I Sayings and Writings About the Railways 8C61 '12'NVriVd 'A 'N 'a Sayings and Writings About the Railways By Those Who Have Managed Them and Those Who Have Studied Their Problems Published by tbe Railway Age Gazette : Woolwor ransportati 1913 New York : Woolworth BuilcW Chicago : Transportation Building or Prefatory Note The purpose of this publication is to assemble for easy reading and ready reference views and sugges- tions of men experienced in the management of railroads, or who have given attention to their problems. All observersof events realize that the American railroads have reacneoa new crisis in their development and that a temperate solution of their problems has a very close relation to the welfare of business and to the future prosperity of the country. In order that right action may be taken, it is necessary that the information on which this action is based shall be as complete as possible. "To do justice we must know the truth," is a sentiment ascribed to Mr. Clements, of the Interstate Commerce Commission. This is a partial but representative collection of the expressions of railroad authorities and students for the reader who may be interested in them. Extracts have been taken from hundreds of pamphlets and magazine articles, scores of books and many legal papers. Even if these sources of information were at the reader's hand it would be a task for him to go through them. As a rule, each extract has its date. It is impor- tant to bear this in mind because of the constantly changing statistics of trans CONTENTS. WHAT RAILROADS HAVE DONE AND WHAT THEY MEAN TO CIVILIZATION AND PROSPERITY. Page Nation's Growth Due to Railroads Franklin K. Lane. . * 11 Wonderful Work of Private Enterprise Morrill W. Gaines 12 Railroads as Creators of Wealth Robert Mather 13 Lincoln's Prophecy H. U. Mudge 13 Soundest Business in the World E. 8. Mead 14 Next After Religion and the Public Schools J. J. Hill. 15 Largest Single Service Simon Sterne. 15 An Industry Necessary to Life W. L. Ross 16 Magnitude of Our Railways H. S. Haines 16 Great Purchasers of Materials Howard Elliott 17 Nation's Destiny in the Railway Problem C. D. Kel- logg 17 What the Railroads Handle Emory. R. Johnson 18 Traffic Actually Moved L. G. McPherson 19 Western Development J. C. Stubbs 21 Life of All Business William C. Brown 22 Growth of Interior United States Sidney Dillon 23 Ablest Men of the Day Arthur Brisbane 24 The Railroad Strike of 1894 at Chicago L. F. Loree. . . 24 Railroads and Prosperity E. P. Ripley 25 More Beneficent than Philanthropy R. W. Emerson .... 26 Civilization's Largest Factor Elbert Hubbard 26 Vital Force of the Century Gardiner G. Hubbard 27 Railroads Created Land Values Joseph G. Cannon 28 Public Opinion and Railways W. W. Finley 29 Mileage and Capital London Times 30 WHO OWN THE RAILWAYS? The Common People's Money A. E. Reynolds 32 Owners of the Pennsylvania Samuel Rea 33 1,000,000 Owners Representing 4,000,000 People H. Elliott 34 Securities on Safe Foundations Theodore Roosevelt. ... 35 People's Confidence Built the Railroads Robert Mather. 35 Getting Closer to the People James O. Fagan 36 Railroad Bonds and Life Insurance J. L. Laughlin.... 36 Bond Investments Comptroller of Currency 38 EFFICIENCY AND SAFETY. American Roads First in the World W. M. Acworth 39 Practicable Efficiency Julius Kruttsshnitt 40 Railroads Lead in Efficiency L. G. McPherson 41 High Efficiency Needed Interstate Commerce Commis- sion 41 A Labor Leader on Efficiency Warren 8. Stone 42 The Pick of All Industry L. F. Loree 44 A Premium on Efficiency Commission on Arbitration. . . 44 Tonic Effect of Good Service C. M. Keys. 45 Modern Freight Cars London Times 47 Growth of the Passenger Car London Times 47 Units of Railway Performance L. G. McPherson 48 More Burdens on the Railways Samuel Rea 49 Economy of Operation C. D. Trueman 50 Capitalization and Service W. H. Williams 51 Value of Large Systems J. J. Hill 52 The Experience of 1907 J. J. Hill 52 Value of Statistics Neville Priestly 53 The System of Statistics L. G. McPherson 55 Eleven Thousand a Year G. A. Rankin 56 Accidents to Trespassers Railway Age Gazette 57 Most of the Killed Trespassers C. C. McChord 57 What Safety Means T, S. Dayton 58 INCREASE IN TAXATION AND OTHER COSTS. The Public Milch Cow J. J. Hill 59 Tar Increase of Thirty Years London Times 59 Some of the Higher Costs of Railroading Daniel Wit- lard 60 THE RAILROAD'S DOLLAR. Problem Critical and Urgent F. L. Jandron 63 How the Dollar is Divided Howard Elliott. 63 The Value of a Postage Stamp Frank Trumbull 64 WAGES AND LABOR. Highest Wages and Lowest Rates James J. Hill 65 Compulsory Arbitration M. A. Knapp 65 Labor's View of Wage Arbitration P. H. Morrissey 65 Sixteen Million People Howard Elliott 65 Labor Holds Balance of Power Commission on Arbitra- tion 66 Labor's Large Share L. F. Loree 66 No Serious Strike Since Erdman Act P. H. Morrissey.. 6T Canadian Disputes Act Commission on Arbitration.... 68 Prosperity and Railroad Employees W. W. Finley 69 Labor's Demands on Railroads H. 8. Raines 70 A Tribute to Railroad Men F. K. Lane 71 The Labor Organization W. J. Cunningham 71 Responsibility of Labor Organizations J. C. Stuart. ... 72 Wages and Rates ; Their Increases Compared H. 8. Haines 72 No Doctrine of Hatred for Labor P. H. Morrissey 73 If Wages Are Increased, Why Not Rates? Charles A. Prouty 74 Clearing House for Labor and Supplies William Bproule 74 Ten Millions Supported by Railways A. Maurice Low . . 76 Ultimate Wages Wall Street Journal 75 Permanent National Wage Commission B. A. Worthing- ton 77 Wages Here and in Europe W. C. Brown 80 SOME OF THE PRESENT NEEDS. J. J. Hill's Famous Prediction J. J. Hill 81 Why Railroads Require More Money Samuel Rea 82 Labor's View of the Railroad's Great Need W. S. Stone. 83 Increased Service and More Money W. W. Finley 83 Looking to the Future Judge Otis 85 More Expenses and More Laws Samuel Rea 86 What is to be the Answer? Charles A. Prouty 87 Terminal Facilities E. H. Harriman 88 Many Costly Improvements B. A. Worthington 88 Whole Railway System Behind Requirements G. A. Rankin 89 Intelligence and Co-operation F. A. Delano 89 Public Confidence Theodore P. Shonts 90 Unfair Attacks on the Railroads L. F. Loree 91 The Legislative Handicaps B. L. Winchell 92 Greater Movement of Cars James J. Hill 93 New Cars Cost More James J. Hill 93 Railway Management Fred. Wilbur Powell 94 Immense Outlay of Money Theodore Roosevelt 94 Better Transportation Theodore Roosevelt 96 A Reasonable Return New York Chamber of Commerce. 96 Cannot Force Private Capital Charles A. Prouty 97 Loading and Unloading Facilities E. D. Sewall 97 "WHAT THE TRAFFIC WILL BEAR." An Unfortunate Expression Frank Trumbull 98 Tendency of Rates Downward Samuel Rea 98 8 The Distribution of Rates Wall Street Journal 99 The Underlying Principle Franklin Escher 101 A System in the Public Interest W. M. Acworth 102 The Evolution of Rates R. S. Baker 103 What the Service is Worth Franklin Escher 105 RATES AND RATE-MAKING. Present Rate Very Small Howard Elliott 106 Rates for Grain and Other Produce D. Miller 106 What a Slight Increase Would Do Benjamin F. Bush.. 107 American Rates the Lowest Horace Porter 107 The Economic Principles Arthur T. Hadley 108 Rates Not Based on Value of Railroad R. 8. Lovett. . . . 109 Variations in Rates Interstate Commerce Commission.. 109 Other Prices that Enter into Cost Samuel W. McCall. . 110 On the Lines of the Common Law S. O. Dunn Ill Freight Rates on Food Products W. W. Finley 112 Excessive Rates Injurious to Railroads E. P. Ripley... 113 General Principle of Rate-making Walker D. Eines 113 Passenger Rates Howard Elliott 114 The 2-Cent Maximum Fare Howard Elliott 114 Importance of Fair Rates L. E. Johnson 115 How the Present System of Rates Grew R. S. Lovett.. 116 Development of Railway Tariffs Charles A. Prouty. . . . 118 What is a Reasonable Rate? Interstate Com. Comm f n.. 120 " " " " " W. M. Acworth 120 " " " " H. C. Adams 121 " "" " " F.A.Delano 121 " " " " " Henry Fink 121 " " " " " W. W. Finley 122 " " " " " W. D. Hines 122 " "" " " R. S. Lovett 122 " "" " " E. P. Ripley.. 123 " " " " " T. Van den Berg 123 " "" " " F. W. Whitridge. 123 " " " " " Daniel Willard 123 " "" " " W. H. Williams 124 Railroad Rate Not a Tax L. G. McPherson 124 Good Credit and a Fair Return Samuel Rea 125 Purchasing Power of Railway Receipts New York Sun. 125 Seven Cents for All a Man Wears L. F. Loree 126 Laws of Trade A. T. Hadley 126 Rates and Prices L. G. McPherson 126 Conditions that Control Charges H. T. Newcoml). 127 Value of the Article A. Van Wagenen 128 Why Rates Can Be Advanced Franklin Escher 129 9 What the Railroads Get L. G. McPherson 129 Rates on Staple Articles L. G. McPherson 131 Rates in Different Countries Robert Mather 132 Steady Decrease in Rates M. W. Gaines 133 REGULATION AND LEGISLATION. Congress and the States Supreme Court 135 Not at the Mercy of Legislative Caprice Supreme Court 135 National Control of Interstate Commerce W. H. Taft.. 136 Federal Authority Over Railroads L. F. Loree 136 Progress of Regulation Commission on Arbitration 137 Regulation Here to Stay Darius Miller 138 Cost of Regulation Howard Elliott 139 Ample Machinery for Regulation Daniel Willard 140 Ignorance and Legislation W. L. Ross 141 Too Many State and National Laws 8. 0. Dunn 142 How the Railroad is Tied A. Maurice Low 142 The Scheme of Legislation M. A. Knapp 143 Railroads and Other Industries J. L. Laughlin 144 Excess of Regulation Henry Fink 145 A Better Understanding Horace Porter 145 Creation of Permanent Conditions W. L. Ross 146 Limits of Regulation W. W. Finley 146 Too Many Laws Howard Elliott 147 Inherent Rights of the Railroads L. G. McPherson.... 148 Why Not Regulate These ? Railway Record 149 Effect of Radical Legislation Howard Elliott 149 Proof of Experience Robert Mather 150 Why New Railroads Are Not Being Built J. P. Morgan. 151 A New Account with the Future Daniel Willard 152 Cost of Regulation W. J. Cunningham 153 A Conservative, Wise, Just Policy B. L. Winchell 154 Flood of Legislation Howard Elliott 155 CAPITAL AND CREDIT. Railways Must Have Adequate Capital M. A. Knapp . . . 157 Way to Strengthen Railway Credit B. F. Bush 157 Value of Securities R. S. Lovett 158 Land Grants Cleveland and Powell 159 Service, Dividends, and Prosperity B. L. Winchell 160 Free Play for the Railroad Builder 8. W. McCall 161 Backbone of Railroad Credit Wm. Sproule 162 Few New Issues of Securities Franklin Escher 163 Labor's View of Railway Surplus W. 8. Carter 164 Another Labor View of Surplus P. H. Morrissey 164 Railroads and the Money Market 8. O. Dunn 165 An Appeal to Reason W. C. Brown 165 The Unending Way of Capital C. M. Keys 166 10 Interest of the Shipper Franklin Escher 167 A Surplus for Emergencies J. J. Hill 168 The Railroad's Surplus J. J. Hill 168 Theory of Railroad Stock Issues Railroad Securities Commission 169 New Issues of Bonds Railroad Securities Commission.. 170 What Constitutes a Reasonable Return? Railroad Se- curities Commission 171 Amount of Additional Capital Required Railroad Se- curities Commission 172 GOVERNMENT OWNERSHIP AND VALUATION. What State Ownership Means Arthur T. Hadley 174 President Wilson's Position Woodrow Wilson 174 President Taft's Views William H. Taft 175 Justice Hughes Opposed Charles E. Hughes. 176 'Government a Bad Business Agent J. G. Schurman .... 176 A Hazardous Test James Bryce 176 State Ownership in Europe Evelyn Cecil 177 Results of Government Ownership E. R. Dewsnup 178 Hard Blow to the Credit of France Yves Guyot 179 A Huge Political Machine J. C. Jeffrey 179 Prance a Bad Railway Manager Pierre Leroy-Beaulieu. 180 Where Railroads Are State Owned Slason Thompson. . . 180 Stimulus of Private Ownership Arthur T. Hadley 181 Danger of Excessive Regulation W. W. Finley 182 Built by Private Funds J. F. Holden 183 Would Imperil Free Government J. J. Hill 183 Ownership and Politics Fairfax Harrison 184 Effect on States Governor Foss 184 Elements of Value W. D. Hines 185 Rates and Physical Valuations Fairfax Harrison 185 RAILWAYS AND CANALS. Canals Only Supplementary W. M. Acworth 187 Different Kinds of Waterways L. G. McPherson 187 Cost by Canal Greater H. G. Moulton 190 Senator Burton's Statement T. E. Burton 190 Rates of Railways and Erie Canal Compared Bureau of Railway Economics 191 FIVE POINTS IN THE SITUATION Frederick A. Delano.. 193 SEVERE TESTS OF RECENT YEARS Logan G. McPherson. . 197 STATISTICS FROM PUBLICATIONS OF THE BUREAU OF RAIL- WAT ECONOMICS AND OTHER SOURCES 203 INDEX TO NAMES 237 WHAT RAILROADS HAVE DONE AND WHAT THEY MEAN TO CIVILIZA- TION AND PROSPERITY. Nation's Growth Due to Railroads This country cannot grow without adequate trans- portation facilities. The railroad is our common highroad; it is not a luxury; it is not a concern in which the farmer and the manufacturer alone are interested; it is an essential to the commercial life of our people, almost as necessary as the land itself, for we have grown up as a people to be physically dependent upon our railroads. No other people are so bound up as are we in economic interdependence. No one community in all this land lives to itself. We have grown as railroads were built. We have made a community of a continent. The freight rate? deter- mines where we shall mine and how we shall mine; where we shall manufacture and how we shall manu- facture; where we shall plant and what we shall plant; what we shall eat and wherewithal we shall be clothed. With a national system of railways that penetrates into the remotest sections of the country, a service that is dependable and adapted to our in- dustrial life, and rates so low as to make the least possible tax upon trade, the United States as a com- mercial and industrial entity will realize itself fully. If, on the other hand, we have too few railroads, giv- ing meager service and following the false policy of exacting high tolls, the nation's growth will be by so much retarded. Franklin K. Lane: What I Am Try- ing to Do. World's Work, March, 1913. 11 12 Wonderful Work of Private Enterprise No other country is so dependent on railroads. The United States has 245,000 miles of line, 40% of the mileage of the world. Its tonnage of freight moving by rail is greater than that of any other two nations, not excepting our formidable industrial rivals, Ger- many and the United Kingdom. The average haul, about 250 miles, is four times the average abroad, so that the 255,016,910,451 ton-miles of 1910, the last year reported, constitute a freight traffic more than twice as great as that of all the rest of the globe. In population we have one-sixteenth of the world's total and one-fourth that of Europe. Freight transporta- tion per capita in the United States is thirty times the world's average and nine times Europe's. With inland coal, iron, and grain, and land-bound cities scattered across a continent, we live by means of railroads that we have built. In our material development they always have been, and always will be, the prime force. The reclaimers of waste places, the builders of cities, the awakeners of opportunity, to our growth as a nation their growth is still essential. Under private ownership the railroads of the United States, built and operated for profit, have grown far beyond the measure of the growth in other countries, where, for the most part, railroads have been the care of the government. Our mileage per capita is five times that of Europe and ten times that of the world at large. Stocks and bonds outstanding per mile of line are a little over half the average amount per mile on the foreign railways, and the freight traffic per mile is three times as great. Rates per ton-mile are lowest in the United States less than half of the average charged in other lands. Private enterprise, dominated by ambition, has fostered the growth of 13 railways in this country not only in length and carry- ing capacity, but in the direction of cheapness and efficiency. Horrill W. Games: A Living Rate for the Railroads. Yale Review, 1910. Railroads as Creators of Wealth We cannot count our wealth and greatness in terms that do not point for their significance to our lines of transportation. We say that we take annually out of the soil six billions of dollars. But these fabulous values result not so much from the fact that millions of bushels of corn and oats and wheat, of tons of hay and of bales of cotton, are grown and harvested, as from the circumstance that a system of transporta- tion, unequalled on the globe for efficiency and cheap- ness of charge, is ready to carry these products to profitable markets. Our marvelous crops would count for nothing if forced to lie in the fields where they grow, or driven to seek such markets only as the farmer's team could reach. The cotton crop, which brings to our shores annually nearly half a billion dollars of foreign gold, would be but a fruitless bur- den on southern winds if there were no railways to carry it to the seaboard. We take from our mines and forests and factories twenty billions of dollars each year, but without means of transportation these costly products would be worthless junk. Robert Mather: The Railroad Problem. Address before Chi- cago Association of Commerce, October 12, 1907.. Lincoln's Prophecy I am here reminded of an incident that is recorded in the archives of the Rock Island Company. This company was the first to reach and bridge the Missis- 14 sippi River. There was much opposition on the part of the river shipping interests, who sought to prevent the bridge. Abraham Lincoln was at that time a Rock Island attorney, and in his argument said: "It is not at all improbable that the traffic crossing thi& bridge may, at some future time, be even greater than that passing up and down the river." How correctly he prophesied you will see when I tell you that the average number of freight and passenger cars now passing over this bridge is about 1,400 per day, and there are now some twenty railroad bridges over the Mississippi River. Address of H. U. Mudge, at re- ception and banquet given by the Commercial Club of Topeka, Kansas, April 11, 1911. Soundest Business in the World The American railway industry, for its size, and considering the large number of companies operating it, is the soundest and strongest business in the world. Observe first the size of the plant and personnel : mile- age, 359,000; cars, 2,408,589; locomotives, 65,310; em- ployees, 1,699,420. Over 10,000,000 Americans draw their living from the railroads ; and the business which is conducted by this great organization is worthy of it. In 1912 American railroads transported 1,817,562,049 tons of freight and 1,019,658,605 passengers. Ex- pressed on a mileage basis, these figures are even more striking. Over every mile of American railroad in 1910 were carried 1,071,086 tons of freight and 138,169 passengers. This immense business was done, more- over, at a very moderate cost to the shipper and pas- senger, a fact proven by an average freight rate of .748 cent, and a passenger rate of 2.22 cents. No other industry, moreover, performs its service or furnishes its goods at so small a margin of profit. The pas- 15 senger business, in the opinion of the best informed 1 railway men, is operated without profits, and out of the three-fourths of a cent received for each ton car- ried one mile, it is a safe estimate that not more than one-fourth cent represents profit. Edward Sherwood Mead: The American Railway Industry. Lippincott's Magazine, June, 1913. Next After Religion and the Public School While the railways of the United States may have mistakes to answer for, they have created the most effective, useful, and by far the cheapest system of laud transportation in the world. This has been ac- complished with very little legislative aid and against an immense volume of opposition and interference growing out of ignorance and misunderstanding. It is not an exaggeration to say that in the past history of this country the railway, next after the Christian religion and the public school, has been the largest single contributing factor to the welfare and happi- ness of the people. James J. Hill: Highways of Progress. Largest Single Service Of all the factors that have contributed during this century to the growth of wealth, to the increase of material comfort, and to the diffusion of information and knowledge, the railway plays the most prominent part. It has widened the field for the division of employments ; it has cheapened production ; it has promoted exchange, and has facilitated intercom- munication. In its aggregate it represents a larger investment of capital than any other branch of human activity; and the service that it renders and has ren- dered to society is, both from industrial and commer- cial points of view, greater than is rendered by any 16 other single service to which men devote their activi- ties. Simon Sterne: Article "Railways" in Cyclo- pcedia of Political Science. An Industry Necessary to Life Without the transportation industry life itself, ex- cept of the simplest sort, would be almost impossible. Everything on earth, even man himself, must be moved before it can have value, and the more highly developed the transportation facilities of a people, the more rapid their development industrially and socially. The rapid and cheap movements of prod- ucts so increases their values that the workers and producers get more for their labor, while the con- sumers at the same time pay less the carrier getting less than formerly for his services in moving the products from the producer to the consumer. W. L. Ross: Address before Transportation Association of Milwaukee, May 22, 1909. Magnitude of Our Railways Consider the magnitude of this system [American railroad system] ! Its mileage about equals the ac- cepted distance of the moon from the earth. Its em- ployees number one out of every twelve of our adult male population. The capital invested in it is esti- mated to represent one-eighth of the total wealth of the country, and its annual revenues to be three times those of the Federal Government. We should recognize that this system has not been superadded to long-existing means of internal transportation. It has not superseded other national highways, for there were none others before it. From the Atlantic coast, hemmed in by almost continuous ranges of mountains, it opened the way to the granaries of the Mississippi 17 Valley and of the Western prairies, and unlocked the treasure vaults hidden deep beneath the Rocky Moun- tains. It has reversed the order of nature by divert- ing the course of trade from those extensive regions, against the mighty currents flowing to the Gulf of Saint Lawrence and to the Gulf of Mexico, and has deflected that course to our Atlantic ports. It has undone the work of Vasco da Gama and of Magellan, and has given to the route across the North American continent that commerce with the Orient which the Portuguese won from Marco Polo and the Venetians. H. S. Haines: Problems in Railway Regulation. Great Purchasers of Materials The railways are the great purchasers of materials of many kinds, and the moment they are forced to stop buying the effect begins to be felt in the forest, the mine, the mill, and the factory. Howard Elliott : Address at the Montana State Fair, Helena, Montana, September 26, 1910. Nation's Destiny in the Railway Problem The railroads have a great problem to work out, and the destiny of tliis country is inextricably bound up in that problem. The only way to settle it is in fairness, rectitude, and righteousness. The people continually want better service, faster trains, more elegant accommodations, more safety all of which are perfectly legitimate demands but the carrying out of those demands costs money, and the people ought to be willing to pay for them. Everything the railroads use, just like everything every one else uses, costs more than it used to, and it costs the railroads more, just as it costs everybody else more. C. D. Kellogg, in Railway World, January, 1913. 18 What the Railroads Handle The general facts brought out in the brief survey of the main sources of traffic in the five large physical subdivisions of the United States may be illustrated and their effects noted by a summary tabular analysis of the principal classes of commodities handled by typical railroad systems located in different sections of the country. The data presented in the following table are taken from the annual reports of the car- riers. The grouping of commodities is that required by the Interstate Commerce Commission: CLASSIFICATION OF FREIGHT TONNAGE OF TYPICAL RAILROADS, 1908. Penna. R. K. C. & O. So. Ry. C. of Ga. Total tonnage . 182,083,103 16,540,833 26,654,389 4,700,841 Products of agricul- ture Per cent. 5 94 Per cent. 4.56 Per cent. 11 04 Per cent. 22 39 Products of a n i - mals 1.78 .69 1.22 1.41 Products of mines.. Forest products Manufactures Merchandise 65.45 4.78 18.51 .77 70.79 10.27 5.99) 3.18 V 38.77 17.76 31 21 24.93 19.11 32 16 Miscellaneous 2.77 4.52 j Total.. 100.00 100.00 100.00 Rock Island. Santa Fe. 15,877,640 16,610,910 Per cent. 26.37 7.92 27.82 12.26 100.00 St. Paul. Total tonnage 26,189,853 Per cent. Products of agriculture 21.537 Products of animals 6.894 Products of mines *28.518 Forest products 12.944 Manufactures 17.267 Merchandise... 1 J Miscellaneous./ 12 ' 84( \ Total 100.000 100.00 100.00 Emory R. Johnson: Sources of American Railway Freight Traffic. Bulletin of the American Geo- graphical Society, April, 1910. 17.92 Per cent. 22.88 7.92 32.05 12.41 17.95 6.79 19 Traffic Actually Moved To ascertain exactly what traffic is actually moved over a mile of railway in one day two railway com- panies were respectively asked to compile this in- formation for their respective lines. One is an eastern trunk line having a greater density of traffic than any other in the United States, and its traffic is typical of the manufacturing region which it serves. The other is a railway of the Middle West whose traffic Is naturally typical of the grain-raising, meat-producing, cotton-growing, lumber-producing region which it serves. Officers of these railways have furnished the information here set forth. Over one mile of the eastern railway pass in one day 794 freight cars, 105 passenger cars, and 46 loco- motives. Over one mile of the western road pass every day 198 freight cars, 27 passenger cars, and 12 loco- motives. Over one mile of the eastern road are hauled in one day 13,494 tons of freight and 1,170 passengers; over one mile of the western road in one day 2,654 tons of freight and 250 passengers. By the application of these governmental statistics of average consumption to the per mile per day ton- nage of the two railways we obtain the following re- sults : The eastern railway hauls on the average over each jnile each day enough cement, brick, and lime to sup- ply 1,976 persons for one year ; enough coal and coke to supply 1,594 persons one year; enough cotton to supply 794 persons one year; dressed meat to supply 318 persons one year; fruit and vegetables to supply 1,176 persons one year; iron for 11,146 persons; ores for 329 persons ; poultry, game, and fish for 650 per- sons ; stone and sand for 1,308 persons ; sugar for 825 20 persons; wines, Hquors, and beers for 381 persons; wool for 1,270 persons for one year. The freight per mile per day thus expressed aggregated 10,552 tons, leaving 2,942 tons, or nearly 6,000,000 pounds, of other commodities not so classified that the average con- sumption can be ascertained. The western railway hauls on the average over each mile each day enough cement brick, and lime to sup- ply 302 persons for one year; enough coal and coke to supply 56 persons for one year; enough cotton to supply 1,698 persons for one year; enough dressed meats and other packing-house products to supply 1,045 persons for one year ; enough flax and other seed for 17 persons for one year ; enough flour for 455 per- sons; other mill products for 569 persons; petroleum and other oils for 633 persons; poultry, game, and fish for seven persons; fruit and vegetables for 249 persons ; grain for 146 persons ; hay and straw for 14 persons; iron for 110 persons; rice for 1,122 persons; salt for 1,896 persons ; stone and sand for 16 persons ; sugar and molasses for 1,089 persons; wines, liquors, and beers for 297 persons. The 1,106 tons of lumber which comprise about two-fifths of the daily traffic over one mile of this railway are enough to build 44 two-story, eight-room wooden houses of medium size. The lumber hauled by this road in the course of a year is sufficient in quantity to build over 45,000 such houses. In order to conduct this daily transportation, which consists on the eastern railway of 1,170 passengers and 13,494 tons of freight per mile, to say nothing of the mail and express, there is required 90,600 pounds of coal as fuel for the locomotives, 3% pounds of oil for lubrication, and % pound of waste for the journal boxes. The similar performance of the western road calls 21 for the services of various classes of employees, offi- cers, stationmen, trainmen, trackmen, and shopmen to an extent equivalent to the total service of 10 men for one day. For the 250 passengers and 2,653 tons of freight and the mail and express which it hauls over one mile in one day it receives $30.82, of which $19.10 is paid out for expenses of operation, $1.39 as taxes, $5.08 as interest, and $2.82 for dividends, the remainder going for miscellaneous items and services. It is repeated that all the statements in this article are of averages, but they are carefully computed aver- ages that give a fair indication of the work that the railways are doing mile by mile, day by day. The average performance for each mile for each day multiplied by 365 days gives the total performance for each mile for the year. This multiplied by 240,000, *the aggregate number of miles, gives the total perform- ance of all the railways of the United States for the entire year. It will be perceived that a difference of one cent a mile a day in the earnings or the expenses makes a difference of $876,000 a year ; a difference of 10 cents a mile a day a difference of $8,760,000 a year ; a difference of $1 a mile a day amounts to $87,600,000 for the year, and this is very nearly one-third of the net dividends paid by all the railways of the United States for the entire fiscal year 1910. L. O. McPher- son: The Times (London), American Raihvay 'Num- ber, June 28, 1912. Western Development Today the gauge of productive industry is the "T" rail. Seven distinct lines of railroad now span the continent from the Missouri River to the Pacific Ocean. Inclusive of Texas, the total length of main line is over 66,000 miles. The wonders they have worked in one generation is but an earnest of what 22 they, unaided, shall accomplish in the generation be- ginning with the current year. But there are fifty- nine hundred miles of additional main line of rail- road, the projection of which, within this territory, is not only acknowledged, but much of the work has been contracted and is now largely in course of con- struction. To these confessed projections it will be safe to add from 1,000 to 1,500 miles which are un- avowed. Much of this new construction will develop and serve virgin territory. If the promise of the fu- ture be measured by the accomplishment of the past, and due weight is given to the industrial energy awakened by the cognate force of electricity, what more need be said in exposition of my subject? J. C. Stubfts: The Railroads and Western Development. Railway World, May 4, 1906. Life of All Business Agriculture, manufacturing, and merchandising, in the free and untrammeled rise and fall of prices to meet changing conditions, act promptly, almost auto- matically. The great business of transportation alone, vital to the prosperity, yea, the very life of all the others, is hedged about and restricted by legisla- tive enactment and supervision of commissions, Na- tional and in almost every State. In addition to this, every act, every change in tariff, made or suggested by the railroads, is watched and questioned by hun- dreds of alert, aggressive associations in every city in the Union. I do not dispute this right of the nation and the States to regulate the corporations they have created ; I do not question the right and duty of these associa- tions to most minutely scan and closely inquire into changes that may affect their interests; but I want 23 to urge upon these commissions, both of the nation and the States, the all-important necessity of exer- cising the great powers that have been conferred upon them with conservatism and wisdom. Samson pos- sessed power the ruins of the temple attest the fact but I fail to find in any history, sacred or pro- fane, a suggestion that that power was wisely exer- cised. William C. Brown: Address at annual dinner of Railway Young Men's Christian Association of Columbus, Ohio, February 4, 1911. Growth of Interior United States No fact among all the great politico-economical facts that have illustrated the world's history since history began to be written is so_full of human in- terest, or deals with such masses of mankind, as the growth of the interior United States since the rail- way opened to the seaboard these immense solitudes. The irruption of the northern tribes upon the Roman Empire bears no proportion to it, and was destructive in its results; and we may say the same as to the Napoleonic wars. These are among the most cele- brated events of commonwealths on our planet, be- ginning and ending in bloodshed and enormous waste of capital. But within fifty years over thirty mil- lions of people have been transplanted to or produced upon vast regions of hitherto uninhabited and com- paratively unknown territory, where they are now living in comfort and affluence and enjoying a degree of civilization second to none in the world, and greatly superior to any that is known in Europe outside of the capitals. And this could not have happened had it not been for the railway. Sidney Dillon: The West and the Railroads. North American Review, April, 1891. 