HE 
 
 2757 
 1916 
 
 T7 
 
BANCROFT 
 LIBRARY 
 
 o 
 
 THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 OF CALIFORNIA 
 
Railway Regulation and 
 Locomotor Ataxia \ 
 
 BY 
 
 FRANK ^RUMBULL 
 
Railway Regulation and 
 Locomotor Ataxia 
 
 AN ADDBESS 
 
 BY 
 
 FRANK ^TRUMBULL 
 
 CHAIRMAN, RAILWAY EXECUTIVES' ADVISORY COMMITTEE 
 
 BEFORE THE TWENTY-THIRD 
 ANNUAL CONVENTION OF THE 
 NATIONAL HAY ASSOCIATION AT 
 CEDAR POINT, OHIO. JULY 12, 1916 
 
 NEW YORK 
 
 61 BEOADWAY 
 
 1916 
 
The National Hay Association has a member- 
 ship of about one thousand representative hay 
 dealers of the country. In 1915 the hay crop 
 was the second most valuable crop produced in 
 this country, aggregating over one hundred 
 million tons, carrying a value to the farmers of 
 over one billion dollars, and the 1916 crop is 
 expected to be as large. 
 
Railway Regulation and p 
 
 Locomotor Ataxia 
 
 I shall not weary you with figures or with 
 platitudes about what you do for the railroads or 
 what they do for you. The fact that you have 
 invited a representative of the railroads to address 
 you evidences sufficiently the mutual welfare and 
 regard of shippers and carriers. Neither shall I 
 apologize for the railroads. There has been a great 
 deal of critical comment about exceptional instances 
 of railway administration, but if you will put it all 
 together you will find it relates to less than 10$ of 
 the mileage of the country, and that it has very 
 much exceeded in volume and sound the praise 
 bestowed upon the other 90$. 
 
 Railway administration of today in this country 
 is as honest as any other business. Notwithstand- 
 ing this, railway directors and officials accept the 
 principle of regulation because railway companies 
 are public service corporations. Discriminations 
 and unreasonable practices by such corporations 
 are and ought to be forbidden by law. Discrimi- 
 nations by individual states against the commerce 
 of other states and unreasonable requirements ought 
 also to be done away with by some better method 
 than tedious litigation. Obviously, any adequate 
 scheme of regulation ought to deal not with 10$ of 
 the roads or with 90$ but with all of them, and no 
 regulation can be adequate that is not unified and 
 consistent. 
 
 I might entertain you with a long history of 
 various attempts at regulation, commencing with 
 the so-called " Granger Laws," followed later by 
 the Interstate Commerce Law, enacted twenty-nine 
 years ago, and both in turn followed by hundreds 
 
 [3] 
 
upon hundreds of statutes enacted by federal and 
 state governments. But it is sufficient for this 
 occasion to say that these endeavors, due to a 
 variety of motives, have, after establishing general 
 principles, all been of a piece-meal and patch-work 
 character ; court plasters, not blood remedies. 
 Railway legislation has been more conspicuous for 
 quantity than for quality, and " legislation " and 
 " regulation " are not synonymous terms. 
 
 PRINCIPLES EOR RATE MAKING 
 
 It is true that much progress has been made. 
 For example, in the so-called Eastern Rate Case 
 the Interstate Commerce Commission made, in 
 December, 1914, the following declarations of 
 principle : 
 
 That there is in this country a fundamental need of 
 adequate transportation facilities. 
 
 That such facilities during the continuance of present 
 economic conditions can only be had by means of private 
 capital, combined with private enterprise. 
 
 That private capital can only be obtained by the hope 
 and realization of fair and reasonable return. 
 
 That to produce such return, freight rates may be raised, 
 when it is shown that existing rates as a whole (considered 
 regionally in this case) yield inadequate revenue, and that 
 the higher rates proposed would be reasonable. 
 
 That such reasonable passenger fares may be charged as 
 will yield a fair return on the property devoted to passenger 
 use, and further that in general each class of service, 
 including the mail and express, should contribute its just 
 proportion to the total economic cost of operation. 
 
