public domain perhaps 40,000,000 acres are forest lands, constituting the most striking elements of wealth in the Philippine Islands. Pine, cedar, mahogany, hundreds of hardwoods, valuable dyewoods, rubber and gutta-percha trees exist in great quantities. Among the 615 varieties of trees now listed in the archipelago there are woods especially adapted for every use for sea piling, for railway ties, for cabinet construction, for the extraction of oils, gums, and drugs. Many trees unknown and therefore undesired in the United States grow there, and also many varieties superior to those which are exported to the United States from Central and South America, and which would readily take their places at cheaper prices. The annual growth of all the forests in the islands is estimated at 1,400,000,000 cubic feet, or about three times the cut of lumber for 1900 in the entire United States. Of this amount more than 99 per cent. is annually going to waste, and yet there is a wood famine throughout the islands and the price of lumber is extremely high. This famine has been caused by the legislation passed by Congress for the Philippines (see UNITED STATES, paragraph Philippine Legislation), prohibiting the sale or other disposition of the public lands or of timber thereon, or of mining rights therein. Under this act the commission was obliged to prohibit the cutting of timber on government lands except by the issuance of licenses in cases of special necessity. Great inconvenience and some suffering was thereby caused, since there is comparatively little lumber on private lands, and because the devastation caused by the war and the improvements initiated under the American occupation, especially in the vicinity of Manila, have caused an abnormally large demand for timber of every kind. The entire amount of government timber cut between July 1, 1900, and June 30, 1901, was a little over 4,000,000 cubic feet, or less than one-third of I per cent. of the annual growth of the forests; and of the amount cut about onehalf was used for government works, leaving many native property owners unable to rebuild their homes destroyed by the war and forcing the insular government to import from the United States nearly a million feet of lumber. Commenting upon these facts in his report for 1901, the secretary of war urged such legislation by Congress as would permit the building of necessary public works, the supplying of the wants of the people, and the exploitation of the forests by responsible persons under proper limitations and government supervision. See FORESTRY (paragraph Forestry in the Philippines).

Commerce.-Notwithstanding such obstacles to developing trade in the Philippines as the continuance of the guerrilla warfare, the lack of adequate transportation facilities in the interior, and the uncertain and fluctuating currency, the business of the islands considerably increased during the fiscal year 1901. The total value of the imports (exclusive of army supplies) was $30,279,406 in 1901, as against $20,601,436 for the previous year, and the total value of exports was $23,214,948, as against $19,751,068 in 1900, thus showing an increase of 47 per cent. in the value of imports and an increase of 171⁄2 per cent. in the value of exports. The following table shows the trade of the Philippines by countries for the fiscal year 1901:

Tariff.—By the decision of the Supreme Court of the United States (see United STATES, paragraph Constitutional Status of Porto Rico and the Philippines), the question of tariff duties in the Philippines was left to the discretion of Congress. This decision, as stated by Governor Taft, was of much benefit to the Philippines, because the conditions prevailing were as different as possible from those in the United States. While it is true that free trade between the United States and the Philippines would have opened a large market to the sugar and tobacco planters, it would have necessitated a heavy internal tax to pay the expenses of the central government, whereas the Filipinos might reasonably expect now that Congress would give them a tariff suited to the development of the islands, and at the same time treating trade between the United States and the Philippines in a liberal

manner.

Currency. The question of the currency in the Philippine Islands, a matter of moment since the beginning of the American occupation, and discussed at length by

