Summary of Gross Earnings of the Railways During the Calendar Years 1907, 1908 and 1909, by Months and Half-Yearly Divisions.190719081909January$199,000,000$173,611,809$183,139,419February178,300,000161,085,493174,425,832March211,700,000183,509,935205,700,012April214,800,000175,071,604196,993,104May224,800,000174,527,138201,572,072June223,000,000184,047,216210,356,965Half year$1,251,600,000$1,051,853,195$1,172,185,404July$228,672,250$195,245,655$219,964,739August241,303,469206,877,014236,559,877September234,386,899219,013,703246,065,955October250,575,757233,105,042260,613,053November220,445,465211,281,504247,370,954December194,304,969205,455,170222,006,183Half year$1,369,688,809$1,270,978,038$1,432,580,761Total2,621,288,8092,322,831,2332,604,766,165Average mileage227,000231,584234,950Earnings per mile$11,548$10,030$11,086
Summary of Operating Expenses of the Railways During the Calendar Years 1907, 1908 and 1909, by Months and Half-Yearly Periods, with Ratios to Gross Earnings.190719081909January$134,225,000$132,502,830$132,659,037February121,500,000123,773,906125,229,071March142,425,000128,200,065136,086,299April144,990,000124,284,164134,612,576May151,740,000123,932,568135,846,301June150,525,000124,208,561136,160,775Half year$845,405,000$756,902,094$800,594,059Ratio67.7%72%68.3%July$152,992,445$127,978,304$141,613,967August156,837,914131,557,475146,175,338September156,631,780137,155,143150,621,999October166,999,266144,195,330156,628,513November154,150,468136,809,421153,043,599December142,631,008136,867,622153,699,578Half year$930,242,881$814,563,295$901,782,994Ratio68%64.1%62.9%Total$1,775,647,881$1,571,465,389$1,702,377,053Ratio67.8%67.7%65.4%Net operating revenue$845,640,928$751,365,844$902,389,113Taxes83,156,18886,872,88592,964,510Net operating income$762,484,740$664,492,959$809,424,603
Through these tables the reader is able to trace the upward course of railway receipts in 1907 to their culmination in October of that year; their rapid drop to February, 1908; through the hard summer following to the gradual recovery of 1909, until in October last they reached the highest monthly total on record.
Concurrently with this story of the depression of 1908, the tale of railway distress and of the drastic measures adopted to meet the emergency can be read in the half-yearly ratios. The ratio for the fiscal year 1906-'07 was 67.53%, and the shadow of approaching trouble was shown in an increase of this ratio to 67.7% for the first six months in the table. By December this ratio had risen to 73.40%. The enormous receipts of the autumn months held the ratio for the six months down to 68%. In February, 1908, it marked the high and ruinous figure of 76.84, and from that point the trend, due to severe retrenchments, was steadily downward until it touched 60.10% in October, 1909.
The ratio of 64.1% for the second half of 1908 is the true measure of the ability of the railways to cut their expenditures to fit the times. But they were on bed rock, as the succeeding months of small receipts proved, when the ratio went up to 72.43% in January, and averaged the high figure of 68.3% for the first six months of 1909. The heavy receipts of October and November without a corresponding expansion of expenditures resulted in thephenomenallylow ratios of these months. But the severity and necessities of operating conditions in December, 1909, ran the ratio of expenses up to 69.23%.
The net earnings for the three years under consideration are apt to lead to erroneous conclusions as to the effect of the depression. Neither the loss in 1908 nor the recovery in 1909 reflects the true swing of the pendulum. The one minimizes the loss, because it conceals the cessation of all constructive work, the curtailment of betterments and improvements, and the postponement of all purchases for replacements except of the most immediate and imperative nature; the other exaggerates the recovery because of heavy receipts without the resumption of the concurrent expenditures that should attend them. The railways in the fall of 1909 were simply doing business on the margin of facilities provided during the fat months of 1907 in anticipation of a continuation of prosperous times. Some idea of the extent of this margin may be gained from the parking of 400,000 freight cars in the yards with 200,000 in the shops in April, 1908. At no time since has this margin been wholly exhausted.
But a continuation of traffic on the scale of the past six months will necessitate an immediate expenditure of $100,000,000 to $150,000,000 for the replacement of freight cars alone.
Income Account for the Calendar Year 1909.