 That in determining reasonable rates, interest upon rail- 
 way debt is not a factor and will be discarded. This has 
 mightily clarified a thing about which there has been much 
 confusion of thought and even more confusion of tongues. 
 The fact is that bonds and stocks indicate only the ownership 
 of property, and are not the property itself which is used by 
 the public. This is simply a corollary to the long established 
 principle that if railway companies take private property for 
 public use, they must pay its reasonable value, regardless of 
 how the previous owner acquired it or paid for it. 
 
 However, almost immediately after this decision 
 was handed down, one state made an order reduc- 
 
ing rates which, if sustained by the courts, will 
 take away several million dollars per annum of 
 the benefits derived at Washington. Various state 
 rates and practices could not be changed to con- 
 form to the recommendations of the Commission ; 
 payments by the Post Office Department were still 
 outside the Commission's jurisdiction ; various 
 tribunals (sometimes both the legislature and the 
 commission of a single state) were determining 
 what " each class of service" should pay upon 
 traffic within the states as distinguished from that 
 between the states ; all the states were at liberty to 
 make requirements which in one way or another 
 changed the net revenue of the roads. All of 
 which illustrates the real helplessness of the Inter- 
 state Commerce Commission to actually "regulate." 
 Clearly, something was still lacking. 
 
 THE MEANING OE REGULATION 
 
 Let us get down to fundamentals ; back to the 
 intent and real meaning of things. If you will 
 look at Webster, you will find these definitions of 
 the word " regulate " : 
 
 u To adjust by rule or method." 
 
 " To put in good order." 
 
 u To adjust or maintain with respect to a desired condi- 
 tion." 
 
 u To regulate a watch or clock, to adjust its rate of 
 running so that it will keep approximately standard 
 time." 
 
 The carriers and the public have suffered because 
 they have not really obtained regulation according 
 to the intent and meaning of that much-used word. 
 Don't take my statement for it, but let me read to 
 you an extract from a recent report of the House 
 Committee on Interstate and Foreign Commerce 
 upon a resolution providing a joint committee of 
 inquiry into the whole problem of transportation ' 
 
 [5] 
 
similar to the Monetary Commission a resolution 
 which has already passed the Senate and is expected 
 soon to pass the House :* 
 
 " Since the approval of the act to regulate commerce in 
 1887 the system has had a gradual and irregular growth by 
 various and sometimes sporadic amendments, some of them 
 making decided if not radical changes in the original plans 
 and policies and some of them adding new and important 
 activities. So that the entire law to regulate commerce now 
 in force is not a uniform, compact, symmetrical structure 
 easily understood, but is an incoherent growth, sometimes 
 inconsistent, in some parts hardly reconcilable, and, to say 
 the least of it, the diversities and incongruities should be 
 carefully considered and wherever possible unified and 
 improved, to the end that the Federal regulation of carriers 
 may be successfully carried on with the best possible service 
 to the public. . . . It is the earnest hope of every mem- 
 ber of your committee that the investigation, if ordered, shall 
 be directed to the detection of defects in the system, the 
 establishment of truth as to the best way to remedy these 
 defects, and the perfection of the system for the increased 
 convenience and prosperity of the people in every way that 
 human legislative wisdom can accomplish perfection in 
 anything/' 
 
 President Wilson, in writing about transporta- 
 tion in 1914, said, among other things : 
 
 "They (the railroads) are indispensable to our whole 
 economic life, and railway securities are at the very heart of 
 most investments, large and small, public and private, by 
 individuals and by institutions." 
 
 And in addressing Congress on December 8, 1915, 
 he said, in recommending the Special Committee 
 above mentioned: 
 
 "It (transportation) is obviously a problem that lies at 
 the very foundation of our efficiency as a people. . . . 
 The question is whether there is anything else we can do 
 that would supply the effective means in the very process of 
 regulation for bettering the conditions under which the rail- 
 roads are operated and for making them more useful servants 
 of the country as a whole. . . . For what we are seeking 
 now, what in my mind is the single thought of this message 
 is national efficiency and security." 
 
 * Resolution passed by the House of Representatives July 15, 1916, and 
 approved by the President July 20, 1916. 
 
