This is not the time or place to discuss the great evils that arose from the unbridled savagery of cut-throat competition in the seventies, the eighties, and the early nineties. The whole rotten record of rebates, of sinister political advantages gained through bribery of one form or another, has long since been bared. The illegitimate use of the railroad pass in itself makes a very picturesque chapter of this record.
Such a condition of affairs could not go forward indefinitely. In this day and age it is a wonder that it existed as long as it did exist. Out of this turmoil and seething chaos was born Railroad Regulation. She was a timid creature at first, gradually feeling her increasing strength, however, and not hesitating to use it. For a long time she had a dangerous enemy, a fellow who up to that time had allied himself almost invariably with railroads and railroaders—the practical politician. Eventually this fellow took upon himself the rôle of best friend to Railroad Regulation.
THE ROYAL GORGE, GRAND CANYON OFTHE ARKANSAS, COLORADO
The most remarkable chasm in the worldtraversed by a railroad.
The effect of the railroad pass upon the dishonest newspapers was only a little less potent than upon the dishonest politician. Put in its kindliest light it was a softening influence in the editorial sanctum. When it was gone a sterner spirit began to assert itself in a large portion of the press. The railroad was being called toaccount for its sins more sharply than ever before. And a smarting politician who went before a legislature with some measure striking hard at a railroad could be reasonably assured of a large measure of support from the Fourth Estate.
In the golden age of journalism both editors and reporters spent their vacations in delightful, but distant, points. It was a pretty poor sort of journalist who paid his fare when he wished to ride upon the cars. Generally his own office took care of his rather extensive and extravagant demands for travel. If, however, he happened to be employed upon one of the few honest newspapers who had conscientious scruples about accepting free transportation, either wholesale or retail, from the railroads, he generally had recourse to the local politicians. There were aldermen in New York, in Philadelphia, and in Chicago, undoubtedly politicians in numerous other cities, who carried whole pads of blank railroad passes in their pockets. It was only necessary for them to fill these out to have them good for immediate transportation. The effect of this transportation upon the political welfare of the railroads in city halls, in courthouses, in state capitols, even in the national capitol itself—can well be imagined.
There was another evidence of this golden stream of free transportation. It was having a notable effect upon the passenger revenues of the railroads, particularly in the relation of these revenues to the cost of operating the trains. It was no unusual thing for a popular evening train from some state metropolis up to its capital,to be chiefly filled with deadheads. The railroads grew alarmed at the situation. It was beginning to overwhelm them. They looked for someone to help them out of it. They found that someone in Railroad Regulation—that spiritual young creature who had been brought into the world and clothed with honesty and idealism. Railroad Regulation came to their aid. Railroad Regulation abolished the pass—the illegitimate use of the pass, at any rate. Long before this time she had made rebating and bribery cardinal and unforgivable sins.
The effect upon the dishonest politician as well as the dishonest newspaper was pronounced. The reaction was instant. If this new creature, Railroad Regulation, possessed so vast a strength, the roads should be taught to feel it. They would be shown exactly where they stood. And so it was that viciousness, revenge, and a crafty knowledge of the inborn dislike of the average human mind to the overwhelming and widespread corporation seized upon Railroad Regulation.
Now the railroads were indeed to be regulated. The spiritual creature was given not one iron hand but eventually forty-six. In addition to the Interstate Commerce Commission down at Washington, each of forty-five separate states gradually created for themselves local railroad-regulating commissions. The efficiency of these boards was a variable quality—to say the least. But if each of them had been gifted with the wisdom of Solomon as well as with the honesty of Moses, the plan would not have worked, except to the great detriment of the welfare of the railroads. Norailroader today will deny that it has worked in just such detrimental fashion. He will tell you of instance after instance of the conflicts of authority between the various regulatory boards of the various states through which his property operates; of the still further instances where these conflict with the rulings and orders of the Federal board at Washington.
