THE UNITED STATES RAILROAD

To assume infallibility or even great accuracy in sketching a regional railroad plan for the United States would be of course ridiculous. We have just had the mere suggestion of twenty-five or twenty-six railroads, some of them non-competitive monopolies and others quite completely competitive, in form at least, which is about all that our so-called competitive railroads are to-day. Still the great transport god of our transport world apparently must continue to be appeased. Form seems to please him. We shall grant him that. But in a national transportation plan which begins to assume any real form of high organization we shall not permit the component parts of it to indulge in internecine struggle. It is too expensive business.

So probably we shall begin the operation of our regional plan, which you already have seen outlined geographically, by first taking our thousand or more separate railroads—nearly 265,000 miles of line—and thrusting them together into a great single organization. This we might easily call the United States Railroad, even though it is to be in one sense not a railroad, from an operating point of view at any rate. For once we have centralized our great rail transport plant, we shall at once begin to decentralize it. We shall make many railroads of it. We shall follow in the main the scheme used by those vastly successful private organizations, Standard Oil and the Bell Telephone, and the equally successful government institution, the Federal Reserve Bank, and set up regional and highly autonomous separate organizations. I began my planning of the regional railroad for this country with the number of separate units fixed at about the same as of these three organisms that I have just mentioned—approximately an even dozen. Gradually I found, however, that in as intricate or as extensive a business as railroading in the United States twelve or fourteen or even sixteen regional companies would not be enough. Perhaps twenty-six is not even enough. After all, that is but a detail. What we really are seeking now is the proper method of organization.

Our regional railroads, recentralized and each provided with a president and other directing and operating officers extremely local and sensitive to the territory which they would serve, would have left something behind them in the central organization which was created primarily for the business of rearrangement. For having transacted that immediate business the United States Railroad still would continue to exist as a permanent body, with its headquarters either in New York or in Washington. Its modus operandi would be the virtually continuous sessions of vice-presidents designated from its constituent railroads—one vice-president for each road, especially chosen for this purpose—together with the occasional meetings of the presidents and other executive officers. These men would form a congress whose powers along almost all phases of our national railroad would be virtually supreme.

Its greatest power—its greatest responsibility, if you please—would be the proper financing of our railroad structure. That problem is far too big to-day to be handled locally, even in the locality which we know as Wall Street, New York. And Wall Street has shown itself capable of taking care of some pretty large financing problems. Before we are done with our railroad financing, it may be necessary for no less a hand than Uncle Sam’s to take hold of it, either by assuming the bonded indebtedness of the roads and against this issuing his own bonds at a slightly higher rate of interest, or else by direct and complete ownership of the carriers.

I am not going into this vexing and highly controversial phase of the railroad question in America further than to say that I do not feel that this country is ready yet to accept government ownership and operation—particularly the latter. Please note that I have differentiated between these two. It is not often done. And yet in that very shading of difference may yet rest the solution of our entire railroad problem. At the conclusion of this book I shall refer to this again.

According to a man who has made a critical inspection of the outstanding securities of our American railroads and of whose ability and impartiality there can be no doubt whatsoever, these are represented chiefly in about ten billion dollars’ worth of perfectly good bonds and about five billion dollars’ worth of good stock, at least normally returning dividends. About $100,000,000 might be written off in poor bonds, that either are fraudulent or else never should have been issued, while there are four or five billion dollars par value of stock certificates which to-day may be regarded as fairly hopeless. Out of all these securities three quarters would assay, which after all does not compare so badly with the estimate of value of from $18,000,000,000 to $20,000,000,000 which the railroads themselves place upon their properties.

These “good securities” in normal time average a return of from $750,000,000 to $800,000,000 each twelvemonth. Suppose that our Uncle Samuel, heeding what seems to be a rather certain voice of his people at this time to avoid both government ownership and government operation, should arrange that the “good” stock of the present railroads be turned in for that of the United States Railroad, which might either keep the stock issue in its own name or else at the proper moment divide it pro rata between its constituent regional roads? This certainly would not be either government ownership or government operation.