 [6] 
 
You will perceive that I am not giving you my 
 own views, but those of great leaders of thought in 
 this country. Senator Underwood, of Alabama, 
 said in an address at Chicago on ^February 4, 1916 : 
 
 li We must recognize that the man who is willing to invest 
 his money at a moderate rate of interest in railroad securities 
 is not exploiting the public but is a public benefactor." 
 
 " We must solve the problem along lines of private own- 
 ership and Government regulation. We must consider the 
 wisdom of substituting one master for the forty-nine masters 
 that regulate our commerce today." 
 
 Colonel Roosevelt and Mr. Taft have made 
 almost identical statements in clear and unmistak- 
 able terms, and Mr. Hughes said immediately 
 after his nomination : 
 
 " We must rescue our instrumentalities of interstate and 
 foreign commerce, our transportation facilities, from uncer- 
 tainty and confusion. We must show that we know how to 
 protect the public without destroying or crippling our pro- 
 ductive energies." 
 
 SERVING MANY MASTERS 
 
 The "Locomotive Engineers' Journal," official 
 organ of the 75,000 railroad engineers, said not 
 long ago : 
 
 u The railroads are almost wholly interstate in character, 
 and it requires little thought to realize how unsatisfactory 
 and unbusinesslike it makes the conditions for the railroads 
 with a commission in every state demanding all sorts of con- 
 ditions from the roads. 
 
 " The great thoroughfares should have one boss instead 
 of forty-nine, and the rate making should be done by one 
 factor of the Government, so that a survey of the whole 
 territory may be before them, when all the varied conditions 
 can be readily seen, and rates made that are just, both to the 
 shipper and the railroads. 
 
 " No other kind of business could live under such unknown 
 and unfixed conditions." 
 
 The Massachusetts Public Service Commission, 
 in reporting not long ago on the New Haven road, 
 after an exhaustive inquiry, made this statement : 
 
" The whole legal question is so difficult, so entangled and 
 confused by conflicting claims and rights, that it raises 
 serious doubts as to the wisdom of the system from which it 
 arose. No man can serve two masters. Is there public 
 advantage in compelling a corporation to serve three or 
 more ? A system tinder which a single undivided corpora- 
 tion is at the same time three separate corporations is wholly 
 illogical and seems contrary to good order and reason. " 
 
 Formerly, wages and rate matters were dealt 
 with in a rather lawless way by shippers, employes 
 and individual roads, but in the last few years 
 there has been an evolution ; both wages and rates 
 have been considered regionally, and now, for the 
 first time, the train service employes are insisting 
 that their wages shall be considered on a nation- 
 wide basis. 
 
 Industrial and commercial bodies all over the 
 country, recognizing the great need for unified and 
 more efficient regulation of transportation, have 
 passed significant resolutions during the present 
 year calling upon Congress for investigation and 
 relief. The Merchants Association of New York, 
 the Chamber of Commerce of Philadelphia, the 
 National Manufacturers Association, the National 
 Lumber Dealers Association, the Southern Pine 
 Association, National Leather Association, Ameri- 
 can Hardware Manufacturers Association and 
 many similar organizations of wide influence in 
 the business world have expressed themselves 
 vigorously to this effect. 
 
 So under our very eyes this thing has come to 
 pass. Men of all classes and of all shades of 
 political opinion are declaring that the transporta- 
 tion question is a national problem, not a local 
 issue. Now, if you and other shippers, and the 
 people who travel in passenger trains or who 
 receive mail and parcels post carried by the rail- 
 roads, and railway directors and officials are all 
 agreed that the propriety of regulation is no longer 
 
 [8] 
 
in dispute surely all of us together ought to be 
 able to search our hearts, ascertain our paramount 
 duty, get down to business and discuss the whole 
 question from the viewpoint of the public interest. 
 
 PERTINENT QUESTIONS 
 
 We may, therefore, ask ourselves : 
 
 Is it in the public interest that the railroads of 
 this country are required to make over two million 
 reports per annum to various federal and state 
 tribunals ? 
 
