Financing the Rutenberg Plan, American Jewish World, 11 August 1922

Financing the Rutenberg Plan, 11 August, #1922Live, The American Jewish World, Timeline of British Mandatory Palestine

 

By JUDGE JULIAN MACK, CHAIRMAN, PALESTINE DEVELOPMENT COUNCIL

 

(The coming to the Twin Cities this month of Rabbi Abba Hillel Silver, chairman of the Central Committee Palestine Development League, on behalf of the financing of the Rutenberg Plan, makes timely the publication of the address of Judge Mack delivered before a group of a Jewish financiers last June in New York’s at the Hotel Pennsylvania in Mr Rutenberg’s Room. All interested in the upbuilding of Palestine will find it informative to give this address a careful reading – Editor’s Note.)

 

Jews from Eastern Europe and Jews from Central Europe and Jews from other parts of the world are going to Palestine. They are going to Palestine because they want to go in part; they are going to Palestine because they cannot with safety in life and limb, or to peace of soul stay at home; and they are going to Palestine partly because they prefer to go to Palestine rather than any other place and partly because there isn’t any other place on earth to which they can go. We have closed the doors in America. In the last ten months some 45,000 Jews have come to America. There have been times when a million immigrants came in a year. The probabilities of even lowering the present quota are great. Canada the same; Western Europe the same; South America doesn’t offer the opportunities. Some people are talking about Mexico , Cuba. That is in the distant future. And the nations of the world have said, the opportunity shall be given to the Jews in Palestine, under Great Britain’s mandate on behalf of the League of Nations. Now, it does not make any difference what the ultimate future in Palestine is to be so far as we are concerned. We, as an organization are concerned only with this – there is the land of our fathers; there are our brethren going and wanting to go there by the hundreds of thousands – there is land which, if developed, if fully developed so that it may be no only brought to its highest powers agriculturally, but also industrially, is capable, according to the best experts, of maintain in decency anywhere from three to six million people.

 

Let us assume that it is not the solution of the Jewish problem at all. Opinions differ. Let us assume that the minimum that I have given you is wrong; that it is only a million Jews that can go there. Even if there be only that many – it is the one ray of hope offered our brethren who are in the blackest of despair in Eastern Europe. And that is the basis of our activities. That is the reason why we believe there is a duty on the part of prosperous Jewry all over the world, but primarily in America, of course, to help lay the foundations on which that million or two million or five million Jews can build, and can build for themselves, a home and life and civilization and industry and agriculture, that will make them self-supporting, that will not bring fortunes to the individual, but what we trust will keep whatever million there may be there, from slum life or from overcrowded conditions that prevail in the Jewish centers of Easter Europe and even this country.

 

Charity Work

 

There is much that is to be done, and will continue to be necessary in the way of charity. For some time to come, assistance must be given both to the present population and those new immigrants. They have their orphans, widows and aged; they need some help in the schools and sanitation. But you cannot build up a land on charity. You cannot make the Jews over there self-sustaining or self-respecting on charity. And the finest thing about the generation of pioneers and they have been pioneers for forty odd years, both the present and new generation of pioneers, young men and women, university bred, trained to be physicians, engineers, lawyers, architects, and what not, who are tramping down through Eastern Europe seeking Palestine, and despite all hardships and suffering, rejoicing when they get there – these Chalazim – I say the finest thing about the old and new, is that they do not want charity. What they do want, what they ask the Jews of the world, is that we who can afford it, have some stake with them in Palestine, that we who are not going there, evidence our kinship and our feeling towards them and recognize our duty both to our ancestry and our descendants by doing something that will enable the Jews who go to Palestine to be the kind of Jews of whom we can all be proud. Because the world has decided – it is not open to question any more – they are going to be held up as the typical Jews, these Jews of Palestine, and we in a measure are going to be judged by them. We always are judges as a people seldom individually.