24 Ablest Men of the Day The newspapers view the railroads as wonderful proofs of the highest degree" of efficiency and ability. The biggest work of an age always attracts to itself the biggest men of the age. When the great work of the world, was painting, in the days of the Medicis, the greatest men in the world were painters. Michael Angelo was the greatest engineer, the greatest archi- tect, the greatest sculptor, of his day, and probably in every other way the greatest man. Leonardo da Vinci was the greatest military engineer, the greatest road and fort builder ; with the power of two Jeffreys, he could take an iron bar and bend it in his hand. The greatest minds go in the greatest direction. Rail- road building, industrial building, is the great work of today. And the men who would have been naval heroes in the days of Elizabeth, and explorers in the days of La Salle, and painters in the days of Michael Angelo, are railroad men today. Such men as Cas- satt and Harriman and Hill are all benefactors of their country, and those benefactors are the greatest and probably the ablest men of today, not excepting the newspaper editors who criticise them. Arthur Brisbane, at the eleventh annual dinner of the Traffic Club of Pittsburgh, January 13, 1913. The Railroad Strike of 1894 at Chicago Virile, resolute, full of resource, , the railroads ap- pear to have appreciated to the full the duties they owed to the public, and to have moved with steady determination to fulfil them. Involved in a quarrel in which they had no more interest than had any other bystander, set on by rioters led by a small but reck- less squad of mutineers from their own forces, the 25 constituted authorities affording no bulwark of de- fense, their conduct may well be carefully examined as affording evidence that the salt of the earth hath not lost Its savor. The country owes more to the rail- roads than it thinks, for the preservation of peace In 1894. Whether we regard the action of their manage- ment, dignified In the maintenance of their rights, dis- dainful of compromise with the wrongdoer, stead- fastly holding their course through this troubled sea; or the conduct of their men, moving In small and Iso- lated groups, quietly and indomitably to the perform- ance of their duties, amid the bowlings of the mob; there stands revealed an Institution and a spirit that may well give heart to them that love the Republic, and that must be reckoned with by them that seek the destruction of the established order. L. F. Loree: Emergencies in Railroad Worlc. Bulletin of the Uni- versity of Wisconsin, December, 1895. Railroads and Prosperity Railway transportation is one of our largest indus- tries. It employs over a million and a half of men, to whom have been paid over a billion dollars in wages in a single year. The concerns that make and deal In railway equipment and supplies, whose pros- perity depends on that of the railways, employ per- haps as many more. Upon the amount their em- ployers can pay these men depends the amount they can spend with the local merchant. Upon how much goods the local merchant can sell depends the quan- tity he can buy from the jobber. Upon how much the jobber can sell depends how much he can buy from the manufacturer. And upon how much the manufacturer can sell depends how much wages he can pay and how much raw materials he can pur- chase. Therefore, the prosperity of the entire coun- try depends to a very large degree on the prosperity of the transportation industry. I do not take the narrow view that this is true only of the transporta- tion industry. But how much all classes will be af- fected by the condition of any industry depends on how large and important it is, and how extensive are its ramifications; and the prosperity of all depends so much on the condition of the transportation indus- try because it is the largest, the most important, and the most extensive in its ramifications, except agri- culture. E. P.^Ripley: The Railroads and the People. Atlantic Monthly, January, 1911. More Beneficent than Philanthropy The benefaction derived in Illinois and the great West from railroads is inestimable, and vastly ex- ceeding any intentional philanthropy on record. Ralph Waldo Emerson: The Conduct of Life. Civilization's Largest Factor The most important business in the world is farm- ing. Food is the primal need. We get our food out of the soil, and the business of the farmer is to tickle the soil so it will laugh a harvest. The second most important business in the world is transportation. Things have no value unless they are at a certain place at a certain time. Food separated from "human bodies by an impassa- ble gulf is absolutely valueless. % I have seen corn selling in Kansas for ten cents a bushel, wheat at twenty-five cents a bushel, and hogs at two cents a pound, simply because there was no available transportation for these things from where they were plentiful to where they were needed. The railroad cancels distance and annihilates space. Railroads have only one thing to offer, and that is transportation. The unit of transportation is the mile haul. Railroads carry an adult human being a mile for two cents, and they carry a ton of freight a mile for a cent or less. To carry a ton of freight on a wagon a mile, with average roads, costs thirty cents. To carry a man on horseback or in a wagon, as was done in stage-coach times, costs ten cents. The stage-coach fare from New York to Philadel- phia, say one hundred miles, used to be ten dollars. If you walked the distance, as my grandfather did, it took three days, and the cost of board and lodging along the road was no inconsiderable figure. George Washington, in his diary, tells of riding horseback from Philadelphia to Boston in a week, and he thought he was going some. Now the railroad carries you in two hours from New York to Philadel- phia, and the fare, say, is two dollars, and on the route you need neither board nor lodging. The railroad is the greatest factor in civilization. America holds her proud place among the nations on account of her railroads, because by the railroad the world's markets are brought to the doors of both pro- ducer and consumer. Elbert Hub'bard: The Smile Habit. East Aurora, New York, 1912. Vital Force of the Century The railroad Is the expression of the vital force of the 19th century. For thousands of years the world had been plodding over beaten ways, climbing moun- 28 tains, toiling through valleys, fording streams, when suddenly the thought and study and knowledge of many generations burst into life, and Mr. Stephen- son's little "Rocket" astonished mankind. The loco- motive threw open vast regions of country until then inaccessible, and gave such an impulse to civilization, commerce, and education as had never before been known. Our own West long and patiently waited for its coming to bring life to her desolate places, to cultivate her fertile prairies, and send forth her produce to feed the millions. Scarcely a generation has passed since the first railroad was built, between Liverpool and Manches- ter. It was nearly completed before it was decided by what motive power the cars should be propelled. A prize was offered for the best engine which could move a given weight ten miles an hour, and of several that were constructed, that of Mr. Stephenson was the only one that could accomplish the task. In our country travel was then by stage coach, and the mail was generally carried on horseback. Now, not only is nearly all travel by rail, and not only is three- fourths of the mail carried and distributed by rail- road, but the supplies of our daily and multiplied wants, our very food and clothing, our books and papers, are brought to us over these iron roads. Gardiner G. Hub'bard: American Railroads. Journal of Political Science, 1874. Railroads Created Land Values We have some people now who fear the Govern- ment has been too liberal and has wasted its public land; but I can remember when the Government prac- tically could not give away lands that are now worth two hundred dollars an acre. We have given away mil- lions of acres of the public lands; but we have by so doing built up an empire in little more than half a century that could not have been developed in a thou- sand years under the old regime. Joseph G. Cannon: Followers After Strange Gods. Saturday Evening Post, May 3, 1913. Public Opinion and the Railways The railway, as a corporation, has no voice in the selection of those who frame and administer the laws for its regulation. Its physical property extending in part through sparsely settled sections and through wildernesses, perhaps is the most defenseless prop- erty that exists. In the very nature of its existence, therefore, it can find safety only when, in the darkness of the night watches, in times of stress and peril, and in the enactment of laws for its regulation, the in- visible sentinel of public opinion stands guard over its rights and property. W. W. Finley: Reply to a toast at the annual dinner of the North Carolina Society of New York City, at the Hotel Astor, New York, De- cember 7, 1908. Mileage and Capital These tables were compiled for The Times by the American Bureau of Railway Economics. RAILWAY MILEAGE OF THE UNITED STATES, 1830-1910. Miles of line Year, operated. 1830. 1835. 1840. 1845. 23 1,098 2,818 4,633 1850 9,021 1855 18,374 1860 30,635 1865 35,085 1870 52,914 1875 74,096 1880 93,349 1885 128,987 1890.. . 156^404 Miles of line operated. 189S 177,746 1900 192,556 1901 195,562 1902 200,155 1903 205,314 1904 212,243 1905 216,974 1906 222,340 1907 227,455 1908 230,494 1909 235,402 1910 240,831 31 RAILWAY CAPITAL OF THE PRINCIPAL COUNTRIES OF THE WORLD. Miles Capital outlay per mile Country. United States.. . Argentina repre- sented. 228,841 14,732 15,467 13,917 12,205 2,684 1,050 32,099 24,731 1,218 24,989 35,473 8,699 4,807 2,753 2,177 41,427 7,041 8,242 2,825 23,387 American upon road Date of and equip- information, ment. $63,631 June 30, 1910 57,327 Dec. 31, 1908 46,217 June 30, 1910 116,690 Dec. 31, 1909 65,509 Dec. 31, 1908 190,630 Dec. 31, 1909 50,008 1906, Archiv. 44,402 Dec. 31,1910 69,939 June 30, 1910 55,032 1910, Archiv. 143,805 Dec. 31, 1909 109,277 Mar. 31, 1909 123,801 1907, Archiv. 44,852 Mar. 31, 1909 52,183 Mar. 31, 1910 33,104 Mar. 31, 1909 79,298 Dec. 31,1907 51,907 Dec. 31, 1910 32,829 Dec. 31, 1908 115,049 Dec. 31,1908 274,364 Dec. 31, 1910 Railway Number, June 28, Australian Com- monwealth. . . . Austria Hungary Belgium Brazil (o) British India . . . Canada (exclud- ing Newfound- land) Denmark (&)... France Germany Italy (&) . Japan New Zealand. . . Norway Russia in Europe (excluding Fin- land) South African Union Sweden Switzerland .... United Kingdom London Times, 1912. Central Ry. only. State Railways only. WHO OWN THE RAILROADS? The Common People 's Money The general public is each year becoming more and more interested financially in our great railroads. I quote from the Wall Street Journal on this subject: The number of individual stockholders in conspicu- ous incorporations in this country at three different periods is as follows : 1901 1906 1911 226,956 431,279 864,684 " You will see that in ten years the number of share- holders has increased more than 375 per cent. These individuals are more largely interested in railroads than in any other class of incorporations. The Pennsylvania Railroad is owned by 65,000 stock- holders, and it is said that more than 48,000 of them are women or trust funds of decedent estates. The New York Central, Atchison, Topeka & Santa Fe, and many others are held in a proportionate manner. In- stead of being owned and controlled by a small band of immensely rich Wall Street speculators, the rail- roads are rapidly becoming the property of the com- mon people. The savings banks, the people's institutions, in the States of Maine, Massachusetts, New Hampshire, and New York own and control more than a billion dollars of the stock of the leading railways and industrial incorporations. Add to this the insurance companies' reserves and you get more than a billion more, and all 36 33 of this vast sum Is the. people's money, the common people's money. The number of people that share in the prosperity of the railroads is increasing by leaps and bounds. The question in the near future will be the relation of the people to their railroads. The second class of people who must suffer by unjust persecution of the railroads is the general public. Show me the community through which a live, up-to- date, prosperous railroad runs and I will point to the community as a prosperous people. Its patrons are well served, its employees are well paid, the air of prosperity is apparent along every mile of its track. The reverse is true along the line of the bankrupt so- called Jerk-water line. A. E. Reynolds: Relation of tJie Railroad to the People. Address "before Transporta- tion Cliib of Indianapolis, November 28, 1911. Owners of the Pennsylvania There are some people who believe the railroads are owned by a few millionaires who could afford to sacri- fice a portion of their interest on bonds or dividends on stock without feeling the effects. As a matter of fact, there are nearly 100,000 persons interested as in- vestors in the stock of the different companies of the Pennsylvania Railroad system. It is likely that holders of this company's bonds number 200,000. A very large percentage of these investors are women. Enormous investments in American railroad securities are held by savings banks, insurance companies and trustees of estates. Strike at the investor of railroad securities and you hurt depositors in savings banks, policy holders in life insurance companies, women investors, and many others least able to cope with the situation. The capitalist does not submit to a reduction of his divi- 34 dends to a point below what he can realize from some other investment in this country or in some other part of the world. Capital is liquid and it flows to where it is wanted and will be properly paid for. If investments in American railway securities are to be denied a proper return, those who can do so will sell their holdings and the money will be put else- where, and when we want more money for improve- ments to handle the public business we cannot get it. Samuel Rea: Letter to Philadelphia Ledger, May 9, 1913. 1,000,000 Owners Representing 4,000,000 People Now, who is the owner of this enormous and com- plicated piece of machinery built up in the last 50 years? The best figures obtainable as to the number of stockholders show 440,000, and while the number of bondholders cannot be determined with the same ac curacy, information about a few roads indicates that the number of bondholders exceeds the number of stockholders, and that 1,000,000 is not an unfair figure to represent those holding railway securities. Many of these holders are women and children, charitable and educational institutions, national banks, savings banks, trust companies, and insurance companies. The average for each owner of railway property in this country is $13,600. Of course, some individuals hold more than this, and very many hold much less, but the statement that railways are owned and controlled by a few very rich men is not correct. These 1,000,000 owners represent at least 4,000,000 people in the United States whose daily bread and butter depends more or less on the success or failure of the railways. Howard Elliott: Address at the Montana State Fair, Helena, Montana, September 26, 1910. Securities on Safe Foundations There has been much wild talk as to the extent of the overcapitalization of our railroads. The census reports on the commercial value of the railroads of the country, together with the reports made to the Interstate Commerce Commission by the railroads on their cost of construction, tend to show that as a whole the railroad property of the country is worth as much as the securities representing it, and that in the con- sensus of opinion of investors the total value of stock and bonds is greater than their total face value, not- withstanding the "water" that has been injected in particular places. The huge value of terminals, the immense expenditures in recent years in double-track- ing, improving grades, road-beds, and structures have brought the total investments to a point where the opinion that the real value is greater than the face value is probably true. No general statement such as this can be accepted as having more than a general value ; there are many exceptions ; but the evidence seems ample that the great mass of our railroad securi- ties rest upon safe and solid foundations; if they fail in any degree to command complete public confidence, it is because isolated instances of unconscionable stock-watering and kindred offenses arouse suspicion, which naturally extends to all other corporate securi- ties so long as similar practices are possible and the tendency to resort to them is unrestrained by law. Theodore Roosevelt on Railroad Investments. Ameri- can Review of Reviews, June, 1907. People's Confidence Built the Railroads We "plead the baby act" as a nation when we cry out against the alleged overcapitalization of our rail- road corporations. The State and the Nation had their opportunity, at the time of issue, to prevent the sale and consequent validation of these "watered" securities. Why was their issue not prevented? Be- cause, as a people, we were willing to pay the price and to take the chance in order to get the railroads built and the country developed. Well, the railroads were built and the country was developed, because, by reason of this attitude of the people, the States, and the Nation, it was possible to sell the securities thus issued in the world's markets, and through their sale to obtain the money without which the railroads would not have been built and the country would not have been developed. Robert Mather: Railway Regu- lation. Speech before Traffic Club of Pittsburgh, April 3, 1908. Getting Closer to the People Day by day the railroads are getting closer to the homes and the pockets of the people. It can no longer be asserted that five or six capitalists own or control the destinies of any railroad. They are now nearly all subject to the influence of an army of stock- holders. James O. Pagan: The Industrial Dilemma. II: The Railroads and Education. Atlantic Monthly, March, 1909. Railroad Bonds and Life Insurance On January 1, 1910, there were no less than 28,087,- 327 policies (including industrial insurance) ; and the insurance companies of the United States had pledged themselves to provide for beneficiaries sooner or later an aggregate sum of $15,480,721,211 a sum five times as great as the public debt of this country at its highest point, at the close of the Civil War, and fifteen times the present debt Within ten years (1900-1909) the 37 amount of life insurance contracted to be paid has in- creased by $6,031,601,217 (excluding industrial com- panies), or six times the total of our national debt. The total current assets carried January 1, 1910, were $3,643,857,971. This sum is the ship which is carrying the hopes of millions of our people. Is that ship sea- worthy? That is the question the people are asking and which they have a right to ask. And an economist may well give thought to so grave a question. In what form are those assets carried, and what are the condi- tions affecting their safety now and in the future in this democracy? These assets, of course, were placed in the produc- tive investments of the country, and were grouped roughly as follows (35 companies doing business in New York) : 30 per cent Real estate mortgages $1,084,345,817 12 per cent Premium notes and policy loans 446,276,468 48 per cent Bonds and stocks of all kinds 1,761,404,870 It thus appears that the largest item is that of bonds and stocks. This entry is resolvable into the following, as nearly as can be estimated : Railway bonds (35 companies) $1,225,576,728 Corporation securities 250,000,000 State, county and municipal securities.. . 286,000,000 This analysis of the kind of investments in which the people's insurance savings are placed may thus enable us to discuss the fundamental issues in the situation as I find it today. James Laurence Laughlln: The People's Investments in Railways. Address at the fourth annual meeting of the Association of Life In- surance Presidents, at Chicago, Illinois, Saturday, De- cember 10, 1910. 38 Bond Investments Railroad and other public-service corporation bonds appear to predominate in the investments of all banks except in private and national banks. Mutual savings banks have over one-half of their bond investments in railroad and other public-service corporation bonds, or about $845,000,000; loan and trust companies have about $472,000,000, or 47 per cent of their investments, in this class of bonds; State banks have about $114,- 000,000, or 37 per cent of their investments, in the same class of bonds; stock savings banks have about $59,- 000,000, of nearly one-half of their investments, in this class of securities, while private banks have in this class of investments only about $1,700,000. There are only about $35,800,000 United States bonds in , banks other than national, while $737,600,000 are held by national banks. Of the $1,116,200,000 investments in State, county, and municipal bonds $714,800,000 are in mutual savings banks, $162,000,000 in national banks, $144,500,000 in loan and trust companies, $63,- 900,000 in State banks, $28,700,000 in stock savings banks, and $2,300,000 in private banks. Mutual savings banks hold $23,500,000 United States bonds, stock sav- ings banks $8,500,000, State banks $2,100,000, loan and trust companies $1,300,000, and private banks about $400,000. Stocks held to the amount of $166,100,000 are re- ported by loan and trust companies, $39,400,000 by mutual savings banks, $37,600,000 by national banks, $29,800,000 by State banks, $7,700,000 by stock savings banks, $2,800,000 by private banks, or a total holding of $283,400,000. Report of the Comptroller of the Cur- rency, 1910. EFFICIENCY AND SAFETY. American Roads First in the World It has always been my opinion that in actual econ- omy of operation the railways of the United States are first in the world. In the number of tons per car, cars per train; in the fullest utilization of loco- motives ; in the obtaining of the greatest measure of result for each unit of expenditure, they are not equalled by the railways of any other nation. When the Greek commanders after the battle of Salamis voted who should receive the prize for valor each put his own name first, but all put the name of Themis- tocles second. And Themistocles received the prize. 80, too, though German, French, and English railway men would, I dare say, all put their own railways first in efficiency they would all, I ani sure, put yours second, and on the voting of the experts your railways \vould come out first. But, further, your nation as a whole is not in other matters pre-eminently efficient. No one would say that your farmers were more efficient than those of France and England or that your Government is more efficient than the government of Prussia. Your rail- ways have reached a higher standard in .international comparison than your farmers or your Government, and under greater difficulties, for in England and on the Continent employment with a railway company is a prize and man hopes to remain in the service of the same company throughout his life. He is, there- fore, obviously more amenable to discipline than the 39 40 shifting and often even foreign force employed on your railways. W. M. Acworth, said by President Hadley to be "the highest authority on the railways of Great Britain:' Practicable Efficiency Efficiency from the standpoint of the railway may consist in loading cars and trains to their capacity and moving only the minimum number of cars and trains necessary to handle the business. Efficiency from the manager's standpoint may involve a rela- tively slow movement of trains, because the faster engines are driven the greater the amount of fuel they consume and the smaller the load they can pull, the result being that the cost of running the train is increased while the revenue derived from running it is reduced. On the other hand, as I have said, speedy, frequent, and regular service Is a very im- portant factor in efficiency from the standpoint of the public. Now, when the public insists on a kind of transportation which is incompatible with the most economical operation no one can justly criticise the railway managers for complying with the public's demands and for that reason failing to operate the properties with the maximum possible economy. If the railway managers operate the properties, not with the maximum economy that might be possible under certain conceivable conditions, but with the maximum economy that is practicable under the actual condi- tions with which thev have to deal, they do all that thev reasonably can be asked to do. I think that the railway managers of the United States are approxi- mately much closer to the maximum practicable effi- ciency and economy of operation than most people believe. Julius Eruttschnitt, before the Graduate 41 School of Business Administration, Harvard Univer- sity, Cambridge, Massachusetts, April 26, 1911. Railroads Lead in Efficiency As they stand today, I believe that the railways, with all their faults, exhibit the highest industrial efficiency attained in this country. The regularity and punctuality necessary in the performance of a railroad man's duty, the seriousness entailed by the safeguarding of lives and of property, elicit respect for the railroad man's calling. This regularity and punctuality have been said to enhance the develop- ment of those qualities in the population in general of a railroad town. That station men and trainmen average at least as high as their fellow-citizens in forbearance and self-control I think is beyond ques- tion. Is it the statement of an impossible ideal to hope that they may develop these qualities to a stand- ard admittedly far above the average? The term "railroad man" is a worthy designation now. Can it not be made so to stand for the manly virtues that it may be honored through coming years as we now honor the Knights of the Round Table and the Sam- urai of Old Japan? L. O. McPherson: Address before annual meeting of station agents of the Delaware d Hudson Railroad Company, Bluff Point; September 21-23, 1911. High Efficiency Needed Next to agriculture our railroads are the greatest single industry. In their ordinary maintenance and operation great numbers of laborers and vast quan- tities of supplies are used. Railroad extension would mean the employment of additional laborers and the 42 purchase of additional material and equipment. Now, the thought seems to be that to permit these advances would induce larger expenditures in the maintenance of our present roads, and would lead to extensions and improvements which would in turn employ additional labor, put into circulation addi- tional money, and thereby improve general business conditions. So far as such expenditures are legitimate, they ought to be encouraged. Our railroads should be kept in a high state of efficiency, and railroad charges should be sufficient to permit this. Necessary exten- sions and improvements should be made, and the treatment of our railroads by the public should be such as will inspire that confidence in the investing public necessary to obtain the funds for such addi- tions. Evidence taken by Interstate Commerce Com- mission in the matter of proposed advances in freight rates by carriers, August to December, 1910, v. 10: 5445. A Labor Leader on Efficiency Recently the papers were filled with the statements made by a new star that had risen in the labor world. "The railroads can save a million dollars a day ;" think of it! 363 millions a year. When a man comes for- ward with such a startling statement as that made by Mr. Brandeis, we commence to look around and ask questions we have a right to ask. Did he ever manage a railroad? No; he never did. Place him in the general manager's chair in charge of one of these great railway systems and he would be lost. You would have to put a bell on him to find him. Did he ever design a locomotive or draft one? No; he never did. I have. I have shoveled more coal into locomo- 43 tives than you could pile on a city block. Mr. Bran- deis has had no practical experience, and knows noth- ing about the subject. Yet only yesterday he stated we could save $500,000 a day on fuel alone. No rail- road at the present time is throwing away a dollar, and, regardless of Mr. Brandeis' statements to the contrary, the American railroads are the best man- aged in the world. The men in charge of these great systems stand head and shoulders above the railroad men of the world. There is no other class of business that is operated on so close a margin ; no other busi- ness where the details are watched so closely as on the average railroad. And yet Mr. Brandeis says they can save 365 millions a year. He must have got this fairy-tale out of some story-book. But who is Mr. Brandeis? Who's Who in America states that he is a very able, highly accomplished attorney of Boston. A short time ago the daily press announced that he, having acquired enough of this world's goods, would devote his future time and ability in philanthropic work, would give his talents and service,, free of charge, to help the down-trodden and oppressed. Next thing we heard he was in Washington filing a brief in behalf o the Shippers' Association, protesting against an increase in freight rates ; perhaps he thought they were the oppressed. Before any association or indi- vidual brings a case before the bar of public opinion and expects their support they should at least come with clean hands. The individual shippers of the country are the very ones who reap the benefits of all rebates ever given and cause the present drastic laws for the regulation of interstate traffic to be enacted. In the end who pays the freight? The most super- ficial study of the question will prove to any one that the consumer pays the freight. The shipper does not 44 pay a dollar of the freight; he is simply a parasite who lives off the consumer and the producer, one of the middlemen who take their toll and increase the cost of living. Warren S. Stone: Efficiency as the Employe* Sees It. 117& annual meeting National Civic Federation, 1911. The Pick of All Industry In something less than three generations there has been built up in the railroad service of this country a practice and a personnel that for efficiency and char- acter stands without parallel in the world. Men en- tering the service are subjected at the outset to a careful physical examination ; they receive systematic instruction, and are held to a high state of discipline. In the main, they are subject to be called upon for duty at all hours of the day and on all days of the year. They are under control not only as to the dis- position of their time, but as to their personal habits. They are engaged in a hazardous occupation. Having in mind the character of the force so assembled, the restrictions imposed and the service rendered, it is of the highest importance that relatively the rate of wages paid and the conditions of employment should be such as to attract and retain in this service the pick of the industrial community. L. F. Loree: Ad- dress at the annual dinner of the Alumni Association of Rutgers College, June, 1908. A Premium of Efficiency The complexity of the problem of determining whether the railroads are able or unable to devote an increasing share of their income to higher wages for their employes is illustrated by the question: What rate of return should be allowed on capital? It seems plain that no fixed percentage can be named. If this were done, there would be no strong incentive, when a road once reached the degree of efficiency requisite to give this percentage of interest, to a fur- ther increase of efficiency and economy. But compe- tition in this respect should not be eliminated, and