 Is it in the public interest that passenger rates 
 are only two cents a mile in some states and higher 
 in more populous states'? And in considering this 
 question will not the most obvious thing to the 
 public be the cost and comfort of the passenger 
 equipment of to-day as compared with twenty 
 years ago ? 
 
 Is it in the public interest that wagon-loads of 
 testimony be submitted to various state tribunals 
 at a cost of millions of dollars to the railroads and 
 the public to prove that rates ought to be higher, 
 or ought not to be reduced, resulting in adverse 
 decisions after a corresponding laborious inquiry 
 by the Interstate Commerce Commission, which 
 resulted in the finding that charges are inadequate 
 and that passenger traffic is not paying its share ? 
 
 Is it in the public interest that some states pass 
 inharmonious head-light laws, boiler inspection 
 laws, extra-crew laws and other laws affecting oper- 
 ation while other states are refusing to pass them ? 
 
 Is it in the public interest that compensation 
 paid by one shipper the Post Office Department- 
 is determined without submission to the Interstate 
 Commerce Commission when other shippers are 
 deprived of such a privilege $* 
 
 Since this address was delivered, authority to determine compensation, for 
 railway mail pay has been conferred upon the Interstate Commerce Commission. 
 
 [9] 
 
Is it in the public interest that public service 
 corporations are required by divided authority to 
 violate the spirit if not the letter of Section Two of 
 Article Eour of the Constitution of the United 
 States, which declares that : 
 
 u The citizens of each state shall be entitled to all privi- 
 leges and immunities of citizens in the several states." 
 
 Is it in the public interest that public tribunals 
 have said in some cases that rates by one line may 
 be higher than another because the cost of opera- 
 tion is higher, thereby penalizing superior location 
 and construction'? If so, what incentive is there to 
 build better roads, or improve existing roads ? 
 
 Is it just that wages of steel workers, coal 
 miners and others be voluntarily increased by 
 employers and these increases then passed along to 
 the consumer, including the railroads, the largest 
 purchasers of such commodities, unless similar 
 flexibility be accorded to railroad investors and 
 nearly two million employes ? If not, what is the 
 alternative ? 
 
 Beside innumerable difficulties like those men- 
 tioned, there are confusing Anti-Trust Laws of 
 various states as well as the Federal Government. 
 These laws not only conflict with each other, but 
 are quite inconsistent with competent regulation; 
 they have cost millions of dollars in litigation 
 and have prevented many economies in transpor- 
 tation. Nowhere else in the world do railroads 
 have this handicap. 
 
 MILLIONS GOING OVER THE DAM 
 
 In consequence of all these wasteful things, 
 millions upon millions of dollars which ought to 
 be saved for somebody, are going over the dam 
 every year, and warrant the query whether there 
 
 [10] 
 
is any more wisdom in disembarking railroad cor- 
 porations at state lines than there would be in dis- 
 embarking passengers and freight or changing 
 wages at state lines. Who, for example, would 
 think of advocating a Post Office Department for 
 each state in the Union 1 
 
 Is it not your duty and mine to cut out waste 
 wherever we can, no matter how prosperous we 
 may be? 
 
 The net result of conditions such as I have 
 enumerated is that individual states are under the 
 guise of "regulation" actually disorganizing com- 
 merce, and are shifting to other states burdens of 
 railway credit which the latter ought not to assume. 
 They are in reality requiring railway corporations 
 to do what the Federal law prohibits them from 
 doing, that is to discriminate between persons 
 and places. This encourages litigation and is 
 wasteful in every way. 
 
 LOCOMOTOB, ATAXIA 
 NOT REGULATION 
 
 The fact is, we haven't had u regulation" at all. 
 It is locomotor ataxia. If you will look again at 
 the dictionary, you will see locomotor ataxia 
 described as: 
 
 " A disease of the spinal chord characterized by peculiar 
 disturbances of gait, and difficulty in co-ordinating voluntary 
 movements." 
 