 

The P.D.C

 

Now, there are organizations that are attending to the charity end of the work. We who started the Palestine Development Council, started it because we believed that in the nature of things, any charity work must be clearly and absolutely differentiated from constructive investment business – that the two cannot be intermingled in any sense whatever, that the differentiation ought to be marked as we have come to believe in the course of the last year, by an entirely different organization, that marks in itself more clearly than anything else the distinction between the two things, and between the two we believe the business upbuilding of that land is the more important. And because of that, a year ago, on the 4th of July, when some of us gathered together to make concrete these thoughts, we decided to create a business organization. We started a million dollar Delaware corporation for the purpose of giving credits in Palestine because that at the time, was thought by Sir Herbert Samuel and others to be the most essential thing, and to give credits first in the way of helping the Credit Unions, because we all believe that in a little land like that, it was more essential to foster the spirit of cooperation by cooperative enterprise than to do anything else. And then as a second business undertaking, the next most essential thing was credits for building of homes. When we set out on the first undertaking we found immediately that other organizations interested in Jewish work like the Reconstruction Committee of the Joint Distribution Committee and the I.C.A (Jewish Colonization Association) of Paris, which spends Baron Rothschild’s money in Palestine and composed primarily of non-Zionists, like the London Economic Board of which Sir Alfred Mond and Sir Robert Waley-Cohen are at the head, which has on its directorate some of the wealthiest Jews of Great Britain, and mostly non-Zionists – agreed with us on these fundamental questions and were ready to join hands with us in establishing this first Credit Union Bank. We have gotten together; we have selected a manager, and Mr Sol Rosenbloom who has been out there for the last 5 months in our interest, has cabled letting us know that the thing is going – work has begun.

 

The Rutenberg Concession

 

And now, in the last two months, Mr Rutenberg has come. And Mr Rutenberg has brought with him what you see on the walls here which is the concrete expression of his fundamental ideas. That fundamental idea is that Palestine, a land without coal and as yet without developed oil, has in the falls of the river Jordan and its tributary streams the power essential to build up industries in the land, the power essential to supply the light and heat necessary, to be developed from these waters. For two years he has been working out a great hydro-electric development scheme which has met with approval of the present government of Palestine, the High Commissioner, who submitted it to British engineers, the Colonial Office which is in the charge of Palestine, Baron Rothschild who submitted it to French engineers and ourselves, the Palestine Development Council, who have on our board of trustees an eminent hydro-electric engineer, one of the vice-presidents of great General Electric Company of America, who has personally gone over the whole matter and all the documents with Mr Rutenberg and called in the leading engineers of the General Electric. I refer, of course, to Dr Loewenstein.

 

Who is Pinchus Rutenberg?

 

Let me say a word or two about Mr Rutenberg. He is a romantic figure in Jewish life. He was a revolutionist in Russia. He had to get out in 1905 when the revolution failed. He then went to Milan and there he was a hydro-electric engineer, and when the war broke out he came to America. And he thought that the only way to help the Jews was to get the Jews of America united to speak to the nations of the world as to the way in which the Jews in Eastern Europe should be treated and what should be done in Palestine. And as a result of his efforts and others, there was created an American Jewish Congress which did send a delegation to Europe and did succeed in doing a good many things in behalf of the Jews of Eastern Europe for the securing of their rights and for the settlement of the Palestinian problem.

But then came the great revolution in Russia and with that he immediately went back. He saw liberty for the whole Russian people and he got there while Kerensky was still at the head of things. And he became assistant commander in chief under the command of Kerensky. And when the Bolsheviks came, they put him in the Peter and Paul prison for six months until he managed to get out. And then he got to Palestine. He had been dreaming all these things all these years and the moment he got to Palestine, with that tremendous energy which is characteristic of him and so many of the Russians, he set to work and he has been working day and night not only on the engineering scheme but on the practical business scheme because he has secured the concession from the government, approved by the Colonial Office, a concession which is broad, liberal, but which is fair and just. It is a 70-year concession. It gives him an option dependent upon his creation of a company within a limited time with a million pounds paid capital and 200,000 pounds paid in and the commencement of work within a limited time.

Taking these concessions in his name, he takes them for the Jews of the world, takes them for this company in which he has no personal interest at all – no personal financial profit. This concession permits of a profit to the corporation of 10 per cent on all the invested capital. In addition to most liberal provisions for amortization, for depreciation, and for reserve, After 10 per cent is earned it can still earn up to 15 per cent, sharing half and half with the government. After 15 per cent, the government gets the profits, but the government is to devote all its profits towards the reduction of the price to consumers.

