893.918/8–2649: Telegram
The Consul at Shanghai (McConaughy) to the Secretary of State
[Received August 26—4:37 a. m.]
3476. Miner-Gould case furnishes apt illustration of vicious circle many American and foreign businessmen caught in at Shanghai.
While Gould’s case probably ineptly handled due his initial firm stand on moral and freedom of press grounds, issue has now boiled down to hard economic facts. Gould-Miner being held personally responsible since they here and Starr not. To meet demands workers, Gould must dispose assets. Prospective clients uninterested while workers in occupation premises or capable attaching lien at later date. As result Gould unable clear workers from premises without settlement agreeable to them and likewise unable dispose assets to make settlement while property attached by workers. Complicating this case is great amount sympathetic publicity given to case workers which makes recession from initial demands virtually impossible without serious loss of face for workers and Communist press.
Miner’s problems liquidating other Starr assets, while not as notorious, are equally involved and difficult. To meet continued payrolls [Page 1284] of five enterprises operating at loss, Miner compelled draw remittances from abroad in US currency which he must exchange at very adverse rate. Since terms wages, expenses calculated basis unrealistic price rice, Miner forced dispose dollars at rate per picul of approximately US $25 compared with real value between $5 and $10. In Miner’s view this results in forced continued investment of US dollars in losing enterprises. Attempts to liquidate are countered by workers’ threats for continuance on payroll pending exorbitant severance pay settlements with the added threat that they in position to enforce indefinite delay in issuance exit permits.
Basic problem in both issues is total absence of any “rule of law”. Despite recent issuance of regulations apparently designed to settle these and similar disputes, invariable insertion of a weasel-worded escape clause permits arbitrary interpretation by local authorities leaving employer at whim of arbitrator. Even from short experience it is obvious all decisions, including those of People’s Court, are to be made on grounds of political expediency and Communists give no sign of intentions to curb or alienate labor. Net result is free rein given to basic mendacity and greed compounded by a moral communist philosophy that political ends justify any means.