Railroaders have large faith in the Interstate Commerce Commission. They believe that is both fair and able, a great deal more able than most of the state regulatory boards. Yet even if all the state boards were as efficient as those of Massachusetts or Wisconsin—to make two shining examples—the system still would be a bad one. Today these state boards, in many cases under the influence, the guiding power, or the orders of erratic state legislatures, are imposing strange restrictions upon the railroads under their control. In sixteen states there are laws regulating the type of caboose a freight train must haul. Linen covers are required for head rests in the coaches in one commonwealth; in another they are forbidden as unsanitary. Oklahoma and Arkansas are neighbors, but their regulations in regard to the use of screens in the day coaches of their railroads are not at all neighborly. In one of them screens are required; in the other, absolutely forbidden. It, therefore, is hard work to get a train over the imaginary line which separates Arkansas and Oklahoma without fracturing the law. According to a man who has made a careful study of the entire subject, thirty-seven states have diverse laws regulating locomotive bells, thirty-five have laws about whistlesand thirty-two have headlight laws. The bells required range from twenty to thirty-five pounds and one state absolutely insists upon an automatic bell-ringing device. The five-hundred candle-power headlights that are good enough for Virginia may be used across the border in Kentucky, but not in North Carolina, which will not permit lights under fifteen-hundred candle-power. And South Carolina insists that the headlight shall be ten-thousand candle-power or a searchlight strong enough to discern a man at eight hundred feet. Nevada goes still further and says that the light must show objects at a distance of a thousand feet.
Even the lowly caboose, the “hack” of the freight-trainmen, has not escaped the attention of state legislators. While many states are quite content with the standard eighteen-foot caboose mounted on a single four-wheel truck, thirteen of them demand a minimum length of twenty-four feet—Missouri twenty-eight and Maine twenty-nine—while fifteen insist that there must be two of the four-wheel trucks. The legislators at eight commonwealths have solemnly decreed that caboose platforms be fixed at twenty-four inches in width, Illinois and Missouri require thirty inches, while Iowa and Nebraska are content with eighteen and with twenty inches respectively. A legislator’s lot cannot be an entirely happy one when it comes to determining these details of railroad equipment. But then compare his lot with that of the man who must operate the railroad—who finds that one state compels the continuous ringing of the locomotive bell while a trainis passing through one of its towns; despite the fact that an adjoining state makes such an act a criminal offense. The life of a man who must operate a railroad over some seven or eight of these states is certainly cast upon no bed of roses.[18]
Yet these are but the smaller troubles which await him. Take the question of the so-called “full-crew” law: Beginning only a very few years ago a wave of legislation swept over the country, compelling the railroads to increase the number of brakemen that they carried upon each of their trains. The carriers protested bitterly against the measure. They said that it was arbitrary, expensive, illogical, unnecessary. But it was indorsed by the labor organizations, and the politicians fell in line. Twenty-two states passed the law. Governors Foss of Massachusetts, Cruce of Oklahoma, and Harmon of Ohio vetoed it. So did GovernorHughes of New York. Later Governor Sulzer of New York signed it. It also became operative in Ohio. The people of Missouri, speaking through their referendum, threw it out. But in twenty states it became and remains statute—a greatly increased operating charge against the railroads which operate through them. The “full-crew” law in Pennsylvania, in New York, and in New Jersey costs the Pennsylvania Railroad an extra $850,000 a year—five per cent, if you please, on $17,000,000 worth of capital.
The “full-crew” legislation has been followed more recently by an attempt at legislation regulating the length of trains—freight trains in particular. Some of the men who engineered the first crusade have been responsible for the second. They have volunteered the suggestion that the railroads have sought to offset the effects of the “extra crew” by lengthening the trains. And they have countered by proposing statutes suggesting that all freight trains be limited to fifty cars, about half of the present maximum.
To the average man this will seem as logical as if the state were to step in and tell him how long he must take to reach his office in the morning or how long he must wear a single pair of shoes. To the railroader the injustice of the thing comes home even more sharply. For these ten years or more he has been working to increase the efficiency of his plant. He has believed that one of the straightest paths to this end has been in increasing the capacity of his trains—just as the carrying capacity of merchant ships has steadily been increased. He has made this possible by enlarging hislocomotives and his cars, by laying heavier rails, by rebuilding his bridges and by ironing out the curves and reducing the grades in his tracks, by multiplying the capacity of his yards and terminals—all at great cost. These things have made the 100-car, 5,000-ton capacity freight train not merely a possibility, but to his mind an economic necessity as well. And this despite the interesting opinion of Mr. Harrington Emerson which I have given in an earlier chapter.