The monthly summaries issued by the Interstate Commerce Commission from time to time afford the details for the construction of the following statement of the transportation revenues and expenses of the railways for the calendar year 1909, from which the averages per mile and the ratios have been computed on the basis of 234,950 miles of operated line.
Statement of Operating Receipts and Expenses of the Railways of the United States for the Calendar Year Ending December 31, 1909, with Amounts per Mile and Ratios.(Average miles of line operated, 234,950.)(a)AmountPer MileRatio to Gross EarningsReceipts from:Freight$1,796,258,314$ 7,64568.96Passengers601,722,9592,56123.10Other transportation revenues182,706,0907777.01Non-transportation sources24,080,802103.93Total revenues$2,604,766,165$11,086100.00Expenses:Maintenance of way and structures$ 339,167,666$ 1,44813.06Maintenance of equipment387,155,0801,64414.83Traffic expenses53,257,4082232.01Transportation857,339,0373,65032.92General expenses65,441,0532802.52Unclassified16,809——Total expenses$1,702,377,052$ 7,24565.35Net operating revenues902,389,1123,84134.65Profit from outside operations3,367,71314—Net revenues$ 905,756,825——Taxes92,964,5103953.56Net income$ 812,792,315$ 3,460(a) At the close of the year the reports covered 236,166 miles of operated line.
Unfortunately there are no similar figures for the calendar year 1907 with which comparisons may be made, but the official returns for the year ending June 30, 1907, when railway earnings reached their maximum before the panic of that year, afford the following instructive comparisons:
Year toYear toJune 30, 1907Dec. 31, 1909Gross earnings$2,589,105,578$2,604,766,165Per mile11,38311,086Operating expenses1,748,515,8141,702,377,053Per mile7,6877,245Ratio67.5365.35Net revenues840,589,764902,389,112Per mile3,6963,841Taxes80,108,00692,964,510Per mile367395
It will be perceived that while the earnings in 1909 exceeded those of 1907 by over 15½ millions they were almost $300 less per mile, while the operating expenses were actually $442 less per mile. The decreased operating ratio in 1909 bears unmistakable testimony as to where the increase in net revenues came from.
With an increase of nearly 9,000 miles of line only $339,167,665 was spent on maintenance of way and structures in 1909 against $343,544,907 in 1907, and the urgent demands of returning activity made the expenditures on this account liberal in comparison with those for the year ending June 30, 1909, i. e. $311,368,083, or $1,336 per mile. It will be years before the railways recover from the economies forced on them by the loss of $300,000,000 in revenues in 1908.
Unregulated Regulation of American Railways.
Today the railways of the United States are "cribb'd, cabin'd and confined" in their services to the American people, not so much by the laws for their regulation as by the spirit in which those laws are administered. To the general tenor and purposes of statutory regulation the railways have become largely reconciled; but from the spirit in which the laws are sought to be enforced, there has to be continuous appeal to the courts and to the public sense of justice.
Regulation of railways has been persistently interpreted by political Commissions to spell reduction of rates and exacting conditions that would drain the purse of Fortunatus. Between 1889, when the Interstate Commerce Commission's statistics first became a valuable index of railway operation, and 1909, the average rate per ton mile has fallen from 9.22 to 7.55 mills. On the freight tonnage of 1909 this meant a reduction of over $372,000,000 in the yearly revenues of the railways. The railways suffered that loss from their income when they needed every cent of it to maintain the people's highway in a condition to transport the people's ever-growing traffic.
The railways lost it, but who got it? The people? Search the market reports of the land, from Eastport to San Diego, and you will find incontestable proof that not one cent of these millions reached the pockets of the people, in whose name all regulation of railways is demanded and for whose benefit all reductions are claimed. The average rate on all commodities has gone down, the price of every commodity transported by the railways has gone up. Who has pocketed the difference?
There can be only one answer—the producers, the shippers and the traders. Today nine-tenths of the increased cost of living in the United States is chargeable to this ever vigilant and aggressive coalition. For everything the railways must buy—labor, supplies, money—they have to pay the advanced prices of the day. But the protests of the shippers and the rulings of the Commission forbid their raising a rate or adopting a money-saving economy. They attempted to readjust freight rates in 1900 one-fiftieth of a cent per ton mile above a ruinously low average and the outraged shippers secured the passage of the Hepburn Act!