Upon the stock portion of this trade our good Uncle Samuel would arrange to guarantee a 4 per cent. dividend annually (possibly 4½ per cent.) and try to standardize and pay a 6 per cent. one. That sounds a little different from the Transportation Act, does it not? As a matter of fact, it is hardly conceivable that even a 4½ per cent. guarantee would ever become a serious drain upon the United States Treasury, while the fact that the stock end of the capitalization of this railroad which is not a railroad would never be permitted to exceed more than 35 or 40 per cent. of the whole would be a real help in the situation.

If the roads that belonged to the United States Railroad found themselves earning more than 6 per cent. upon the entire property a tripartite even division could be arranged of the excess between their stockholders, their employees, and the Government. It is hardly conceivable, however, that such a condition would long continue without a demand arising for a downward revision of the rates. It is a question that would settle itself rather automatically most of the time.

The stock distribution of the new centralized company of the holders of the existing stock-certificates of the present companies would be in the ration of the new standard dividend of 6 per cent. to be paid by the U. S. R. R. to the dividends maintained by the present companies for an average period of a certain number of years before the adoption of the scheme. Thus the stockholders of the Santa FÉ railroad who have been receiving 6 per cent. would probably have a chance to make an exchange upon even terms; those of the Northern Pacific, who have been receiving 7 per cent. would gain one and one sixth shares of the new stock for one share of the present. New York Central stockholders would have five sixths as many shares of the new stock as of the old.

“Do you think that many stockholders would be willing to exchange their certificates upon this basis?” asks my querulous old railroad friend from out of the West.

I do not think anything of the sort. I believe that they would have to form many lines to the right of the security-holders who could not get to the places of transfer quickly enough. Uncle Sam holding the bag? Uncle Sam’s credit back of our transportation system? Let me ask you, Old Railroader, if you have any fondness for Liberty bonds in your own strong-box?

While the stock would be called in and reissued, the bonds of the American railroads—between ten and eleven billion dollars’ worth and returning an average of 4.30 per cent. during the period of government control—would be called in, principal and interest, by the United States Treasury, and, as we have just seen, new government bonds issued against them—at just enough lower interest to make the thing a profitable banking transaction for our Uncle Sam.

The essentials of this plan are not my own. They are those of the Hon. George W. Anderson of Massachusetts, a most hard-headed and far-seeing jurist, who has had a remarkable experience in transportation law, including some years as a member of the Interstate Commerce Commission. I am putting it forward here for just what it is worth—nothing more. It is most interesting, and seemingly most workable. Judge Anderson and I differ, however, in one large essential. Trained Federal officer that he is, he sees centralization as the one panacea for the situation, which is a characteristic attitude of the Federalist, from the days of Alexander Hamilton until these.

I believe myself that the United States Railroad, should it be found necessary to incorporate it, should be made a Federal corporation and nothing else. The State charters of the present-day railroads would be made virtually null and void once the roads ceased to operate as separate concerns. It is possible, I will admit, that litigation might arise in regard to this delicate point. But in the steady decline of States’ rights in all our political life I can have no great anxiety as to the final outcome of such litigation. Apparently the Federal Government and not the separate State has the power to-day.

I hold myself that once the centralized organization has been created—and I shall refer to its opportunities again in a moment—prompt decentralization is quite as essential to the situation. The Boston and Albanys, the Lackawannas, the Bessemers, all the other successful small railroads of our present-day situation arise to bid me go very easily indeed when I suggest any national centralization of actual operation or of the actual relationship between the carriers and their workers. And Sentiment also crooks a warning finger. I know what she means by her glance.

It would be pathetic, nay tragic, to remove an American railroad name like the Pennsylvania or the Northwestern, to try to paint out the red cars of the one line and the yellow ones of the other. New York Central is too good a name to be scrapped. The same is true of Baltimore and Ohio. How can we prate of morale and then dare to take from under it the things that are its chief support? After all does sentiment count for nothing? And tradition? Have we not possibly become a little too materialistic a nation?