the Philippine Commission in 1900, acquired even greater importance during the year 1901, owing to the nearer approach of peace throughout the islands and the consequent necessity of preparing for their commercial and industrial development. Simply considered, the problem of the currency is this: The unit of currency throughout the archipelago, and the only currency with which the natives are familiar, is the Mexican dollar, whose value fluctuates with local trade conditions, with rates of exchange, and with the value of silver bullion in the trade centres of the world. As a fluctuating currency, the Mexican dollar is out of relation with the banking and commercial exchanges of Europe, and more especially of the United States, and trade, so easily deterred from entering new fields, is in every way checked. On the other hand, the Filipinos are accustomed only to the Mexican dollar and its subdivisions, and if the American dollar were suddenly and arbitrarily substituted for it, trade would be even more seriously hampered than at present, both on account of native prejudice and because the value of every monetary unit would be doubled at a time when the mass of the people were impoverished. The essence of the problem, then, is to bring Philippine currency in relation to the money of the world without at the same time upsetting established usage. That the problem is a pressing one in point of time, and may at any moment, until settled, give rise to acute conditions, is shown by three semi-arbitrary orders which the Philippine Commission issued toward the end of the year 1900. The commission found it necessary, first, owing to a general rise in the value of silver throughout the East, to levy a tax of 10 per cent. upon exports of silver from the Philippines; and the commission directed, secondly, in order to keep the Mexican dollar in commensurable ratio with American money shipped to the islands, that two Mexican dollars should be taken as the equivalent of one American gold dollar; and, thirdly, to prevent the established banks of Manila from mulcting the people, the commission ordered that no banker's commission should be thenceforth charged on exchanges of Mexican and American money. By these orders the currency problem was temporarily adjusted. The general situation, however, was stated by Secretary Root in his report for 1900 to be "in as bad a condition as is possible." And in order that adequate recommendations might be made to Congress looking toward a complete settlement of the matter, the secretary of war sent Mr. Charles A. Conant as a special commissioner to the Philippines early in 1901 to confer with the Philippine Commission and to make a final report upon the whole subject. The recommendations embodied in Mr. Conant's report, which was made public late in November, 1901, concurred with the recommendations made by the Philippine Commission in their annual report for 1901, and also with the recommendations made by the secretary of war in his annual report for 1900. These recommendations were in effect that the basis of future currency in the Philippines should be a Philippine silver dollar, minted at Manila, with a value in United States money of 50 cents; that this dollar should be divisible into a hundred equal parts, called centavos, and that minor coins equivalent to different numbers of centavos should also be coined. The Philippine silver dollar and its subdivisions should be issued by the Philippine government and should be maintained at par with American gold (1) by limiting the amount of silver coin minted, (2) by making the dollar of slightly less value than the Mexican dollar, so that it would not be exported, and (3) by maintaining an insular gold reserve derived from the seigniorage of silver coinage. By this plan it was believed that all Philippine money would be kept in relation with United States currency, and therefore with the currency of the world, and at the same time new Philippine currency could gradually take the place of the old, the Mexican dollar and its subdivisions, which would be used little by little as bullion for the making of the new coins.

Banking. Closely related to the question of currency, and probably more important in its ultimate effect upon American trade in the Philippines, is the question of banking. This question, also, Mr. Charles A. Conant was directed to investigate, and, as in the matter of the currency, he reached conclusions practically identical with those of the Philippine Commission. There are at present, it appears, no American banking organizations in the Philippines, and the major part of the banking business is done by the Hong Kong and Shanghai Banking Corporation, the Chartered Bank of India, Australia, and China (both English), and the Spanish Filipino Bank. The first two are much the larger of the three, and both make a specialty of exchanges, doing little in the way of advancing money on native securities or notes. Both for this reason and because American capital is justly entitled to at least a fair share in the banking of the archipelago, it is proposed by Mr. Conant, and also by the commission, that the national banking law, with certain modifications, be extended to the Philippine Islands. It is recommended, first, that national banks in the United States shall have authority to establish branch offices throughout the islands, and also that other banks may be established having their main offices in the Philippines and branch offices in the United States.