 Surely Webster must have had the railroads in 
 mind when he wrote that ! The railroads may be 
 likened to the spinal chord of our industrial and 
 commercial life. Congress can and should 
 without any Constitutional amendment act in 
 these matters in behalf of all the states and 
 "co-ordinate" the railroads. The small number of 
 people who would be thrown out of political 
 employment are as nothing in the balance to the 
 
millions who would be benefited. In fact, State 
 Public Service Commissions would still have quite 
 enough to do in supervising street car lines, light- 
 ing companies, water companies and local regula- 
 tions affecting railway operation. Any fear of too 
 much centralization could be easily overcome by 
 regional commissions, and the best State Commis- 
 sioners, if promoted to such Eederal positions, 
 could render far greater service, and more satisfac- 
 torily to themselves, than is possible under their 
 present limitations. 
 
 If we can mobilize the strength of the banks 
 regionally, why not also the railroads ? The people 
 of the states 'would be better served and better 
 protected, for no merchant or producer is willing to 
 be restricted to his own state in comfortable travel 
 or in commercial opportunity. Our state lines are 
 not the " frontiers " of forty-eight separate coun- 
 tries, and the people care nothing for state lines on 
 the map, or for theoretical state sovereignty, when 
 they want to do business with each other. 
 
 RELATION OP RAILWAY CREDIT 
 TO ADEQUATE SEEYICE 
 
 Not long ago I heard an after-dinner speaker 
 say : " The railroads must be taken out of the field 
 of speculation." I do not know just how this is 
 to be accomplished, unless by Government guaran- 
 ties, but certainly the business ought to be relieved 
 of the speculative risks of conflicting treatment by 
 public authorities. 
 
 Railway investors are quite willing to take 
 their chances with the other people of this country. 
 They do not have any problems except so-called 
 regulation that you have not. You have your 
 puzzles about wages, about fluctuations of crops, 
 
 [12] 
 
about demand and supply and many other things. 
 The railroad investor takes "pot-luck" with you 
 but is timid, even in prosperous seasons, about the 
 one thing with which he has to contend and with 
 which you do not; that is, bewildering artificial 
 limitations on profits. He is quite willing to have 
 supervision of railway securities, but, naturally, 
 thinks that the machinery should be simple and 
 prompt and the Federal Government should act in 
 behalf of all the states in regulating the instru- 
 mentalities of commerce. 
 
 Right now nineteen states are trying to regu- 
 late the issuance of securities, and no two of the 
 regulations are alike. If you were a banker, how 
 long would you, with present opportunities for 
 making money, tie up your funds or your cus- 
 tomers' funds, waiting for " consents" of various 
 tribunals, some of which impose a heavy special 
 tax on this "privilege" of devoting money to 
 public use although the proceeds of the securities 
 may be largely spent in other states ? 
 
 *So railway regulation can really put the 
 machine " in order " that does not comprehend the 
 question of railway credit. Facilities must, of 
 course, precede service and credit must precede 
 facilities. Our railroads should always be ahead 
 of, not behind, the growth of the nation. In this 
 connection, may I bring to your attention just one 
 graphic statement ? The debt of the railways of 
 this country is now, roughly speaking, about Ten 
 Billion Dollars. The stock amounts to about Six 
 Billion Dollars. Now, how long would your 
 bankers do business with you if you were attempt- 
 ing permanently to borrow ten dollars for every 
 six you put in the business yourself ? Manifestly, 
 the financial condition of the railroads will become 
 more and more unsound and more and more diffi- 
 
 [13] 
 
cult and expensive unless future financing is done 
 more with stock and less with debt. 
 
 Millions of people are as dependent upon weak 
 roads as other people are upon the strong ones. 
 For example, take the Southwest. A large part of 
 its railroads are in bankruptcy. Surely that is not 
 all due to bad management. How much of it is 
 due to unwise regulation, how much to unsound 
 laws about financing, and how much to other 
 things? Could any Congressional action be of 
 greater service than to do whatever is necessary to 
 safeguard and strengthen all railway credit? 
 
