  REGULATION At the time that these lines are being written the railroads of the United States are entering a veritable no man’s land. The ponderous Newlands committee of Congress has begun its hearing and accomplished little; so little that it has asked and received an extension of time of nearly eleven months in which to go into the entire question more thoroughly. We all hope it does. The Adamson bill, establishing the so-called eight-hour day for certain favored classes of railroad employees, is statute, but its constitutionality is yet to be established. And the railroads are preparing to fight it, in its present form, and to the bitter end. General sympathy seems to be with them; it is quite probable that even the four brotherhoods that fought for the measure—unlike the Pears Soap boy—are not quite happy now that they have received it. In the midst of all this confusion President Wilson, assured of a second term of office and so of a reasonable opportunity to try to put a concrete plan into effect, has emerged with his definite program, not radically different from that which he evolved last August at the time of the biggest of all crises between the railroads and their labor, but which was warped and disfigured until its own father might not know it. His plan, as now is generally known, provides not alone for It now looks as if the United States was upon the threshold of the eight-hour day—in many, many forms of its industrial life. I believe that, in his heart, the average railroader—executive or employee—favors it, fairly and honestly and efficiently applied. It has been charged as the first large step forward toward the government operation of our railroads, yet I cannot see it as nearly as large a step as the extension of the maximum weight of packages entrusted to the parcel post, a system which if further extended—and apparently both legally and logically extended—might enable a man to go up to Scranton and place enough postage stamps upon the sides of a carload of coal to send it to his factory siding at tidewater. Compared with this the eight-hour day is as nothing as a step toward government operation or ownership. A genuine eight-hour day is, of course, a long step toward the nationalization of our railroads—quite a different matter, if you please. President Wilson’s entire plan, as it has already been briefly outlined, forms a very definite step toward such nationalization. It at once supersedes the indefinite quality of the Newlands committee hearings—no more indefinite at that than the average hearing of a legislative committee. When the Wilson plan has been The men who control our railroads today look forward to such a definite program with hope, but not without some misgivings. For, after all, we are by no means nationally efficient, and there seems to be a wide gulf between the making of our economic plans and their execution. No wonder, then, that the railroads are dubious. They are uncertain. They have been advised and threatened and legislated and regulated until they are in a sea of confusion, with apparently no port ahead. The extent of the confusion is indicated not alone by their failure to handle the traffic that has come pouring in upon them in the last days of the most active industrial period that America ever has known, but by the failure of their securities to appeal to the average investor—a statement which is easily corroborated by a study of recent Wall Street reports. And what would be a bad enough situation at the best has been, of course, vastly complicated by the labor situation. We already have reviewed some of the salient features of that situation; we have seen, of organized labor, the engineer and the conductor at work; and Or the railroads might have sedulously recognized the nonunion worker in their ranks and by a careful devotion to his position and his pay envelope kept his progress equal to that of his unionized brother. True, that would have cost more in the first place, but it now looks as if the railroad would have to pay the It is not yet too late to do this last thing; it is a principle for which the railroaders should fight, into the last ditch. The greatest of the many fundamental weaknesses of the Adamson bill is the bland way in which it ignores this principle—the way in which, as we already have seen, it singles out the four great brotherhoods for the generous protection of the so-called “eight-hour day,” and leaves all the other railroad workers out in the cold. Or is it a method of proselyting by which the four brotherhoods hope to force the other branches of railroad workers into organization? It is not too late for the men who control our railroads to offset such brutal forms of proselyting by raising the status of their unorganized labor—voluntarily and in advance of possible legislation, if you please; with a generosity of heart that cannot fail to make a warm appeal to public sentiment. It is not too late for our railroads, on their own part, to consider labor from as scientific and as modern a viewpoint as they do their physical and financial problems. It is not too late for them to raise up high executives who shall make labor, its emoluments and its