Last winter, when the state of Illinois seriously considered the legislation limiting train-lengths, the president of one of its greatest railroads went down into the southern part of the state and said:
“Do you wish us to discard these strong new locomotives that we have been building? Do you wish us to return to the small engines of a quarter of a century ago? It would be inefficient, wasteful to use our modern locomotives for the short-length trains. And sooner or later you would have to bear the cost of the discarded equipment. State laws may be erratic. Economic laws never are. They are as fixed as the laws of nature or of science.”
And the state of Illinois took heed of what this man and his fellows said and killed the piece of ridiculous legislation. But it is by no means killed in some of the other states of the Union.
The conflicts between state authorities that we noticed already have borne directly upon the railroad’s earnings. The conflicting intrastate rates have borne far more deeply and far more dangerously upon them.Indiana long since fixed the demurrage penalty at one dollar a day for each car which a railroad failed to furnish a shipper; North Dakota made it two dollars; while Kansas and North Carolina fixed it at five dollars a day. Unscientific is hardly the word for such rate-making. And how shall one term Kansas’ action, withholding passenger-fare legislation until she found whether or not the supreme court of Nebraska would permit the two-cent-a-mile bill of that state to stand?
If these rank discrepancies in the manhandling of rates by the various states affected only their own territories it would be quite bad enough. Unfortunately they play sad and constant havoc with the interstate rates.[19]These are delicate and builded, many times,upon local or state conditions. And this despite the fact that the vast majority of freight traffic is interstate, rather than intrastate. The majority of the grain from the farm lands of Nebraska or Minnesota is not destined for Omaha in the one case, or Minneapolis in the other; yet these sovereign states take upon their solemn shoulders the regulating of grain rates—to the ultimate discomfiture and cost of the other portions of the land.
I have but to refer you to Justice Hughes’s decision in the so-called Minnesota rate case. He showed how this arbitrary local outgrowth of the obsolete doctrineof states’ rights worked to the utter and absolute detriment of the nation as a whole. And yet in the six long years while that case was pending the Great Northern and Northern Pacific companies lost more than $3,000,000—a sum of money never to be recovered from their shippers—as a result of the state’s unsustained reductions in freight rates.[20]No better argument has ever been framed for the nationalization of our railroads, for making the powers of the Interstate Commerce Commission absolute and supreme.
No wonder, then, that the railroaders are praying that a way may be found and found soon for lifting the entire authority over them out of the hands of the forty-five present state boards of control—who neverhave agreed and who apparently can never be made to agree on any one form of procedure—and placing it in the hands of the very competent regulating board down at Washington, enlarged and strengthened for its new burdens. The Interstate Commerce Commission has never shown a tendency toward freak rulings. Its time has been taken with genuinely important matters. On these it has raised itself to its present high degree of efficiency. It has shown itself capable of studying the details of complicated transportation problems and rendering decisions of great practical sense.
But the scope, and therefore the efficiency, of the Interstate Commerce Commission are closely hemmed in by existing laws. The latest “crisis” between the railroads and the four great brotherhoods of their employees brought this limitation sharply to the fore. It is therefore equally essential that the power and scope of the Federal commission be broadened as well as being made superior to those of the state regulating boards.[21]And it is gratifying to note the progress thatPresident Wilson already is making toward the first of these necessary immediate reliefs to the railroads of the land.
If President Wilson shall succeed in persuading Congress that the entire control of the railroads should be placed in the hands of an enlarged and strengthened Interstate Commerce Commission, he will have earned the thanks of every man who has made an honest study into the situation. Such a commission, clothed with the proper powers, could and would do much not only toward relieving the railroads’ immediate necessities in regard to both physical betterment and the enlargement of their pay-rolls, but in enabling them to grasp some of the opportunities which we have outlined in previous chapters—opportunities requiring a generous outpouring of money at the beginning. If I mistake not, public sentiment is going to demand that, if the railroads be granted the relief of unified regulation, they shall be prompt in their acceptance of at least some of these great avenues of development.