How the federal Commission and shippers work together for the so-called regulation of the railways is evidenced in the unbroken tenor of the decisions handed down by the Commission. Out of 357 decisions printed during the year 1908-09, no less than 219, or 61.3%, were orders granting reductions of rates or reparation for charges found comparatively excessive or unreasonable. In not one case in a score was the rate found excessive or unreasonable per se. In only one case out of the 357 was an increased rate ordered, and this was done reluctantly and as unavoidable.
Although the decisions are for the most part the unanimous finding of the Commission, the following table distributes the opinions of the year among its members into dismissals and reductions or reparations among the Commissioners writing them:
Opinion byDismissing ComplaintsGranting Reductions or ReparationChairman Knapp2120CommissionerClement1629"Prouty1340"Cockerill2020"Lane2042"Clark2928"Harlan1940Total138219Per cent39.761.3
Some of the cases upon which the Commission is called on to pass are so trivial as to be beneath the notice of a justice's court, while others involve issues so momentous as to threaten the whole structure of railway rates by which the unparalleled prosperity of the country has been made possible.
But the number of cases reaching the Commission for adjudication is insignificant compared with the grist of informal reparationorders that runs an endless stream through its regulating rollers. In the twelve months from December 1, 1908, to November 30, 1909, these aggregated no less than 2,223 separate orders involving amounts all the way from 47 cents to $14,717.64, as seen in the following orders:
7100.Larabee Flour Mills Companyv.Atchison, Topeka & Santa Fe Railway Company. September 11, 1909. Refund of $0.47 on shipment of cotton bags from Kansas City, Mo., to Hutchinson, Kas., on account of excessive rate.3629.Lackawanna Steel Companyv.Central Railroad Company of New Jersey. June 26, 1909. Refund of $14,717.64 on shipments of spiegeleisen from Newark, N. J., and Hazard, Pa., to Buffalo, N. Y., on account of excessive rates.
7100.Larabee Flour Mills Companyv.Atchison, Topeka & Santa Fe Railway Company. September 11, 1909. Refund of $0.47 on shipment of cotton bags from Kansas City, Mo., to Hutchinson, Kas., on account of excessive rate.
3629.Lackawanna Steel Companyv.Central Railroad Company of New Jersey. June 26, 1909. Refund of $14,717.64 on shipments of spiegeleisen from Newark, N. J., and Hazard, Pa., to Buffalo, N. Y., on account of excessive rates.
Multiplying these awards by the number of orders enables the reader to imagine the range of their respective pettiness or portentous possibilities.
It is doubtful if the American people, or even the Interstate Commerce Commissioners themselves, realize how the formal decisions and informal orders of the Commission are slowly but surely whittling away the safe margin of American railway profits. At the rate of two decisions every three days and forty informal orders per week, the work of incipient confiscation proceeds with remorseless enthusiasm.
With the best intentions in the world the present Interstate Commerce Commission is so enmeshed in its own anti-railway traditions, so enamored of the administrative control theories of its statistician, so covetous of unbridled, irresponsible authority to tear down where it has no constructive capacity, that anything like co-operation between the Commission and the railway management for the public good seems out of the question.
To the writer it appears that only blind rejection of facts can find any conserving element in the regulation of railways as at present administered. Signs of a helpful disposition in official acts are entirely lacking. The Senate and House calendars groan under bills for the further regulation and restriction of the railways, but not one contains a promise of relief. For not one is there a genuine public demand.
And what is the situation as this is written? It can be stated in a few lines. As a consequence of the drop of $300,000,000 in gross earnings in 1908, the railways in 1908 and 1909 cut $277,000,000 out of their expenditures. This was done mainly at the expense of maintenance of way and structures and in a cessation in the purchase of equipment, but the so-called economies of postponedexpenditures permeated every line of railway extension, operation and replacement. In 1908, with 6,000 more miles of track to maintain, $18,788,217 less was spent for maintenance than in 1907, and in 1909 with 12,000 more miles of track $32,176,824 less was expended.
Between 1897 and 1907 the expenditures for maintenance of way increased from $159,434,403 to $343,544,907, or over 115%. This means an increase of approximately 8% a year, or at least $25,000,000 on present plant. Therefore at least $43,000,000 was withheld from this essential line of railway maintenance in 1908 and fully $82,000,000 in 1909, a total of $125,000,000. The saving on equipment was nearly as great and is dealt with in the body of the report.
A comparison of the income accounts for the month of October, 1907 and 1908, corroborates the foregoing statement as to the economies forced on the railways by the adverse winds of regulation and business depression.