privileges, its possibilities of evolution their whole study. In an earlier chapter of this book we discussed this matter in detail; called attention to the lack of new blood of the right sort coming to the ranks of the railroad, to the opportunity of fixing wages upon a purely scientific as well as a cost-of-living basis; suggested even the broad Upon these foundations the pay envelopes of the railroad worker in the future must be figured. If the railroads themselves are incapable of so establishing it—and in full fairness to them it must be stated that the time may have passed when they were capable of accomplishing this, unaided at least—then the national government must step in and do it. The Interstate Commerce Commission may be asked to establish, with compulsory arbitration, not only a minimum but a maximum rate which the railroad may pay its various classes of employees—and so still another great step will be taken in the nationalization of our system of transportation. Call it socialism, if you like; I do not, but I do feel that it is another large step toward nationalization. Moreover, the very consideration of the topic brings us at once to the greatest immediate necessity of the railroad—unified regulation. Unified regulation is the crux of the railroad situation today, from the railroad executive’s, the investor’s, and the patron’s point of view. Your wiser executive is holding the question of increased rates in abeyance for the moment. He is devoting his best thought and his best energy toward simplifying and bettering railroad control. He has a frank, honest motive in so doing. Not only will he build toward permanence of the great national institution with which he is connected Capital is a sensitive creature. Conservative is far too mild a word to apply to it. Capital takes few chances. And the steady and continued talk of the plight of the railroad has driven Capital away from the bedside of the sick man. Yet Capital, if unwilling to take chances, rarely overlooks Opportunity. And if Capital be convinced that Opportunity is really beckoning to the Railroad, that fair treatment is to be accorded to the patient at last, he will return there himself and place his golden purse in the sick man’s hand. Only the wary Capital will demand assurances—he will demand that the Railroad’s two nurses, Labor and Regulation, be asked to mend their manners and that that fine old physician, Public Sentiment, be called to the bedside. Let us cease speaking in parables, and come to the point: Railroad regulation today is, of course, an established factor in the economic existence of this nation. Already it is all but fundamental. It came as a necessity at the end of the constructive and destructive period of American railroading. I connote these two adjectives advisedly, for while the railroad in a physically constructive sense was being built it also was doing its very best to destroy its competitors. It had hardly attained to any considerable size before the natural processes of economic evolution began to assert 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 OF The most remarkable chasm in the world 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 to 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, 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. No 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 whistles 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 train 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 Governor 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 his 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. 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, 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 doctrine 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 never 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 that 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 income 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 railroad 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 so 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 he must grow. 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 conservative 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. 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, the Railway Age Gazette recently 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. “‘All of the initiative in solving the labor problem must not in the future come from the employees. If the employers of America do not solve the labor problems by business statesmanship, the employees of America will determine the outcome by force; and what labor cannot get in the future by the physical force of strikes, it may be able to get through the legal force of legislation and the income-taxing power.’ “If our railroad employers, among others, will learn and apply the wisdom expressed in this excerpt, all will yet be well.”