We have heard much in late years of the banker control of our railroads and of absentee landlordism in their management. The two things are not to be confused. Banker control is not, in itself, a bad thing. Absentee landlordism invariably is. There are good stretches of railroad in every part of the country that today are failing to render not alone the proper incomereturns to their owners but, what is worse, service to their communities, because of this great canker, this lack of immediate executive control and understanding. And it is significant in this close connection of two phases of the railroad situation that it was the banker control in New York of the one-time Harriman system—the Union Pacific, the Southern Pacific, the Oregon Short Line, etc.—that gave to it at one fell swoop, five presidents—one at San Francisco, one at Omaha, one at Portland, one at Tucson, and one at Houston—each a young, vigorous man equipped with power and ability. The good effects of that far-seeing move—that instant wiping out of the charges of absentee landlordism that were being lodged against the Harriman system—are still being felt.
It is not banker control that is essentially bad for our railroads. It is banker control together with an utter lack of vision, that has cost them so many times their two greatest potential assets—public interest and public sympathy. Banker control plus vision may readily prove itself the best form of control for our carriers. And that our bankers do not entirely lack vision may be argued by the far-seeing and opportunity-grasping way in which our bankers of the newer school are today reaching for American development in South America, in China, in the Philippines, and in other parts of the world.
Back of the President, back of the Newlands committee and its rather dazzling sense of importance, sits the nation. It is far superior to any mere committees of its own choosing and it is weighing the entire railroadsituation as perhaps it never before has been weighed. It is considering the enlargement and the strengthening of the Interstate Commerce Commission—together with it a feasible method for the Federal incorporation of our roads—this last a vital necessity in the mind of any man who has ever tried to finance an issue of securities for an interstate property with each separate state trying to place its own regulations—in many cases both onerous and erratic—upon them. With the spirit of Congress willing, there still remains the very large question of how far its power would extend, in attempting either to reduce the power of the state boards or to make them more amenable to the Federal commission. Our states have been most jealous of their sovereign rights. And it is easy to conceive that their aid and cooperation—so very necessary to the success of the entire ultimate project of the nationalization of our railroads—is not to be obtained by the mere wishing.[22]
President Wilson has set the beginnings for the plan and set them well. As I write it is still up to Congress to undo its mischievous legislation which, if it is made to include an eight-hour day, should render a genuine eight-hour day, one applicable to every class of railroad employee—although it would be difficult to imagine a railroad superintendent or general manager or president quitting at the end of the short-term service. They are schooled to harder things.
And with the eight-hour day must come these other things to which we have already referred, not once but several times. First among these are the matters soclosely correlated in President Wilson’s program that they cannot be separated from the eight-hour day: arbitration—compulsory arbitration, if you please—the strengthening of the power of the government to seize the railroads and operate them in a time of national panic or military necessity, the enlargement of the powers and the personnel of the Interstate Commerce Commission. With all these things accomplished, and the situation just so much strengthened, it will then become the duty of the railroads to reach out more generously toward their opportunities for further development as the transport service of a great and growing people. It will be necessary for them to attract, to train, to reward new executives of every sort; to further their credit by deserving credit, to show outwardly in a more potent way the thing that so many of them have believed they inwardly possess—true efficiency, both for service and for growth.
Please do not forget this great point of growth—of development, you may prefer to put it. In my mind, men, institutions, nations, even railroads never stand still; they either grow, or else they decline, they shrink, they die. But the Railroad, as the greatest servant of a great people, cannot die without bringing death to the nation itself. Therefore hemustgrow. He must plan. He must announce his plans. He must bring Public Sentiment to his aid. Law can do many things—but few of these latter ones. Public Sentiment may accomplish every one of them, and almost in a crack of a finger. No wonder that Capital—that conservativefellow—longs to have him stand at the bedside of the Railroad.
The sick man is not without his ambitions—you may be sure of that. He sees his opportunities, perhaps more clearly than ever before in the course of his long life. He is anxious to be up and at them. But before this can be done, some of these things, which we have outlined so briefly here, will have to come to pass. There are reckonings to be made, huge doctors’ bills to be met—and the American public will have to help meet them.