if it is to be encouraged great care will have to be taken not to limit too closely the dividends on the stocks of roads which are managed with exceptional efficiency. Commissioner Lane in the Western rate-advance case, decided February 22, 1911, gave it as his opinion that "some method must be found under which a carrier by its own efficiency of management shall profit. A premium must be put upon efficiency in the operation of the American railroad. * * * Society should not take from the wisely-managed railroad the benefits which flow from the foresight, skill, and planned co- operation of its working force." Commission in Arbi- tration between the Eastern Railroads and the Broth- erhood of Locomotive Engineers, Charles R. Van Hise, chairman; Oscar 8, Straus, F. N. Judson, Otto M. Eidlitz, Albert Shaw, D. Willard, 1912. Tonic Effect of Good Service This intensive growth of a railroad system is the most powerful stimulus possible to a manufacturing country. I think that a purely agricultural com- munity needs rather new mileage, no matter how poor. The farmer, whose freight is mostly grain, does not care particularly whether it goes out today or next week. He sells it on contract any way, and it will move only to the elevators, and go to the final market long after it has been gathered in from the fields and local markets. He may fret a little over 46 the fact that he has to order his new machinery and seed months earlier than his cousin in the next State, who lives on a better railroad; but it will not make any material difference in his bank account. The manufacturer, on the other hand, must have good service. The jobbers in New York, Chicago, St. Txmis, Philadelphia, or Cincinnati, who buy his goods, or who sell them on commission, keep a record of the length of time that he takes to make deliveries. Two men, both manufacturing the same grade of furni- ture, are located at an equal distance from New York. Both get orders on the same day, from the same jobber, for a similar amount of similar goods, known to be ready for shipment in their sheds. The first has a poor railroad service. He makes his de- livery of the goods in twenty-two days. The other, with a good service, makes delivery in fifteen days. The ultimate result is obvious. The factory on the better railroad will outstrip its rival in the New York 1 trade, other things being equal. And the town on the better railroad will outstrip the similar town on the poorer railroad. All indus- tries will flourish better in the town with the better service. The plants will add hundreds of men to their staffs, while the plants in the other town will add dozens. Capital will follow where the greatest successes, have been won. The man with a fund to put into business studies very carefully the records of men already in business. He searches for ultimate causes. In a great many cases he finds the ultimate cause in the difference between poor railroad service and good railroad service. O. M. Keys: An Era of Better Railroads. World's Work, February, 1909. Modern Freight Cars Contrasted with what may be called the extrava- gance of the passenger service, the modern freight car, as we have seen, carries two-and-a-half times its own weight, and a train of the largest freight cars will transport to the seaboard the product of 5,000 acres of wheat fields. The mammoth steel cars which are seen in long trains in the vicinity of the coal mines are little less imposing than an array of bat- tleships, which name the trainmen have aptly applied to them. And the economy accomplished by enlarg- ing the cars is no less striking than that due to the increase in the sizes of the locomotives. Where the Mallet compounds are used, one engine moves a train twice as long as the usual train hauled by locomo- tives of the former standard, and the number of trains is correspondingly reduced, with a great sav- ing in the wages of conductors and brakemen. On one division of the New York Central, where the traffic consists largely of coal, all of the 60 consoli- dation locomotives formerly used to move the freight trains have been transferred to other divisions and 26 Mallet compounds, less than half the number of engines formerly employed, now handle the whole of the trains and do it at much better average speeds. The consumption of fuel per mile is 35 per cent less than with the old engines. London Times, American Railway Number, June 28, 1912. Growth of the Passenger Car The same growth has characterized the American passenger car. From a length of between 40 ft. and 50 ft. it has increased to 75 ft. and 80 ft, and with the increase in length has come a more than corre- 48 spending increase of weight. The seating capacity of an ordinary day coach 70 ft. long is about 88 pas- sengers, and its weight is about 135,000 Ibs. If the passengers are averaged at 140 Ibs. each, this gives a dead load of about 11 Ibs. for each pound of passen- ger. London Times, American Railway Number, June 28, 1912. Units of Railway Performance The pressure for lower rates, the steady increase in taxes of all kinds, the rapidly increasing wages, and the mounting prices for all material used by the railroads forced great economies in methods of oper- ation. These were made possible largely by the pow- erful locomotives and the capacious freight cars. The traffic units carried per dollar of capitalization, which had increased 38 per cent from 1885 to 1895, in- creased 91 per cent from 1895 to 1905. The number of traffic units carried per mile of track increased 13 per cent from 1885 to 1895 and 66 per cent from 1895 to 1905. The number of traffic units carried per loco- motive increased 21 per cent from 1885 to 1895 and 59 per cent from 1895 to 1905. The number of traffic units carried per employee increased 22.59 per cent from 1895 to 1905. This greater performance per unit of plant is also reflected in the ratio of the capi- talization to the earnings. In 1885 it took $10.15 of capitalization to produce one dollar of gross earn- ings; in 1895, $8.84; in 1905, but $5.36. The capital- ization per unit of traffic was 13.4 cents in 1885, 9.7 cents in 1895, and but 5.3 cents in 1905. This result was attained, notwithstanding that the average rate per ton per mile in twenty years had decreased 27.5 per cent. L. G. McPlierson: The Needs of the Rail- roads. Political Science Quarterly, September, 1908. More Burdens on the Railways The public should know exactly what is meant by the proposal to increase freight rates 5 per cent. The annual revenue from freight in the territory concerned is about $800,000,000. Five per cent on this is $40,- 000,000. There are about 40,000,000 people in this por- tion of the country. The proposed increase therefore means an average of $1 per year per head of popula- tion eight cents a month. Everybody knows that the railroads have been put to greatly increased expense in recent years. On the Pennsylvania Railroad System lines east of Pittsburgh the added cost of new legislation from August, 1906, to December, 1912, was nearly $11,000,000. Question is not here raised as to the propriety of the legisla- tion; the fact is that it has cost $11,000,000 in six years to comply with it Recently many more laws have been enacted. These will cost still more. The New Jersey grade-crossing bill alone involves an ultimate cost to this company's system of more than $60,000,000, for that law imposes upon the railroad companies the entire burden of the cost of removing all grade crossings. Extra-crew laws, drinking-water laws, railroad-valuation laws, all are adding to the cost of running a railroad. Now managements of railroads seek to obey the law. If the public, through constituted authority, de- mands certain measures of safety, certain improve- ments, certain conveniences, it is entirely within the right of this public to express that demand in the form of law. But certainly such measures of safety and comfort must be paid for by somebody. The rail- roads are only too happy to remove all grade cross- ings, to equip every mile of track with automatic block signals, to make everv car of all-steel construe- 50 tion, but to do these things is utterly impossible with- out the money with which to pay for them. Samuel Rea: Letter to Philadelphia Ledger, May 9, 1913. Economy of Operation On the occasion of the last rate controversy an attorney from Boston said, in arguing the case of his clients, that the roads of this country could save al- most one million dollars each day by applying the "science of management" to their operation. It seems unfortunate to his cause that the gentleman omitted domestic and Christian Science, for they are about equally applicable to railroad operation and are more clearly understood by the general public. However, it is no doubt true that that statement, coming as it did at the psychological moment, artfully diverted public attention from the question of rates to the possibilities of a vague theory. That was its effect, at least. While the gentleman from Boston was no doubt sincere in his opinion, we must not forget that he was inexperienced and incompetent, as we know him, in practical railroad operation, and not there- fore competent to pass judgment on the thing of which he spoke. Compare his statement with the opinion of W. M. Acworth, an accepted English authority on railroads, as expressed in an interview in the New York Even- ing Sun prior to his departure for his home in Eng- land in February last, in which he said: "It has always been my opinion that in actual economy of operation the railroads of the United States are first in the world." Compare the Boston gentleman's opinion also with that of the Hon. Franklin K. Lane, of the Interstate Commerce Commission, as published in the Chicago 51 Evening Post, September 7, 1910, following his return from the International Railway Congress at Berne, Switzerland, where he represented the United States, in which Mr. Lane is quoted as saying: "The conference established beyond question, I think, the supremacy of the American railroads from the standpoint of efficiency." Charles D. Trueman: Railroads and the Citizen; Their Relation. From the Railway World, October 6, 1911. Capitalization and Service The suggestion that a superabundant issue of capi- tal securities would lead to higher charges for rail- way services might seem to be of more practical Im- portance if there were any real and general over- capitalization of American railway property. But, as has been proven over and over again, the contrary is the fact on the whole, the value of the railway system of the country is actually and greatly In ex- cess of the par value of all the securities outstand- ing. Examining the suggestion as it stands, however, it plainly involves the assertion that charges can be advanced at will and that the desire to earn a return upon all outstanding securities is a sufficient Incen- tive to such advances. But between the desire for more revenue and its satisfaction by means of ad- vancing rates to unreasonable figures or the substi- tution of Inferior service stands (first), the regula- tive power and established agencies of the Federal and State governments, and (second) the fact that the commodities moved must be sold in competitive markets, where they meet the same and substitutable articles produced locally and brought from other sources of supply, and that, in consequence, exorbi- tant rates or inferior service will invariably produce 52 less, and not more, net income. W. H. William*: Letter to Railroad Securities Commission, January 18, 1911. Value of Large Systems In addition to the benefits pointed out as conse- quences of consolidation in industrial growth, espe- cially as affecting the workingman, many others hare accrued to the public by reason of the grouping of railroads into large systems. In Europe, where the population is dense, this fact has long been recog- nized, and the paralleling %f a railroad Is forbidden by law. Good service can be given only by a road that is making money. The people are the chief suf- ferers wherever a railroad is operated at a loss. Formerly every small railroad that began nowhere and ended at the crossroads had its president, vice- president, and full complement of other officers, all drawing good salaries. For these there is now one series of officers and one set of salaries. Economy has marked every stage of the welding of these little railroads together; but all other gains are insignifi- cant when compared with the enormous increase of efficiency in operation and the decrease in cost to the public. James J. Hill: Highways of Progress. The Experience of 1907 If you increase the size of a bottle without enlarg- ing the neck, more time and more work are required to fill and empty it. That is what has happened to the transportation business. In 1907 traffic was blocked on nearly all the principal Eastern railway lines. It took months to convey an ordinary ship- ment of goods from one domestic market to another. 53 The deadlock was broken partly by a panic that lessened the volume of business and partly by the efforts of railway managements to add, by increased efficiency, to the moving power of facilities at com- mand. We neither anticipate nor desire perpetual business depression. WhAe the limits of efficiency have not been reached, we know that it cannot be made to cover the demands of our growth in popula- tion and production. The records of any large city will prove this. The tonnage of the Pittsburgh Dis- trict, for example, by railroad alone, grew from 64,- 125,000 to 152,000,000 in the ten years between 1901 and 1911. It is both practical #nd patriotic to ask, What is to be done? James J. Hill: The Country' 9 Need of Greater Railway Facilities and Terminal*. Address at annual dinner of Railway Business Asso- ciation, New YorJc, December 19, 1912. Value of Statistics One of the subjects which had exercised my mind a good deal before I went to America was how the large undertakings now operated under one organi- zation were managed and controlled, since personal supervision by the higher officers was no longer prac- ticable. I asked the question of several presidents, vice-presidents, heads of departments, and district officers whom 1 met. Without exception they gave me the answer that the control was exercised through statistics. Equally without exception they said they could not possibly conduct their business efficiently without statistics; that without them they were working in the dark; and that they could not under- stand how any railroad could be efficiently and eco- nomically operated without statistics. The president of the railroad which has made the most scientific 54 study of the subject told me that at one time his railway kept only the most meager statistics. Be- yond knowing in a general way that he ran so many train miles and carried so many passengers and so many tons of goods, and that he earned so much reve- nue and expended so much* money in the service, he had no information. He had no means of knowing what the income from any particular service was, nor had he then any idea of the cost of providing It. He had.no standards of any kind to guide him. He felt this was not right, and that if he was to operate his railway economically and with profit, he must know exactly where the money went, and what income was being received for a particula^ jenditure. He ac- cordingly proceeded to devise some form of statis- tics which would give him the necessary information, and, after many trials and errors, he arrived at his present system. * * * I was assured that both he and his officers were quite satisfied that the money was more than well spent, and that by means of these statistics they had been enabled to introduce reforms and economies the necessity for which would otherwise never have been known, and that gen- erally the outlay which they incurred in the compila- tion of the statistics represented only a very small percentage of the saving effected by their aid. * * * Of course every one recognizes that experience and reflection are necessary for the intelligent application of all statistics, and that statistics used without in- telligence may be not only of no value, but very harmful. But it is contended that, when used with intelligence, they help to impress all with the money value of the service performed and to bring sharply to their attention the cost of inefficient service, help- ing thereby to cut out a proportion of the numerous things that militate against an economical perform- ance 'Neville Priestly, Under Secretary for India, appointed by the British Government to make an in- vestigation of the methods of American Railways. The System of Statistics The early railroads were rarely more than one or two hundred miles long. The officer responsible for maintenance and operation was personally familiar with every mile of the track, the characteristics of every locomotive, and of almost every employee on the pay roll. By continual travel over the road and in- cessant personal supervision this officer, the man im- mediately responsible to the owners of the road, could immediately direct the application of material and the performance of the employees. As many of the roads were extended and as there was amalgamation of the smaller roads, this minute direction of the one re- sponsible officer passed beyond the limits of any one man's capacity. Certain measures of authority had to be delegated to others, the operations not often being so extensive as to baffle the personal inspection of the responsible manager. As, however, the larger railways have been extended over thousands of miles and there has been amalgamation of large roads into systems, each penetrating many States, traversing both lowlands and mountains, with traffic increasing in density and variety, there has arisen that compli- cated organization the results of whose co-ordinated performance are absolutely beyond unaided physical perception. By way of exhibiting the results of the details of different phases of operation, of comparing the performance of one division with that of another, the accounting department began to collect and record figures, not simply with a view of making bookkeep- ing debits and credits, but with a view to aid in the 56 scrutiny of any detail of performance, by placing In comparison the results obtained here with the results obtained there, the results obtained at one period with those obtained during another and corresponding period, thereby enabling analysis of the causes pro- ducing variations, the elimination of idiosyncrasies and inefficient practice, and the intelligent outline of a policy for the future. This practice has developed into a system of statistics which by universal consent has been a foremost factor in contributing to the effi- ciency of the American railroads. L. G. McPherson: The Working of the Railroads. Eleven Thousand a Year Nobody was ever struck by a railway engine except upon a railway track, or, at any rate, so near to it that he was poaching on its preserve. Between the rails of a railroad there are, ordinarily, just four feet eight inches and a half, and the balance of the unsafe space does not exceed three feet ; yet with all the rest of the world to stand and walk on, some eleven thousand people every year find it necessary to their employment to end their days, or their health, on this narrow strip of land. It is not, as I before intimated, that I am so much worried about these curious people as I am annoyed that they should be the means of giving my friend such a bad reputation. It is rather to protect his reputation against their assaults that I would make it, as near as possible, impossible for them to get within a destructive dis- tance of him. George A. Rankin: An American Trans- portation System. 57 Accidents to Trespassers Fourteen people were killed yesterday while tre- passing; fourteen will be killed today; fourteen will be killed tomorrow if the record of recent years is being and shall be maintained. It is not often that as many as fourteen passengers are killed in a wreck ; but every bad wreck causes numerous investigations and reports, often resulting in orders by commissions or legislation. The greatest number of passengers ever killed in a single year from all causes was in 1907, when they numbered 610, and even in that year the number of trespassers killed 5,612 was over nine times as great as the number of passengers killed. In 1911, the last year for which we have com- plete statistics, the number of passengers killed was only 356 and the number of trespassers killed 5,284, or fifteen times as great. And yet newspapers agi- tate, commissions issue orders, and lawmakers legis- late to reduce accidents to passengers, and almost ho one in a position of public authority does anything to reduce the slaughter of trespassers. From article entitled "Why 5,000 Trespassers Are Killed Yearly." Railway Age Gazette, December 20, 1912. Most of the Killed Trespassers In the five-year period from 1905 to 1909, inclusive, 31,091 other persons were killed ; 26,201 of these were trespassers. In the same period 49,786 other persons were injured, of which number 28,205 were trespass- ers. A significant feature connected with these fig- ures is the surprisingly large number of trespassers killed by being struck by trains, locomotives, or cars at "other points along the track." Of the 26,291 deaths to trespassers during this five-year period, 58 17,469 were due to this cause. The extremely fatal nature of this class of accidents is indicated by the fact that while more than 17,000 persons were killed, less than 10,000 were injured, the deaths exceeding the injuries in a ratio of 1.76 to 1. * * * In Eng- land and on the continent of Europe walking on rail- road tracks is forbidden by law, and it should be here; furthermore, vigorous measures should be un- dertaken to make people understand that railroad tracks cannot be used as footwalks with impunity. Hon. C. C. McChord, Interstate Commerce Commis- sioner, at Milwaukee, October 1, 1912. What Safety Means On a busy line a stoppage of traffic for sixty sec- onds means a loss of $250. In an hour this loss may reach $25,000. It is more than trebled the second hour, and goes on increasing until in the third hour the blocked railroad is losing a thousand, two thou- sand, five thousand dollars a minute no one can cal- culate how much. The railroads appreciate better than the public that safety is cheaper than wrecks, and do not hesi- tate at the expenditure of great sums for block-signal systems. These investments have saved many times their cost, but they do not put an end to wrecks. They have decreased the human element in railway operation, which is the weakest spot, but there is still a huge margin left for further improvement. Thaddeus S. Dayton: The Wreckless Railroad. Har- per's Weekly, February 22, 1913. INCREASE IN TAXATION AND OTHER COSTS. The Public Milch Cow Another item of expense which grows out of all proportion to railway revenue or national develop- ment is taxation. In 1890 the taxes paid by all the railroads aggregated $31,207,469; in 1910 they had risen to $103,795,701; for 1911 they are estimated at $109,000,000, and may be a couple of millions more. The increase in twenty years up to 1910 is 233 per cent. This is by direct act of the people. The ex- travagance of all modern legislative bodies, the doub- ling of State and National expenses within a few years, and the continuous issue of bonds for all sorts of public purposes formerly met by general taxation have drained the ordinary sources of revenue. The railroad treasury has come to be looked upon as the public milch cow, from which a new supply of nour- ishment may always be obtained. So railway taxes have risen by leaps and bounds. Each mile of line in the country paid $199 in taxes in 1890 and $431 in 1910. James J. Hill: The Country's Need of Or eater Railway Facilities and Terminals. Address at annual dinner of Railway Business Association, New York, December 19, 1912. The Tax Increase of Thirty Years The following table shows the aggregate amounts paid in taxes to the State and Federal governments 59 by the railways of the United States in 1880, as shown by the census of that year, and in 1888, 1893, 1898, 1903, 1908, and 1910, as shown by the statistical reports of the Interstate Commerce Commission: Year. Taxes paid. 1880 $13,283,819 1888 25,435,229 1893 36,514,689 1898 43,828,224 1903 57,849,569 1908 84,599,992 1910 103,853,576 These figures show that in 30 years the amount collected from the railways for the support of the Federal and the various State governments has in- creased almost eight-fold. London Times, American Railway Number, June 28,. 1912. Some of the Higher Costs of Railroading The coal bill of the Baltimore & Ohio Railroad Company amounts to approximately $6,000,000 per year, and within the last two years there has been an advance in the price of coal of upward of 10 per cent. The increase in price of ties has also been con- siderable. Prices asked and" paid for locomotives, freight and passenger cars are also higher today than was the case three years ago for equipment of the same kind. Legislation of various kinds both State and Fed- eral has had an important influence upon expenses. The so-called Full Crew Bill, which has become a law in many of the States, requires the railroads to em- ploy an extra man on all trains of more than certain length, regardless of the local conditions. 61 The hours of service law, boiler inspection law, laws in various States prescribing standards of construc- tion for caboose cars, laws with reference to the con- struction of postal cars, revised orders with reference to safety appliances upon new equipment, as well as upon existing equipment ; laws with reference to grade separation, etc., etc. all have tended to very greatly increase the cost of operation. Taxes have increased largely during the last three years. In the case of the Baltimore & Ohio Company, the increase in that one item since 1909 amounts to more than $900,000 a year. I think it is perhaps not a matter of common knowledge, although one of pub- lic record, that the American railroads, as a whole, pay each year in taxes more than $120,000,000, a sum nearly two and one-half times as much as the total amount received by all the railroads for carry- ing the mails. Another very important element to be considered is the rate of interest which railways are obliged to pay upon new capital raised for improvements and better- ments. It may be said that the interest basis on all investments has been raised within recent years, and that the very best securities must pay higher rates today than ever before, and that the railroads are not peculiar in this respect ; but even so, they are still re- quired, in common with others, to pay a much higher rate of interest than was the case some five or ten years ago. Ten years ago, for instance, if a railroad company with well-established credit, decided to in- crease its capital for improvement purposes we will say $1,000,000 it was customary to assume that the interest charge on that account would be approxi- mately $40,000 per year. Under existing conditions, the interest charge would be between $50,000 and $60,- 000 per year as a minimum, and in some cases, even 62 in excess of $60,000. This item alone, as you will see, becomes very important when large systems like the Baltimore & Ohio are spending upward of $20,- 000,000 a year, and ought to do so, for betterments, extensions and new equipment made necessary by the growing demands of a constantly expanding com- merce. 4 Further the public demands, expects and receives a higher standard of service in all directions than has ever been the case before. Daniel Willard: Before the Boston Chamber of Commerce, June 12, 1913. THE RAILROAD'S DOLLAR. Problem Critical and Urgent In the railway industry of America today the stock- holders' , narrow margin of profit and the constant clamor for higher wages make the problem a critical and an urgent one. Of every dollar earned by the railway companies, 42 cents is disbursed in the form of wages, and 33 cents is available for improvements and the satisfaction of interest and dividend require- ments. The latter in 1910 were on the modest basis of 3.79 and 3.64 per cent, respectively, compared with 4.27 and 2.44 per cent in 1900. Recent governmental discouragement of proposed rate increases makes it clear that if the rights of capital are to be protected, there can be no further increases of wages which are not offset by corresponding economies in other direc- tions. Francis Lyster Jandron: Efficiency and the Railway Wage Problem. Engineering Magazine, No- vember, 1912. How the Dollar is Divided The revenue of the railroads is collected in the main from the handling of property and passengers, and it cannot pay out more than it takes in. In 1912, out of every dollar that the railroad received, the follow- ing disposition was made: 63 Labor direct 44.17 cents Fuel and oil, 70 per cent labor 8.93 " Material, supplies and miscellaneous ex- penses 14.06 " Loss and damages 2.20 " Taxes . s 4.21 " Rents for leased roads 4.41 " Interest on debt.. 13.43 " Total 91.41 Balance 8.59 100.00 Of this balance 3.75 cents were for betterments and deficits, and 4.84 cents for dividends. In other words, of the dollar collected there had to be paid out 91.41 cents for those things that were absolutely necessary for maintaining and operating the property, paying taxes and interest, leaving only the small balance of 8.59 cents for improvements and dividends. Howard Elliott: Address before the Minneapolis Chapter, American Institute of Banking, April 26, 1913. The Value of a Postage Stamp If you should write a letter to an American railroad official, his corporation 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 corporation must pay its employees, buy its materials, pay its rents and taxes, interest on Its debt, and make its living. Frank Trum- "bull: Address, March 14, 1911, Canadian Club of New York. WAGES AND LABOR. The Highest Wages and the Lowest Rates The American railway pays the highest wages in the world out of the lowest rates in the world, after hav- ing set down to capital account the lowest capitaliza- tion per mile of any of the great countries of the world. James J. Hill: Highways of Progress. Compulsory Arbitration Compulsory arbitration, about which a great deal is very glibly said and written, seems to me as much a misnomer as a white blackbird, because {he very idea of arbitration implies the voluntary submission of a controversy. Martin A. Knapp, before the National Civic Federation, March, 1912. Labor's View of Wage Arbitrations There is no such thing as absolute justice in the arbitration of wage disputes. Those who agree to the principle cannot in the nature of things hope always to be fully sustained. Arbitration points to compro- mise of extreme views, and this is particularly true when human welfare or social justice is a factor. From Minority Report of P. H. Morrissey, represent- ing the Brotherhood of Locomotive Engineers in Arbi- tration with Eastern Railroads. Sixteen Million People In addition to the 1,525,000 employees working di- rectly for the railways, there are 2,500,000 in coal 65 66 mines, steel mills, manufacturing plants, all supplying what is necessary for the railways in their operations, who represent af least 10,000,000 of our total popula- tion. So the railway employees and the employees of the industries dependent more or less on its mainte- nance on a sound basis represent approximately 16,- 000,000 people whose rights must be considered. How- ard Elliott: Address at the Montana State Fair, Hel- ena, Montana, September 26, 1910. Labor Holds Balance of Power In the opinion of the Board the balance of power in the control of wages, which was first with the rail- roads, has now passed to organized railway labor. The railroad' operators, under the control of national and State commissions, and under the control of public opinion, are weaker than strongly organized unions. The latter, without any control through commissions, are of course also affected by public opinion, but not so directly. Never in the history of the United States has there been a concerted strike on all the railroads of a great section of the country. The strikes have usually been upon individual roads, although in some cases strikes have taken place upon a number of roads at the same time. Commission in Arbitration between the Eastern Railways and the Brotherhood of Locomotive En- gineers, Charles R. Van Hise, chairman. Labor's Large Share No one thing, perhaps, so embitters as a sense of injustice, and I am satisfied that much of the resent- ment of the workman is due to his belief in the as- surances that have been made him by his leaders that 67 he was not getting his fair share of the joint product, and it is highly important that the facts with regard to this be determined and be widely diffused. I am not aware of any considerable body of information regarding the relative contributions to value by the property owners, the brain workers, and the manual workers. It would seem desirable to undertake a physical valuation of labor. Were this done it would probably be found that in most industries the wages of labor are substantially in excess of the contribu- tion made by labor to the value of the product * * * If we reflect that the total maintenance of way ex- penses of the roads of the country are about $300,- 000,000 annually, and that of these expenses the moneys paid out for labor amount to 56 per cent, while all the other expenses amount to but 44 per cent, it would seem to justify the suggestion that your asso- ciation devote at least a substantial part of your work to the study of labor. I would, therefore, urge that, to the present list of regular committees, there be added a committee on maintenance of way labor, whose duties shall be to investigate the conditions of employment of and the relation of maintenance of way labor to seasonal supply and demand. L. F. Loree: Address at annual linner of American Rail- way Engineering Association, Chicago, March, 1912. No Serious Strike Since Erdman Act There has not been a railway strike of any serious consequence since the Erdman act has been made effective. The organizations have availed themselves of this act as often as have the companies, and there is but one instance where a strike occurred after medi- ation had begun, and that strike resulted disastrously to the organization responsible for it. In the contro- 68 versy which resulted in the present arbitration neither side showed a disposition to take advantage of the act The engineers were prepared to strike and the railways were willing that they should strike; or, if they felt differently about it, they at no time made this known. Their position did not indicate any fear of the power of the organization or any lack of ability to handle a situation which might grow out of a strike. Fortunately for the public's interest the inter- vention of Judge Knapp and Commissioner Neill, al- though without authority under the law, did that which neither the railways nor the engineers appeared dis- posed to do, and thus averted a test of strength. From Minority Report of P. H. Morrissey, representing the Brotherhood of Locomotive Engineers in Arbitration with the Railroads, 1912. Canadian Disputes Act The Canadian Industrial Disputes act, passed in 1907, is broader than the Erdman act in that it pro- vides not only for the settlement of disputes between railroads, but industries in general. This act is a distinct advance over the Erdman act in that no strike or lockout can be made by a party to a contro- versy until the difficulties have been investigated and recommendations made. For each case of arbitra- tion a separate board is appointed. Of these there has been 109 to the end of 1911. During the five years of the existence of this law, from 1907 to 1911, inclusive, there have been only twelve industrial disputes in which strikes have not been averted or ended, and this for all of Canada for all industries. Commission in Arbitration between the Eastern Railroads and the Brotherhood of Locomotive Engineers. 