 Railway net returns for the fiscal year j ust ended, 
 although it showed the largest gross earnings in 
 their history, were equivalent to about 5J$ on the 
 property used by the public surely not exorbitant. 
 Is there any prosperous private business in the 
 world that yields so small a return ? In 1913, the 
 return was about 5$ ; in 1914, about 4$ ; in 1915, 
 about 4$. I am speaking of the railroads as a 
 whole; not even a unified regulation can be suc- 
 cessful if it is not to make weak roads healthier 
 and more serviceable, nor can it be successful if 
 based on returns of prosperous years only. 
 
 In no business is it conservative to draw out 
 every year all of the profits. How long would 
 your bankers be cordial if you were to withdraw 
 every year all of your gains, instead of building up 
 reserves or adding to the real value of your assets ? 
 
 COMPENSATION FOR SERVICE 
 
 I have said that I am not here to apologize for 
 the railroads, nor am I here to boast ; but perhaps I 
 may give you one or two illustrations : The average 
 passenger train in this country earns for carrying 
 passengers, mail, express and parcels post about 
 $1.40 per mile. The average equipment of loco- 
 
 [14] 
 
motive and cars provided for this probably weighs 
 about 500 tons and is projected through space at a 
 speed varying from 20 to 60 miles per hour. That is 
 to say, a 500-ton train of steel, plate glass, expensive 
 woodwork, electric lights, etc., costing $200,000 or 
 more, is projected twelve miles at high speed for 
 the price of a ton of hay. Do you happen to know 
 of any equivalent service for less money ? 
 
 Again, as I have illustrated in the past : If you 
 should write a letter to an American railroad 
 official, his company will have to haul a ton of 
 freight two thousand pounds of average freight- 
 coal, ore, silks, ostrich feathers, and everything 
 for more than two and one-half miles to get money 
 enough to buy a postage stamp to send you an 
 answer. Out of that kind of service the company 
 must pay its employes, buy its materials, pay its rents 
 and taxes, interest on its debt, and make its living. 
 
 Let me also quote from a recent statement of 
 W. M. Acworth, a distinguished English writer on 
 railway economics. He said : 
 
 " This is my tenth visit to the United States, of whose 
 railway affairs I have been for about thirty years a diligent 
 student. Every time I am brought into contact with Ameri- 
 can railways, the overpowering impression produced on my 
 mind is of the marvelous results which the efficiency of the 
 railroad men produces with the minimum expenditure both 
 of capital and income." 
 
 NATIONAL CONSCIOUSNESS 
 
 A very helpful American writer has said : 
 
 " A nation is made great not by its fruitful acres but by 
 the men who cultivate them ; not by its great forests but by 
 the men who use them ; not by its mines but by the men who 
 work in them; not by its railways but by the men who run 
 them. America was a great land when Columbus discovered 
 it ; Americans have made of it a great nation." 
 
 I am sure you will not censure me for remind- 
 ing you that we are a great nation, not a federation 
 of tribes. Never before has there been such a 
 
 [15] 
 
national consciousness. The word "National" in 
 the name of your Association signifies something, 
 and I venture the hope that, when the Congres- 
 sional inquiry to which I have referred is inaugu- 
 rated, all of us will join hands in doing what the 
 House Committee suggested, in the quotation I 
 have made, to wit: seek "the establishment of 
 truth as to the best way to remedy defects and the 
 perfection of the system for the increased confidence 
 and prosperity of the people." 
 
 Your co-operation will help our statesmen to do 
 for the railroads of this country, and, therefore, for 
 the whole people, as fine a piece of constructive 
 work as has already been done for the banks. We 
 should be as proud of safe and prosperous railroads, 
 as of safe and prosperous banks ; we must have both 
 if we are to keep pace with the great expansion 
 ahead of us, to say nothing of our normal growth. 
 
 The opportunity of this generation your oppor- 
 tunity and mine is to serve our country by pro- 
 moting national unity. The paramount " state 
 right" is to be part of the Union. Nothing will 
 promote national unity more than unified and 
 consistent regulation of transportation, which, as 
 President Wilson has suggested, is " the one com- 
 mon interest of our industrial life." It is a 
 fascinating task, and it is most gratifying that 
 all the multiplying signs of mutual friendliness 
 and appreciation are so favorable to its accom- 
 plishment. 
 
 [16]