On the other hand Southern Pacific means but little to-day as the name of a railroad which reaches as far north as Portland, Oregon, and as deeply into the heart of the country as Ogden. The Californian railroad has a sense of dignity that ought to appeal to every man of that great State. Such a sense too has the Puget Sound Lines.

What’s in a name?

Everything. Sentiment. Tradition. Morale. Progress. Dollars and cents, if you will force me to be materialistic.

But the far greater thing to be gained is the intimacy of contact resulting by the location of a railroad president with large authority within but a few hours reach of the people that he is endeavoring to serve. Why should the man of Concord, New Hampshire, or he of Lewiston, Maine, have to go farther than Boston for the adjudication of even his most serious differences with the railroad? Or he of Madison or Racine further than Chicago? And when it comes to the contacts with his fellow-workers, how can a railroad president in our Federal capital city of Washington be expected to know of living conditions in Great Falls, Montana, or in Wichita Falls, Texas? Incidentally that is the chief issue upon which the Pennsylvania is to-day fighting the Railroad Labor Board in the courts. It wishes the right to meet its own workers, in its own way. This is real regional thought. The people in control of the Standard Oil and the Bell Telephone companies came long ago to bless the day when legislation embarrassing to them at the time, forced the regional system upon them. They now know its real advantages. The intimacy of labor control alone is worth all the trouble and all the expense.

There is little or no dispute among those who really know the situation that nine tenths of the solution of the railroad labor problem as it exists in this country to-day rests in better contacts between the employers and the employed. A predicament such as we saw but a little time ago—the general manager of a great railroad unable to get his proposals to his shop-workers—would hardly be possible in a road whose limits were not too great. A certain high executive of my acquaintance is going to take extreme exception to my suggestion that the regional trunk-lines in the immediate district between New York and Chicago be broken at Buffalo, at Pittsburg, and the Ohio River.

“I can sit in my office,” he says, “and each morning within an hour talk with each of my subordinate executives—in Pittsburg, in Cleveland, in Detroit, in Chicago, in St. Louis, in Cincinnati.”

Yet that is just the trouble. Too many railroads in this country have been operated on the long-distance telephone principle. Ten minutes’ talk over a copper wire is hardly equivalent to a day of personal contact, once every ten or twelve or fourteen days. That the men who are at the very tops of our largest railroads have done wonders with the long-distance telephone I shall not deny. But I do not think that they have accomplished intensive railroad direction with it, or anything like intensive railroad direction. And I have not noticed them accomplishing any remarkable results in bettering their relationships with their workers, or with raising the morale of their roads.

Yet just as regional operation and a pretty well divided regional operation, is essential to the best operating results in our American railroads, so on the other hand is centralization fairly vital to any large traffic or financial results.

It will be argued always against any plan for the centralization of our railroads that it makes an easy first step toward government ownership. Such argument is foolish. Yet if it might be good business for the Federal Government in some distant day to take such a step, why is it not good business to undertake it to-day? Particularly when it is in a position to command valuable governmental assistance in the taking of the step. Here is the real nub of this question.

For few practical railroaders will deny certain vast advantages to be gained by the complete centralization of our rail properties—not only in financing and in rate-making, but also in traffic solicitation and control, in expert staff study of mechanical and operating problems, and in the production of proper personnel, particularly for the filling of future executive positions. All of these functions and more too, the United States Railroad could and would undertake. In contentions which might arise from time to time between the regional roads, its word of decision would be absolute, its authority supreme. And nowhere is this more necessary to-day than in the vexed question of rates—particularly of freight-rates.

The expert traffic executives of this super-railroad would settle these rate questions, and be subject only to revisions, in the strict legal points involved, by the Interstate Commerce Commission, which then would become almost exclusively a high court of railroad law, in turn subject only to revision in its decisions by the United States Supreme Court itself. The traffic experts of the United States Railroad would control absolutely the routings of through business where it passed over the lines of two or more of the regional carriers. But as an immediate beginning the best construction step that they possibly could make would be the creation of a real scientific freight-rate structure for this country.