—Collier’s Weekly. [7] Already it has been followed by several other railroad and express systems—conspicuous among these, the Southern Pacific, the Union Pacific, the Erie, Wells Fargo & Co. Express, and the American Express Company. The Union Pacific’s plan, embracing an expenditure of approximately $2,500,000 in bonus payments, differs from those of the other railroads, except the Erie, in that it does not make a distinction between the men who belong to the brotherhoods or other forms of union labor, and those who are not “contract labor.” The Union Pacific’s plan also embraces a scheme of group insurance, in the benefits of which its employes participate without cost to themselves. Insurance plans, of one sort or another, have recently become popular, and are being recognized as a logical outgrowth of the pension systems which have long since become part of the fiber and structure of the older and more conservative of our railroad and express companies. [8] The filing of further plans for the development of its main passenger terminal in Chicago would indicate decidedly that the Illinois Central had not overlooked the possibility of the electric development of its great suburban territory there. For the plans now not only include the new terminal, itself, but the complete electrification of the suburban service on the main line, as well as the South Chicago, Blue Island, Kensington and Eastern branches—all told, some forty miles of line—and involving for electric equipment alone the expenditure of about $25,000,000. The railroad is to give up a large portion of the ground occupied by the existing station to permit of the widening and extension of the Lake Front Park, and its approaches. An interesting part of the whole terminal scheme is that which provides that the entire portion of the Illinois Central tracks between the present main passenger terminal at Twelfth street, which, in a general way, will become the site of the new one, and Randolph street—reaching the entire eastern edge of the Loop District—will become an elongated suburban station. From the several platforms of this station subways will pass under Michigan avenue, and so enable commuters to avoid the heavy automobile traffic of that great thoroughfare. The new terminal is to be planned large enough to accommodate eventually the many passenger trains of the several large railroads that now enter the LaSalle and Dearborn stations. If this is ever brought to pass the city of Chicago will have accomplished a real economic benefit. For the land occupied by these two great stations and their yards is not alone a considerable acreage, but the terminals themselves have acted as real barriers to the most logical growth of the so-called Loop District—the busy heart of commercial Chicago. Barred on the east by Lake Michigan, and on the north and west by the Chicago River, this commercial center would have grown south long ago had it not been for these two great terminals. Their removal, therefore, would not only accomplish a passenger traffic consolidation—of great advantage to the through traveler—but would open a great downtown area for the development of Chicago’s heart. [9] Definite announcement has been made by the Milwaukee that it will begin the extension of its electric-equipped main line through the Cascades to Puget Sound early in the summer of 1917. This will mean that for a time there will be a “gap” for about 400 miles in the vicinity of Spokane, where steam will continue to be used as a motive power. For a number of miles west of Spokane the Milwaukee’s main passenger line has trackage rights over the Oregon-Washington system. This fact, and the fact that electrification is best justified economically in mountainous districts is responsible for this “gap.” It is probable that it will not continue to exist for many years more. At the present time the very high cost of electric locomotives suitable for hauling heavy freight and passenger trains for long distances is making the Milwaukee—today the unquestioned leader in this great progressive policy of electrification—move both slowly and surely. According to the last annual report of the road the most recent lot of twenty engines cost an average of $114,396.30 each—or about four or five times the cost of the largest steam locomotive. Despite the tremendous initial expense of these electric engines, their remarkable performances more than justify their cost. [10] To a very prominent hotel in the White Mountains five years ago, ninety per cent of the patrons came by train; last year ninety-five per cent of the guests arrived in their motor cars. “Talk about getting folks to go to California, or even to the Rocky Mountains,” said the veteran passenger traffic manager of one of the greatest of our transcontinental carriers, when he was in Boston a few weeks ago and heard of this, “we can and will advertise, but we are up against two tremendous competitors: The first of these is New York City, which is a tremendous permanent and perpetual attraction to all the rest of America 365 days out of the year. The second is the automobile, the family car, if you please, into which has gone the recreation money which otherwise might have been going into the ticket wickets of our railroads. Think of it, there were 900,000 pleasure cars built and sold in the United States last year, while the experts are placing 1,250,000 as the figure for 1917! More than $1,500,000,000—an almost incredible sum—was spent by