 

I won’t go into the details. Rutenberg is being attacked right now by the anti-Semites led by the Morning Post, for having obtained this concession. That fight illustrates the real value of the concession – the importance of it for the Jews, not as a money making thing but as a means of building up Palestine in the proper way.

 

Financing the Plan

 

Baron Rothschild and the Jewish Colonial Trust of England have been putting up the money necessary for all the preliminary work for the past two years and they are ready to put up not less than 100,000 pounds each towards the million pound corporation. The Economic Board for Palestine, this English body which is, as I said, composed primarily of non-Zionists – wealthy Jews – is going to put up 100,000 pounds. The J.D.C. the Reconstruction Committee, under certain conditions is ready to put up $200,000. Jewish communities all over the world will be appealed to to put up the rest, but, of course, the bulk will have to come from America, and the Palestine Development Council, which is a non-profit organization, a membership corporation of New York, which has a Board of Trustees whose sole purpose is to stimulate and to further projects that will be beneficial to Palestine, has undertaken to help raise this money primarily among Jews in America. It is starting out to raise one and a half million dollars, and starting out to raise it on a business basis, as an investment enterprise. Of course, there won’t be returns for some time to come. Of course, Palestine may be swallowed up by the sea and everything lost, but don’t count on that. Of course, Palestine may have all sorts of troubles, but we don’t believe that it will. Located as it is, between Asia, Africa and Europe, with the nations of the world pledged to assist in its growth and development and with England as the mandatory power keenly interested because of the Suez Canal and routes to India, there is no reason to fear that it has not a great future.

 

All experts have told us about the possibilities. It is a second California, one twentieth the size. And its topography, the climate and the conditions of climate are similar to California, only in a little area. It has the possibilities that California had 50 years ago and because of location even greater possibilities. We believe therefore in view of the experts’ report to us as to the present demand and the probable demand of the future as the country grows, that the Rutenberg plan is what the British Government believes it to be, what the engineers in Europe and here say in their judgement it is – a sound undertaking. We believe, but we offer no guarantee, that it is an investment where returns may be deferred, but a real investment. We know that they carrying out is absolutely essential to a real upbuilding of Palestine and for that reason, even though returns be deferred, even though we be disappointed in the getting of returns, we feel that we are offering an opportunity to the Jews of America to do a fundamental thing, vital in the life of the Jewish people.

 

As to the financial phase, our present plan is this; The Palestine Development Council, of which the trustees in addition to myself, are, Mr Sol Rosenbloom, multi-millionaire, now in Palestine, and our Treasurer, Mrs Mary Fels; Lewis Straus, Jr., of Kuhn Loeb & Company; F. Julius Fohs, geological expert; Dr Loewenstein, Leon Kamaiky and Senator Nathan Straus, Jr., is asking that subscriptions be made to it and trust certificates issues by it and that it be entrusted as trustee to determine when and how the thing should be done. We state in the document we are issuing that our idea is this; That the company to be formed shall have preferred stock and common stock and the common stock not less than 20 per cent of the whole., shall be taken out of the funds owned by the public bodies and controlled by them. And we ourselves, the P.D.C. have funds of that kind, because in all of our enterprises there are some people who, while they want to further investments, nevertheless want also to make a donation of their investment for the benefit of Palestinian Jewry.

 

And funds that come to us in that way are completely within our control, and we would invest those in common stock. We are saying in this prospectus that we are offering preferred and common stock, and the preferred stock is to be sold to private investors and that the preferred stock will bear interest up to 8 per cent, non-cumulative, with the right to share in the surplus profits up to 12 per cent, and the common stock shall be enabled to get up to 15 per cent. What we are offering now is the trust certificates of the P.D.C. as trustee.

 

As to the expenses for all this work of getting in subscriptions, in the declaration of trust we say that out of the funds subscribed there shall be used for these expenses not exceeding 4 per cent. We want the investor to feel that he is getting a real investment and that not more than that is being taken, and we have to rely on private donations to meet administration fund in order to meet our additional expenses. In our million dollar corporation, not one penny has been taken for expenses and we got up among ourselves a private administration fund to pay for our work, so that every penny that is given to us as trustee, with the deduction of not exceeding 4 per cent for the general expense of doing this work, will be used for the purpose of the corporation itself when it is formed.

 

Done