George Howard Earle, Jr.

“ Is the rule hereafter to be that human characteristics and methods, universally existing and applied, are all to become the basis for a charge of crime, and that the law, in attempting to reach that equality and fairness which constitute justice, is going to allow those wishing to buy commodities produced by others to beat down the prices, whilst those who have added to the world's supply are to defend their rights in bargaining by a threatened intervention by the State that may end in their ruin as well as their loss of liberty? ”

“ The carrying on of trade by the use of money does not change its essential character, but merely permits the various exchanges, of which trade is made up, to be divided into parts or steps, and thus more easily effected. When commodities are exchanged for money, but half a full exchange is completed. When a man sells a thing for money, it is to use the money in buying some other thing—and it is only as money has this power that any one wants or will take it. ”

“ Gentlemen, this is a criminal proceeding; you cannot guess men out of their Liberty; you must have evidence that satisfies you, beyond any reasonable doubt, that the defendant, in dealing with matters looking largely to the future, and about which no one can be guided except by surmise or guess, didn't guess at all, but correctly drew deductions from the known facts and circumstances, which could not be known at the time he acted. ”

“ What sum must be calculated to cover the enormous variation in the value of money that has taken place, and which has really turned all business into a most dangerous gamble? 10. And what sum, under all these conditions, is a man fairly to be allowed for the fact that from his profit he must buy his living from others whose commodities have likewise enormously increased, if not in value, at least in price? ”

“ It is no doubt because of this truth that our law of Freedom, out law that lets all of the people take part in finding natural values and fair and reasonable prices, has, in the end, always asserted its triumphant and necessary superiority. ”

“ The best evidence of price is market price,—the price fixed by the joint inquiry and judgment of the world through its free competitive forces. Where that result is thus reached, no other evidence is admissable on the point. On the other hand the best evidence of excessive price is price fixed by monopoly, by private greed. ”

“ A single plant is known which though now making large contributions to the supply of necessaries, and earning substantial profits that may prove purely illusory did not pay any return for over thirty years. Could anything better illustrate the absurdity of indictment for its present transactions than the proof that it at last was making a large percentage of profit, especially as the high prices now prevailing must mean more lean years to come? ”

“ It can, therefore, easily be seen why there is so much complaint, and so little defense of the excess profits tax, for when the matter is reduced to its fundamental principles, it is found that these taxes are but a depletion of what really is the fund that insures the continuance of the life of American trade. ”

“ What is called 'gross profit' comprehends frequently, not only this surplus, but what is retained for compensating such extraordinary losses. * * * The chance of loss is frequently undervalued and scarce ever valued more that it is worth. * * * In all the different employments of stock, the ordinary rate of profit varies more or less with the certainty or uncertainty of the returns. * * * The ordinary rate of profit always rises more or less with the risk. ”

“ To repeat, again, where all the facts and circumstances are known, ordinarily intelligent men can reasonably and lawfully make deductions from them. With a preponderance of evidence, men can find only from their common experience whether they have exercised the care of reasonable men, or whether they have compiled with certain duties, even where they have intended the natural consequences of their acts. ”

“ There are no men so gifted with wisdom and prescience who can tell what future replacements will cost, what future taxes are to be or when levied, what strikes, what transportation difficulties, what idleness, what storms, what droughts, what earthquakes, what fires, what wars, what revolutions, what crop failures, and really what everything else is going to be. ”

“ If the President could not determine prices of necessaries safely and effectively, as was shown in the case of sugar, then far less should it fairly be required of his fellow citizen to make such decision under peril of indictment. This phase of the matter is, however, not now under consideration, but a more serious one. A citizen, having used his best judgment as to prices which he fixed, and having reached a conclusion conscientiously and without any complaint or threat from the Government, has, in turn, no right to complain. He has no right to redress where no wrong is threatened. ”

“ We know that coal has advanced from two and one-half dollars a ton to sixteen and one-half dollars, and raw sugars have mounted from $.03271⁄2 to $.2462 per pound. One hundred per cent. advance in price for this commodity, therefore, is really very insignificant. We know that some sum must be allowed to stimulate improvement, inventive genius and production, if the present scarcity is not to continue. At what sum are enterprising business men to be permitted to fix that item, without inviting ruin and a loss of their freedom and consequent usefulness? ”

“ We see how easy it is for even the most expert men to fail in reaching a correct conclusion on these unascertainable and difficult questions. To say, therefore, that those men who in rare exceptions had guessed the market price of sugar correctly, or probably less than half correctly, as to the prices that they would be compelled to pay for the replacement of their stock, for no other reason than their sales at this inadequate price, had acted criminally, seems preposterous. ”

“ A man is facing business ruin who takes and consumes as profits from his plant what should be set aside for its upkeep and replacement. The same may be said of the payment to provide against risk, which may be called insurance. The amount of money which a careful business man sets aside from the unusual gains of prosperous years to secure himself against disaster from losses in lean years is not profit. ”

“ You must be careful, however, to remember that it was impossible for him to know all these essential facts, and that the common deductions of the ordinary man upon such matters are, to an excessive degree, entirely wrong. You are also to remember that as one section of the Act, itself, provides, in supplying the President of the United States with funds for business purposes, that such funds are recognized as 'revolving' items. That is to say, that business proceeds in a cycle, and, so long as it continues, is never completed, nor its profits really ascertainable. ”