Americans last year on automobiles, and all the things which directly pertain to them. What chance has the railroad against such a giant of a competitor?” [11] “The railroad that neglects its branch-line service is playing with fire vastly more than it may suppose,” said a distinguished railroad economist only the other day. “It may feel that it has an economic right to neglect branch-line opportunities because of the limited revenue opportunities that these feeders ofttimes present. But it must not overlook one thing—the patent fact that many of the voters, the men and women whose sentiment expressed in their ballots may build or ruin the future of so many of our overland carriers, reside upon these same branch lines. Indeed, one may say that the manufacture of sentiment upon branch-line railroads is a business well worth the attention of a keen traffic-man. For it may be just that very amount of sentiment that might swing the balance for or against a railroad.” [12] “Something more than a nation-wide railroad strike would have been required to interfere seriously with the business of the Norton Grinding Company, of Worcester, Mass., of the Halle Brothers Company, of Cleveland, the American Telephone and Telegraph Company, and some other far-sighted concerns,” says a circular issued by the White Automobile Company at the time of the strike crisis in August, 1916. In meeting the threatened emergency of having all freight shipments blockaded, these companies outlined a new example in industrial preparedness. “The Worcester machinery makers and the great Bell institution increased their fleets of trucks by having the machines delivered overland to avoid all chance of strike congestion, while the Cleveland department store planned its own transportation system between the Atlantic seaboard and the Sixth City. “The situation confronting the Norton company was one which demanded immediate action, and in which normal methods were of no avail. When a general suspension of all the ordinary facilities for moving goods seemed imminent, the Norton company placed its order for three five-ton trucks with the Seymour Automobile Company, The White Company’s Worcester dealer, and it was stipulated in the contract that the trucks should be delivered in Worcester within three days, independent of railroad service. “The trucks were shipped by boat from Cleveland to Buffalo, and then driven overland to Worcester. The 500-mile journey was completed in the remarkably short time of forty-eight hours, with a gasoline consumption of better than eleven miles to a gallon. Stops were made only for the purpose of replenishing the gasoline and oil supply, and for meals for the drivers.” [13] “The effect of the improvements wrought as the result of the self-propelled vehicle’s influence is already strikingly apparent. When Franklin County, New York, voted $500,000 in bonds to improve its system of roads, twenty-five cans of milk, weighing one hundred and twenty pounds each, constituted the average two-horse load. After the money raised by the bond issue had been spent, motor-trucks hauled fifty cans to the load. With the sum of $28,000 the twelve-mile stretch of road leading from Spottsylvania Court House to Fredericksburg was improved. In a single year $14,000 was saved in draying. “The estimated cost of hauling the corn, wheat, oats, potatoes, cotton, and hay crops of the country is annually $153,000,000. No one knows how much of that vast sum could be saved if motors were able to ply between the farm and the railroad station. Very few cities have compiled statistics. Some light is shed on the subject in a report prepared by the Chicago municipal markets—not so much on the influence of good roads as on the reduction in haulage costs, which is effected by self-propelled vehicles running on fine pavements. It appears that it costs eleven and one-quarter cents to carry one ton a mile by motor in the city of Chicago, and seventeen and three-quarter cents by horse. The average cost of delivering a package by the department stores, grocery stores, and meat markets of the city is approximately eight cents by motor and sixteen cents by horse for each mile. “Apply these figures to the cities of the entire country, and consider further that motor-trucks can deliver goods directly from the farm to the city retailer, and it seems not unreasonable to expect that the cost of living must at least be held stationary, if it is not actually reduced by the wider introduction of mechanical road vehicles. Surely, the horse must eventually disappear in our towns, at least, if the city consumer pays an average of one dollar and ninety cents for vegetables which the farmer sells for one dollar; if it costs more to haul by horse one hundred pounds of produce five miles from Chicago wharves to the householder or the retail store than to ship it by boat from the shores of Lake Michigan to Chicago; if it costs nearly half as much to deliver a ton of coal by horse from the railroad tracks to the business district of Chicago as it does to ship it four hundred miles by rail from southern Illinois to the city.”