The alternative?
There are many panaceas suggested; but I fear that most of these are but nostrums. Ingenious, many of them are, nevertheless. And some of them come from men who speak with both authority and experience. One man proposes to have the entire Federal taxes paid through the railroad, which, in turn, would recoup itself through its freight and passenger rates. He makes an interesting case for himself. Another suggests a Federal holding company for all the railroads of the United States and makes his suggestion read so cleverly and so ingeniously that you all but forget that he is drawing only a thin veil over government ownership. Of government ownership I am not going to treat at this time; not more than to say that to almost all American railroaders—big and little, employers and employed, stockholders and bondholders—it represents little less than death itself to the sick man of American business. In my own opinion it is, at the least, a major operation—an operation whose success is extremely dubious.
INDEX
Adamson Bill, object and effect of,235-239.Aliens, value of, in railroad work,74ff.American Railway Association, cooperation of, with government,211.Arbitration, compulsory,240,258;in wage disputes,57ff.Architectural problems in relation to increase of passenger traffic,107ff.Atlantic coast, service of railroads in defense of,192.Automobile: effect of the, on railroad traffic,134ff.;as a freight feeder of the railroad,158;operated on railroad tracks,151.Betterments and additions, amount needed for,18ff.,22,26.See alsoRailroads.Branch-lines and their relation to automobile competition,142;opportunities neglected by railroads,152,156.Brotherhoods,90ff.;influence of, on wages,95, n.;strength of,238.See alsoLabor.Canals, advantages of, to railroads,176.Capital,4;relation of, to earnings,17;Conductor, efficiency of the present-day,45.Cooperation of public vital to railroads,179.Cost of living, how influenced by railroads,6.De Luxetrains, economic wisdom of,228.Deficits, how met,18.See alsoRailroads.Droege, John A.,211,214.Efficiency,12,15;relation of, to economy,13.Eight-hour day legislation,220,236,257.Electricity as motive power,105,125,129;advantages of,113ff.;in Boston,114;in Chicago,117;in Philadelphia,119;to freight traffic,131;to railroad systems as a whole,129,132;to suburban systems,121;transformation of gravity pull into motive energy,131.Elliott, Howard,179.Embargoes: cause of,9;effect of,15,159;motor truck, value of, in case of,160.Emerson, Harrington,99.Employees, number of, in interests allied to railroads,5;number of, on steam railroads,5.Engineer, efficiency of the present-day,33ff.Engineering problems in relation to increase of passenger traffic,109.Excess-fare trains,222,226;pending inauguration of, on western railroads,227.Extensions, difficulty of raising funds for,26, n.Freight and passenger traffic, economic difference between,232.Freight cars, number and condition of, in use,24;number needed per year,22, n.See alsoRailroads.Freight feeder for railroad, automobile and motor truck recommended as,158,162.Freight gateways as housing places of affiliated industries,166.Freight terminals, development of,169.Full-Crew Bill, the,219;legislation regarding,247.German railroads, efficiency of,188.Government ownership,259.Grade crossings, extent of removal of,20-21.Grain, cost of transportation of,8.Grand Central Station, the,107,110.Gray, Carl R.,179,211.Harriman, E. H.,179.Harrison, Fairfax,211.Hill, James J.,19,21,179.Hine, Major Charles,212.Holden, Hale,179.Hustis, James H.,179.Interstate Commerce Commission, effectiveness of,253;enlargement of powers of,258.Labor, bonus payments,97ff.;brotherhoods, affiliation of labor with,90;improvement in quality of,31;relations of organized, with the railroads,30,56;unorganized labor, interests and responsibilities of,62ff.;wage adjustments between railroads and employees,56ff.;wages of,92ff.Labor question, the,3,4.Legislation, conflict of state,245ff.Liquor, opposition of railroads to its use by employees,31.Locomotives, number ordered per year,24, n.Markham, Charles H.,179,211.Mellen, Charles S.,196.Military Reserve Corps among railroad men,212.Negro, value of the, in railroad work,73.Nonunion labor, employment of,238.Noonan, William T.,179.Operation, what it involves,18.See alsoRailroads.Pacific coast, service of railroads in defense of,200.Panic of 1907, effect of,26.Passenger and freight traffic, economic difference between,232.Passenger-mile, statistics of,17;unit of