the market in a great many lines—shellac, for one example. The Navy’s deal in wool during the war is still remembered by civilian experts as a master-stroke, millions of pounds being purchased without raising the market and millions of pounds sold after the emergency without breaking the market. In transportation we have not as yet progressed as far; but we may still hold up our heads in the shipping world. We are at least abreast of most of our contemporaries and gaining ground slowly.
Navy manufactures must serve two masters: first, we try to obtain the needed articles at the minimum cost to the taxpayer; second, we must avoid interference with any civilian enterprise. Our overhead is necessarily great and is sometimes questioned. However, our cost accounting system is one of the most complete in existence, necessarily so in view of the Budget Act; and we charge ourselves with all our overhead. Many of the civilian concerns showing apparently much lower indirect charges would not compare so favorably if they accounted as closely as the Navy does. Navy manufacturing is also, in many localities, an important employer and a real factor in community life.
The Navy’s entire reason for existence is summed up in that word, preparedness. Not for war merely, although that of course is understood. War, however, is but the continuation of conflicting peace-policies after peaceful means of adjustment have failed. Our duties in peace are just as vital as those in war. When war comes, appropriations are had for the asking; but unless we have prepared in advance, the biggest appropriations will buy little safety. Large appropriations for the armed forces in peace time are impossibilities in every peaceable and democratic country. We may confidently expect much less money every year in peace than we would like to have in order to feel comfortable. However, we are not paid for feeling comfortable. We are expected to produce preparedness, and to do it with such money as our masters, the people, see fit to allow us. This is right and just—it is their concern, and they must always have the final voice. Herein lies the necessity of educating ourselves as business men. A fool can plan and buy with an unlimited purse. We are supposed to be better than fools.
Our N.S.A.F.' and R.M.N.A.' are our most powerful weapons against high costs; but to use them intelligently we must have some knowledge of how and when to buy wholesale, how and when to live hand-to- mouth. In short, we should know the business cycle, both annual and absolute. The annual cycle is the main one to consider in the purchase of perishables of daily use. It must be absolutely applied in the purchase of provisions, for example. For non-perishable material, purchase at the ebb of the absolute cycle is made possible through N.S.A.F. and subsequent cramping by excessive inventory avoided through R.M.N.A.
Logistics has been defined as “that branch of military science which embraces all details of supply and transport and covers all activities up to actual battle.’’ Logistics is
' Naval Supply Account Fund, Reserve Material Naval Account.
a military study; but strip it of its uniform, and logistics stands forth as economics and nothing else. It is governed by the same laws, holds out the same rewards to the wise and the same chastisement to the fool.
The Navy’s crucial test comes in war. The Navy’s almost constant exercise is intervention, small or great. No war, trivial or important, was ever waged without an economic basis. No war was ever won unless that basis was sound. The trade and financial data of a possible opponent, when translated by a sound economist, form the best possible index of future peace or approaching trouble. At one time not many years ago, a great many military men watched the copper market with anxious eyes. When certain firms began to sell copper by the shipload, the military and diplomatic world drew a mighty breath of relief, for a disastrous war had been at least postponed and probably avoided. One war, narrowly averted several years ago, fell through largely because of the unostentatious movement of thirty tramp colliers.
Our entire life in the Navy is a study of economics, interior on shore, exterior afloat. If we know the meaning of a stock quotation or a bank rate, six lines in a foreign paper may give us news of coming events that the most expert spy could not obtain by other means. If we know our business at home, we may not only save hundreds of thousands of dollars in taxes during our career; but we may be of immeasurable benefit to the preservation of peace and the upbuilding of the nation’s trade.