69 Prosperity and Railroad Progress The business man has still another interest In the prosperity of his railway partner. There are on the payrolls of the railways of the United States more than a million and a half of employees. The purchas- ing power of each member of this vast army is depend- ent upon the maintenance of the wage-paying power of the railways. The money received by railway em- ployees finds its way through all the channels of trade and is a factor of local business importance in prac- tically every community in the United States. The railways are also large purchasers of the products of industries which in turn support another vast army of employees. Through these channels, the benefits of the maintenance of wage-paying and purchasing power are so widely distributed as to reach directly or in- directly practically every individual in the United States, whatever may be his business or occupation. This interest of the business man in the railways was very well expressed in an address by one of the most prominent merchants of the United States, in which he said: "Let any merchant look over his records for years ; let him note the fat years and the lean years ; let him then mark the years of railroad extension and rail- road improvements of railroad spending. Let him mark on the other side the years of railroad retrench- ment, and he will find that the years when his pros- perity has waned have been the years when the rail- roads were not progressing." William W. Finley: The Railway as the Business Man's Partner. One of a series of lectures prepared for the Alexander Hamil- ton Institute, New York City, 1911. 70 Labor's Demands on Railroads But railroad corporations are not, primarily, manu- facturers or miners. They produce no articles for sale. They are carriers by land for hire, just as the wagoner or the carriage-driver is, but with the fur- ther difference that in return for the exercise of the sovereign power in their behalf they are bound to a public service which they cannot evade. They are en- gaged, by day and night, in the constant performance of a personal service to each passenger who travels and to each shipper of freight. They have, too, a spe- cial contract with the Post-Office Department affecting every one who reads a newspaper or writes a letter. With this public burden to carry, an obligation es- sential to their corporate existence, they are at a dis- advantage when they come to trying conclusions with their employees. The lockout is forbidden to them as a measure of defense. They can neither close up their stations nor stop their trains. If the railroad manage- ment cannot agree with the men as to the terms and conditions of its employment, it must, at its peril, find competent men to replace them and in numbers suffi- cient to maintain its service without inconvenience to its patrons. The public will be satisfied with nothing less, and so long as the men abstain from violence, the corporation and its representatives are alone held to account by the laws, by the many persons incon- venienced, and by the newspapers. Under such a pressure, what wonder that railroad managers yield to demands to which their judgment does not give as- sent, or that employees gain from each successful step the assurance of submission to yet further demands? And when may we expect these demands to cease? Are they to be limited only by the desires of those 71 who are in a position to enforce them? There Is an- other limit the financial ability *of the corporations to satisfy them. Henry Stevens Haines: American Railroad Management. A Tribute to Railroad Men The men who actually operate our railroads, who keep the intricate wheels of this mighty machine con- stantly in motion and always at our service, receive too little public acknowledgment for the work they perform. They are among the most skilled,, capable, and honest of our business and professional men. They have an enthusiasm in their work and a loyalty to their companies that is a constant satisfaction, and their delinquencies too often may be traced to policies which purely as railroad men they would not counte- nance. With these men we can work, and through them we may hope for the realization of a national system of railroads that will be fair as to rates, profit- able as to income, and adequate as to service. Frank- lin K. Lane, World's Work, March, 1913. The Labor Organization Perhaps the greatest barrier to the introduction of any system designed to accomplish savings which will diminish the number of employees is the labor organ- ization. Practically every branch of the railroad serv- ice is strongly organized and militant. The manu- facturer has his labor problem also; but he can close down his plant or lock out his men if he sees fit. With railroads, resistance to demands considered by them as unreasonable must not be allowed unduly to affect service. Trains must be kept moving at any cost, and if men cannot be had to take the place of striking 72 employees, or If, before a strike is declared, it Is plain that resistance is useless, the company must make the best terms it can, and maintain peace. William J. Cunningham: Scientific Management in the Operation of Railroads. Quarterly Journal of Economics, May, 1911. Responsibility of Labor Organizations Organized labor is constant in its endeavor to bene- fit its members, and has done good; but it should guard against the danger of unlimited power. Great power, unrestricted and constantly successful, requires a broader control, consideration, and direction, and there is constant danger that in the exercise of such power it may encroach upon the right of those not possessed of equal power and strength. Stating my own personal views, it is proper to regu- late the common carrier; but it is equally as essential to regulate labor organizations engaged in public trans- portation, the purpose being to maintain the principles of property rights and the continued prosperity of this country under our immediate civilization. J. C. Stuart, before Board of Arbitration in Engineers' Con- troversy, July 26, 1912. Wages and Rates; Their Increases Compared The increase in the wage scale has been a promi- nent factor in the demand for an advance in rates; yet the relation of this advance, in total amount, to the total increase in the cost of service from that cause varies widely in the estimates made by nineteen companies that were to be benefited by it. These esti- mates totaled the yearly increase in wages at $22,- 843,000, and the increased revenue from the advance 73 in rates at $21,527,000? so that the totals approxi- mately balanced each other. Yet the separate esti- mates were far from doing so. Some examples of this difference were as follows: Increase Increase in wages. in rates. $7,000,000 $3,000,000 1,480,000 1,954,000 1,069,000 1,797,000 910,000 1,244,000 372,000 84,000 288,000 699,000 186,000 14,000 160,000 228,000 153,000 71,000 With such disparities as these, how is it practicable to base a reasonable rate upon the cost of service as applied to different classes of freight? H. 8. Haines: Problems in Railway Regulation. No Doctrine of Hatred for Labor I believe it will be accepted as a principle of democracy that the interests of the whole people are greater than those of any class, even its largest class, and that the interests of any class shall predominate only when shown to be identical with the welfare of the mass. Organized labor cannot advance the inter- ests of the worker by holding itself aloof from the other groups which go to make up society. It should be able and prepared to state its principles and de- fend them anywhere. It cannot, in my judgment, ultimately succeed by preaching the doctrine of hatred, or encouraging labor to withhold its recognition of these great public questions, because, perchance, labor 74 would be associated with some of its enemies, past or present. P. H. Morrissey: Speech at Railway Em- ploye's' Picnic at Galesburg, III., June, 1911. If Wages Are Increased, Why Not Rates? Suppose organized railway labor makes a further demand for increased wages, and that the railroads accede to this demand. The increased wage adds to the expense of operation and reduces net revenue. The railroad applies to the Interstate Commerce Com- mission for leave to advance its rates on this account. What now is to be the answer of the Commission? The railway rate is paid by the whole body of the public. If, therefore, this increase in -wages was un- justifiable, and if on that account an increase in rate is allowed, it results that the general public, including all other forms of labor, is required to pay what is unreasonable. Must not, therefore, the Government be satisfied, not only that the added wages are paid by the railroads, but that they are necessarily and properly paid? And is not the railroad thus placed in a most unfortunate and embarrassing dilemma? Chas. A. Prouty: Address, March 28, 1912, at tenth annual banquet of the Traffic Club of Pittsburgh, held at Fort Pitt Hotel, Pittsburgh, Pennsylvania. Clearing House for Labor and Supplies The railroads are not only the great transportation agencies of the country, but I invite your attention to the more intimate fact that they are in a large sense but a clearing-house for labor and supplies. They collect, to pay out again. Wm. Sproule, at the annual dinner of the Chamber of Commerce of San 'Francisco, December 9, 1912. 75 Ten Millions Supported by Railways You get some idea of the Immensity of the railway business when you understand that roughly there are two million men on the payrolls of Jhe railway com- panies of this country, including everybody, froni the president, who sits at a mahogany desk, to the office boy, who answers the president's bell ; from the chief engineer, who supervises the plans for a million-dollar bridge, to the man who works in overalls, seeing that every bolt In that bridge is in place; and the men in overalls form the great army of railway employees, while the presidents and chief engineers constitute only a fractional percentage. Two million men repre- sent ten million persons, for statisticians assume that every man is the head of a family, and the average family consists of five persons, which is fairly accu- rate on a large scale; so that ten million persons, or one-tenth of the entire population of the United States, are dependent upon the railways for their support. There Is no other industry to compare with it In this country none other, In fact, In the world. If It were possible to imagine all the railroads suddenly com- pelled to cease doing business, one can conceive the distress and suffering that would follow. A. Maurice Low: The Railways and the Public. Harper's Weekly, August 31, 1912. Ultimate Wages The firemen's vote on the strike question is bringing to the fore the query whether there is an ultimate limit above which railroad wages will not go, or whether the rise is to keep on absorbing the total rail- way income until there is little or nothing left for 76 dividends and interest. In view of the anti-corpora- tion sentiment which actuates both legislators and voters, railway managers may he pardoned for what might otherwise be their cowardice in shrinking from calling a halt. The following exhibit, however, makes it clear that it is only a matter of time when a halt will necessarily have to be called in order to protect the capital which stock and bondholders have already invested : Per cent Y* ftr Gross Aggregate R. R. of wages earnings. wages, U. S. A. to gross earnings. 1912 $2,895,690,325 $1,243,677,738* 42 . 95 1911 2,841,190,738 1,193,701,522 42 . 01 1910 2,817,721,735 1,143,725,306 40 . 59 1909 2,468,734,760 988,323,694 40.03 1908 2,457,821,131 1,035,437,528 42 . 13 1907 2,649,731,911 1,072,386,427 40 . 47 1906 2,386,285,473 900,801,653 37 . 75 1905 2,134,208,156 839,944,680 39 . 36 1904 2,024,555,061 817,598,810 40 . 38 1903 1,950,743,636 757,321,415 38 . 82 'Estimated. Reflection upon the fact that it now requires 42.95 per cent of gross earnings to cover the wage bill against 38.82 per cent In 1903, and even less in 1906, disposes of all doubt as to the necessity to call a hatt. How long is It physically possible for this absorption of gross earnings to keep on increasing? The propor- tion absorbed by wages has grown by 10.64 per cent of Itself during the past nine years, and a similar rate of increase must be expected so long as railway man- agers, however excellent their reasons, continue yield- ing to the demands made. 77 It requires 57.5 per cent of gross earnings to cover wages, dividends, and surplus after dividends com- bined ; but at the rate wages are absorbing gross earn- ings these wage payments alone by 1938 will consume 57.5 per cent of gross. Moreover, It requires 71.7 per cent of gross to cover wages, dividends, surplus and interest combined; and by 1958, at the present actual rate of Increase, wages alone will absorb this 71.7 per cent. The compensation of railroad employees has seem- ingly Increased faster than that of other workmen In the United States, and, Indeed, even more rapidly than that of the whole people, Including the Income-receiv- ing classes. During the past ten years, for example, engineers' pay has Increased about 26.9 per cent, as compared with 21 per cent for the general average of all wages, and with about 22.8 per cent for the aver- age per capita wealth of all the people. However, the most striking fact is that at the pres- ent actual rate of increase railroad wages would leave nothing for dividends by 1938, would put all the rail- roads Into receivers' hands by 1948, and would leave nothing for Interest payments by 1958. Wall Street Journal, January 25, 1913. Permanent National Wage Commission One of the recommendations made by the board which arbitrated the recent controversy between the Eastern railways and their engineers and which, if carried out, should result in a most radical change for the better from the present unsatisfactory conditions was in respect to the creation of a permanent national wage commission to arbitrate differences between the railways and their employees in order to prevent strikes, effect equitable adjustments of working concU- 78 tlons and wages, and, at the same time, protect the rights and interests of the roads, their employees, and the public. This particular arbitration case Is probably the most Important, and the result will doubtless be the most far-reaching of any that has yet been presented In the history of organized labor In this country, involving as it did, the Brotherhood of Locomotive Engineers, representing 31,840 locomotive engineers; fifty-two railroads, representing 56,876 miles of main track or over 25 per cent of the total main track mileage in the United States handling from 42 to 47 per cent of the total traffic of the country, and affecting a popu- lation tributary to these fifty-two roads of over 32,- 000,000 people. In this controversy, of course, the public did not directly participate ; but, as can be easily appreciated, and as is so lucidly set forth In the re- marks of the board of arbitration, the Interests of the public are most vitally concerned indeed, their Interests are paramount. If 31,840 engineers, through their organization, can inaugurate a strike, thereby jeopardizing the business Interests not only of the 32,000,000 people in the dis- trict directly affected, but also Indirectly a still greater number, It is apparent that some measures must be taken to protect the rights of the public, and this can only be done through the establishment of a commis- sion such as is recommended by the board of arbitra- tion. Capital need have no apprehension from the establishment of such a commission, and, to Judge from the results of their political activity In the past, organized labor should have no hesitation In Indorsing the plan proposed. The present restrictive policy in respect to the regu- lation of railroad rates and operation has been 79 adopted, and is being carried out with the hearty sup- port of the public. This policy has already resulted in limiting the earning power of the railroads, and, if persisted in, will ultimately impair the credit of the railroads, rendering them incapable of expansion and of making much-needed improvements to keep up with the commercial and agricultural development of the country. If the public continues to indorse this policy of regulation, it should be willing at least to protect the railroads in so far as possible from the excessive and unreasonable demands made upon them by their employees and enforced through their various organi- zations by threats of strike, which affect not only the district directly involved, but also indirectly those districts far distant from the actual scene of contro- versy. The establishment of such a national commission as recommended would prove economical, undoubt- edly would result in a more equitable adjustment to all the parties concerned, and, this being a Federal commission, all the proceedings would be spread broadcast, and in this way the general public would be kept fully informed as to the points in controversy and the justness of the demands made. Until, however, such a commission shall be estab- lished, these wage questions must necessarily continue to be handled as heretofore, and the public will sooner or later be brought to realize what an unsatisfactory method it is, for in the end the public is the party most vitally affected. B. A. WortMngton, President Chicago and Alton Railroad: Wages Board Needed. New York Times, January 5, 1913. 80 Wages Here and in Europe The engineers pulling the train between Paris and Cherbourg receive two dollars and seven cents, In con- trast to ten dollars and twenty-five cents paid the engi- neers handling the trains between Cincinnati and Cleveland; and the conductors one dollar and thirty- one cents, in contrast to seven dollars and twenty- three cents paid on the run in Ohio. In other words, while the passenger fare in France is sixty-nine per cent greater, the wages paid here to engineers and conductors are four hundred per cent greater than those paid in France. Between London and Liverpool, a distance of two hundred miles, the first-class passenger fare, including one hundred and fifty pounds of baggage, is seven dol- lars and eight cents, while from Cincinnati to Toledo, a distance of two hundred and eleven miles, the fare, including a parlor-car seat and one hundred and fifty pounds of baggage, is only four dollars and seventy-five cents. The engineers handling the train from London to Liverpool receive two dollars, in contrast to eight dol- lars and twenty cents paid engineers for the run be- tween Cincinnati and Toledo, and the wages of con- ductors and firemen bear approximately the same rela- tion. W. C. Brown: Address at annual dinner of Rail- way Young Men's Christian Association at Columbus, Ohio, February 4, 1911. SOME OF THE^PRESSING NEEDS. J. J. Hill's Famous Predictions It was in January, 1907, that James J. Hill sent his famous letter to the Governor of Minnesota, telling of the need of 'the railroads of the country to spend at least $1,100,000,000 annually on construction for the next five years if they would handle the business of the country adequately, Three years and a half later he was telling the railroad men that without more extensive terminals the traffic of the country would be blocked. Both predictions were borne out by facts. It has been proved that the railroads are falling behind in the country's progress. Beset by legislatures and railroad commissions, they find it increasingly more difficult to sell the securities that will give them the needed improvements in the way of additional tracks and terminals. That they didn't spend a billion dol- lars annually in new construction, or anything like it, after 1907 is well known. The result is that now they must raise the average of expenditure or fall still farther behind. That is one of the points they are trying to impress upon their regulators, but without much success. "The men who are making the laws," Mr. Hill said, "do not know the effects of their own acts, and they do not know what they are legislating about. They think, as one of them expressed it, that the railroads are there and' cannot get away." Rail- way Record, April 19, 1913. 81 Why Railroads Require More Money We have today the lowest railroad capitalization per mile of any great country in the world, much lower than in any of the great European countries. It is impossible to continue this building and de- veloping of railroads without more capital. To ob- tain that capital, the railroads must have credit; credit that will withstand the scrutiny of the banker of Lombard street, as well as appeal to the investor in Philadelphia. That credit cannot be assured and maintained unless the railroads are permitted to earn sufficient revenue to have left over at the end of the year a surplus out of which to make the necessary im- provements which do not add to the earning power of the company, and which yet assure the investor of the productive value, both now and prospective, of the enterprise in which he proposes to put his money. The railroads of this country pay the highest wages of any country in the world. They pay more to the support of the Government in taxation, proportioned to the capital invested, than is paid in any country in the world. They do their work upon less capital, and they do more work upon their capital, than is done in any country hi the world. In addition, the railroads of this country haul freight cheaper than is done in any other country in the world. Confronted, therefore, with such costs as have been noted, not to speak of the growing cost of materials and wages, is it not absolutely proper that the railways should ask, on their own behalf as well as on behalf of the public they seek to serve, that a small increase be made in the rates of freight? Samuel Rea: Letter to Philadelphia Ledger, May 9, 1913. 83 Labor's View of the Railroad's Great Need I believe that the masters of finance, such as repre- sented by Mr. Morgan and others, are absolutely right when they say they have reached the limit of economy in railroad operation. I don't believe it is possible to do any more along that line, and I agree with them that anything in the future toward improvement will have fc/be by addition or increase to freight rates. There never was a time in history of the railroads when so much was demanded as now. There never was a time when so much was demanded along the line of fast traffic, high speed, splendid roadbeds and a thousand and one other things, and there never was a time when the railroads were in need of more money to make improvements, build terminals and other things needed as now, and the only hope for them is in an increased freight rate. Warren S. Stone: Efficiency as tlie Employe* Sees It. llth annual meeting National Civic Federation. Increased Service and More Money In a growing country, such as the United States, there is a constant demand for increased transporta- tion service, calling for additional facilities on existing railways and the construction of new lines. It is transportation which has, more than any other one agency, made the United States the wonderfully pro- gressive and prosperous country it is. Transportation companies have, in the face of steadily lowered rates, increased the extent and raised the quality of their service, and at the same time steadily increased their expenditures and the work for the development of the , country. Without transportation facilities its develop- ment would have been retarded and its progress slow. 84 A growing railway has constant need of money. The provision of additional facilities will call for the investment of large amounts of new capital in railway enterprises. Investors naturally seek those fields in which the prospects for returns are fair and reason- ably assured. They will put their money into railway enterprises, therefore, only if the returns from invest- ments in railway properties are approximately equal to the returns secured from capital invested in other kinds of business. Whether or not this shall be true, and railway development, with its advantages for rail- way men, affording an ever-widening field for employ- ment and promotion, is to continue will depend in large measure upon the efficiency with which the prop- erties are operated. This is particularly true in the present era of rail- way regulation by State and Federal authority. I should not be construed as criticising the policy of governmental regulation within its proper field. I am speaking of it on this occasion merely for the purpose of directing attention to its bearing on the subject I am discussing. If the demand for the product of a farm or a manufacturing establishment is such as to make an advance in price possible, the margin between the cost of production and the selling price can be increased by the simple method of advancing the lat- ter. But the railways of the United States are not free to advance the price of their product. Whatever may be the demand for transportation, the price can- not be increased without first securing governmental approval, which will always be a difficult thing to do. As a result of this condition, substantially the only way in which a railway can increase the margin be- tween the cost of producing transportation the ex- pense unit and its selling price the earning unit is by greater efficiency of operation by more efficient 85 solicitation, whereby a larger volume of traffic may be secured, and by greater efficiency, whereby the traffic may be handled at a reduced cost. W. W. Finley: Address before Richmond Railroad Club, Richmond, April 4, 1912. Looking to the Future Economy of Management. It has been urged before the master with reference to the lines of railway under consideration that the evidence discloses want of economical management, in that limited portions of the business were unremunerative and not infre- quently resulted in loss. If the convenience and demands of the public were disregarded, greater economy could doubtless be exer- cised. Full cars and long trains at fewer intervals would be a great saving of cost, and to this end pro- duce could be stored in elevators awaiting shipment under the most economical conditions. Needless to say that this would result in great public incon- venience and dissatisfaction, and recourse ,to such methods is unthinkable. The carrier must properly yield to public demand and recoup for loss on other portions of its business. It is also urged that as to some of the roads surplus lands and equipment are disclosed much beyond pres- ent needs. But it is good business sense to anticipate and prepare for the requirements of the near future. Readiness to serve is of the highest importance to those requiring service, and an efficient management will, if practicable, take advantage of the markets and buy what will soon be needed when it can be obtained at a reasonable price, and not wait until it must be had regardless of cost. Present patrons are not to be burdened for the benefit of those to be acquired in the distant future, but they can well afford to pay a some- what higher rate, that they themselves in the near future may enjoy a cheaper and better service. It is proper for the carrier not only to provide itself with ample facilities for the efficient conduct of its present business, but also to anticipate demands soon to be made as the country becomes more prosperous, and it is entitled to revenue sufficient for such purpose. Extract from Judge Otis' s report in the Minnesota Rate Case. More Expenses and More Laws Consider the position of the railroads of the coun- try for the past few years, and in no district is this more apparent than in the eastern section of the United States, where the railroads are at present ask- ing for a slight advance in rates. The Pennsylvania Railroad Company is as good an example as can be found. In 1901 for every dollar we earned it cost us, including taxes, 67.7 cents to operate and maintain the road ; for every dollar received in 1912 it cost us over 78 cents for actual operation and maintenance. This is largely the result of increased wages and taxes, and apparently the end of these increases has not yet been reached. Wages and taxes are not the only cause, for the railroad company, by the increase in its efficient operation, which is shown in heavier trainloads and by public requirements, is compelled to have a higher standard for road-bed, equipment, stations, signaling, etc., and pay the cost of new capi- tal, labor, and materials to produce them. With these demands all railroads are pleased to comply, but we cannot ignore the result that it costs more. We are, further, under governmental supervision and regulation, required to observe extra-crew laws, laws for grade-crossing abolition, which in some States 87 is exclusively at the expense of the railroads, com- pensation acts, etc., regarding which we may not com- plain, as the public has the right to impose burdens short of confiscation upon the railroads, but as a prac- tical matter we must realize that eventually outgo must be governed by income. The estimated annual cost to our company for three States of the extra-crew laws alone amounts to $756,- 000 per annum, for which no increased return will come to the company. In the six and one-half years ending December 31, 1912, our company paid over $10,- 000,000 to comply with the new regulations, Federal and State. Samuel Rea: Letter to Philadelphia Ledger, May 9, 1913. What is to be the Answer? Suppose organized railway labor makes a further de- mand for increased wages, and that the railroads accede to this demand. The increased wage adds to the ex- pense of operation and reduces net revenue. The railroad applies to the Interstate Commerce Commis- sion for leave to advance its rates on this account. What now is to be the answer of the