While branch banking has hitherto been against the genius of banking laws in the United States, its great advantage in the Philippines would be to insure the credit and stability of Philippine financial institutions and to reassure capitalists dealing with them in a way which could not otherwise be done. In the second place, it is recommended that, in order to meet the future currency needs of a practically undeveloped country, the banks established may be allowed to issue notes up to 50 per cent. of their paid-up capital without depositing bonds in excess of one-fourth of their paid-up capital; but these notes shall, in lieu thereof, constitute a first lien upon all the assets of the bank excepting public funds, they shall pay a tax of one-half of 1 per cent. a year as a guarantee fund, they shall be protected by a cash reserve equal to 25 per cent. of the notes outstanding, and they shall be issued only by banks having a capital of half a million dollars or over. The national banks thus proposed would serve mainly to promote American commerce and industries in the islands. Another and hardly less pressing need is that some form of mortgage bank should be authorized in order to aid directly the agricultural interests of the Filipinos. The insurrection and the lack of improved methods have left the agriculture of the islands in a lamentable condition. Loans upon real estate mortgages in the islands command now an extortionate rate of interest, varying from 25 to 40 per cent. Mortgage banks whose solvency should be assured by proper precautionary provisions of Congress would do much to revive agriculture, to encourage the introduction of improved machinery, and by giving cheaper money would greatly add to the volume of the products of the earnings of the country.

Civil Government. By the executive directions of April 7, 1900, with which the Philippine Commission was originally charged, it was made incumbent upon the commission to establish civil government in the islands as soon as possible, giving to the natives under this government the greatest degree of autonomy "consistent with the maintenance of law, order, and loyalty." In pursuance of these instructions, the commission passed an order on January 31, 1901, for the organization of municipal governments throughout the archipelago, and on February 6 for the organization of provincial governments. Towns under the municipal government act became municipal corporations, having the customary corporate powers. The municipal authority was to be exercised by a president, vice-president, and municipal council, elected for a term of two years by the qualified electors of the municipality. These qualified electors were to be persons who had held office under the Spanish government prior to the capture of Manila, or who owned property to the value of $250 or paid an annual tax of $15 or more, or who could speak, read, and write either Spanish or English. Under this act 765 towns had been organized by the end of 1901. The law for the organization of the provinces provided for a governing body consisting of the governor, treasurer, supervisor, secretary, and the fiscal or prosecuting attorney. In the establishment of the first provincial governments these officers were necessarily appointed by the commission; but it was planned, after February, 1902, to place the offices of secretary, treasurer, and supervisor under the civil-service rules, while the governor was to be elected in a mass convention of the municipal councils of the towns of the province. To the provincial government was given jurisdiction over the construction of highways, bridges, and other public works, the administration of criminal law in the province, the assessment and collection of taxes conjointly with municipal officials, and extensive supervisory power over municipal officers, the governor being empowered to suspend municipal officers, and to visit the towns of the province to inspect their administration, and to hold hearings in the case of municipal abuses. The organization of provinces under this act was made by the commission in a tour of the islands made for that purpose, beginning in February and ending in August. Provinces to the number of 35 were organized at this time, including nearly all territory in the archipelago which was at all accessible and whose population was sufficient to render an organized government advisable. Of these 35 provinces three proved to have been prematurely established and were turned back to the control of the military officers, leaving 32 in full operation. At about the same time, on July 31, the city of Manila was placed under a special government quite similar to that of Washington.

Judiciary. Under the executive orders of April 7, 1900, outlining the duties of the Philippine Commission, a complete reorganization of the judicial system of the islands was directed. After investigation of the needs of the islands these directions were complied with by an order of the commission on June 11, 1901, establishing a supreme court for the archipelago, a court of first instance in each of the fourteen judicial districts into which the Philippines were divided for that purpose, justices' court in each municipality. To the justices' courts was given jurisdiction of petty cases; to the courts of first instances appellate jurisdiction over cases arising in the justices' courts, and also jurisdiction in all civil and criminal cases of moment, and to the supreme court appellate jurisdiction over the courts

and a

of first instance. The personnel of the supreme court was ordered to consist of seven justices, appointed as follows: Chief justice, Cayetano Arellano; associate justices, Florentino Torres, formerly attorney-general; Victorina Mapa, of Iloilo; J. F. Cooper, of Texas; James F. Smith, of California; Charles A. Willard, of Minnesota, and Fletcher Ladd, of New York. It will be seen from these appointments that while the chief justice of the court and two of the associate justices are natives of the Philippines, four associate justices, constituting a majority of the court, are citizens of the United States. In addition to these appointments, L. R. Wilfley, of Missouri, was appointed attorney-general of the islands.