Up to the present time this has been deemed an impossibility, by traffic experts outside of the ranks of the railroads as well as those within them. But it has only been an impossibility because of the lack of proper central organization or authority among our railroads as they exist to-day. Such a plan in the main—called the block-and-zone system—has now been in successful operation for a number of years in both our parcel-post and express services. I was in the express business myself when it first came into being there. Up to the very hour of its arrival the tariff-sheets of the express companies were veritable Chinese puzzles; they were nearly as complicated and as obsolete as the freight tariff-sheets of our American railroads of to-day.

The extremely gifted and far-seeing mind of the late Franklin K. Lane devised the block-and-zone tariff system for the express. Some of the older men of the express companies then felt that the blackest day in their history had come to hand. Within a twelvemonth the most reactionary of these had been converted to the new scheme. They saw its simplicity, its fairness, its utility, its economy.

What was done for the express nearly half a dozen years ago should be done for the railroad freight situation here immediately. At the time of his retirement from office Director-General McAdoo already had begun to plan a national freight-rate structure. He had engaged to perfect its details Edward Chambers, vice-president of the Santa FÉ, and one of the ablest traffic men that this country has ever known. The Chambers plan was worked out quite fully but was never made public. It is known, however, that it follows very closely the general scheme of both the parcel-post and the express block-and-zone tariffs varying from them only in its intricacies of detail due to the vast range of commodities that a railroad finds itself obliged to carry upon its cars.

For a centralized traffic bureau of our railroads there is also a huge international opportunity. The representation of our American roads overseas is to-day a woeful thing indeed. The Southern Pacific has an office of its own in Paris. Perhaps there are others. If so I have never seen them. But in my long months of residence in that old city the railways from all quarters of the world save the United States have called to me appealingly from their shop-windows along the boulevards. So it is in London; so in other great capitals of Europe. It is only America—only that lovely great quarter of North America that we call the United States—that is deaf and blind alike to the possibilities of the traveler and the freight from overseas. In April, 1921, I picked up the time-table of a prominent American railroad in the chief hotel in Madrid; in its familiar colorings it seemed like an old friend, indeed. It was an old friend. It was dated December, 1916—and so were all of its fellows from the U. S. A. in the time-table rack of the man from Cook’s.

The United States Railroad would represent adequately every mile of railroad in the United States in every great city of the world. Its offices would be the outposts of American commercial enterprise. They would be filled with adequate and up-to-date information for the tourist and shipper alike. It might be that they would sell through tickets and through bills of lading to the most humble and sequestered of American communities, while to-day the scarcity of information that the European may readily acquire upon even important towns of our U. S. A. is appalling. Contrast such service, or lack of it, with that rendered, let us say, by the Swiss Federal Railroads in the City of New York, where one may go and find the fullest and the most accurate information in regard to the smallest of Swiss villages.Already I have hinted upon the valuable work that this United States Railroad might do in the technique of the business, both in studying of constant new inventions as well as in working out better operating methods from the tools already at hand. This last certainly would include the constant study of a far better correlation between our steam railroads, our highways, and our inland waterways. It probably would result in not only the complete study of the most efficient and economical container but the actual ownership of several millions of them. It might be well for the title of all our freight-cars as well as our present Pullman sleepers to be vested in it. The advantages of a pooled ownership of these fleets of wheeled carriers, so extremely valuable in inter-railroad communication, have long been realized by our hard-headed railroad executives. The United States Railroad could accomplish such point ownership, and with a minimum of fuss and feathers. In the long run it might even accomplish the tremendous feat of establishing a through fast passenger-train between New York and Seattle. Who knows?