Commission? The railway rate is paid by the whole body of the public. If, therefore, this increase in wage was un- justifiable, and if on that account an increase in rate is allowed, it results that the general public, includ- ing all other forms of labor, is required to pay what is unreasonable. Must not, therefore, the Government be satisfied, not only that the added wages are paid by the railroads, but that they are necessarily and properly paid? And is not the railroad thus placed in a most unfortunate and embarrassing dilemma? Charles A. Prouty: The Commission Above the Courts. Address before the Traffic Club, Pittsburgh, March, 1912. Terminal Facilities The ability of the railroads to render service is ab- solutely dependent upon the matter of terminal facili- ties; and those are conditioned, not upon the length of the yards, but the number of tracks and the capac- ity of the cars. For instance, if you have a hundred cars on a lim- ited number of tracks, and you want to pick out any twenty cars to move out somewhere, it is necessary in practice to move virtually the entire hundred; but if you have the total amount of freight distributed among fewer cars of larger capacity, or have the hun- dred cars distributed over a greater number of tracks, there is a proportionate reduction of the number of cars that will have to be moved in order to pick out the twenty. E. H. Harriman: The Railroads and the 'People. Independent, March 28, 1907. Many Costly Improvements The railroads are in crying need of more adequate terminal facilities. For the greater safety of the trav- eling public, wooden passenger cars soon must be rele- gated for steel. The capacity of our freight equip- ment must also be increased, to produce a lower unit cost of transportation. Equipment must be recon- structed, or substantially strengthened, to sustain the heavier load and the increased strain of the ponderous locomotives that are now displacing the eight-wheelers of yesterday. This, in turn, entails heavier rail, more substantial ballast, more and better ties, stronger bridges, larger round-houses and turn-tables, new ma- chinery throughout the shops, reduction of grades, double-tracking in places, etc., etc. B. A. Worthing- ton: The Railroad Question. Whole Railway System Behind Requirements This is written in December, 1908. This otherwise unimportant fact is mentioned because to raise the question of the adequacy of our railway system at this time seems to smack of irony. With from 300,000 to 500,000 freight cars standing idle during the past twelve months, the system would seem to be rather overloaded with adequacy. But how short are our memories ! We should not forget that during the two years preceding the panic of 1907 our railway freight system literally broke down under the enormous loads of freight offered it. Or, if you wish your memories refreshed, turn to pages 16, 17, 18 of the Report of the Interstate Commerce Commission for 1906, wherein you will find it stated as a fact by the highest author- ity, that "a car famine prevails which brings distress in almost every section and in some localities amounts to a calamity." Likewise, that in the Northwest farm- ers could not ship their grain; that in the Southwest and trans-Missouri region "tens of thousands of live animals are denied movement to the consuming mar- kets," "while throughout the Middle West and Atlantic seaboard the shortage of cars for manufactured ar- ticles and miscellaneous merchandise has become a matter of serious concern." G. A. RanJcin: An Ameri- can Transportation System. Intelligence and Co-operation It is a favorite theme with a certain class of poli- ticians to tell of the fabulous profits of railroads. They do not tell of the fortunes that have been lost in railroads of the frequent reorganizations, nor of the wiping out of capital actually invested. Because we are a hopeful nation, and because there Is always a fresh crop of investors coming along, there is always new money to be found to re-finance an old property or to float a new one; but there has been a marked checking of the enthusiasm in this direction. Few people, apart from those engaged in finance, comprehend the constant requirement of railroads for cash for development work. The needs of this coun- try in normal years are not far from five hundred millions per year. Now, this money must be drawn from the investor the banker, the trustee, the in- surance company, and the savings bank by the issu- ance of securities, backed by a valid promise of re- payment of the principal and a fair rate of interest on the investment. The railway cannot sell securities that is to say, borrow money without credit; it has no credit unless its operations show a fair profit; it cannot show a fair profit if starved and strangulated by legislation. And who suffers most? The public, whose servants the legislatures and the commissions are. In this endless chain of circumstance, what is the answer? To my mind, more intelligence and bet- ter co-operation. F. A. Delano, before Convention of Commercial Associations, State of Michigan, Detroit, April 17, 1912. i Public Confidence In the matter of improvements the railroads of the country, almost without exception, have been pursuing a hand-to-mouth policy which has proved costly to themselves and irritating to the public costly to themselves because, before improvements necessary to relieve existing conditions have been completed their capacity has been exceeded by the growth of traffic ; irritating to the public because at no time in recent years has the public been able to get free from 91 the delays and annoyances of a continual state of congestion. The result is that today, when the rail- roads are confronted with conditions requiring more comprehensive improvements than ever before in their history, and consequently greater utilization of money than ever before, they are confronted also with a state of public mind extremely hostile to themselves; so that the raising of money to provide facilities so urgently needed is, under present conditions, well nigh impossible, although many of the corporations have sought to do so at the risk of almost imperilling their credit. Theodore P. Shonts, at annual banquet of the Iowa Society, February 15, 1907. Unfair Attacks on the Railroads For a number of years the railroads have been sub- jected to a great concerted attack. The skill of the employees, the character of the officers, and the honesty of the capitalization have alike been im- pugned. Back of all stands the sinister threat to seg- regate from all other forms of investment the in- vestment in railroad securities, to assert over such in- vestment a high-handed control, assuming no responsi- bilities for losses, but limiting any possible gains to a savings-bank rate of interest. Should this effort be successful, it is certain to degrade the employees, to drive out the capable officers, and to lead to the re- fusal of investors to make new contributions to capi- tal. If such an effect were brought about, the conse- quences to the community would be more far-reaching than one likes to contemplate. L. F. Loree: Address at annual dinner of the Alumni Association of Rutgers College, June, 1908. 92 The Legislative Handicaps No improvement work of moment is now under way. The roads cannot much more than merely "mark time." Neither the courage nor the money necessary for railroad construction is to be found under exist- ing conditions. What can be reasonably expected when we say to a body of men that we want them to go right ahead with their construction of new rail- roads and additional facilities, so as to be prepared for any increase of traffic which may be offered for movement, but, at the same time, we put them on no- tice that after their money has gone into property which they cannot remove and cannot cease to operate after its creation, some or all of the 40 State railroad commissions, more than 40 State legislatures, the Interstate Commerce Commission, and the National Congress will decide what rates shall prevail ; what practices shall obtain in more or less minute detail; how many men shall be employed on each train; how old or young these men shall be, and how many hours they shall work, if at all ; upon what plans new sta- tions shall be built, as well as when and where; how fast stock trains shall move over the rails ; what sort of headlights shall be bought; what sort of signals shall be installed, and when ; how many new securi- ties may be issued and sold, if purchasers can be found, and, failing to get authority for an issue of securities for the purchase, let us say, of equipment; or, failing to induce the owner of money to exchange his money for such securities, penalties will be en- forced for failure to furnish any shipper whatever cars he may want at any time. B. L. Winchell: Ad- dress before Commercial Club of Council Bluffs, Iowa, March 18, 1909. 93' Greater Movement of Cars The public assumes that if enough cars are pro- vided they can be moved on schedule time from point of origin to destination, wherever these may be. This is not the real trouble. What is really needed is the greater movement of cars. The average movement of a freight car is about 24 miles, or two hours, per day. Delays in loading and unloading by shippers are partly responsible, but much of the lost time is consumed in getting into, out of, or through terminal points where there is not room to handle the cars. More cars intensify instead of reducing the trouble. No other business could endure the loss of the use of its machine plant for twenty-two hours out of twenty- four. One thousand cars will cover nearly eight miles of track. Each car must be switched, loaded, or unloaded, or all three. This multiplies the track- age requirement. James J. Hill: Address, The Coun- try's Need of Greater Railway Facilities and Termi- nals. New Cars Cost More Steel cars are a good illustration of this kind of expense. They are coming into general use, and it has been proposed to make their purchase and employ- ment compulsory even before their benefits have been fully proved. To buy them is a big expense, but that is only the beginning. A train made up of them is sixty-five per cent heavier than one composed of old- style cars. More trains must be run to render the same service. Tracks and bridges must be strength- ened. James J. Hill: Address, The Country's Need of Greater Raihvay Facilities and Terminals. 94 Railway Management The public is interested not only in rates, but in service as well. It demands that service shall be ade- quate. * * * It requires that proper provision be made for the health, comfort, and convenience of pas- sengers, and for the humane care of live freight. * * * It is in response to these demands that steel coaches are being introduced, and all-steel passenger trains are becoming increasingly common upon our most progressive lines; that block-signal systems are gradually being extended; that rules governing the operation of trains are being more strictly enforced; that temperate habits are being required of employees ; that hours of labor for despatchers and trainmen are being reduced ; and that full crews are being required on all trains. Congress has required that all equip- ment used in connection with interstate commerce shall be equipped with power brakes, automatic coup- ling devices, and suitable grab-irons ; that proper care be observed in the handling of explosives; and that locomotive boilers shall be rigidly inspected. These legitimate demands of the public create a strong tendency toward increasing the expense of rail- road operation. We find, therefore, that the railroad manager of today is strictly limited in the exercise of discretion ; that there are limits beyond which he may not increase earnings through an increase in rates ; and that expenses are becoming constantly greater Fred. Wilbur Powell: Les Chemins de fer Amtiricains, Revue ticonomique Internationale, November, 1912. Immense Outlay of Money It is urgently necessary at the present time, in order to relieve the existing congestion of business and to 95 do away with the paralysis which threatens our ex- panding industries, because of limited and inefficient means of distribution, that our railway facilities should be so increased as to meet the imperative de- mands of our internal commerce. The want can be met only by private capital, and the vast expenditure necessary for such purpose will not be incurred unless private capital is afforded reasonable incentive and protection. It is therefore a prime necessity to allow investments in railway properties to earn a liberal return, a return sufficiently liberal to cover all risks. We cannot get an improved service unless the carriers of the country can sell their securities ; and therefore nothing should be done unwarrantedly to impair their credit nor to decrease the value of their outstanding obligations. I emphatically believe that positive restraint should be imposed upon railway corporations, and that they should be required to meet positive obligations in the interest of the general public. I no less emphatically believe that in thus regulating and controlling the affairs of the railways it is necessary to recognize the ' need of an immense outlay of money from private sources, and the certainty that this will not be met without the assurance of sufficient reward to induce the necessary investment. It is plainly inadvisable for the Government to undertake to direct the physical operation of the railways, save in wholly exceptional cases; and the supervision and control it exercises should be both entirely adequate to secure its ends and yet no more harassing than is necessary to secure these ends. Theodore Roosevelt: American Review of Reviews, June, 1907. Better Transportation The great need of the hour, from the standpoint of the general public of the producer, consumer, and shipper alike is the need for better transportation facilities, for additional tracks, additional terminals, and improvements in the actual handling of the rail- roads; and all this with the least possible delay. Ample, safe, and rapid transportation facilities are even more necessary than cheap transportation. The prime need is for the investment of money which will provide better terminal facilities, additional tracks, and a greater number of cars and locomotives, while at the same time securing, if possible, better wages and shorter hours for the employees. There must be just and reasonable regulation of rates, but any arbitrary and unthinking movement to cut them down may be equivalent to putting a complete stop to the effort to provide better transportation. Theodore Roosevelt: American Review of Reviews, June, 1907. A Reasonable Return Resolved, That the Chamber of Commerce of the State of New York, in the interest of shippers and of the well being of the country as a whole, urges upon the Interstate Commerce Commission and ajl State railway commissions the importance, for the future, of so carefully weighing and considering the effect to be produced upon the railways in the making of any necessary readjustments of freight rates that the same may be accomplished without further curtailing the total revenue of the railways, upon which their borrowing credit depends, bearing in mind, as stated by the Railroad Securities Commission, that "a reason- able return is one which under honest accounting and responsible management will attract the amount of 07 Investors' money needed for the development of our railroad facilities," and also bearing in mind that the development and prosperity of the railroads means de- velopment and prosperity of the country. Chamber of Commerce of the State of New Yor7c, Railroad Rate* and Railroad Credit. Report adopted April 4, 1912. Cannot Force Private Capital While we can provide by legislation the sort of cars which a railroad shall use and the rates which it shall impose, we cannot by legislation force one single dollar of private capital into railway investment against its will. Charles A. Pronty, CJiairman of the Interstate Commerce Commission, YaJe University, September 13, 1912. Loading and Unloading Facilities Up to the present time the terminal facilities of the principal carriers have kept pace approximately with the growth of traffic. The loading and unloading facili- ties of shippers and consignees have fallen far short of doing so. The explanation of shipper and consignee for this situation in all large business centers is the expense involved. The railways are today face to face with this same insurmountable obstacle. The prop- erty purchased with wise foresight years ago is being utilized to the maximum extent, and the value given to the adjacent property through the transportation thus afforded makes prohibitive any further purchases on an extended scale in the congested district, except for union passenger facilities or some similar special purpose, where the expense can be divided among a number of companies. Abstract from statement of E. D. Sewall before tlie Committee on Interstate and Foreign Commerce, United States House of Represen- tatives, February 6, 1913. "WHAT THE TRAFFIC WILL BEAR." An Unfortunate Expression It has always seemed to me that the expression, "What the traffic will bear," has been a most unfor- tunate one for all of us. If we would say, "What the traffic can afford," it would represent a great deal more than we get and would sound much pleasanter. The fact is, we are all trying to make rates on our respective lines that will "move the business," and I think I could not express it in a few words better than that. Probably hardly any general freight agent knows what the capital of his company is, but he is anxious to move business to, from, or over the line he serves, and to build up its industries. So long as the Sherman Anti-Trust Law is in effect he is anx- ious to move it, and the shippers are pressing him to move it, as against some competition somewhere ; so that, while we now have uniformity of rates, we still have competition in service and real competition in the matter of fostering business in competitivo Communities and districts. Frank Trumbull: State- ment 'before Federal Railroad Securities Commission, New York, December 22, 1910. Tendency of Rates Downward Our experience is that not only have expenses and taxes and other expense outlays been increased, but the tendency of the rates themselves has until recently been downward, so that the present rates do not pro- duce a fair return upon the capital employed. This return on the capital employed solely for railroad pur- poses has during the past ten years in the history of our company been continually reduced. On the total cash invested in railroad tracks, equip- ment, and facilities, the president of our company testified in the rate hearings in 1910 that 5.01 per cent was earned in the year 1909. In 1912 the return upon the amount similarly invested on our lines east of Pittsburgh and Erie was 4.83 per cent, while in 1900 the return was 9.39 per cent. Our problem is: Is this a fair return, and can the company continue to render an effective service and raise new capital for future growth on that basis? We are sure that unless this margin over a fair return to the stockholders is earned, everything above bare maintenance of the property must be provided out of capital account, and this in turn means that new capital for betterments and improvements of our facilities and service will be exceedingly difficult to raise, and it must be at measurably higher rates than have heretofore prevailed. We cannot raise that money except in competition with other forms of cor- porate and private enterprise, and without public ap- proval and co-operation in securing the payment of a fair transportation rate by the shippers. Samuel Rea: Address at a meeting of shippers, Boston, Mass., June 12, 1913. The Distribution of Rates There is evident need of clarifying the general con- ception of the meaning of the phrase "What the traf- fic will bear," especially in view of the insinuating use of the phrase "All the traffic will bear" on the part of demagogues and of some attorneys for the Interstate Commerce Commission. The best recog- 100 nized authorities on both the economics and the prac- tice of railroading are generally agreed that railway freight rates should be fixed according to what the traffic will bear. All this means, however, is that since freight charges are virtually a form of tax upon the general movement of merchandise, and therefore upon the commerce of the nation, this taxation, like any other, should be distributed according to ability to pay. It probably costs about as much to govern one man as another ; but a system of levying taxation according to the cost of government is manifestly ab- surd and unjust. Likewise a system of levying rail- road freight charges according to the cost of the serv- ice rendered would act as a restraint to trade. Approxi- rommnriitv Ton mileage, Rev. per mate Commodity. carload lots. ton-mile, value per ton. Grain 6,928,262,616 0.595 $30.00 Hay 827,579,088 0.957 22.00 Cotton 711,041,421 1.743 300.00 Live stock 2,220,764,548 1 . 182 145 . 00 Dressed meats..... 851,025,602 0.889 195.00 Anthracite coah . . . 4,772,992,507 0.611 5.00 Bituminous coal... 14,981,599,184 0.498 3.40 Lumber 7,937,958,258 0.727 37.00 Of these principal commodities, the one bearing the lowest freight rate is bituminous coal, which also has the lowest value per ton, while the one bearing the highest freight rate is cotton, which also has the high- est value per ton. In brief, the freight rates, or taxes on transportation, are distributed roughly according to ability to pay. It probably costs no more to move a ton of anthracite than a ton of bituminous coal, but the higher transportation tax on anthracite is Just, not only because the higher value of hard coal enables 101 it to pay the higher tax, but also because an even dis- tribution of this taxation upon all commodities would absolutely halt the movement of low-grade freight, such as coal and lumber ; overstiinulate the movement of high-grade freight, such as cotton and live stock, and at the same time reduce the traffic of our railroads to such an extent as to put many of them out or busi- ness. Wall Street Journal, editorial, September 7, 1910. The Underlying Principle "What the traffic will bear" that the foremost au- thorities on railway economics in the country unite in declaring the true measure of the value of the service rendered. A railroad, for instance, which hauls a ton of cotton, worth $300, a mile, renders a service of greater value to the cotton shipper than it renders to the owner of a coal mine when it hauls a ton of coal, worth perhaps $3, a corresponding dis- tance. That principle is well recognized. Last year the average revenue per ton-mile derived by the rail- roads from hauling soft coal was only 0.498 cents. For hauling a ton of cotton a mile it was 1.743 cents. To haul the cotton probably cost the railroad very little more than to haul the coal, but the greater serv- ice rendered the cotton dealer made it right and just that the railroad should charge him more. That is the underlying principle on which the trans- portation men claim that freight rates should be based. The value of the service rendered, they say, is accu- rately measured in what the traffic will bear. A coal mine, for example, would be put out of business in a day were the rates applying to the transportation of cotton or of meat to be applied to coal. Business simply could not be done under those conditions. 102 To charge more than the traffic would bear would consequently only react upon the railroads themselves. Just as manufacturing or other industrial plants are dependent upon the railroads along the lines of which they are located, so it is upon these very industrial plants that the railroads themselves are dependent for the traffic without which they cannot live. To charge rates too high or to do anything else which will lessen the volume of traffic is exactly in opposition to the railroads' own best interests. What they want to see is traffic stimulated to the highest possible point. Franklin Escher: The Reasonable Basis of Railway Freight Rates. Harper's Weekly, September 24, 1910. A System in the Public Interest The phrase "charging what the traffic will bear" has, for some not very obvious reason, undoubtedly acquired an ill repute. On the face of it, it surely seems to represent a principle, not of extortion, but of moderation. To charge what the traffic can bear is, in other words, not to charge what the traffic can- not bear. * * * The real meaning of the phrase is that, within the limits already described the supe- rior limit of what any particular traffic can afford to pay and the inferior limit of what the railway can afford to carry it for railway charges for different categories of traffic are fixed, not according to an esti- mated cost of service, but roughly on the principle of equality of sacrifice by the payer. So regarded, "what the traffic will bear" is a principle, not of extortion, but of equitable concession to the weaker members of the community. Had railway managers in the past declared that their principle was "tempering the wind to the shorn lamb," their descriptive accuracy would have been equally great, while their popularity might 103 have been even greater. * * * Translated into railway language, the principle means this: the total railway revenue is made up of rates which, in the case of traffic unable to bear a high rate, are so low as to cover hardly more than actual out-of-pocket ex- penses; which, in the case of medium class traffic, cover both out-of-pocket expenses and a proportionate part of the unapportioned cost; and which, finally, in the case of high-class traffic, after covering that traf- fic's own out-of-pocket expenses, leaves a large and disproportionate surplus available as a contribution towards the unapportioned expenses of the low-class traffic, which such traffic itself could not afford to bear. This, in principle and in outline, is the system of charging what the traffic can bear. It is the system which the point must be reiterated is, always has been, and, as far as we can see, always must be adopted on all railways, whether they be State enter- prises or private undertakings. It is a system * * * in the interest of the public, because traffic is thereby made possible which could not come into existence at all if each item of traffic was required to bear not only its own direct expenses, but its full share of all the standing charges. W. M. Acworth: The Elements of Railway Economics. The Evolution of Rates To decide between all these varied interests, the railroads of the nation have employed, on a conserva- tive estimate, over 5,000 experts dealing with traffic and rate adjustments. Each railroad usually has one vice-president in charge of rate affairs, a traffic man- ager, several general freight agents and assistants, and all the way from ten to one hundred highly expert jrate-clerks whose brains, through years of training, 104 have become perfect compendiums of rate and traffic statistics. Upon this body of men rests the highly difficult task of building the rate structure of the country. In the early days of the railroad the rate was fixed exactly as it was on a turnpike a regular toll : for so many miles, so much of a charge. If five miles cost ten cents, then ten miles cost twenty cents, twenty miles forty cents, and so on a simple method of dis- tance tariffs. But the growth of competing railroads and the desire to build up distant business led to the adoption of a wholly new principle, that of "charging what the traffic will bear" in other words, getting all the money possible out of every kind of goods trans- ported. Supposing under the old system the rate was five cents for carrying a ton one mile. A man who was shipping silk, or shoes, or hats, or other high- priced goods could afford to send them a long distance, because a ton of hats would be so valuable that the freight rate would count for next to nothing in the selling price. On the other hand, the man who was making brick, which are both heavy and cheap, could not afford to ship his product at all, because five cents a ton a mile would soon eat up the entire profit. Con- sequently the brick man went to the railroad owner and said: "See here, you give me one cent a ton a mile and I can give you a great deal of business. You have got your roadbed and your investment; you have got to run your trains anyway, and one cent a ton a mile will pay you a profit on your actual running expenses." The railroad man saw that while hats would bear a charge of five cents a ton, brick would bear only one cent. And the fundamental principle of all railroad- ing is that "whatever happens, traffic must move." Well, the railroad soon found that coal, wheat, build- 100 ing stone, and other heavy, cheap commodities, would move, and move long distances, if the rate was low enough. More and more changes were therefore made in the direction of "charging what the traffic will bear." Ray Stannard Baker: The Railroad Rate. McClure's Magazine, November, 1905. What the Service is Worth What the service is worth there we have the basis on which freight rates are really fixed. Not what the railroad would like to get or what the capitalization makes it necessary to get in order to pay dividends, but simply what is the money equivalent of the service rendered. Selling railroad transportation is really no different from selling anything else. Imagine a mer- chant, about to fix a price on a lot of goods, saying to himself: "Here, I and my associates have capitalized this business at more than it is worth, and now we 4 have got to make enough money to keep up our divi- dend. I'll just put such a price on these goods as will allow us to make the amount of money we need." Would that be likely to accomplish the desired result? Hardly. What does the consumer care about the amount of money the merchant considers it necessary to make? The goods, presumably, have a certain value, and that value, or something approximating it, is all the purchaser is willing to pay. Let the mer- chant arbitrarily mark up the price, and one of two things will surely happen the purchaser will either go somewhere else or will refuse to buy entirely. Frank- lin Escher: The Delicate Question of Railway Credit. North American Review, February, 1913. RATES AND RATE MAKING. Present Rate Very Small The present freight rate is very small. How small it is can be better understood when one realizes that for 25 cents, what it costs according to the United States Department of Agriculture for the farmer to move a one-ton load by wagon one mile, the Northern Pacific Railway, at its average rate last year, will move the one-ton load 27.2 miles. For the cost of a two-cent postage stamp it will move a ton about two and a quarter miles. For the cost of ten pounds of ten-penny nails it will move a ton 44 miles; for the price of a No. 2 Ames shovel, 166 miles ; for the money it takes to buy a good milk pail, 138 miles ; and for the price of an ordinary lantern globe, 16 miles Howard Elliott: How the Railroads Help the Farmer. Leslie's Weekly, April 3, 1913. Rates for Grain and Other Produce There has been a cry against the railroads for their high freight rates. But close examination reveals the fact that the great economies of modern transportation have made possible the carrying of grain and other produce at ridiculously low cost. For instance, it costs the farmer on an average forty cents per ton mile to haul his corn to the railroad. The railroad, on the other hand, carries it at an average rate of approximately three-quarters of a cent per mile. More efficient means of getting the grain from farm to railroad should be devised. The auto-truck should find 106 107 its way to the farmer. D. Miller: America's Greatest Crop. Harper's Weekly, December 28, 1912. What a Slight Increase Would Do Can the railroads meet this serious situation with which they are confronted? Yes, if allowed to charge a fair compensation for their services. The railroads now receive on an average per mile 7% mills for hauling a ton of freight and less than 2 cents for carrying a passenger. If this average compensation could be increased even one mill, or the equivalent of the price of a postage stamp for twenty miles* service, it would extricate them from all further trouble and anxiety. It is scarcely conceivable that such a 'slight advance would injuriously affect any trade, industry, or person, yet it would be the means of conferring untold benefits upon the entire business of the country. Benjamin F. Busli, before the Economic Club, New York, April 29, 1913. American Rates the Lowest ^ The freight rates in the United States are, in gen- eral terms, only five-eighths of those charged on the continent of Europe and a little less than one-half of those which prevail in Great Britain. But it will be seen that in reality our charges are relatively even lower than stated by the above figures, when