Education.-Provision for the systematic organization of public instruction in the Philippine Islands was made by the commission on January 21, 1901, when an act was passed establishing a department of public instruction under the direction of a general superintendent and a superior advisory board, to consist of the general superintendent and four members, to be appointed by the commission. The archipelago was divided for educational purposes into 18 divisions, each to have a division superintendent, and such a number of deputy division superintendents as should seem desirable. At the same time, plans were made for bringing 1,000 trained teachers to the Philippines from the United States, not only to instruct Filipino children, but to instruct the Filipino teachers in English. Of these teachers 769 had been appointed and had reached the Philippines by the end of 1901. In addition to the American teachers, between three and four thousand Filipino teachers were engaged and entered upon their duties during the year. While the commission expected that all public instruction would eventually be given in English, this was, of course, at first impossible, although in 1901 all public instruction in Manila was in English. While no accurate figures are available showing the number of pupils in all the schools in the archipelago, the number of those enrolled in 1901 approximated 150,000, while the actual attendance was perhaps half that figure. In Manila alone the actual attendance in July was 5,123. Besides providing for regular instruction, the commission had also, by its act of January 21, 1901, authorized the establishment in Manila of a normal school for the education of natives in the island; for the establishment of a trade school in Manila, and also for the establishment of a school of agriculture in the island of Negros. The preliminary term of the normal school opened on April 10, and it was estimated that there would be some 350 in attendance. The number, however, was nearly double that, 570 studying throughout the term. One of the most serious problems which the commission believed would confront it in the establishment of a public school system, namely, the secularization of education and the prevention of religious proselyting in the schools, has in fact given no trouble whatever. The commission, in its order of January 21, 1901, laid down rigid rules forbidding any teacher in any of the schools to give religious instruction or to speak against or in behalf of any religion; but the commission at the same time stated that advocates of any religious belief might, upon permission being granted by the proper authorities, enter the schools and speak directly to the pupils upon the subject. Thus far, however, the commission remarks, its offer has not been taken advantage of, and no opposition has been manifested to its general order. Parents send their children, especially in Manila, to private Catholic schools when they do not desire to be bound by the commission's rule.

Public Works and Roads.-There is no harbor in the islands of sufficient draught for large vessels. The roads leading to the interior are in general mere trails, difficult to traverse at any time, and often impassable in the rainy season. For these reasons the native civilization, such as it is, is almost wholly confined to the seacoast and nearby towns. Much of the interior of the great islands of Luzon and Mindanao is inhabited by people who have never been to the sea coast, or by wild tribes who were never within the jurisdiction of Spain. Recognizing that the remedy of these conditions was the first prerequisite to the commercial development of the islands, and would besides remove the greatest bar to the immediate pacification of the islands, the commission in 1900, immediately after its installation, passed preliminary acts to make the islands accessible from without, and the interior of the islands accessible from the sea coast. For improving the harbor of Manila, whose shallowness at present necessitates the lightering of the freight of all ships of over 16 feet draught, a million dollars was appropriated on October 15, 1900, and two million dollars more by a supplementary act of March 19, 1901. The plans for the improvements call for a depth of 30 feet within the harbor, thus doing away with lightering and reducing freight rates, which are now heavier between Manila and Hong Kong, about 700 miles, than the freight rate between San Francisco and Hong Kong, about 8,000 miles. For the improvement of roads, which in the absence of navigable waters leading to the interior are of special value, the commission, on September 12, 1900, made a preliminary appropriation of a million dollars. Acts leading to the construction of railways were beyond the jurisdiction