by
Frank Trumbull

PRESIDENT OF THE COLORADO & SOUTHERN RAILWAY COMPANY.

An Address to the Western Society of Engineers at their Annual Dinner, Chicago, Jan. 5, 1909.

Mr. President and Gentlemen of the Society:

I shall not attempt to deal with any technical phase of the railroad industry, and in saying this I am emboldened by a declaration which I find in the Constitution of your society, to-wit:

The American railroad administration of today has abundantly demonstrated its ability to solve all engineering and mechanical problems, and we may rely upon it that the same American enterprise and valor which have gridironed the continent with shining bands of steel will solve any technical problem that may be ahead of us for which money may be had.

I therefore proceed at once to engage your thought for a few minutes, if I may, upon what seems to me to be the great problem of the American railroad situation of today; that is, how to satisfactorily settle the relations between private capital and the users of the railroads.

FOUR YEARS' RETROSPECT.

During the last four years the American railroad has been in a seething cauldron of publicity; a good deal of refuse has risen to the surface and has needed to be skimmed off,—but I think I do not violate any confidence in saying that not all of it has come from the body of the railroad. Part of it seems to consist of political bacteria and defunct statutes which attempted to violate the voice of the people,—the Constitution which legislators had sworn to support. And in this connection, perhaps I ought, in passing, to say a word which has rarely been spoken in defense of the railroads, by pointing out the shame of putting them to the great cost of proving in the courts the unconstitutionality of statutes which ought never to have been enacted because they were never valid. In the last four years there has been much noise; the air has been filled with shouts and cries, and more or less dust. Hysteria and virtue, although really not at all alike, became confused, and a very large percentage of the public absorbed the idea that the railroad highways are public property, forgetting that all of us are absolutely dependent upon private capital for the American railroad of today. Again, we seem to have been upon a storm-tossed ocean. Fortunate are we that through it all has run the Gulf Stream of our wonderful American resources. If it were not for that, we should all have been ruined. We have survived, but the pity of it is to think how much better off we might be, if "We, the People of the United States," would, in financial legislation, railroad regulation and other matters, only exercise our wisdom as much as we do our power. Legislation has been restrictive, not constructive. There is very little in it, thus far, to help the railroad. Nearly everything seems to have been thought of, except provision for money or for improving credit so as to command cheap money. The country has been flooded with conflicting laws and still the cry goes up for more bureaucratic power and more statutes. It reminds me of an immigration meeting in Mississippi:

The court-house was filled with an assemblage of white people, and when the meeting adjourned an old darkey asked one of the gentlemen who came out of the court-house what the meeting was for. The reply was that it was an immigration meeting. "What is dat?" asked the darkey, to which the gentleman responded, "We want to get more white people from the North and East to settle here." Whereupon the darkey said, "Foh de Lawd's sake, Majah, dars moh white people in dis county now dan us niggahs can support!"

I admit there have been many evils in railroad administration, but I modestly affirm that there have been no more than in other lines of business. The railroad industry of this country is young and it acquired some children's diseases. Many people think the railroads would have recovered from measles, mumps and whooping cough without prescriptions from forty-seven varieties of doctors—forty-six states plus the Federal government. It has seemed many times that the railroad patient has been like the man who fell ill in some mysterious way. The consulting surgeons determined that an operation was necessary. They could not locate any definite malady, but they found five hundred dollars on him so they operated on him for that! Of one thing, however, we may be absolutely sure—that is that the law of compensation is always at work. If we have an excess of regulation, there is less of something else. It is entirely probable that if there had been no political regulation of railroads, the people of this country would have more roads, far better and safer roads, and a greater distribution of wealth than they have today. But I must not forget that, according to the subject assigned me, we are here not to look backward, but to look at the present, and then perhaps take a little look forward.

SOME CONTRADICTIONS.

From a mechanical and traffic standpoint the American railroad of today is one of the wonders of the age. I give one illustration only: Compare its splendid performance with a report I have here of the Northeastern Railway of England, which has a large mineral traffic. This report shows average contents of loaded freight cars to be 5.72 tons, and average contents of freight trains to be 114.7 tons.[D]

On the other hand, the American railroad situation in its political and governmental relations is a bundle of contradictions. If you were to engage your money in merchandising or manufacturing, you would no doubt be appalled if you should discover that some one entirely outside of your line of business could fix the prices at which you must sell your product, and that the burden of proof that the prices so fixed are confiscatory, is upon you,—and that you could not abandon your operations. Yet this is precisely what may happen if you invest your money in a railroad. The contradiction is that there are no reciprocal assurances in your behalf. Neither the State nor the Federal government will give you any financial aid, nor will they guarantee you anything, nor will they even protect you against competition, as France has long since been wise enough to do.