In other words the work of this centralized railroad organization would not only be analagous to the staff of any army but something considerably beyond. Expert railroaders, removed for a season, short or long, from the details and the vexations of everyday problems and working with skilled technical experts and even recognized theorists, ought to and would accomplish wonders. I have hinted also at the possibility of a strong central organization in training and recruiting future executive personnel. Those possibilities might be carried much further, in the super-relationship between the American railroad and the rank and file of its employees. With a proper scheme of representation upon our United States Railroad—of which more in a moment—it might even be possible to have it supersede the present rather hapless Railroad Labor Board out at Chicago and so accomplish a real governmental economy.

Yet remember that the actual hiring and the immediate relationship and authority between the railroad and its employee—no matter what his rank—should always remain with the regional organization. For remember also that it is largely for this purpose that we brought it into being—to better the human relationship between the human officer of the railroad and its human patron and its human employees. Contact alone does this. For this we have gone through to decentralization. We have tried to keep authority in these human relationships active and alert and acute upon the immediate ground. If we can accomplish that one great thing, if we can make our railroad of the United States as a huge mechanism of organization quickly responsive to the human being and his rights, it will be well worth the huge expense and trouble of decentralization. Remember all the while, if you will, that the one very great sore spot of our railroad problem is that we have thought too much of it always in terms of dollars and not enough of it in terms of men.

I bear no particular grief for the organized bodies of shippers or for those of the employees. They are all entitled to fair treatment—and nothing more. The one group may easily become a pest, the other an autocrat. Yet a just consideration for the patron and for the employee is a rock upon which our railroads may stand secure, the lack of it a rock upon which they may inevitably crash. This may be poor epigram, but it is a solid fact.

In fact I may go much further and state quite bluntly that no plan for the reorganization of our railroad system of the United States now has any real prospect of success that does not recognize in its fundamentals the need of a radically changed status for labor.

It matters not that there are now five or six millions of workers temporarily out of employment, that the railroad strike of October, 1921, was called off because organized labor saw naught but defeat in it; the fact remains that in the future labor must be given just and proper representation in the initial management and so must be forced to assume its own proper share of the responsibility for the uninterrupted and steady development of our rail transport facilities. That it must be given a fair wage is now beyond the point of controversial discussion. There may be, and probably will be, plenty of future discussion as to just what constitutes the fair wage and the fair working condition for the railroader, but the fact remains that if these both are not kept fair and just there will not be sufficient railroaders coming forward to maintain the human side of the machine. Here is a self-evident fact of which our reformers sometimes quite lost all track.

With this principle in mind I believe that the directorate of the United States Railroad, divided into three groups, should have one of these composed of directors elected by the classified employees of the roads. Assuming that fifteen or twenty-one would be the right size of directorate—in order to avoid too clumsy and unwieldy a body—from five to seven men would represent labor, a similar group the public (probably being appointed by the President of the United States and confirmed by the Senate), while the third group would be elected by the stockholders of the company. It might be found more practicable to have a separate set of fifteen directors for each of the regional railroads and, by making these directorates almost exclusively local, so serve still further to keep the management of these regional roads alert to the service of their individual roads, right here and now.

The point is that whether there is one board of directors or twenty-five or twenty-six for the future rail transport organization of the United States, labor must have its representation there. This, in addition to the possible sharing of one-third of the dividends over 6 per cent. which already I have suggested, would form a generous gift to labor. For it labor must in return make a generous offering. For despite sentiment, I believe that is the usual economic principle in the making of gifts. The gift that labor must make in return in this instance is its recognition that any combination of employees in restraint of trade—no matter under what name—is illegal and against the public weal. Strikes of any form unquestionably are combinations in restraint of trade. To-day they are legal. They must be made illegal, both in law and in universal public opinion. This, of course, cannot affect the right of the individual railroader to leave his job if he desires. That, of itself, also is fundamental. Certain it is that no railroad should want a man who is disgruntled and dissatisfied for very many hours in its employ.