traffic,17.Passenger rates, increases in,220;prospects for future increase in,229,233.See alsoRailroads.Passenger service, state of,25, n.See alsoPassenger-mile.Pullman cars, comparison of, with European cars,224.Pullman Company, control by, of sleeping and parlor cars,224.Railroad fares, effect of automobile on rate of,139ff.Railroads, and national defense,181;army operation of, in case of war,207;as military lines of communication,191ff.;banker control of,254;betterments and additions, expenditures for,18;capitalization of,14;car famine now existing,22, n.,23;condition of, in case of present-day war,185;in Middle West and South,19;congestion, effect of, on,15;cooperation of public vital to,179;cost of living, how affected by,6;credit of, affected,16;debt of American farmer to,8;deficits, how met,18;depreciation fund, an asset, when,28;development extent of, yet needed,21;difficulties under which they labor,2;double-track, military value of,202;needed,21;earnings of, in relation to capital,17;efficiency, as applied to,12;emergencies, ability of, to meet,214;employees, number of, on,5;equipment,25;federal incorporation of,256;flexibility of equipment of,210;freight and passenger traffic, economic difference between,232;German military use of,188;governmental operation of, in case of war,206;inadequacy of, to meet needs of nation,15, n.;labor and tax,31ff.;locomotives, condition of, in operation by,25, and note;losses, extent of,29;necessity and value of, to the country,217;operating, cost of, in relation to capital and earnings,17;opportunity of,105;passenger rates, part played by, in cost of operation,232;part played by, in Civil War,182;possibilities of development for,151ff.,158,163,166,171,176;receiverships of,10-12;regulation of,235,240ff.;rehabilitation, extent of, needed,29;relations of, with employees,30;resources of, need for study of,177;service of, in defense of Pacific coast,200;service of, in defense of Atlantic coast,192;superiority of, in 1898, over those in Civil War,184;seizure of, by government,258;trained officials necessary for efficient handling of,208;upkeep, failure of, to meet,23;value of, to the nation, in time of war,181;wealth of the nation, how affected by,6;See alsoLabor.Rate increases, need of,219.Regulation of railroads,4,235;confusion resulting from present methods,237;essential and advantageous,241ff.;unified,240.Section boss, the,62ff.See alsoLabor.Standard unit container, a factor in freight traffic,163.See alsoRailroadss. v.“Possibilities of development.”State railroad commissions, ineffectiveness of,244.Station agent, the,62ff.,77ff.See alsoLabor.Supervisor, the,66.See alsoLabor.Telegraph, value of the, in time of war,181.Telephone, effectiveness of the, in national crisis,181.Terminals, development of,106.Ton-mile, statistics of,17;unit of traffic,17.Tonnage-mile costs,101.See alsoLabor;Wages.Track foreman, the,62ff.See alsoLabor.Traffic tides and congestion,217.Trains, legislation regulating length of,101,248.Union Pacific Railroad, military value of,200.Vanderlip, Frank A.,32, n.“Vital area” of country, how served by railroads,192,195.Wage adjustments and arbitration,56ff.Wages, bonus payments,97,102;hour basis, the,100;maximum and minimum rates of,240;mile basis, the,100;“piece-rate” principle, the,100ff.;rate of, discussed,92ff.See alsoLabor.Waterways: development of inland,171;objectionable provisions of navigation law,172;vessels, need of,175.Wealth of nation, how affected by railroads,6.Willard, Daniel,179,211.
Footnotes:
[1]“Not only have the developments of the last fifteen months disclosed the enormous productive capacity of the people and industry of this country, but they have also shown that when it is being fully utilized the facilities of the railroads are not adequate to the demands which it causes to be made upon them. To sum up, then, the industry and commerce of the country grew rapidly throughout the ten years ending in 1907, and almost throughout that period the facilities of the railroads were increased so rapidly that they proved adequate to the demands made upon them. At last, however, the traffic did catch up with the facilities, the result being the great car shortage of 1906-1907. The year 1916, unlike the year 1906, marks the beginning, not the approach of the end, of a period of industrial and commercial activity and growth. There will doubtless be a painful and violent readjustment after the war ends, but there will be another period of industrial expansion after the readjustment is passed.