A second contradiction is that although there was a four years' war to prevent a division of this country, and although thereafter our American genius connected up remote sections of our common country, and although the work of the railroads has been splendidly national, the attempt to regulate them has been lamentably local and Lilliputian. I need only cite the conflicts between the enactments and rate-making of different states and those of the federal government. We hear more or less these days about the "twilight zone" between the states on the one hand and the Federal government on the other; but for those who administer the affairs of a great railroad system, the phrase "twilight zone" is too polite a term. It is instead a jungle in which the wayfaring railroad man may easily lose his way, and possibly be actually devoured by "laws with teeth in them." We hear a great deal about the simple desire that the railroads shall obey the law; but who is wise enough to say what the law is, when only yesterday the Supreme Court of the United States left an important case unsettled, so far as it was concerned, because it was divided four to four. These uncertain and conflicting laws and changes in rates confuse the railroad manager more than the public has ever realized.

A third contradiction is the attempt, by anti-trust laws, to maintain the competitive idea alongside regulation, as if unrestricted competition were compatible with compulsory uniformity in rates and service. The President of the United States and other high officials have spoken in no uncertain terms concerning the absurdity of a situation like this, and yet thus far there is no relief.

A fourth contradiction is found in the great increase in cost of producing transportation without the corresponding increases in selling prices which have taken place in other kinds of business in which private capital is engaged. The erroneous impression seems to prevail that the supply of capital for the railroad industry is an inexhaustible reservoir, regardless of the compensation which it shall receive and the conditions under which it shall perform its work.

A fifth contradiction is the effort to connect up rate-making with physical valuations. If it will be a satisfaction to the politicians to have a physical valuation of all the railroads in the United States, and the people are willing to be taxed to pay the great expense of obtaining it, perhaps no great harm will be done; but I believe all of us here would concede that valuations by the ablest engineers, if separately made, would not agree, and that before such valuations could be finished, they would be out of date. Some of us probably think that for rate-making purposes the Government may as well be employed in making a physical valuation of farms and farm improvements in order to ascertain what is a fair price for wheat; or, for that matter, perhaps be as well employed in adding up car numbers. I know something of a piece of railroad out west, which in a great mining excitement was built through rocky and tortuous gorges, and with four per cent grade hung upon the precipitous sides of awful mountains in a climate described by one of the inhabitants as consisting of three seasons—July, August and winter. Later the boom evaporated and the business of the road got down to one train a day. In the low ebb of traffic a brakeman one day "sifted" into the trainmaster's office and asked for a job. The trainmaster put him through the catechism, and among other things inquired, "What would you think if you saw a train carrying green signals?" to which the applicant promptly responded, "I'd think business was picking up." Now, can any of us tell what they would do in Washington with a physical valuation of a road like that? Its rates today are only about one-fifth what they were at first.

A sixth contradiction is the wide-spread desire to regulate capitalization. Now it may be that there have been abuses; but if one asks any of these critics what is the grievance to be remedied, great silence usually falls upon them, for they are unable to show any more relation between rate-making and either physical valuation or capitalization than there is between the price of a pair of suspenders and the physical valuation or capitalization of a department store. Railroads are continually importuned to make rates that will "move the business," as in the case of the Western road just cited, and those parts of the United States which have the highest railroad capitalization have the lowest average freight rate. If you will look at the American Review of Reviews for the month of June, 1908, you will find a very interesting article by Interstate Commerce Commissioner Lane on "Railroad Capitalization and Federal Regulation." His program is a very simple one, and while pointing out that there should be some way of insuring that the proceeds of all railroad securities shall be actually invested in "acquisition of property, construction, completion, extension, or improvement of facilities, the improvement or maintenance of service and the discharge or lawful refunding of obligations," he says:

"Fundamentally, there is at present no inter-dependence of capitalization and rate—the latter is not in law, nor in railroad policy, the child of the former—though railroad men have sometimes expediently urged the claim, and courts have sometimes too kindly given it their nod of sanction."