we con- sider that in the passenger service vastly superior accommodations are furnished in the way of heating, lighting, ventilation, ice-water, lavatories, and free carriage of baggage ; and that in the transportation of merchandise greater advantages are afforded by run- ning freight trains at higher speed, making longer hauls without breaking bulk, and allowing cars to remain a greater length of time in the hands of ship- 108 pers for loading and unloading, there being usually employed from the latter cause from 20 to 25 per cent more cars than would be necessary for the strict haul- ing of the traffic. In this connection we must also recollect that the cost of fuel, wages, and all construction material is considerably higher here than in Europe, while the population from which the railways derive their sup- port is much more sparse, the United States having 166,000 miles of railway with a population of 63,- 000,000* while Europe has only 135,000 miles with a population of 335,000,000. Horace Porter: Railway Rates. North American Review, December, 1891. The Economic Principles The economic principles involved in fixing railroad charges are not radically different from those involved in fixing the price of bread ; it is only that their opera- tion is slower and more obscure, and that the public has learned the lesson less completely. There was a time when it was thought necessary to have the public authorities fix the price of bread. People feared that, if matters were left to themselves, the sellers would have a monopoly, and take every advantage of the needy buyers. But, as time went on, it was found that such laws did more harm than good. If the price was fixed too high, it was useless ; if it was fixed too low, the supply of bread fell short of the demand, and while some people got their bread cheap, others got none at all. The suffering of the latter class was greater than the advantage to the former. A new system gradually superseded the old. Sellers were allowed to get what price they could, buyers to pay what price they would. In that way, and in that way only, was there an adjustment of quantity of service 109 to public demand. Arthur T. Hadley: Railroad Prob- lems of the Immediate Future. Atlantic Monthly, March, 1891. Rates Not Based on Value of Railroad It is perfectly obvious that the railroad rates of this country are not based on the value of railroad prop- erty. No railroad company has ever undertaken to base rates on the value of its property, and no rail- road man has ever attempted to make rates according to the value of the railroad. * * * Rates must of necessity be the same on all competing railroads ; and yet we know that the value of such railroads varies greatly. If the more valuable should raise its rates because of its investment or value, it would simply drive the competitive business to the cheaper line. * * * In short, it is just as plain that railroad rates are not and never have been based upon the value of railroad property as that they are not and never have been based upon the stock and bonds outstanding. Nor do I un- derstand that Congress has ever authorized or re- quired the Interstate Commerce Commission to base rates on the value of railroad property. R. S. Lovett, Statement before Railroad Securities Commission, De- cember 21, 1910. Variations in Rates While the Supreme Court has undertaken to point out "certain elements" to be considered in determining the reasonableness of an entire system of rates, it has not named any as shedding light upon the reasonable- ness of a rate on a single commodity, like lumber. It is evident that such elements are widely variant in the 110 two cases. Where an entire system of rates is in- volved, the principal, if not the only, question is, whether the revenue yield by the rates on all traffic is a fair return on the value of that which is "employed for the public convenience" a question, the determina- tion of which, as we have shown, can have only a very remote, if any, practical bearing on the reasonableness of a rate on a single article of traffic. On the other hand, where the rate on a single article is in issue, the question (which could not arise in the former case), whether the rate is unjustly discriminatory or unduly preferential, may be presented, and the reason- ableness of the rate depends upon the value, volume, and other characteristics affecting the transportation of the particular commodity to which it is applied. * * * The rate on one article of traffic may be reasonably high and the carrier fail to earn a fair return on the value of the entire property employed for the public convenience because of unreasonably low rates on other traffic; and, vice versa, the rate on one article of traffic may be unremunerative or unreasonably low and the return to the carrier from its entire business may be fair or reasonably high, the deficiency under the rate on the one article of traffic being made up by the rates on the balance of the traffic. Interstate Com- merce Commission, 539, Central Yellow Pine Associa- tion vs. Illinois Central Railroad Company et al. Other Prices that Enter into Cost A railroad rate is a fluctuating thing in the cost of its production, and from an economic standpoint no law can fairly fix a future rate which does not fix those material elements upon which the rate depends. As was pertinently asked by Mr. Ben ton, an able law- Ill yer of my own State, If the State fixes the price that railroads are to receive for transportation, would it fix also the prices that go into the making of the cost of that transportation? Hon. Samuel W. McCall, speech in House of Representatives, February 2, 1906. On the Lines of the Common Law The policy of governmental control and limitation of profits through regulation of rates does not seem well adapted to secure any of the main objects of regula- tion of railways. It appears to be more apt to injure than to benefit the public. The most equitable, effec- tive, and beneficial way to determine and fix reason- able rates is to proceed in much the same way that the courts determined what was a reasonable rate under the common law. When an individual rate or a schedule of rates is in question, whether that rate or schedule is fair and reasonable cannot be determined merely by reference to how much profit the railway is making in the aggregate; for if the road's profits were small, it might be held that the rate or schedule was reasonable; whereas the fact might be that the particular rate or schedule in question was excessive, and that the smallness of the road's profits was due to the excessiveness of this rate or schedule, or to the lowness of its other rates, or to bad management. And if its profits were large it might be held that the par- ticular rate or schedule in question was excessive; whereas the fact might be that that rate or schedule actually was unfairly low, and that the road's profits were all derived from other and higher rates. Simi- larly, if the large profits of a single road were con- sidered, it might be held that its rates were excessive ; whereas investigation might disclose that other roads hauling the same kinds and amounts of traffic, under 112 substantially similar conditions, for the same rates, were making small or no profits; which would show that the differences in profits were mainly or entirely due to differences in the skill of the managements. S. O. Dunn: Shall Railway Profits l Limited? Journal of Political Economy, October, 1910. Freight Rates on Food Products Secretary Wilson shows that the proportion of the consumer's price that goes to the retailer as his com- pensation for delivering milk from the railway station to the residence of the consumer is more than six times as great as that received by the railway for carrying it from the dairy station to the city. When the farmer receives 50 per cent of the consumer's price, the freight charge on butter is about five-tenths of one per cent of the consumer's price; on eggs, six- tenths of 1 per cent; apples, 6.8 per cent; beans, 2.4 per cent ; potatoes, 7.4 per cent ; grain of all sorts, 3.8 per cent; hay, 7.9 per cent; cattle and hogs, 1.2 per cent; live poultry, 2.2 per cent; wool, three-tenths of one per cent. These percentages given by the Secretary are averages for the United States, and, of course, do not hold good as to all shipments of the commodities mentioned, as there would necessarily be wide differ- ences due to variations in the distances shipped and to other circumstances. They demonstrate, however, that, generally speaking, railway freight charges are relatively a small factor in the margin between the price received by the farmer and that paid by the consumer, and that the greater proportion of this margin goes to those who handle the products after they leave the hands of the carrier. W. W. Finley: Address at a Meeting of the Agricultural Societies, Baltimore, Md., November 22, 1912. 113 Excessive Rates Injurious to Railroads It is the duty of the railway not only to make its rates fair as between different commodities, shippers, and communities, but also to make them .reasonable that is, not excessive. I believe the railways of the United States have fully discharged that duty. Traffic cannot grow rapidly on excessive rates, and industry and commerce cannot thrive on them. But traffic and industry and commerce have increased in an unpre- cedented and unparalleled degree on the rates made by American railways. E. P. Ripley, Atlantic Monthly, January, 1911. General Principle of Rate-making. You gentlemen are entirely familiar with the general principle of how rates are made, I think it can be illus- trated, very briefly, by a situation which arose in western Kentucky a great many years ago, when coal mines were first opened on the Henderson Division of the Louisville and Nashville Railroad. At that time the only fuel in that country was wood. These coal mines were opened. The railroad company wanted to make rates to haul this coal, which was a new traffic. Strange to say, the railroad company did not select anybody who knew anything about its capitalization to do that. It selected a very wise man who was operat- ing coal mines down in that country, and said: "You find out what rates will move this traffic." And this gentleman went to work to find out what wood cost in the various towns on the road, and what was the equivalent in coal of a given amount of wood. He figured out, from that, what consumers of fuel in those towns would be willing to pay in order to get coal instead of wood to burn. He figured out what the coal 114 could be put on the cars for at the mines, and he figured out that the difference was the rate that the railroad company would have to charge to move the traffic. That is typical of the way in which rates are made. The rates are made to move the traffic. They are made with no reference to dividends on stock. Walker D. Bines: Statement before Railroad Securities Com- mission, December 22, 1910. Passenger Rates The passenger trains of the United States earned on the average for the year ending June 30, 1908, $1.27 per train mile, and the average cost per train mile for expenses, not allowing anything for taxes, using the total freight and passenger train miles, was $1.47. From this it is plain that there is no margin in the passenger business for taxes, interest, and dividends, and that passenger train service, as a whole, is fur- nished without profit, and often to the detriment of the freight business, which must be moved promptly for the development of the country. Howard Elliott, ad- dress at the Montana State Fair, Helena, Mont., Sep- tember 26, 1910. The 2-Cent Maximum Fare This country, as it grows in population and wealth, wants more and , better passenger train service and better stations, just as it wants more and better hotels and more and better street paving and lighting, more and better restaurants; but in the case of the hotels, paving, lighting, restaurants, and many other things, the public are willing to pay more and do pay more for the better facilities. Not so with the railways. 115 With more trains, heavier trains, faster trains, more luxurious trains, and better track, there has swept over the country a wave of legislation for a 2-cent fare. The 2-cent maximum fare is unjust, and retards the development of the very things the railway user wants, because it is obvious the railway owner must sooner or later stop doing so much work without any margin of profit at all. In England the first-class passenger rate is 4 cents ; second-class, 2% cents, and the third-class, 2 cents. In Germany, the first-class is 3 cents; second-class, 2.55 cents ; third-class, 1.79 cents ; but the second and third-class accommodations in England and Germany are nowhere near as good as those furnished the traveler in the United States. Howard Elliott, ad- dress at the Montana State Fair, Helena, Mont., Sep- tember 26, 1910. Importance of Fair Rates The capital required for this progressive develop- ment must come as the result of the sale of securities whose attractiveness and safety will depend upon the earning capacity of the railroad rather than upon the value of the property as a salable asset. This earning capacity must be shown to be uniform and progressive, year in and year out. Its sole foundation rests upon fair, reasonable, and suitable rates. When the in- vesting public is satisfied that a policy which will per- mit such stability has been adopted as the result of deliberate judgment of the people of this country, I feel safe in predicting that the necessary capital will be available to the railroads on silch terms as will enable them to perform a far greater service to the people than they have been able heretofore to render. 116 In the creation of this public sentiment, the shippers must take the leading part, and I appeal to thoughtful men that it is absolutely to the interest of the shippers that this condition may be brought about. These facts are the basis of a legitimate appeal for the con- sideration and co-operation of all shippers, both large and small. The American House of Industry is of imposing strength, but even with harmony and co- operation its strength is not greater than is needed in the contest that is in progress. Divided it cannot stand, much less could it continue in prosperous de- velopment. L. E. Johnson, President NorfolJc <6 West- ern Railway Co., "before the Traffic Club of Pittsburgh, November 9, 1911. How the Present System of Rates Grew I have been rather intimately connected with the management of railroads for over twenty-five years, and during that period have had occasion to specially study rate-making problems. During all that period I have not known a single rate to be increased or in any- wise changed on account of, or with a view to, the bond interest or stock-dividend needs or requirements of the company, or indeed with any regard to the financial necessities of the company. Traffic men as such have nothing to do with the financial management of railroads. Their thought is not in that direction, but is toward the traffic and the commercial condi- tions affecting the railroads. I doubt if there are a dozen traffic managers or general freight agents in the whole country who know the amount of stock or bonds or the fixed charges or annual dividend pay- ments of their companies. If they have such knowledge it is acquired, not by reason of any official use they have to make of it, but merely as a matter of general 117 information. Not only from my own experience, but from observation, I feel entirely warranted in stating that the railroad rates, both passenger and freight, prevailing throughout the United States today were not made, and were not in anywise influenced, by the bonds and stocks outstanding; and that the needs of the companies for interest on bonds and dividends on stocks had nothing whatever to do with the fixing of such rates. If you ask me to state all the factors that entered into, and that still enter into, the making of rates, it is impossible for me to do so. They are as innumerable as the transactions in the commercial and business life of the nation. They grew out of the needs of each community, each station, each industry, each commodity, and each individulal ; and as the needs of one of these were met the rate resulting would often, and I may say generally, affect a different com- munity and different individuals in such other com- munity, and require the readjustment of the rate there ; and so on almost without limit. Out of such considerations as these the present system of rates grew. I know of no better way to illustrate or define their character than to say that they developed much like the common law of England. They grew up with conditions, just as the common law of England did; and they will go on growing and requiring change from time to time just as the common law of England has required change by statutory enactments in order to adapt the system to modern needs and progress. Such changes in rate schedules must be made from time to time; and the method of making them must be very flexible, so as to respond to the needs and requirements of business in each community and in each industry, if our commercial, industrial, and agricultural develop- ment is to continue naturally. The one fact, however, that I wish to anirm with entire assurance is that the 118 rates we have, and under which the business of the country has hitherto been done, were not dictated or influenced to any extent or in any degree by the amount of stocks or bonds outstanding or the rates of interest or dividends paid thereon. Perhaps the best evidence of the truth of this is that all competing railroads maintain, and must of necessity maintain, the same rates, whilst the amount of their stock and bonds and their annual interest and dividend requirements vary to the greatest imaginable extent some paying large dividends, some small dividends, and others no divi- dends at all, although serving the same territory, seek- ing the same traffic, and necessarily charging the same rates. R. 8. Lovett, Statement before Railroad Se- curities Commission, December 21, 1910. Development of Railway Tariffs I am the manager of a railroad extending 250 miles from A to B. At C, a distance of 50 miles from A, is located a coal mine, at which the cost of placing the coal upon the cars is one dollar per ton. Coal of that ling of that coal for a distance of 50 miles, grade sells in the open market at A for $2.25 per ton. I establish a rate of one dollar per ton for the hand- This is certainly a liberal rate; but the earnings of my road as a whole are not excessive; nor can the rate itself, five cents per 100 pounds, be regarded as extortionate. The owner of the mine is perfectly satis- fied, for he is making a magnificent profit upon the operation of his property. A is a prosperous com- munity, buying its coal cheaper than most communi- ties. I resign as manager of this road and become the manager of another road extending in the opposite di- rection from A, 250 miles to X. The two roads are in 119 all respects identical, the cost of construction, capitali- zation, business everything is substantially the same. At X is located a coal mine precisely similar to that at C. The cost of producing coal upon the cars is one dollar per ton, and the coal will sell in the market at A for $2.25 per ton. I establish a rate for the haul of 250 miles of $1.15 per ton. Now, have I in these two cases been guilty of any wrong? In the first instance everybody is satisfied ; everybody is prosperous. In the second case, the mine at X is not as prosperous as the one at C, for the profit of the miner at C is two and one-half times as great; but still the miner at X operates to advantage upon a profit of ten cents per ton. The return to my railroad is not satisfactory under the rate of $1.15 ; but that figure is better than nothing at all. In other words, the traffic will bear one dollar in one case and $1.15 in the other ; therefore, I impose one dollar in the first case and $1.15 in the second case. Nor does it seem to me that the traffic manager can be accused either of inconsistency or of moral dereliction who establishes rates as suggested in this illustration. The case which I have put is an extreme one ; but it illustrates the principles under which the railroad tariffs of this country have been developed. The study of the traffic manager has been to get business, and he has made such rate's as were necessary to secure that business. The rates actually made in pursuance of this idea have been often inconsistent and have pro- voked severe criticism. It does not seem to me that the application of the principle is of necessity wrong. Upon the contrary, its application, within reasonable bounds, is healthy both for the railway and for the community. Hon. Charles A. Prouty: Transportation. Address before Senior Class, Sheffield Scientific School, Yale University, 1910. 120 What is a Reasonable Rate? It is even difficult to say what constitutes a reason- able rate, and more difficult to give in detail the reasons that lead to that conclusion. Although the Supreme Court of the United States has furnished certain rules by which to test the reasonableness of transportation charges, and although this Commission has 'endeavored to apply these rules, yet, whenever it has interrogated railway officials as to whether or not they are governed by them in making rate schedules they have invariably answered in the negative and said that to do so would be impracticable. The Interstate Commerce Commission. All railways alike, whether they be in State or in private hands, must base their rates on what the traffic will bear. * * * Further, the great bulk of the cases which make up the practical work of a railroad: "What is a reason- able rate, having regard to all the circumstances, pres- ent and prospective, of the case? Would it be reason- able to run a new train or to take off an old one? Would it be reasonable to open a new station, to ex- tend the area of free cartage, and the like?" all these are questions of discretion, of commercial instinct. They can only be answered with a "Probably on the whole," not with a categorical "Yes" or "No," and they are absolutely unsuitable for determination by the positive methods of the law court, with its precisely defined issues, its sworn evidence, and its rigorous exclusion of what, while the lawyer describes it as irrelevant, is often precisely the class of consideration which would determine one way or other the decision of the practical man of business. 121 What we need is a system under which the respon- sibility rests, as at present, with a single man (let us call him the general manager), and he does what he on the whole decides to be best, subject, however, to this : that if hp does what no reasonable man could do, or refuses to do what any reasonable man would do, there shall be a power behind to restrain, or, as the case may be, to compel him. And the power may, I think, safely be simply the minister let us call him the President of the Board of Trade. For, be it ob- served, the question for him is not the exceedingly difficult and complicated question, "What is best to be done?'* but the quite simple question, "Is the decision come to which I am asked to reverse so obviously wrong that no reasonable man could honestly make it? * * * A reasonable rate is a rate which an expert manager would fix, or, as the case may be, would maintain, having carefully considered all the relevant circum- stances and being actuated solely by judicial and avow- able motives. W. M. Acworth. A just rate does not mean a rate which a particular shipper can pay for particular goods, but rather a rate which, when enforced and maintained, entails in a community just and commendable results* Prof. H. C. Adams. Whether any specific rate is too low can only be judged by knowing the cost of transportation, a diffi- cult fact to determine. Whether any specific rate is too high can only be judged by whether it interferes with the movement of the traffic. Frederick A. Delano. Railroad companies are not entitled to a reasonable return on the value of the property used. They are 122 entitled only to what they can earn, be it much or little, by charging rates that are just, reasonable and undiscriminatory, the reasonableness of such rates being determined by commercial and competitive con- ditions and the value of the service to the shipper and to the railroad. Rates adjusted on the value of the service principle, intelligently and fairly applied, are just alike tor the railroad and to the shipper. The reasonableness of rates can only be determined by the facts bearing upon each particular case. Reasonableness of revenue is a legal fiction. Henry Fink. The only just method of determining the reasonable- ness of transportation charges is to measure them by the services performed, and neither capitalization nor cost of railway construction, either as a matter of economics or practice, can have any controlling bearing on the fixing of any specific rate. W. W. Finley. A reasonable rate is a point the lower line of which is the constitutional minimum. "The upper boundary , line is the rate which is just and reasonable under all the circumstances which honest business men would have the right fairly to consider." Walker D. Bines. This requires a great number of factors to be taken into account, just as they have always entered into the making of railroad rates, such as the cost of the service to the carrier ; the value of the service to the shipper ; the previous rate on the same article; the rate else- where on the same article ; rates on similar articles in the same or other localities ; the competition of mar- kets ; the intrinsic value of the commodity ; the risk of breakage or other injury in transit; the insurance 123 risk; "what the traffic will bear" (a much-abused phrase) ; or, in somewhat less offensive form, "what the traffic can afford" ; and a great variety of other circumstances and conditions which cannot be enumer- ated abstractly. R. S. Lovett. First and foremost, there never was any better defi- nition of a reasonable rate than that which was given many years ago by somebody and which has been used as a byword and a reproach ever since, namely, "what the traffic will bear." That is the best definition that ever was given of it. That does not mean all the traffic will bear ; it does not mean all that can be extorted or squeezed out of it, but what the traffic will bear having regard to the freest possible movement of commodities, the least possible burden on the producer and on the consumer. E. P. Ripley. While it is possible some rates are too high, there is no question but what it can be proven, with reason- able diligent effort before a competent and impartial tribunal, that most of the rates are low in and of themselves and not commensurable to service per- formed, and on the merits should be advanced. Y. Van den Berg. It is the demand for a commodity and the price of it which mainly determine the freight rate for it. F. W. Whitridge. The question of what is a fair and reasonable freight rate is also a difficult one to determine. Certain it is, as I view it, that the sum of all such rates must at least be sufficient, when combined with efficient man- agement, to furnish such net earnings as .will enable the individual road to obtain the necessary new capital when needed on a favorable basis. Daniel Willard. 124 Rates for railway service must be fixed at such a level that the service obtained by the shipper is worth to him something more than he is asked to pay for it. W. H. Williams. Railroad Rate Not a Tax One ground upon which specific governmental con- trol of the prices charged for transportation is urged is that a railroad rate is a tax. A tax primarily is a levy for the support of a government, laid sometimes upon people and sometimes upon commodities. A price is a measure of the services embodied in a com- modity. The disposition of the revenue derived from taxation is mainly for the preservation of peace and order and the public health, the maintenance of the conditions under which the people may carry on their vocations. The aggregate of price measures that aggregate of service which constitutes the carrying on of the vocations of the people. A railroad rate represents payment for service rendered, a service that enters into the cost of production of commodities and, with other factors, constitutes that cost of production. It, therefore, in no sense is a tax ; a railroad rate is not a levy, but a measure of service. That is, how can the transportation charge be designated a tax any more than any other charge entering into the cost of pro- ducing a commodity? If it were true that the freight charge is a tax, a large portion of the value of every article of food, of clothing, of every structure, is a tax ; and inasmuch as certain States tax the earnings of the railroads, they would be imposing a tax upon a tax. L. G. McPherson: The Working of the Railroads, 1907. 125 Good Credit and a Fair Return All questions of valuation and rate making cannot evade the main problem of credit and a fair return on capital. If this cannot be had, public ownership is the only alternative, but we believe public opinion will continue to endorse and support private owner- ship and operation under governmental regulation. Confronted by this situation, the railroads have made a public appeal not for the maximum rate which under their charters they are entitled to charge, but for a moderate increase over the minimum rates now in existence. On such a basis as that they confi- dently rely upon public support, preferring to make this appeal so that railroad enterprise may not be halted, but that, on the contrary, railroad manage- ments will continue to assume their full responsibility, and provide the facilities and service to make the country progress. Samuel Rea: Address at a meet- ing of shippers at Boston, June 12, 1913. Purchasing Power of Railway Receipts He who would know why railroad development is lagging behind in the United States must look not only below gross receipts, operating expenses, and net revenue to the income account of the railways, but he must take cognizance of the essential changes during recent years in values in general, and even in the value of money itself. * * * * While railway rates as indicated by the average receipts a ton a mile have changed but little since 1900, as expressed in money, they have when expressed in the purchasing power of money declined on the average at least 23 per cent. New York Sun, October 14, 1912. 126 Seven Cents for All a Man Wears To assemble, for example, here in New Brunswick, or in any other city between the Atlantic and the Mississippi, the articles of apparel in which a man goes about the public street, a charge is made by the steam railroads of less than 7 cents. Similar exam- ples might be given in sufficient number to demon- strate that the transportation charge under what are known as the "classified" rates is so small that it does not affect the retail price of the staple articles of general use. On the traffic moving under "com- modity" rates, such as coal and iron ore, the rates are small in proportion to those charged by European roads if compared on the basis of the money unit of value. They are vastly smaller if compared on the basis of the average daily pay of common labor, which I think is a much more equitable basis. L. F. Loree: Address at annual dinner of Alumni Association of Rutgers College, New Brunswick, N. J., June 17, 1908. The Laws of Trade It is clear that even with the whole power of the European governments, the laws of trade have proved too strong for any arbitrary attempt at railroad regu- lation to succeed. The effort to base rates upon cost of service has only resulted in a compromise. Arthur T. Hadley: Railroad Transportation. Rates and Prices Compared with the average of the decade from 1890 to 1899, the average wages for 1905 were 14 per cent higher and the average hours of labor per week 127 4.1 per cent lower. Food advanced an average of 12.4 per cent and all commodities an average of 15.9 per cent. The average rate per ton-mile of the railroads decreased 8.8 per cent. The men who ship the larger portion of the freight say, almost without exception, that railroad rates are low. L. G. McPherson: The Needs of the Railroads. Political Science Quarterly, September, 1908. Conditions that Control Charges The persistence of the delusion that rates are con- trolled by the par value of securities is curious and unaccountable. Throughout the whole history of American railway development parallel routes have been represented by widely different amounts of secur- ities and have carried at identical rates or, in many instances, the route having the highest par of securi- ties has carried at a differential lower than its com- petitors; rates have gone down as the par value of securities has been augmented by new issues and the issues of securities have repeatedly been revised be- cause the commercial conditions that control rates made such revision necessary.. * ,* * The condi- tions that control railway charges do not seem to me to be hard to discover. At each end of the railway service there is a market; at the market of origin there is a marginal producer whose product is re- quired in the other market and whose traffic is wanted by the railway, at the market of destination there is a marginal consumer who fixes the price there. The difference between these prices must satisfy the rail- way and all the other agencies employed in getting the product from the producer to the consumer; how they divide this amount is a matter dependent upon skillful and fair trading, subject to such regulation 128 as public authority has imposed. H. T. Newcomb: Government Regulation of Railway Capitalisation. Part I. Railway World, March 10, 1911. Value of th Article At first thought it would appear that the value of the article ought not to be taken into account in de- termining the transportation charge. A ton of cotton, it would appear, ought to be carried as cheaply as a ton of silks. It would also appear to one who has not studied the question that a charge of a certain amount per mile, taking into account weight, bulk, perishabil- ity, and the expense of loading and unloading, would be just. Such a method of fixing rates, however, would stagnate the whole movement of commodities at once. These theories were discarded long before railways came into existence. If the bulk and weight of articles were made the basis of charging, a prohibitive tariff would at once be laid on the move- ment of many important commodities. If a purely distance tariff were established, it would bankrupt the Western agricultural States and stagnate exportation of the chief commodities of foreign commerce. Therefore, the value of the article must be taken into account when fixing its carriage charge. Prop- erly speaking, the ability of the article to pay must.be reckoned with. That is generally determined by its value. In other words, a rate has to be fixed for each commodity at which it will move. If the rate on agri- cultural products was the same per ton as the rate on cutlery, not a bushel of wheat would move any great distance by rail for export. This fact was recognized in the shipping industry long before railroads were thought of. Anthony Van Wagenen: Government Ownership of Railways. 