“Since our railroad facilities have proved inadequate at the beginning of the present period of prosperity, will they not prove inadequate to the demands which will be made upon them as soon as the period of readjustment is over. And if they prove inadequate at the beginning of a period of prosperity, what kind of a situation will they cause to develop if industry steadily grows more active and traffic heavier, as it did for several years prior to 1906?
“There seems to be only one rational answer to this question. No matter how favorable to a period of prolonged and great prosperity other conditions may be, progress in industry and commerce will be sharply arrested, and there will not be any long continuance of prosperity, if the facilities of transportation are not greatly increased. The net operating income of the railroads during the year now closing has been unprecedented, probably averaging more than six per cent on the investment in road and equipment. In the past whenever it has averaged over five per cent there has resulted a largely increased investment in new facilities. In view of the large net earnings now being made the expenditures during 1916 for new mileage and trackage, for new equipment and other improvement have been relatively small.”—Railway Age Gazette.
[2]Frank A. Vanderlip, President of the City National Bank, New York city, in an address delivered in Washington, late in October, 1916, called attention to the fact that in the year just closing, $400,000,000 had been invested in new industrials in America, but practically not a dollar for railroad investment. The only new capital which the railroads have been able to obtain has been through borrowing. On top of this Congress has taken the extraordinary responsibility of advancing the wages of the railroad trainmen. The extent of the railroad business is such that it ought to be building 200,000 freight cars a year. Last year (1915) they built 74,000, in 1916 the total was little, if any, greater. And week after week the reports are published, showing the car famine in America.
[3]“In the five years, ending with 1906, the number of locomotives ordered by the railroads of the United States was almost 22,400, or almost 4,500 per year. During the five years, ending with 1916, the number ordered has been less than 14,000, or about 2,800 a year.
“In the five years, ending with 1906, the total number of freight cars ordered was almost 1,100,000, an average of over 218,000 a year. During the five years, ending with 1916, the number ordered has been only about 740,000, or an average of about 148,000 a year.”—Railway Age Gazette.
[4]The winter which ushered in 1917 has seen not only great freight congestion, and in consequence many embargoes, but a serious impairment of passenger service, particularly in the northern and eastern sections of the United States. This impairment has taken the form of constant and irritating passenger train delays. These have come despite a winter more mild and open, particularly in the East, than we have had for a number of years. They have been so constant and so pronounced as to arouse much comment as to their possible causes. By some they have been attributed to labor disaffection, and by others, to the congestion caused by the abnormal movement of freight. But the railroaders who know best feel that the real cause is in “engine failure.” In the hard years of stringent economy through which our carriers have just passed they not only failed to purchase sufficient new locomotives, but to repair and maintain properly the ones already in their roundhouses. And in February, 1917—after eighteen months of grilling traffic—these locomotives have begun to bend and break under the strain. After all, a locomotive is not so very much different from a man. There comes a limit to its endurance.
[5]“Some question has been raised repeatedly as to whether the condition of railroad net earnings really has been the cause of the decline in new construction, and in the acquisition of new equipment. For example, in the hearings before the Newlands Committee at Washington some of the members of the committee have called attention to the fact that the stocks of many of the better managed and more prosperous railroads have steadily sold above par, that their bonds also have commanded what seem to the questioners figures which indicate a good market for bonds, and it has been asked whether any cases can actually be cited where strong railroad companies have sought and have failed to sell at good prices securities to raise money for improvements. Points of this kind having been raised, theRailway Age Gazetterecently addressed a letter to the presidents of several of the leading railroads of the country, asking them to give specific examples of how the condition of earnings and of the money market during recent years has interfered with their raising money for extensions and improvements. There has not been time as yet for replies to all these inquiries to be received. Some have been received, however, and they contain significant information. One letter which has been received is from the president of an important and relatively strong, prosperous and conservatively managed railroad in the Northwest. He says in part:
“‘This company has been for some time, and is now desirous of building about four hundred miles of extensions of its railroad in sections of the Northwest that are not at present adequately served by transportation facilities; but, because of its inability to dispose of its securities, at a price that, as a business proposition, would warrant their sale, has been unable to make these much needed extensions.