—Waldemar Kaempffert in Harper’s Magazine. [14] “During 1916 the largest movement of troops took place in the United States, since the Spanish-American war. It began early in the year when regular army detachments of cavalry, infantry, artillery and engineers were sent to the border on March 11, March 20, May 9 and June 11. The transportation of these organizations was accomplished in an excellent manner, in exceptionally good time, and without accidents of any nature. On May 9, the militia of Arizona, New Mexico, and Texas, were called to the border, and on June 18, 1916, the National Guard troops of all the other States were called into the service of the United States, and directed to assemble at their state mobilization camps. From these points to designated stations on the frontier transportation arrangements were under the direction of the War Department. The troops began leaving their mobilization camps about midnight on June 26. On July 1 there were en route to the border from various sections of the United States, 122 troop trains, carrying over 2,000 freight, passenger, and baggage cars, with a total strength of 36,042 men. On July 4, 101 troop trains were en route, and 52,681 militia troops (not including Arizona, New Mexico, and Texas) were either at the border or on the way thereto. From the beginning of the movement up to July 31, 111,919 militia troops were moved to the international boundary. “Some idea of the task imposed upon the railroads of the country by the transportation of the National Guard may be had when it is considered that 350 trains were necessary to carry the first 100,000 troops. Over 3,000 passenger cars, including standard Pullman and tourist cars and coaches, were provided, and in addition about 400 baggage cars, most of which were equipped as kitchen cars for serving hot meals en route, 1,300 box cars, 2,000 stock cars, 800 flat cars, and approximately 4,900 locomotives and crews, not including switching engines, yard engines and their crews. The call upon the railroads for the transportation of the militia occurred in the fortnight which includes the Fourth of July, the time of the greatest density of passenger travel in the eastern States. Instructions were issued by all railroads concerned that the movement of troop trains was to be given preference over other travel, and it is believed that this was done in all cases. “To have effected the entire movement of all the troops in tourist sleepers would have required approximately 3,000 cars, or five times as many as were in existence. The Pullman Company, by utilizing some standard sleeping cars, made available for the movement 623 tourist cars. In all cases where it was possible to do so tourist equipment was furnished, and where they were not immediately available the troop were met en route and transferred to tourists in every possible case. Official reports from all military departments show that no organization moved in coaches in less space than three men to every four seats, and wherever possible two seats for each man. The total number of men transported in coaches averaged 30 men to each coach. “Although the movement of organized militia came at a time when the commercial traffic on the railroads was the largest in years, it was accomplished with very little interference with regular train service, and with no congestion whatever, either at initial or terminal points or en route. In July there were moved into the Brownsville, Texas, district 106 special trains, composed of 1,216 cars of passengers and 1,201 cars of freight for the army, in addition to 680 cars of army supplies, handled in freight trains, and the usual commercial traffic. This district is reached only by one single-track line, and all rolling stock had to be returned over the same line. “The concentration of the militia on the Mexican border and the mobilization for the great war in 1914 are not comparable, as all civil traffic was suspended in Europe to make way for military movements, and the distances involved in the movement to the Mexican border were very much greater than those in Europe. The longest run in Germany was about 700 miles, and in France much less, whereas the distances traveled by the troops in the United States varied from 608 miles, in the case of Louisiana troops, to 2,916 miles in the case of Connecticut troops. The majority of the troops came from northern and northeastern states and were carried over 2,000 miles, in most cases in remarkably fast time. For example, the Seventh New York Infantry with 1,400 men, equipment, ammunition, and baggage left New York at 2 p. m. on June 27, and arrived at San Antonio, Texas, at 8:30 p. m., on June 30, a distance of 2,087 miles. Shipments of freight were made from Washington and vicinity to the border in four days, from New York and vicinity in five days, and from the Great Lakes in a little more than forty-eight hours. “As a specific example showing how the cooperation of the railroad companies assisted the army, there may be cited the case of the first motor trucks purchased for the expeditionary forces in Mexico. Twenty-seven trucks were purchased under bid in Wisconsin on March 14. They were inspected and loaded in fourteen cars; the men to operate them were employed and tourist cars furnished for them, following which a train was made up which left Wisconsin at 3:11 a. m., on March 16. It arrived at Columbus, N. M., 1,591 miles away, shortly after noon on the 18th; the trucks were unloaded from the cars, loaded with supplies, and sent across the border, reaching General Pershing’s command with adequate supplies of food before he had exhausted the supplies taken with him from Columbus.”