Month of October19071909Earnings from operation$250,575,757$260,613,053Operating expenses166,999,266156,628,513Net earnings$ 83,576,491$113,984,540Operating ratio66.6460.10
The canker worm in this, the most promising flower of returning prosperity, is revealed in the abnormal ratio of 60.10 for October, 1909, or nearly 7% below the American average. Now this 7% on the revenues of last October means that in some way over $16,000,000 less than normal was expended on American railways in that month alone. And October, 1909, was only a sample of how railways had cut expenses for 24 consecutive months.
That this should be so, with no reduction in the scale of wages or the price of supplies, is, in the view of the writer, a situation of serious national concern. Happily he is not charged with any commission to suggest how or where the deferred debt of nearly $300,000,000 to efficient railway road and equipment is to be met. But that it must be met, to place the railways in as good condition as they were before the panic of 1907, when the cry was for more, not less facilities, does not admit of question. If it, together with the advance in wages now being adjusted, is to be met out of income, only an advance in freight rates can take care of it. If out of fresh capital, it can only be coaxed from the pockets of shrewd investorsby rates of interest that discount the risk attendant on the unregulated and irresponsible regulation of railway revenues, resources and responsibilities. And it is proposed to make an irresponsible Commission, unfamiliar with the necessities of the situation and unversed in the ways and means of raising capital arbiters of these necessities, ways and means.
All attempts to meet such a situation by legislation, unless it be directed to a reform of the instrumentalities of regulation, must prove ineffectual. In a broader, saner, more helpful administration of the laws already on the federal and state statute books lies the hope for the future of the great American transportation industry. "Whate'er is best administered is best."
The Bureau's Statistics for 1909.
Thus far what has been written has related almost wholly to the financial aspect of the transportation industry as presented through the monthly reports of the railways. While these in their way serve as an admirable barometer in keeping the public informed as to general business conditions throughout the Union, they throw little light upon the railway operations behind the financial results. They are absolutely dumb on the main question upon which all railway legislation and regulation should hinge—adequate and efficient public service.
In the following pages the Bureau attempts to remedy this omission, in the essential particulars for the year ending June 30, 1909. The reports from which its summaries have been compiled were received almost a month earlier this year than last, but the publication of the Bureau's statistics has been delayed in order to make the usual comparisons with the Official Statistics for 1908. The writer is advised from Washington that the fault for this unusual delay rests with the Government printer—whose office is overwhelmed with Congressional and departmental work—and not with the Interstate Commerce Commission or its Bureau of Statistics and Accounts.
For the first time, the reports to this Bureau cover the division of freight movement into the seven chief commodities; the separation of revenues from Mail and Express; the distribution of expenses for injuries and damages, and the summaries of expenses for maintenance of way and equipment, traffic expenses, transportation expenses and general expenses. It is believed that with the addition of these accounts the annual report of the Bureau has become so comprehensive as to warrant its publication hereafter at an earlier date, without waiting on the publication of the official statistics for the preceding year.
This year the Bureau has received reports from 368 roads operating 221,132 miles of line or approximately 94.4% of the mileage and carrying over 97% of the traffic of the country. Last year reports were received covering 216,460 miles. The increase of 4,672 miles fairly represents the actual increase of railway mileage in the United States for the twelve months.
In presenting these statistics, the writer has endeavored to make them as colorless summaries of facts as an earnest desire to arrive at the truth permits. Such comment as accompanies them will be confined to comparisons and elucidation and not to the furtherance of any personal theories.
For the sake of brevity, the Interstate Commerce Commission will be referred to herein as the "Commission"; the Commission's "Statistics of Railways in the United States" as "Official Statistics" and "the year ending June 30th" will be implied before the year named unless otherwise specified.
The statements as to foreign railways are compiled from the latest official sources available.
Here the writer wishes to record his personal appreciation of the assistance rendered by the executives and accounting officials of the railways, whose co-operation has made this report possible. In the midst of increasing burdens imposed on them in reporting to federal and state commissions and legislatures, the requests for information from this Bureau might have seemed excusably negligible. The completeness of the report itself testifies to the cordiality with which the Bureau's work is viewed.
Acknowledgments are also due to Federal and State officials for their uniform courtesy in responding to the many requests from this Bureau, and the writer has been much gratified to receive from the chief government railway official of one foreign country the assurance that he considers its Annual Report "one of the most comprehensive and useful compilations of statistical matter relating to railways that has come into his hands."