129 Why Rates Can Be Advanced The whole history of American railroading, indeed, is filled with instances of railroads built through terri- tory in the development stage keeping their freight rates below the value of the service rendered in order to give new industries located along the line a chance to get a foothold and grow strong. There is nothing altruistic about it. It is a matter of business, pure and simple. The prosperity of the railroad depends upon the prosperity of the territory it serves, and for the railway to forego immediate returns in order to build up future business is a most reasonable sort of policy. The industries located along its lines having developed and become firmly established as a result of low freight rates, the traffic can bear more and rates can be advanced to a point where the railway can make a reasonable profit out of handling the busi- ness. FranJdinEscher: The Delicate Question of Rail- way Credit. North American Revieic, February ', 1913. What the Railroads Get The price paid by the housekeeper per dozen for eggs during the season of shipment seldom exceeds by more than five cents the price received by the Western farmer who takes them to the country store. That is, the railroads bring eggs a thousand miles to New York for a cent or a cent and a half a dozen, and two thousand miles or so for about two cents and a half a dozen, the dealers taking the remainder of the five cents as payment for handling. The net difference between the price paid per pound for butter at the creamery, whether in New York City or in the Missis- sippi Valley, and that paid by the New York retail 130 dealer averages about one and one-half cents for com- mission and one cent for freight. In December, January, and February turkeys are taken from the Texas ranches to marketing centers, the transportation, charge on ten birds, weight one hundred and twenty pounds, .being about 25 cents. After these ten birds have been dressed and packed they weigh about one hundred and two pounds, and the freight rate from Texas to New York is $1.50 per 100 pounds that is, a Texas turkey that retails in the New York market for 20 cents a pound will have paid one and three-fourths cents per pound to the rail- roads that took it from the ranch to the concentration point, and thence to the market. The farmer in Texas received about nine cents per pound, leaving a trifle over nine cents to be divided between the packing- house, the produce merchant, and the retail dealer. Chickens and other dressed poultry that come from Chicago pay a freight rate of about three-fourths of a cent a pound, the railroad company supplying a re- frigerator car, and keeping them iced while in transit. The rail rate from Chicago to New York on grain and grain products for domestic consumption has been about l7 l /2 cents per 100 pounds; that is, a bushel of oats or corn or wheat, that may bring in New York anywhere from 40 cents to $1, has been brought from the Western farm for from 8 to 15 cents. Hay that has yielded the farmer $18 or $19 a ton and sells in New York at about $24, has paid the railroads some- where from $3 to $5 per ton, according to whether it came from the meadows of the Ohio or the Mississippi valleys. A bullock that weighs 1,200 pounds will, at Chicago, bring on an average $5.50 per 100 pounds, which in- cludes an average of 5 cents per 100 pounds for freight from the grazing grounds. Its total value at the 131 stock yards, therefore, is $66. When it has passed through the packing-house its weight will have been reduced to 700 pounds. From Chicago to New York it will pay 45 cents per 100 pounds freight ; or, in other words, the 700-pound carcass, which, if retailed at an average of 15 cents a pound, would bring $105, has paid the railroads between $3.50 and $4 from the Far West to the metropolis. On potatoes the freight rate per barrel containing about two and a half bushels is $1.05 from Florida, 65 cents from South Carolina, 45 cents from North Carolina, 30 cents from Virginia, and from this 12 cents per bushel the rate scales down to 5 or 6 cents per bushel from near-by regions. The freight rate on tomatoes from Florida is 25 cents per package of six baskets, from Texas 15 cents for twelve quarts, from Mississippi 76 cents per 100 pounds, and from the near-by farms 8 cents per bushel of twenty-eight quarts. The freight rate on cantaloupes to New York ranges from less than a cent for a melon from the Carolinas to about 2% cents for that from California. Oranges from Florida to New York pay the railroads from 4 to 9 cents a dozen, and those from California 6 to 12 cents a dozen, as they may be large or small. A three-pound can of tomatoes from Maryland pays the railroad about one-half cent per can. L. G. Mc- Pherson: Railroad Freight Rates. Rates on Staple Articles In response to inquiries made concerning certain staple articles of daily and general use in various of the smaller cities and towns extending from Massa- chusetts to Georgia and Illinois, and from Michigan to Mississippi, it has been ascertained that throughout this region the transportation charge on such articles 132 ranges as follows: On a man's suit of clothes, from two to eight cents ; on calicos and ginghams, from one- fiftieth of a cent to one-fifth of a cent a yard; the freight charge paid on the entire apparel of a fully dressed man or woman in this section would range perhaps from 6 or 7 to 16 or 18 cents. The rate on an ordinary dining-room suite, consisting of table, side- board, six chairs, and a china closet, would average from 75 cents to $5 ; on a parlor suite of sofa and four chairs, from 50 cents to $4 ; on a bedstead and its equip- ment, from 75 cents to $1.50, in each case from the fac- tory to the home. The lumber used in the ordinary eight- room house will have paid the railroads from $35 to $150, and the brick from $6 or $8 to $SO or $60, as the kiln may be near or remote. A fifty-pound sack of flour from the mill,, even at Minneapolis, in but a few cases, has paid a freight rate of over 8 or 9 cents to the consumer. Products of the beef or the hog are carried from the western packing-houses throughout' this territory at rates that vary from a fifth of a cent to not exceeding a cent per pound. L. G. McPherson: Railroad Freight Rates. Rates in Different Countries Railroad rates in this country are not unreasonably high. As shippers and consumers of freight, we pay a transportation cost less than one-half that of Germany, barely more than one-third that of France, and but slightly in excess of one-fourth that of England and the other countries of Europe. Following are the figures for the last year [1907] : 133 Freight cost per Country. ton-mile, in cents. China 10 Japan 05 Russia . .. 022 Italy 024 Austria 0225 Germany 015 France 019 England .026 United States 0069 Besides, the cost of transportation to the actual con- sumer is so slight a quantity as never to disturb his thoughts except when forced upon his attention as a campaign issue. A careful writer has computed the amount which freight charges actually add to the cost at Pittsburgh of necessary articles of wear and con- sumption, and I give you some of them : A suit of clothes, three cents ; A pair of shoes, one and one-half cents ; A man's hat, less than half a cent ; A lady's hat, trimmed for wear, less than one cent ; Muslin, one-twelfth of a cent per yard ; Flour, less than one-fifth of a cent per pound ; Dressed meats, one-fourth of a cent per pound ; Fish, one-third of a cent per pound; Vegetables and canned goods, one-sixth of a cent per pound. Robert Mather: Railway Regulation. Speech before Traffic Club of Pittsburgh, April 3, 1908. Steady Decrease of Rates The record of the extension of lines (with the rates for which they were extended) reads as follows, by decades : 134 Year. Miles of line. Increase. Per cent. Rate per ton-mile. Rate per pass. mile. 1832.. 229 229 1839.. 2,302 2,073 905 1849.. 7,365 5,063 220 1859.. 28,789 21,424 291 1869.. 46,844 18,055 63 1879.. 86,556 39,712 85 *1.29c t2.422c 1889.. 161,276 74,720 86 0.922 2.165 1899. . 194,336 33,060 20 0.724 1.978 1909.. 236,869 42,533 22 0.763 1.928 * 1880. 1 1883. Except for individual roads, rates for the earlier years have not been handed down to us. In 1852 the Pennsylvania charged 4.64 cents per ton-mile, and the Erie 1.95 cents. In 1865 the freight rates on four principal trunk lines ranged from 2.44 cents to 3.45 cents. In 1875 six low-rate through routes charged 1.01 to 1.53 cents per ton-mile, and by 1885 the same lines had reduced their rates to 0.55 cent and 0.94 cent. The roads cited had lower rates than the aver- age, which must necessarily include a large proportion of local and feeder lines. They, however, will serve in conjunction with the figures given in the table, to illustrate the progressive fall in rates that continued until 1899. Morrill W. Gaines: A Living Rate for the Railroads. Yale Review, New Haven, 1910. REGULATION AND LEGISLATION. Congress and the States There is no room in our scheme of government for the assertion of State power in hostility to the au- thorized exercise of Federal power. The authority of Congress extends to every part of interstate com- merce, and to every instrumentality or agency by which it is carried on; and the full control by Con- gress of the subjects committed to its regulation is not to be denied or thwarted by the commingling of in- terstate and intrastate operations. Supreme Court, Nos. 291, 292, and 293, October Term, 1912, Opinion Delivered by Justice Hughes June 9, 1913. Not at the Mercy of Legislative Caprice The property of a railroad corporation has been devoted to a public use. There is always the obliga- tion springing from the nature of the business in which it is engaged which private exigency may not be permitted to ignore that there shall not be an ex- orbitant charge for the service rendered. But the State has not seen fit to undertake the service itself ; and the private property embarked in it is not placed at the mercy of legislative caprice. It rests secure under the constitutional protection which extends not merely to the title but to the right to receive just compensation for the service given to the public. Supreme Court, Nos. 291, 292, and 293, October Term, 1912, Opinion Delivered J)y Justice Hughes, June 9, 1913. 135 136 National Control of Interstate Commerce The court holds that Congress has complete power to control interstate commerce and to regulate it, and that this necessarily includes the power to regulate such business within State lines as affects indirectly interstate business. But the court holds that until Congress acts in re- spect to such business within the State it must be left to the action of the State. The judgment of the court is a broad declaration in favor of the plenary power of Congress to vest the Interstate Commerce Commission and the Federal courts, or some other appropriate instrumentality, with the authority to regulate and restrict such im- proper or prejudicial interference with interstate com- merce as the fixing by a State Railroad Commission of merely State rates may involve. The result of the main issue is a great victory in principle for the national control of interstate com- merce and the possession by Congress of the right to use every appropriate means to render that control effective and uniform. William H. Taft on Supreme Court's Decision in Minnesota Rate Cases, June 9, 1913. Federal Authority Over Railroads The Supreme Court points out that the authority of the United States may be made as complete in rail transportation as it now is in water transportation. Practically no rate can be made by State commissions that does not directly affect existing interstate rates. The opinion of the court should give the railroads a means amply to protect the structure of their rates if they elect to maintain those authorized by the Inter- 137 state Commerce Commission and resist all interfer- ence with them by State commissions. If this policy is consistently pursued, it should eliminate the States from the field of rate-making as fully as they are now elinlinated from control of water navigation. L. F. Loree: Apropos of the decision in the Minnesota Rate Case, June, 1913. Progress of Regulation Only slowly and reluctantly did the majority of railroad men yield to public control, and even now some of the operators hold the older attitude to be correct, although admitting that it can no longer be followed in practice. The railroads, being common carriers, require public franchises, and therefore have all of the obligations of public utilities. But the pub- lic has gradually asserted its authority over them. As early as 1869 the State of Massachusetts established a railroad commission. California did the same in 1876, New York in 1882. But these early commissions, and those of other States, did not attempt any large control. Indeed they did not have authority to do so. Their power was usually limited to that of recom- mendations to the Attorney-General. Illinois created a railroad commission in 1871, which in 1873 was given power to prescribe rates, but little in the way of effective regulation was accomplished during this decade. While in Iowa there was earlier legislation looking toward the control of railroads, in 1897 a law was passed which went a long way towards assuming con- trol within that State. The rates were to be -'reason- able," and the findings of the Commission were to be prima facie evidence of the reasonableness of the rates. The State of Wisconsin in 1905 enacted an even more 138 comprehensive and effective law, under which the Com- mission was given ample power to control the rates charged within the State. The example of Iowa and Wisconsin has been followed by many other States. The Interstate Commerce Commission, when it was created in 1887, had the power of investigation, but it could go no further than to recommend reparation in case of just complaint. It was, in fact, a purely advisory body. Not until 1906 was the law so amended by Congress as to give to the Interstate Commerce Commission the power to fix minimum rates. In 1910 the Commission was given the further power to sus- pend any increase of rates pending investigation. Thus it is only five years ago that the National Government has asserted its broad authority to control the rates which railroads may charge in interstate commerce. Commission in Arbitration between the Eastern Rail- roads and the Brotherhood of Locomotive Engineers, Charles R. Van Hise, chairman. Regulation Here to Stay Government regulation- is here to stay, and, intelli- gently administered, it is no bugbear to railroad owners or managers. On the contrary, it can and should be a protection and safeguard. It is plain, however, to every one that the result today of the activity of the Federal and State tribunals has greatly altered the position of railroad securities in the public eye. They no longer offer opportunities for speculative profits ; the only speculative element remaining arises from and inheres in the sensitive fear that capital always ex- hibits in the face of hostile or adverse conditions. The investor, wisely or not, today views the safety and future value of railroad securities with distrust. Meager returns, coupled with doubt about the public 139 intention toward invested capital in railroad proper- ties, are making it more difficult and also more ex- pensive to secure funds for the urgent improvements and extensions that are necessary fully to equip the railroads to keep abreast of the times. Whether this fear is well grounded remains for the future to de- termine. Every patriotic citizen should persuade him- self and his neighbor that this great industrial servant is in safe hands, and see to it that this proves to be so. Otherwise a continuation of inadequate trans- portation facilities will, as certainly as night follows day, "place an arbitrary limit upon the future pro- ductivity of the land." This was the anxious utterance of the Interstate Commerce Commission in 1907, and is the present concern of every thoughful student of the situation. Darius Miller: World Today, December, 1910. / Cost of Regulation Now all of this regulation costs a good deal of money, and in these days of great governmental ex- pense it would seem wise to pause a little and make certain that the very best use of the tax-payers' money is being made. For example : The Commerce Commis- sion cost the country in 1888 $97,867, but in 1910 it cost 14 times as much, or $1,385,000. The State Com- missions of Wisconsin, Minnesota, North Dakota, Mon- tana, Washington, and Oregon cost in 1909 $266,718.70, or an average of $44,450. Using this average for the States west of the Mississippi River having commis- sions, gives a total expenditure of $844,550 a year. Recently the owners of the Mipnesota railroads were obliged to appeal to the courts to decide whether laws and orders affecting the earning power of their prop- erties were just, and that case is still pending. The total cost of preparing for and trying that case to the 140 State and to the railroad stockholders will be more than $400,000. The extra cost to the railroads of the United States by what in many cases seems to be excessive and unnecessary regulation is estimated to be about $85 per mile of road per annum, or nearly $20,000,000 per year. Howard Elliott: Address be- fore the Minnesota Federation of Commercial Clubs, in annual convention, St. Paul, Minn., January 26, 1911. Ample Machinery for Regulation There can no longer be any doubt that the public has ample and efficient machinery for the thorough control and regulation of the railroads. We have not only a Federal Commission in Washington which has been granted the widest possible powers to regulate and supervise, but we have also commissions in nearly all of the individual States, with powers relatively as great as those delegated to the Federal body. The Interstate Commerce Commission is empowered to prescribe the manner in which the railroad accounts shall be kept, even to the minutest detail, and the roads are now keeping their accounts in harmony with the requirements of the Commission. It is also provided by law, under penalty of heavy fine and im- prisonment, that no discrimination shall be shown either with reference to rates paid or service given, as between individuals or communities. It has come to be understood that the railroad is a semi-public institution, and that it is expected to treat, and must treat, all with equal fairness. The executives in charge of the railways by virtue of what has come about, occupy the dual position of semi- public officers, charged with the duty of operating the properties in harmony with the laws of the country, and also with the equally important duty of trustee, 141 representing those whose money is invested in the enterprise. It should be remembered that although the railroad is considered a public utility with im- portant public functions to perform, it' nevertheless owes its very existence to the employment of private capital. Daniel Willard: Before the Boston Chamber of Commerce, June 12, 1913. Ignorance and Legislation The average critic of railroad management, be he legislative or journalistic, spends one day or two in- vestigating transportation problems that three genera- tions of shippers and railway employees and managers have struggled with. After a session of an hour with himself and a study of magazine and newspaper clip- pings, he formulates solutions that he hopes may be accepted by the public. He never had charge of a train in face of a mile washout in a storm, with an ax, a crowbar, and a lantern, to make repairs. He knows nothing of the game of chess involved in keep- ing a dozen trains of constantly varying speed capaci- ties moving on a single track; over a mountain top, against another dozen to be kept moving in the oppo- site direction. But in an hour's speech he can tell you that the railroad must be made to move its freight with un- varying expedition, or suffer. He does not consider that a railroad has not the slightest control over the destination of its own cars or the cars in its service. He does not realize that the shipper says where these cars shall go and gives them destinations all over the United States, and that the cars received by the road are largely dependent upon the directions of shippers in other sections of the country, maybe thousands of miles away. 142 It is from such authorities that the general public have formed their conceptions of the railroad business, its evils and its remedies. And, more unfortunate still, too many of those same ideas have crystallized themselves into legislative enactments that hinder instead of heal transportation hurts. W. L. Ross: Address 'before American Association of Local Freight Agents' Associations, Toledo, June 16, 1908. Too Many State and National Laws Every Anglo-Saxon community likes fair play, and as within the last eight years there have been passed about 1,800 State and National laws for the regula- tion of almost every detail of the railway business, there has been spreading among the people a feeling that the roads ought to be given a rest. 8. O. Dunn, American Railway Number of the London Times, June 28, 1912, How the Eailroad is Tied The high cost of living during the last few years has pinched the railways more severely than any other branch of business. Everything that the railway uses has gone up, from the wages of the office boy to the price of locomotives; but the one thing that has re- mained stationary has been the cost of transportation. The railway is just like a merchant; it has something to sell to the public. But there is this difference between the railway and the merchant. If the mer- chant has to pay more for his goods because the wages of the men who make the articles that he sells have increased, and the price of raw materials has ad- vanced, the salesmen and bookkeepers ask more money, and the landlord thinks his store is worth more this 143 year than It was last, and more men have been ap- pointed on the police force and in the fire department, making taxes heavier, why, the merchant simply charges more for his goods, whether it be coffee or calico, beans or beef. And he can do this, because every other merchant is in the same boat. Manufacturing costs more this year than last, and the retailer has to pay the difference; so the retailer puts the burden on the public, the ultimate consumer. The railway can- not do this, because it is not permitted to charge what it pleases for its Cervices. It is under the control of State and Federal laws ; its rates for the transporta- tion of passengers and freight are subject to the ap- proval of local or national authorities. A. Maurice Low, Harper's Weekly, August 31, 1912. The Scheme of Legislation The public service in which the carrier engages is undertaken for private gain; the shipper avails him- self of this public service, likewise for private gain. The selfishness of human nature is on both .sides of the transaction. Now the object of legal regulation is to hold these opposing forces in stable equilibrium, to reduce contests and complaints to a minimum, and to bring the dealings between shipper and carrier under the control of mutual justice. The sufficient scheme of legislation, therefore, will recognize the possibility of wrong-doing on one side as well as the other: it will be judicial rather than partisan in its aims anu requirements, and while equipping the shipper with ample protection will also furnish the carrier with all needful defenses. Martin A. Knapp: Principles oj Railway Legislation. Address before the Railway Congress Auxiliary of the World's Columbian Exposi- tion, June 23, 1893. 144 Railroads and Other Industries It may be well to examine the case of railway securities, which form so large a part of the people's investments. The ability of the railways to pay a legitimate dividend on capital is as essential to the maintenance of transportation of persons and goods one of the most necessary services required by soci- ety as is the payment of wages to their employees. At the bottom of a just policy toward railways is the right to the same treatment that is accorded to other industries, such as agriculture, mining, or manufac- turing except so far as it is necessary to take into account their quasi-public character. As quasi-public corporations, railways must submit to that kind of supervision by the public which will ensure equality of service and the same rates to all. But beyond that, the railway should not be singled out for crippling and special attacks any more than an iron furnace or a shoe factory. Yet because of the psychological condi- tions above described, the ambitious politician wins votes by "baiting" the railways and large industrial organizations. Therefore it is well, as in the recent election, to drive the cows out of the garden. The need in Congress is for men who are not representa- tives of special interests, but who will take into their purview the interests of all who are affected by the problem. James Laurence Laughlin: The People's In- vestments in Railways. Address at the fourth annual meeting of the As,sociation of Life Insurance Presi- dents, at Chicago, Illinois, Saturday, December 10, 1910. 145 Excess of Regulation The country is suffering from an excess of railroad regulation. Much of it is ill-considered. In many cases the remedies are worse than the evils they are designed to cure. We have seen that the best remedy for over-capitalization due to insufficiency of earnings to pay fixed charges and return on the capital stock lies in the growth of the volume of the traffic. In such; cases a restriction of the issue of stock cannot affect its intrinsic value. Henry Fink: Federal Regu- lation of Railroad Securities and Valuation of Rail- road Properties. A Better Understanding With a proper exercise of the large experience and recognized ability possessed by railway managers, and public discussions which will lead to a better knowl- edge of the subject, there are good reasons to believe that a better understanding will be reached between legislators, shippers, and railway companies, and that methods will be introduced which will be for the good of all and end the possibility of further warfare. If unremunerative rates are forced upon the railways, they will unquestionably lead to a deterioration of the service and the impossibility of raising money to build necessary extensions and create new roads. Capital, which furnishes the sinews of all business, will shun localities which render investments un- profitable, disbursements will be smaller, the pur- chasing power of customers will be reduced, and every branch of trade will feel the evil effects. It is a sound axiom that whatever injures a part, injures the whole, and no one great industry of the country 146 can suffer without others suffering in some degree. Horace Porter: Railway Rates. North American Re- view, December, Creation of Permanent Conditions Vast areas of country upon the American continent yet remain to be developed. Great sections of the West, Northwest, Southwest, and South have only fairly begun what will be their ultimate development. A railroad's facilities for meeting these demands of the coming years must be planned for long in advance. This is a strong argument for the stability of govern- ment regulation. In the coming ten years at least 100 per cent more traffic must be handled than in the ten years that have just passed, and all reasonable regulation should have in mind the creation of per- manent conditions that will enable the railroads to meet these demands that are to come to them. Conditions must be maintained and created that will give the railroads the money to carry on this development. W. L. Ross: Address at meeting of Traffic Club of Philadelphia, February 17, 1912. Limits of Governmental Regulation As a railway is a public highway, it is a proper function of the Government to protect all travelers and shippers from undue discriminations in charges or in service when the service is performed under sub- stantially similar circumstances and conditions. As the operating company must exercise a monopoly of transportation over this highway, it is a proper func- tion of the Government to prevent unreasonable or ex- tortionate charges for the service performed. Neither as a matter of sound economics nor of soand public policy can governmental regulation of 147 the railways be carried beyond these limits, and It is to the interest of the business man that it should not be. It is to his interest that the railway should re- ceive just and reasonable compensation for each spe- cific service which it performs, as it is only in this way that railway credit can be maintained and ade- quate facilities be provided. It is, 1 believe, a prop- erty right in which a privately owned railway is pro- tected by the Constitution of the United States to re- ceive just and reasonable compensation for each spe- cific service performed, and I believe that it is to the ultimate interest of the business man that the rail- ways should be protected in this right rather than that by the exercise of governmental authority their revenues should be so reduced as to restrict the value of capital in railway enterprises. William W. Finley, at Alexander Hamilton Institute, New York City, 1911. Too Many Laws Today on all important questions but one the rail- way owner is directed by acts of Congress, of State legislatures, and by the orders of commissions and bureaus. He has little control over the rates, over the hours of labor, over the rules for the conduct of the business in which his money is invested, over the taxes he shall pay. There is reserved to him the one duty and responsibility of finding money to pay the bills. The Congress, the legislatures, the commissions and bureaus may pass laws and issue orders and the rail- way will obey them when they understand them and If they are constitutional and until they are exhausted. But there is one great fact that cannot be changed by legislative fiat or commission decree and that Is you cannot make a man invest his money in railways 148 unless he wants to Howard Elliott: Address at the Third National Apple Show, Spokane, Washington, November 14, 1910. Inherent Rights of the Railroads As we have seen, the popular and legal conception of the relations of the railroads to the government has undergone marked changes and, as we all know, there is a possibility of still more radical change. The era of corporate amalgamation marks a transition in the industrial and commercial status which has found effect in modifications of the laws. As the problems developed by this period of transition are not as yet thoroughly understood, the laws to which they have given rise are as yet incoherent. Inasmuch as the railroads of this country have been constructed and maintained by private capital that capital must be protected in the rights inherent in property. To do otherwise would impede their opera- tion, impair their maintenance, and obstruct their de- velopment. There is but one way in which the obli- gation of the government to the railroads as private property can be removed, and -"that is through their purchase by the government. The experience of other countries in the ownership and administration of the railroads is sufficient to give the people of^the United States a long pause before taking this stejv That private property must be used for the public good applies with redoubled force to the railways. This does not mean, however, that their public rela- tions may be considered a basis for their oppression by the public any more than their status as private property can be made the basis for oppression of the public by them. Logan O. McPherson: Lecture under auspices of the College of Arts and Sciences, Cornell University, May 13, 1912. 