“ The difficulty, under present conditions, consists not in finding instances in trade where the purest speculation and surmise are essential, but in deciding how many of these may be treated without overburdening the subject.
Economic decisions are self appealing, being founded on natural law. Human law cannot vary the inevitable results that follow human errors. In the end we are inevitably controlled by the uncontrollable, and part of that law is that nothing more decreases production, with its consequent increase of prices, than uncertainty. ”

“ This again demonstrates Adam Smith's contention that the ever present tendency is for hope unwisely to overbalance fear.
Business will not and cannot go on, or production continue, much less increase, if, when the occasional year of profit comes, it is to be made more dangerous and cruel than even the years of loss. It is probable that most, if not all, of the men now under indictment for sugar profiteering were only indicted because of a failure on the part of the Government to distinguish between "price" and "value" ”

“ Cohen [16] relating to an indictment under the Act for an alleged unfair price in a sugar sale, an examination has been made into the uncertainties appertaining to the manufacture of that commodity. The mathematical problem reduces itself to this question: "What price must a man ask for sugar, which, after the deduction of many other sums which cannot possibly be stated, will leave a remaining sum that will satisfy any jury that no more than a reasonable profit has been made?" ”

“ In the case of commodities, the difficulties are a thousandfold greater, and under this merciful Act the business man not only has the expense and trouble mentioned, but, if his business is to go on, he must make the attempt under the further inducement of knowing that if for any sales he is indicted and brought to trial and the jury should not approve his results, he might go to jail, and suffer consequent loss of business and property. ”

“ All commodities may rise in their money price, but there cannot be a general rise of values. It is a contradiction in terms. * * * Things which are exchanged for one another can no more all fall, or all rise, than a dozen runners can each outrun all the rest. * * * That the money prices of all things should rise or fall, provided they all rise or fall equally, is, in itself, and apart from existing contracts, of no consequence. ”

“ So that it follows inevitably, in those instances where there can be no fair competition, where monopolistic condition is paramount, the State must assume control,—not that this is desirable, nor can ever be satisfactory, but that it is absolutely necessary to prevent a part of the taxing power being exercised by individuals,—and thus establishing "taxation without representation." ”

“ As an instance of this constant occurrence by reason of an improvement in the filters used in refineries, sugar plants are scrapping a very expensive portion of their machinery. What sum are they to determine, in advance of unknowable inventions which should be applied for this purpose? 5. All men who have given any attention to economic thought know that risk taking in trade constitutes the chief difference between business men and wage workers. Without it, the world would never have reached its present necessary production. ”

“ If the phenomena of production and prices were as easily resolved as the witness implied, much discussion and much literature have been wasted, and some of the problems that are now distracting the world would have been given composing solution. Of course, competition affects prices, but it is only one among other influences, and does not more than they register itself in definite and legible effect. ”

“ You must be guided by the knowledge and experience of the ordinary reasonable business man in determining that the defendant, beyond every reasonable doubt, drew improper deductions from known facts in fixing the prices of the necessaries in which he deals. ”

“ Under existing conditions, what must be the amount of taxes to be deducted, National, State and Municipal? Would it be fifty per cent. and upward, as at present, or eighty, or ninety, or one hundred? 2. What is the exact percentage of plant idleness through failure of raw sugars and materials to arrive, by reason of never ceasing strikes, embargoes and like contingencies, and the impossibility at times of procuring necessary supplies of coal? Every one knows that the cost of production not only may, but does, go up by leaps and bounds, as output decreases. ”

“ Of course, the contention as to the Lever Act is that men have so far lost their freedom under it that these "reactions" are no longer to be permitted to take place—an unthinkable proposition to any one familiar with the world of business. ”

“ Before coming to the question of profit at all, the Company is entitled to earn a sufficient sum annually to provide not only for current repairs, but for making good the depreciation and replacing the parts of the property when they come to the end of their life. The company is not bound to see its property gradually waste, without making provision out of earnings for its replacement. ”

“ The explanation of this is, again, free competition. In order to keep their trade, men have a tendency to underrate possible loss, and to take chances in business with reference to the elements which are uncertain and undeterminable. Thus we have the high percentage of failures in business enterprises, where the preponderating element and distinction necessarily consist of risk taking. ”

“ In estimating the cost of our production, we have, among other things, to include risk, and would very much like to insure this item. Raw sugars usually sell at about one-fourth of the present market price. We are compelled to buy large quantities, and, on the average, considerably ahead of the dates of delivery, and are under the constant necessity of replacing the sugars manufactured by us. If we have to estimate these items, we are largely guessing on a very uncertain and highly speculative market. ”

“ A close and liberal construction deprives them of half their efficiency, and leads to gradual depreciation of the right, as if it consisted more in sound than in substance. It is the duty of Courts to be watchful for the constitutional rights of the citizen, and against any stealthy encroachments thereon. ”

“ If justice is to be done, all these questions, and many more like them, must be answered, even thought it is beyond the power of the human intellect to do so. Of course, the difficulties enumerated are passed along the line. The manufacturer has to meet it; the wholesaler, in turn, is governed by what the manufacture has to guess at, before the retailer has his turn. ”