Slason Thompson.
Chicago, April 30, 1910.
According to the preliminary income report of the Interstate Commerce Commission for the year ending June 30, 1909, compiled from the monthly returns, the average railway mileage operated in the United States during the year was 233,002.67 miles; and the total mileage operated at the end of the year was 234,182.70.
The former total is made up of:Large roads operating 251 miles or more214,916.86milesSmall roads " 250 " or less16,801.52"Switching or terminal companies1,284.29"Total233,002.67miles
The returns to this Bureau, compiled from the annual reports for the same year, cover 221,132 miles, against 216,460 in 1908, an increase of 4,672 miles. Reports to the Commission for December, 1909, showed a total operated mileage of 236,166 miles.
In its report dated December 21, 1909, the Commission stated that for the year ending June 30, 1908, substantially complete returns had been received for 230,494 miles of line operated, including 8,661.34 miles used under trackage rights. These are the official figures of mileage for 1908, which will be used in all subsequent comparisons with the Bureau's figures for 1909—the latter, however, may include some switching and terminal mileage excluded from the former.
Of the mileage reporting to this Bureau, 8,927 miles were operated under trackage rights, leaving a net of 212,205 miles of line covered by capitalization and rental.
Assuming that the total operated mileage in the United States at the close of the fiscal year 1909 was 234,182, the complete returns to this Bureau cover approximately 94.4% of the mileage and 97% of the traffic of all the railways in the United States. No attempt has been made, or will be made, to segregate the returns of switching and terminal companies from the Bureau's figures, of which they are an integral part.
The first summary under this table presents theoperatedmileage reported to this Bureau in 1909 and 1908, classified by states and territories in comparison with the official figures of mileage owned in 1908, with relation to area and population of the respective territorial divisions:
Summary of Railway Mileage in the United States by States and Territories in 1909, 1908 and 1907 and its Relation to Area and Population.Bureau's Figures1907(a)Miles ofInhabitants19091908OwnedLine per 100perOperatedOperated(Official)Sq. Miles ofMile ofMilesMilesMilesTerritoryLineAlabama4,9174,6444,8409.77406Arkansas3,9963,7584,8619.21301California6,3766,2516,6644.38243Colorado5,2295,0965,2955.11114Connecticut9309361,01620.96999Delaware34234333617.14615Florida3,1172,9603,9707.39148Georgia6,4856,2936,78311.65361Idaho1,6511,5681,7312.09102Illinois13,21612,79612,13721.80442Indiana7,7747,3267,25920.24388Iowa9,9239,8659,86717.87252Kansas9,1259,1758,93610.94184Kentucky3,2293,2053,4418.71690Louisiana3,8603,8054,55810.43326Maine1,9841,7502,0937.19361Maryland1,3251,2781,43214.90906Massachusetts2,0792,0792,11226.451,492Michigan8,3848,3128,94115.63302Minnesota8,2588,1008,24610.46236Mississippi3,5453,2814,0819.00416Missouri8,2008,1418,03911.79429Montana3,5373,4063,3072.2891Nebraska6,0996,0835,9327.76200Nevada1,6211,5401,7001.5528New Hampshire1,2111,2111,24813.86369New Jersey2,0462,0462,25030.59917New York8,1067,9898,47217.86957North Carolina3,5673,3324,3859.21473North Dakota4,0264,0253,9065.56118Ohio8,9519,0419,26122.75502Oklahoma5,5725,5322,8217.84202Oregon1,6871,6001,9392.07237Pennsylvania10,53210,22411,25925.25621Rhode Island19219020820.112,262South Carolina2,8922,9753,27111.02451South Dakota3,6463,5683,7034.82122Tennessee3,2833,5283,7259.01600Texas12,84712,93212,9324.95263Utah1,8201,7721,9572.42156Vermont9419261,07111.98351Virginia4,0993,9004,05610.43495Washington3,3533,2073,7675.69152West Virginia2,8462,7773,26413.62320Wisconsin7,0396,9007,45914.01304Wyoming1,4291,4141,5261.5670Arizona1,7051,6841,9281.7171New Mexico2,7822,5212,9652.4274District of Columbia51423153.539,709Canada(b)1,3431,273United States221,132216,460227,6717.74370(a) Official mileage by States not available for 1908.(b) Mileage operated in Canada by American roads.