“‘Until within the past few years this company was able to dispose of its four per cent bonds at approximately par, and in common with other first class securities, these were considered by the purchasers to be a good investment; but in the last few years we have found it practically impossible to dispose of these bonds at a price that would meet the demands of an economical and proper administration of its financial affairs.
“‘In 1915 in order to secure funds required for needed improvements and betterments, we were compelled to issue bonds drawing five per cent, and for improvements on our Chicago division we were unable to find purchasers for its bonds, and were compelled to issue notes due in three years, bearing interest at five per cent for that purpose.’
“Another letter which has been received is from the president of one of the greatest railroad systems, not only of the eastern part of the United States, but of the world, a system which has been managed with notable conservatism and ability, and which has regularly paid substantial dividends. The president of this railroad says:
“‘Replying to your letter regarding cases where railroads had found it impracticable to do any new construction work because of their inability to get the public to invest in their securities, much depends upon how this question is put. Railroads cannot issue bonds and stock and throw them on the market to discover whether the public will take them or not. I know of no instance where any company with sound credit and good earnings had any difficulty in selling its securities to the public, provided the rate was satisfactory, compared with others, but there have been very many cases where the railroads have discovered, through consultation with investors and bankers, that there was no market for railroad securities, except on terms too onerous for the railroads to accept, and, further, because many railroads, including our own, suffered such a reduction in earnings that they were not warranted in offering securities to the public or proceeding with large items of construction work or large orders for equipment.
“‘For instance, in the case (of an important subsidiary property), I know that for a long period we had to defer selling bonds on more than one occasion, although the construction work was proceeding, because market conditions were not favorable. Its mortgage bonds would be guaranteed by (its owners), but in lieu of selling them, we temporarily authorized short-term borrowing at lower interest rates. For the period 1908 to 1915 the general experience of most of the railroads was that they had not sufficient business, or earnings, to furnish a credit basis to make proper additions to their property and equipment, nor was there sufficient prospect of any increased traffic to justify proceeding with any great expenditure program. During this period, short-term financing had to be resorted to because of the impossibility of selling capital stock on any basis, or mortgage bonds, except on onerous conditions.’”—Railway Age Gazette.
[6]“The bitter fight now raging as to the content and enforcement of the Adamson Act should not make us lose sight of certain things which are more fundamental in railroading than either wages or hours. The transportation service of this country has been the best in the world, partly because it gave us a free field for able and ambitious men. Rising from the commonest sort of day labor, these executives command the respect and obedience of the rank and file, but sometimes forget to cooperate. That is the root cause of the present-day troubles. It is natural that a corporation president should stand for the interests of the company, but if the men are to be bound up heart and soul in loyalty to the work, then their interests are, and must be, part of the interests of the company. A railroad cannot be run exclusively by presidents, superintendents, and managers; there must be engineers and firemen of training and long experience. As a practical matter, this means that these occupations must hold many capable men during their entire working lives. In a country of free institutions this situation cannot be held down by autocratic rule. If the men have no say in the company, they will try to get one in the union. The great mistake of American railroad presidents during the last thirty years has been to force this growth of factionalism, to make it plain that the union was the means by which the men could get ahead. The railroad brotherhoods secured one concession after another in hours, wages, and operating rules, concessions which the nonunion men could not get. The limits of this method have about been reached. Cannot railroad executives save the future by definitely abandoning this policy of quarrel and drift, by making themselves the true leaders of all their men? We think they can. They have had too much of a caste point of view and have been too much absorbed in other things. It is time to change. The general alternatives have been well stated by Edward A. Filene, a leader of the new mercantile New England, in these words:
“‘If American employers are farsighted they will begin to put as much hard thinking into the problem of men as they have put into the problem of machinery, for, finally, that contentment of labor which is based upon a welfare that springs from justice and frank dealing is the only soil from which permanently prosperous business can spring.