Of late it has rather become the fashion among many otherwise thinking people of a degree of mentality to ascribe the many troubles of our railroads in this country either to the “high” wages that they are paying their employees or to over-regulation on the part of various governmental commissions, both State and Federal. Of the wage question I have said my last words in this book. Nor is the highly controversial question of regulation—or of so-called over-regulation—worth much discussion.

From time to time some gifted (but uninformed) soul bursts into the public prints with the highly original suggestion that we should in some mysterious and occult fashion return to the days before 1887 when regulation of our rail carriers was an unknown art in these United States. It all has a rather fascinating sound, particularly to such people who may have been the witnesses or the victims, direct or indirect, of some of the ridiculous rulings that these commissions—particularly the State ones—occasionally hand down. Unquestionably there have been many foolish decisions. Unquestionably many of them have contradicted and offset one another. And the dabbling of the professional politician into the delicate centers of a transportation machine, of which he really knows nothing at all, has brought us a very great deal of trouble. But—

I do not believe that any thinking railroader or patron of the railroads—no matter what his job or what his degree or station in life—really would go back voluntarily to those uncouth, unregulated days of 1886 if he could possibly avoid it. In thirty-five years many things are forgotten. It once took our magazine muck-rakers nearly two decades to set down the great business evils that arose in those very days that now seem halcyon to us largely because thirty-five years have aided us so largely in the business of forgetting.

Then there is the chap who cries for the return of a Hill or a Harriman—I do it myself at times; I had and still have much admiration for each of them—a Hill or a Harriman who with the wave of some mystic, magic wand will make all transportation things right once again. We Americans fairly worship a character of that sort, even though we may have largely created him within our own imaginations. We love to fall prone at his feet.

Yet even as one of those who from time to time cry aloud for a Hill or a Harriman, I am quite ready to admit that perhaps the slow but certain progress of our American civilization has now brought us beyond the necessity of bold, blunt captains of industry such as these two big and picturesque figures of our recent history. It is possible, please remember, that if either of them had been given the supreme control of all our railroads they might not have made such an overwhelming success of it. It is possible that even under their wizard hands there might have arisen distrust and discontent, both upon the part of the patrons of the railroads and of their workers. Remember that we do move. And 1922 cannot be 1886. Or 1896. Or 1906. Or even 1916. And perhaps it is just as well that it should never be any of these years. Why turn the clock backward anyway? It is much better to be looking forward.

Looking forward may yet bring us government ownership and operation of our railroads. Just now I do not see it. Yet sometimes we move pretty rapidly here in the United States and charge about face, with an astounding swiftness.

It is probable, however, that before we adopted both government ownership and operation, as a permanent policy, at least, we should swallow but one of the pills. It is not necessary in the present event to take both at once. If it did become necessary it probably would be that of ownership, and possibly somewhat along the lines that I have indicated for the formation of the United States Railroad. In which case it would be necessary to contrive some plan for the leasing of the regional railroads to private corporations, for operation solely. This has been done already, notably in India, but never with a pronounced success. It is also the method used by the City of New York for the operation of its newer rapid transit lines, and again without success. It has many complications, many potential difficulties in its pathway. And it is hardly conceivable that it will come into use ahead of a scheme for a centralized, privately-owned and operated railroad.

Yet despite all these possible complications and difficulties, in the eyes of the average man who thinks, it still is to be preferred to the double-dose of government ownership plus government operation. That the first of these offers large opportunities for the proper financing for the steady growth and the future development of our rail transport I think that I have shown you already. It is the stronger of the twins. Of the second it is hard, as yet, to speak with much enthusiasm. To say that he is untried is putting the thing both mildly and with extreme politeness. To say that the American public of to-day even wants to try him, would be making a large statement, a very large statement indeed. Without joining in the shrieks for the coming of a second Hill or a second Harriman or the wholesale murder of all the regulatory commissions, I honestly believe that our American public to-day wishes a little safer, a little surer panacea for its transportation ills, than government operation. It is not the solution that it really desires for its railroads of to-morrow.