—From the report of Quartermaster-General Henry G. Sharpe, of the United States Army, as reprinted in the Railway Age Gazette. [15] “When railroads were started in England, they were influenced by stage coach precedents. They put the engineer behind the iron horse and called him a driver, they called the railroad car a coach or a van. They imitated the class distinction of the four-in-hand, and then charged by the mile. Coach travel cost by the mile. There were no terminal charges, no road upkeep charges. It was a piece rate proposition, a price per mile proposition as to revenues. The great difference between horse coaches and railroads was overlooked. Probably 90 per cent of stage coach expenses, whether of capital investment or operation, lies in the coaches, horses and harness. Even in the modern railroad, in the United States, only 20 per cent of the capital and 20 per cent of the operating expense are in the moving trains. Classified passenger and classified freight rates based on distance are founded on one-fifth of the real cost. This is not all. The cost of the other four-fifths has been increasing steadily from the start. Yard expenses are increasing far more rapidly than road expenses. The cost of terminals is growing with the square of the population. What is more serious, both will continue to rise. Getting so much for nothing, both passengers and shippers congregate in the big cities, and add still further to the congestion, to the increased cost of the part of railroading. “Every railroad man, every banker, every investor, every student of transportation knows that rates should be increased because the roads can no longer stand the drain of deferred obsolescence, or unremunerative investments, especially in terminals. “Rates ought to be based on four elements and probably a fifth added. The four basic elements are. (1) Cost of collecting the traffic; (2) Cost of transporting the traffic; (3) Cost of insurance or classification; (4) Cost of delivering the traffic. “Only (2) and (3) now enter into rates. It is as cheap to arrive at New York at the Pennsylvania, or New York Central Station, as to drop the train in Newark or Tarrytown. It is as cheap to ship freight to a New York dock as to unload it from the car at a country siding. “In the New York Subway the cost of (1), (3) and (4) sinks to a vanishing point, and nothing is left but the flat cost of running trains and a flat revenue per passenger. “In steam railroads operation costs of both (1) and (2) are very great, but not made up by revenue. The fifth element that ought to govern charges is a principle that even frogs know all about, but which human beings operating railroads have not yet learned, namely, to put on flat and expand when prices are high so as to accumulate a surplus to tide over the lean years. This fifth element is really included in (3) classification. Railroads now have different rates for different commodities, but $1.80 a bushel wheat and $0.20 cotton are not the same as $0.50 wheat and $0.05 cotton. The wheat raised and the cotton grown, and the iron made into pig iron at $30.00 a ton can afford to pay rates that vary with the price. “Piece rates applied to traffic is the tuberculosis that is gradually but surely consuming our railroads.”—Harrington Emerson. [16] As an evidence of the fact that the sick man of American business has by no means lost his ability to render service, consider what might have seemed to travelers a minor detail of ordinary service, and yet was in reality a tremendous task. On a certain snowy morning in January, 1917, traffic into New York was unusually heavy. The great automobile show was just opening, folk were flocking to it from all corners of the country. The facilities of even as great a railroad as the New York Central were severely taxed. Its Twentieth Century Limited was in three sections, the Detroiter in two, Train Six in three. On these and two other trains due into the Grand Central Station between 8 and 9:40 a. m., 1,200 persons were served with breakfast. This breakfast required sixteen dining-cars, eighty-two stewards, cooks, and assistants, and 105 waiters. Advance advice was received of the requirements, the cars assembled, the crews brought together, and everything made ready to attach the cars to the train at Albany in the early morning. And this was all in addition to the regular dining-car service of the road. [17] And now Congress has adjourned without passing the supplementary feature of the Adamson bill—the all important requirement of arbitration in labor disputes. [18] “Fifteen States have laws designed to secure preferential treatment for their freight by prescribing a minimum movement for freight cars. Several of these require a minimum movement of fifty miles a day, though the average daily movement throughout the nation is only twenty-six miles. One state imposes a penalty of ten dollars an hour for the forbidden delay. Though under the Federal law there is no demurrage penalty for failure to furnish cars to a shipper, several states have penalties running from one dollar to five dollars per car per day. The result is that the railroads are compelled to discriminate against Interstate Commerce and against commerce in the states that have no demurrage penalties. “One by-product of all this chaotic regulation has been an increase in ten years of eighty-seven per cent in the number of general office clerks employed by the railroads, and an increase of nearly 120 per cent (over $40,000,000) in the annual wages paid to them. During this period the gross earnings of the roads increased only fifty per cent. In the fiscal year of 1915 the railroads were compelled to furnish to the national and state commission and other bodies over two million separate reports.”—Harold Kellock in The Century Magazine. [19] Illinois a few years ago passed a statute limiting passenger fares within her boundaries to two cents a mile. To this, the Business Men’s League of St. Louis filed a complaint with the Interstate Commerce Commission, stating that a discrimination had been created against St. Louis. The Federal board had made most of the interstate passenger fares in the central portion of the country average two and one-half cents. This made the fare from Chicago to St. Louis (in Missouri) $7.50, while the fare from Chicago to East St. Louis (directly across the river, but in Illinois) only $5.62. A similar complaint was received from Keokuk, Iowa, also just across the Mississippi from Illinois. After reviewing these complaints the Federal Commission held that two and four-tenths cents was a reasonable rate for interstate fares in this territory and required the railroads to remove the discrimination against St. Louis, Mo., and Keokuk, Iowa. The decision was limited, however, to the points involved in the complaint. The supplemental report covers all points in Illinois. “‘In our original report in this proceeding,’ Commissioner Daniels says, ‘it was shown how the lower state fares within Illinois furnished a means whereby passengers could and did defeat the lawfully established interstate fares between St. Louis and Illinois points. This was done by using interstate tickets purchased at interstate fares from St. Louis to an east side point in Illinois, and thence continuing the journey to any Illinois destination on a ticket purchased at the lower state fare. “‘We deem it advisable to point out that the interstate fares between St. Louis and Keokuk on the one hand and interior Illinois points on the other, made on a per mile basis of two and four-tenths cents, would likewise be subject to defeat if the state fares to and from interior Illinois points intermediate to the passengers’ ultimate destination be made upon a basis lower than the fares applying between St. Louis or Keokuk and such Illinois destination. It would be necessary merely for the passenger who desired to defeat the interstate fare to shift the intermediate point at which to purchase his state ticket. The burden and discrimination which a lower basis of fares within the state casts upon the interstate commerce would not be removed merely by an increase in the intra-state fares to and from the east bank points. “‘And not only this burden, but the direct undue prejudice to St. Louis and Keokuk will also continue if the east side cities while on the face of the published tariff paying fares to and from Illinois points upon the same basis as do St. Louis and Keokuk can in practice defeat such fares by paying lower state fares in the aggregate to and from Illinois destination, by virtue of such an adjustment of fares.’” As soon, however, as the railroads attempted to put this edict of the Interstate Commerce Commission into effect the state courts of Illinois stepped in and tied their hands. At the present time the matter is still involved in much litigation. And a man may buy a ticket from Chicago to East St. Louis for $5.62, and for ten-cent trolley fare cross the Eads bridge into St. Louis. This is, of course, a great injustice to the railroads—an inequality which must sooner or later be adjusted, and the sooner, the better. [20] “A curious light was thrown on this condition in connection with the Shreveport rate case. Texas, in order to keep Louisiana merchants from competing in its markets, had fixed a number of rates within the State applying between points of production and jobbing centers and markets in the direction of the Louisiana line. These rates were substantially lower than the interstate rates from Shreveport, Louisiana, to the same Texas points of consumption. The United States Supreme Court sustained the Interstate Commerce Commission in raising the Texas rates so that Louisiana business men could get a square deal. “Thereafter Senator Shepard, of Texas, introduced a bill in the Senate to abolish the doctrine of the Shreveport case. In a hearing on this bill it developed that while Louisiana was protesting against rate discrimination on the part of Texas, the city of Natchez, in Mississippi, was making a similar protest against the action of Louisiana in fixing rates which excluded the business men of Natchez from the Louisiana markets. Moreover, one of those who appeared in favor of the bill was Judge Prentice, chairman of the Virginia Railroad Commission, which was at that time complaining that the state rate-fixers in North Carolina had discriminated against Virginia cities. “In short, an appalling condition of interstate warfare was revealed that was hurting business generally and killing railroad development.”—Harold Kellock in The Century Magazine. [21] When one comes to consider the possibility of the Interstate Commerce Commission being made supreme in these matters of railroad regulation, he must assume that the members of this Commission are to be held immune from interference; save by the actual and necessary processes of the higher courts. The objection by Senator Cummins, of Iowa, recently to the Senate’s affirmation of the reappointment of Commissioner Winthrop M. Daniels, is in this connection, most illuminating and disquieting. Senator Cummins was careful to say that he held no quarrel against Mr. Daniel’s character or personality. He added that he would be glad to vote for a confirmation of appointment to any other government position. Unfortunately, Commissioner Daniels had written several of the commission’s opinions advocating recent raises in railroad rates. For this offense the Senator from Iowa sought to punish him by blocking his reappointment. Fortunately, however, Mr. Cummins carefully conceived revenge failed of execution. The Senate promptly and generously confirmed the President’s appointment. But the episode shows clearly a great potential danger to which the members of this Commission, as well as all other regulatory boards, are subject if their honest opinions, as expressed in decisions, run counter to the whim of popular opinion. [22] “No one who has traveled about the world will seriously contend that there is any other country where the quality and quantity of rail transportation is so good or so abundant as in the United States. In most European countries rail transportation is furnished by the government at great cost to the public, both directly in the form of heavier taxes and indirectly in the form of high rates. In this country it is furnished by the investment of private capital. This capital is supplied by about 2,000,000 persons. It is absolutely at the mercy not only of the Federal Government, but, within their boundaries, of the legislatures of forty-eight States. How much it may earn depends upon the whim of these masters. How much it may lose has never been determined; for when a certain point is reached the courts step in and administer the bankrupt’s business. “Last year the railways of the country earned about $1,000,000,000 net, a greater sum than ever before in their history. It was less than six per cent on railroad property devoted to the use of the public. “The record earnings of the railroads in 1916 are being used and will be used to urge Government ownership. But how about the lean years? If in the most prosperous year of their lives the railroads of the country cannot earn six per cent, what happens in poor years? Ask the courts. They know. “It is possible now, by right administration, to make particular railroads yield liberal returns to investors; but under Government ownership there could be no such incentive to careful management; the bad would be lumped with the good; the profits in one quarter would be required to meet the deficits in another; the Government would have to assume all necessary capital, and this would by so much impair the Government’s borrowing power. “If the people of this country can once be brought to appreciate the importance of maintaining the quality and expanding the quantity of rail transportation they will see to it that private enterprise is supported, not hampered, in furnishing this most vital of public services. They will manifest overwhelmingly a wish that the roads be set free from the conflicting authorities of forty-eight masters and be controlled by only one, greater than all the rest put together. They will demand that the Federal Government allow such rates as will permit earnings sufficient to attract private capital actually needed to supply public service. They will insist that the Federal control and regulation of transportation shall be as constructive and helpful as Federal control and regulation of banking. It is painful to look at the Federal Reserve system and then to contemplate the plight into which haphazard regulation has brought the railroads.”—The New York Sun. This and all associated files of various formats will be found in: Updated editions will replace the previous one--the old editions will be renamed. 1.F. 1.F.3. LIMITED RIGHT OF REPLACEMENT OR REFUND - If you discover a defect in this electronic work within 90 days of receiving it, you can receive a refund of the money (if any) you paid for it by sending a written explanation to the person you received the work from. 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