149 Why Not Regulate These? Two hundred and twenty-one persons killed in New York city during the year 1912 by automobiles; 355 by automobiles and street cars; 135 passengers killed on all the railroads in the United States. Why not regulate the autos and street cars. Rail- ways are entitled to a rest. Railway Record, March 8, 1913. Effect of Radical Legislation One reason, perhaps, why there has been some hesi- tation in the growth of Minnesota is that the State has been rather extreme in the past about legislation affecting the transportation business. The feeling that the State is somewhat inclined to extreme legis- lation has had a tendency to keep capital away. Some regulation is necessary and desirable in our modern, complex industrial system ; but during the last few years regulation has too often been interpreted by the ambitious law-maker or the active railroad commis- sioner to mean the taking away of something from some one else, whether such act was just or not. Prices of commodities and railroad rates cannot be handled on a rigid arithmetical basis, with no elas- ticity, and there has not been enough statesmanship and every-day common sense in connection with at- tempts made to regulate and manage business by statute. Commissioners and legislatures should have before them always the question, "What is best for all the people, including the owners and employees of railroads?" and not the question, "Can the railroads stand another reduction in rates without the courts stepping in to prevent confiscation?" 150 Every legislator, every commissioner, and every, right-minded man should remember the words of Chief Justice Waite, of the United States Supreme Court, who said: "This power to regulate rates is not a power to destroy, and limitation is nojfc equivalent to confiscation under pretense of regulating fares and rates. The State cannot require a railroad corpora- tion to carry persons or property without reward. Neither can it do that which in law amounts to the Baking of private property for public use without just compensation or without due process of law." How- ard Elliott: Address before the Minnesota Federation of Commercial Clubs, in annual convention, Saint Paul, Minnesota, January 26, 1911. Proof of Experience There should be great care in experimenting with regulation that offers as warrant of its effectiveness the arguments of theorists rather than the practical proof of experience. Among the proposals thus to be tested is the one for Federal limitation of the capital- ization of interstate corporations. If the purpose and effect of such action is to invalidate in the courts or to depreciate in the exchanges what are now de- nounced as watered securities, the blow will fall not on the persons responsible for their creation, but on the victims who parted with money to acquire them. Such an act of vicarious punishment could only be justified by the unquestioned conviction that the con- tinued existence of the assailed securities is a menace to the public welfare. The only ground for such be- lief is the unfounded fallacy that the amount of se- curities outstanding against a railroad property deter- mines the rates it charges for transportation. The sufficient answer to this is the fact that the Union 151 Pacific Railroad, with capitalization of $92,000 per mile of road, competes very comfortably, and upon oqual rates, with the Atchison, capitalized at $50,298 per mile, and with the Great Northern, whose capital- ization is $42,350 per mile. And the same rates be- tween the same points serve for the Illinois Central, whose capital is $56,495 per mile ; the Eastern Illinois, with $62,599, and the Alton, with nearly $115,000 per mile. Robert MatJier: The Railroad Problem. Ad- dress before Chicago Association of Commerce, Octo- ber 12, 1907. Why New Railroads Are Not Being Built Mr. Untermyer: Do you attribute the absence of competing railroad building as against the great sys- tems to the dominance of the banking interests in those great railroad systems? Mr. Morgan: I do not. Mr. Untermyer: You do not? Do you attribute it to the fact that in this comparatively new and grow- ing country there is not any need for any more rail- roads? .Mr. Morgan: I do not. Mr. Untermyer : Do you attribute it to the difficulty of getting new capital? Mr. Morgan: I do. Mr. Untermyer: For competing systems? Mr. Morgan : I do. I might add to my reply, if you will allow me to Mr. Untermyer: Yes. Mr. Morgan (continuing) : That I think it is owing in large measure to the fact of the want of prptection against railroads that has been current in this country for the last ten years. 152 Mr. Untermyer : You mean the want of protection to the railroads? Mr. Morgan : To the railroads ; yes. Nobody wants to put money into a new railroad in these times. Money Trust Investigation, December 19, 1912. A New Account with the Future I assume we are all equally interested in the pros- perity of our country as a whole. We cannot have such prosperity as we all desire while the second largest industry in the land, measured by capital in- vestment, remains inert. I positively know that there is today in the minds of railroad managers a feeling of hesitancy, of uncertainty, as regards the future. Possibly that feeling is not justified by the facts, by the conditions. Possibly the managers are mistaken. None the less, the feeling is there and it is dominating the situation, and the all-important question is, How can it be corrected? How can the feeling of distrust, which now rightly or wrongly so powerfully influences the policy of the railroads, be allayed? I should say by removing the cause, and, unless I have altogether failed to make clear what is in my mind, I think the cause, as I view it, should be apparent; but, to i>e more specific, let the people who use the roads and want the roads now indicate that, having secured the enactment of such laws as they considered necessary in order to correct the conditions complained of in the past, they are now willing (as I think they should be) to open a new account with the future. Let them show that they are willing, as I believe they are, that the roads should be treated fairly; they are entitled to nothing more, they should receive nothing less. Let them consider each new proposal for legislation with entire freedom from any spirit of retaliation, I do 153 not say that it is necessary to undo anything already done (although experience may show such action to be wise in some instances), but I do say that the rail- roads should be given a respite from further legisla- tion State or Federal for a time at least and until they can work out some of the many new and com- plex problems now confronting them. If such a course should find favor in the minds of the people and be reflected in their attitude towards the carriers, I do not hesitate to say that the patient now indisposed would immediately show signs of convalescence. Daniel Willard: Address at annual dinner of Railway Business Association, New York, November 22, 1910. Cost of Regulation The effect of governmental regulation is much more apparent in railroad operation than in private indus- tries, and, while both proper and desirable, it adds to the cost of operation. Mr. Howard Elliott, president of the Northern Pacific Railway, recently [January 26, 1911,3 stated that the cost to the railroads of the United States for board and commission control amounts to $85 per mile of road per annum, an aggre- gate of $20,000,000. This regulation affects nearly every detail of operation. Though justified by public policy and apparently necessary to keep all the rail- roads up to a standard which the well managed might adopt without governmental requirement, it has an im- portant bearing on any comparison which may be made between railroads and manufacturing establishments not so circumscribed. William J. Cunningham: Scien- tific Management in the Operation of Railroads. Quar- terly Journal of Economics, May, 1911. 154 A Conservative, Wise, Just Policy Fair and intelligent consideration would result in the concentration of authority over the railways in the hands of the Interstate Commerce Commission and the abolition or subordination to the Interstate Commission of the numerous State commissions, with their multitudinous, conflicting, vexatious, and costly requirements. It would result -in the appointment of well-paid experts and scientists, both to membership on the commissions, and to the various important and responsible positions under them. It would result in public authorities ceasing to try to substitute them- selves for the managers of the railways, and becom- ing content to perform their proper duty of holding the managers responsible for the effects of their man- agement on the public interests. It would result in no diminution of the efforts, growing every day more successful, to suppress all forms of unfair dis- crimination by railways; but it would result in a diminution of the incessant and successful efforts to hold down railway profits efforts which are repelling capital from the railway business, and, by preventing adequte increases of facilities, imperiling the welfare of every manufacturer, every merchant, every farmer, every wage-earner, in the country. One thing is cer- tain, and that is that we cannot long continue to mud- dle along as we are doing now. W. M. Acworth, the eminent English authority on railway affairs, after a visit to this country, said in an article published last autumn in the Bulletin of the International Railway Congress: "If I have an individual belief it is that the Unked States will get much nearer to the brink of nationali- sation than they have come at present, and will then 155 start back on the edge of the precipice, and escape by some road not yet discernible." The best road by which we may escape is a con- servative, wise, just policy of regulation; and the most vital question of our time is whether the people of the United States will be just, wise, and conserva- tive enough to take that road. B.. L. Winchell: At- lantic Monthly, December, 1912. The Flood of Legislation The disposition to try to adjust everything by pass- ing laws is nowhere more strikingly shown than in the number of laws introduced into Congress. While the largest number of proposed enactments submitted to any American Congress during the ten-year period ending in 1909 was at the sixtieth session, when 38,388 bills were introduced, the more deliberate and careful methods of the English are shown in the fact that the largest number of bills before any Parlia- ment in that period, that of 1900, was only 621. Less than 2 per cent of the bills before the sixtieth Con- gress became law, while 67 per cent of the bills pro- posed in Parliament in 1900 were enacted. During this ten-year period our National Senate and House considered 146,471 different bills. During the same period the English Parliament considered but 6,251 measures. The Congressional "mill" added 15,782 measures to the law of the land; Parliament enacted but 3,822 new laws. The figures in both in- stances include both public and private bills, and it should be added that Parliament considers and acts upon many subjects which are considered by State and municipal bodies in the United States. The State legislatures for 1911 considered as a part of new railroad legislation proposed, a total of 512 156 bills, affecting physical operation of railroads. These proposed bills related to hours of service, terms of employment, the kind of uniforms to be worn, and other matters affecting employees, compulsory and voluntary arbitration, train rules, regulations for the operation of freight and passengers trains, equipment, car supply and claims, signals, clearances, crossings, maintenance of tracks, and many details which it would be supposed that the long experience and ex- tensive knowledge of railroad managers under the varying conditions of business would be a better guide than the judgment of a legislative body, no matter how excellent its intentions. Howard Elliott: Public Opinion; Its Effect on Business. Address before the Publicity Club of Minneapolis, Minnesota, January 10, 1912. CAPITAL AND CREDIT. Railways Must Have Adequate Capital Without regard to the personnel of railroad officials, without regard primarily to the interest of stockhold- ers, but in the interest of public welfare and national prosperity, we must permit railroad earnings to be adequate for railway improvement at advantage and profit. The prosperity of the country is measured, and will be measured, by the ability of its railways and water- ways to transport its increasing commerce. With a country of such vast extent and limitless resources, with all the means of production developed to a won- derful state of efficiency, the continued advancement of this great people depends primarily upon such an increase of transportation facilities as will provide prompt and safe movement everywhere from producer to consumer; and that we shall not secure unless the men who are relied upon to manage these great high- ways of commerce have fitting opportunity and the capital which is required for, their needful expansion is permitted to realize fairly liberal returns. Martin A. Knapp, late Chairman of the Interstate Commerce Commission. Way to Strengthen Railway Credit The Interstate Commerce Commission in 1907 de- clared that the inadequacy of transportation facilities was alarming, yet when the railroads sought to ad- 157 158 vance their rates in 1910 to enable them to make bet- ter provision for the public demands and establish a higher financial credit, the Commission would not sanction the advance. The earnings for the roads for the two following years, 1911 and 1912, increased $11,054,000, but the operating expenses and taxes were swelled $98,544,000, leaving a less net revenue for 1912 than for 1910 by $87,490,000. This loss was equivalent to the impairment of their ability to raise over $2,187,000,000 at 4 per cent. It is thus that the net revenues of the railroads are depleted and their inability to borrow money is further emphasized. If the railroads could retrieve such yearly net losses, they would be able to strengthen their credit in the financial marts and raise the necessary funds to meet the exigent demands of the business public. Benja- min F. Bush: Before the Economic Club, "New York, April 29, 1913. Value of Securities Of course the value of corporate securities does not depend wholly or even to a great extent upon the money originally put into the enterprise. That is only one of many factors. Much more depends upon foresight or good fortune in location, and in develop- ment and management, and in the drift of population and business or in territorial development. But the main reason why there is so little imposition or fraud practiced upon investors in railroad securities is the publicity given to the affairs of railroad companies. This came originally from the honesty of railroad managers, either from instincts of honor or from the necessity, on account of the large number of stock- holders, of stating fully and accurately in the annual reports to the stockholders the real condition of the 159 corporation. This has been reinforced in recent years by legal requirements. The greatest value of the In- terstate Commerce Act, in ny judgment, is the re- quirement of accurate and intelligent bookkeeping and accounting in all particulars, and in the publicity given thereto. Except in some minor matters respect- ing depreciation charges and the classification of main- tenance charges, betterments, and additions, the pres- ent system of railroad accounting as prescribed and enforced by the Commission is well-nigh perfect, and affords almost complete protection to the investors against fraud and imposition. R. S. Lovett: State- ment before Railroad Securities Commission, Decem- ber 21, 1910. Land Grants There is no doubt that the benefits received by the railroads from land grants have been smaller than was expected when they were so eagerly sought. To the States immediately concerned, the grants have in many cases caused hardship. Following the with- drawal of large tracts of lands for indemnity purposes, construction was often brought to a halt on account of bankruptcy, and the result was that no railroad was built, and the State was left with a smaller popu- lation and less revenue than there would have been had the grants never been made. Cases of this sort were not at all infrequent in undeveloped States like Florida, Arkansas, and Texas, and in the territories where population was scant and products limited. Of all the railroads in Missouri which received grants of land, a single one obtained any real aid to con- struction from this source. In some instances land grants have been a source of expense rather than a benefit to railroads. Admitting that some great specu- 160 lative inducement was necessary in the launching of such pioneer ventures as the construction of the Illi- nois Central-Mobile and/ Ohio and Central-Union Pacific projects, the fact that some railroads have been constructed along similar routes and under iden- tical conditions without the aid of grants of land points to the conclusion that the system of land sub- sidies was not an indispensable accompaniment of railroad construction in the West. When the grants have proved of service, it has generally been not at a time when their aid was most urgently needed, but after the initial stage of development had been passed by means of loans of public credit and the investment of private capital. Cleveland & Powell: Railroad Pro- motion and Capitalization in the United States. New York, 1909. Service, Dividends and Prosperity As the preacher says, here is a thought which I wish you to take home with you, and that is that every statutory regulation which either improperly reduces the earning capacity of the railways or un- necessarily increases the cost of operating them, ren- ders them just that much less able to serve you with due dispatch and reasonable and increasing safety. Adequate and efficient railway service is today the first necessity of every class of business men in the United States, and, so far as demonstrated up to date, this can only be provided by profitable railroads. You know better than most people in this country the dif- ference between what you and the rest of the public get from roads which pay dividends and are pros- perous, and the character of service which you receive from roads which continually pile up deficits ; but the "strip of dividend fat" which separates the profitable 161 from the unprofitable American railway is less than 4 per cent thick; when that is pared away, we all suffer, but not all of us attribute the difficulty to the proper and right reason. The freight rates of the railways are guarded, super- vised, and restricted almost as zealously, in most of our States, as the rates of fare, but the road which makes up on its freight traffic what it loses on its pas- senger business is, as the Wisconsin Railway Com- mission says, "guilty of a species of piracy practiced upon the shippers of freight." If it does not in this, or in some other manner, make good its losses in pas- senger revenue, the result must be either deteriora- tion or bankruptcy. Bear in mind, at the same time, that the low freight rate of the average American railway is the economic wonder of the world, as well as the economic necessity of the national prosperity, which is dependent upon cheap carriage cheap but safe carriage of all manners of commodities with which you are so intimately associated. B. L. Win- chell: Address at banquet of National Association of Commercial Travelers, Chicago, July 27, 1909. Free Play for the Railroad Builder The great factor in the advancement of America has been the free play given for individual action. If at the outset we had tied up the energies of men by stat- utes and removed the spur of ambition from the in- ventor, the railroad builder, and the man of business, the progress of our country would have been far less marked than it has been during the last century, and the progress that the rest of mankind has gained under the influence of our example would also have been less. The American railroad managers, not through altruism or philanthropy, but by their indi- 162 vidual genius, called into play by the beneficent influ- ence of our free institutions, have been working out the destiny of the American people. They have helped powerfully to mold a vast and naturally diverse con- tinent into one people. They have, in a double sense, bound together the most remote parts of the country by cords of steel. They have interwoven our inter- ests and our hearts inextricably with the meshes of the iron net. And if they are to receive your denun- ciation instead of your gratitude, then there is no species of property in the country which may not be plundered by law. There is a prescription that will almost infallibly work in forcing through such legis- lation. Fiercely denounce some Wall Street magnate by name, and then add some lurid declamation about insurance, and you could successfully rob any business in the country except farming, and if farmers were not so numerous they, too, would not escape. Samuel W. McCall: Speech in House of Representatives, Febru- ary 2, 1906. Backbone of Railroad Credit j An eminent authority has stated, and very properly, that the surplus of a railroad is the backbone of its credit. The surpluses of the railroads are disappear- ing. When under schemes of regulation severely ap- plied the surplus of a railroad disappears, its capacity for extensions and improvements stops, because what remains represents only a precarious dividend. The margin between that dividend and the interest obliga- tion upon the bonds is too narrow to enable any rail- road to borrow money long or in considerable amount. It has been widely published that in the past year the Railroad Commission has saved two million dollars for the people by reducing the rates of the railroads 163 within this State. Accepting that statement for the present purpose, it means five per cent on a borrowing capacity of forty millions of dollars. Which is more important to this State, that forty millions be spent in the increase of railroad facilities to serve San Fran- cisco and California, or that the railroads have two million dollars stricken from their earnings? I would like to ask any one in this room whether he has been benefited in his own business to any appreciable extent by that reduction. It would be interesting if every man in this room who has been so benefited would rise in his place ; it would be presumption on my part to ask him to do it. If it were fitting, I would like to ask every man to rise in his place who believes he would be benefited by the expenditure of a new forty millions of dollars in railroad improvements and con- struction in this State. I would hazard my own judg- ment on your answer. Wm. Sproule: Address at the Annual Dinner of the Chamber of Commerce af San Francisco, December 9, 1912. % Few New Issues of Securities / In no clearer way can the present state of railway credit be set forth than by the bare statement that the railways have practically stopped offering new issues of bonds to the investment-buying public. With traffic moving in the greatest volume ever known and railway facilities very much curtailed as a result of two years of enforced economy, there is every reason why the railroads should be in the market for funds. But such is not the case. Like the man who knows that his credit isn't good and so very wisely keeps away from the bank, railway finance managers are very wisely forbearing to ask investors to subscribe to new issues of railway securities. Franklin Escher, North Ameri- can Review, February, 1913. 104 Labor's View of a Railway Surplus A surplus should be accumulated for the purpose of maintaining uniformity of dividends over periods of industrial or commercial depression, for meeting un- foreseen and heavy expenses such as those growing out of the lamentable and disastrous floods in the Middle West, and for installing improvements such as grade crossings or track elevations, which are not immediately productive, or, in other words, do not add directly to the earning capacity of the transportation companies. Where surplus funds are used, however, to make permanent improvements to a railroad prop- erty, such appropriations should be considered as a distribution to stockholders in addition to regular cash dividends. The surplus or deficit of an individual railroad also has no significance, as already pointed out, unless its corporate relations are considered. W. S. Carter, President Brotherhood of Locomotive Firemen and Enginemen; Brief in Arbitration case, 1912. ^ Another Labor View of Surplus Railway labor does not begrudge on the contrary, it approves of proper expenditures out of income for additions and betterments, because it knows that these are necessary to keep pace with the growing demands of traffic, and in the end mean higher pay, better con- ditions and greater safety for the employe's. Besides, these are matters that concern the stockholders and the public after the employes wages have been earned and paid. The distribution of net earnings after the payment of proper operating expenses, taxes and in- terest charges can be left to the owners of the prop- erties, under the watchful supervision of the Interstate 165 Commerce Commission. From Minority Report of P. H. Morrissey, representing the Brotherhood of Loco- motive Engineers m Arbitration with Eastern Rail- roads. Railroads and the Money Market The amount of profit that railroads ought to be allowed to earn should be treated solely as a matter of expediency. The public will harm itself by exercising its legal right to reduce rates to the point where they are barely not confiscatory. Railroads compete in the money market with manufacturing, mercantile, and other concerns for capital. Capital is invested where, allowance being made for difference of risk, it can get the largest return. If railroads are restricted by re- duction in rates, as some propose, to the current rate of interest on the bare value of their physical proper- ties, while investors can get an average of from fifteen to twenty per cent from investment in manufactures, is it probable that capital will be permanently forth- coming for the adequate maintenance and develop- ment of the country's rail transportation system? Samuel O. Dunn: Fair Regulation of Railroads. North American Review, February, 1910. An Appeal to Reason. I do not wish to speak in a spirit of complaint or criticism; but I want to ask you to carefully study the legislation, National and State, that has been passed during the last five years in the so-called regula- tion of railroads regulation that has resulted in al- most every instance in either seriously reducing revenue or largely increasing the cost of operation. Recall the campaign of violent agitation and ex- travagant unmeasured condemnation of the past four 166 years. Bear in mind that the average return on capital invested in our railroads is about 4.4 per cent, whereas the return on money invested in agriculture (using statistics of 1905 as a basis) averages about ten per cent, in manufacturing over fifteen per cent, and in merchandising and banking above twenty per cent. Remember that everything in the way of development of railroad transportation in the past has been the result of the investment of private capital, and that if these extensions, enlargements, and improvements, absolutely indispensable to national growth and de- velopment, are made, it must be by the further in- vestment of private capital by private citizens, or that dread alternative of Government ownership. Then ask yourselves if these conditions are of such a character as to attract new investors or to encourage those that have already invested largely in railroads to materially increase their investments. W. C. Brown: The Country and the Railroads. Address at the seventh annual dinner, Albany Chamber of Commerce, Albany, January 7, 1909. The Unending Way of Capital. Wherever a steel track can be made to pay, that steel track will be built; for that is the unending way of capital. In a world of politics, great and small, of laws wise and foolish, of lawsuits sane and crazy, of scandal aimed at stock exchange and magnate, it is well to remember this one fact, that capital, and capital alone, can open up the million fields yet un- broken in this country, and coax civilization into the great lands as yet untrodden. C. M. Keys: The Ad- vance Agent of Prosperity. World's Work, January, 1909. 167 Interest of the Shipper Ignoring the right and wrong of such a proceeding- its hopeless injustice to those who have in good faith put their money into railway enterprise and passing directly to the cold question of expediency, would the limitation of profits accomplish the end in view, the lowering of the actual cost of service? Why, of course it would, we hear it said ; that's the point of the whole thing to limit profits by making the railway charge less for its service. But just a moment. It stands to reason, of course, that if a railroad is making what is considered too much money and its rates are ordered reduced, its profits will be cut down. But suppose now that as a result of its profits having been cut down the railroad can't spend as much for improvements as it used to and there is deterioration in the service offered. Then how about the lower rates? Apparently they are lower, but are they really so? Well, the ship- per pays less money. Yes, but not for the same thing. The railroad, perhaps, was contemplating buying a number of bigger engines or putting in double track or doing other things calculated to make it possible to move freight faster and better. Very possibly now, with its margin of earnings so reduced, it will not feel like spending the money and the improvement in service will not be made. The shipper may be paying less, but he is getting correspondingly less for his money. Franklin Escher: The Delicate Question of Railway Oredit t Worth American Review, February, 1913. 168 A Surplus for Emergencies The railroads should be permitted to earn and hold a surplus equal to fifty per cent of the amount they pay out in dividends, to be held for emergencies and applied to improved facilities. There are many ex- penses, and new ones constantly arising, that must not be added to capital charge unless rates are to be made that the public cannot and ought not to be asked to bear. In addition to the heavy demands of the ordi- nary growth of traffic, there are many extraordinary expenses. James J. Hill: The Country's Need of Greater Railway Facilities and Terminals. Address at annual dinner of Railway Business Association, New York, December 19, 1912. The Railroad's Surplus An extraordinary doctrine is now being propounded in many quarters. It is held that the accumulation of a surplus is evidence that rates are too high and ought to be lowered; just as if the man who earns, saves and puts a dollar in bank to meet future contingencies thereby admitted himself guilty of either dishonesty or extortion. It is held that a railroad has no right to receive or enjoy income derived from any other source than the operation of its plant. It is asserted that a railroad has no right to the natural increment in the value of its property, though this is not denied to any other corporation or to any individual under like cir- cumstances. It has been attempted to apply these principles to the regulation of railway property, strip- ping it of privileges enjoyed by citizens and other corporate entities under the Constitution. But how about the other side of the shield? Does the State recognize and abide by this same doctrine when its own revenue is at stake? James J. Hill: The Country's Need- of Greater Railway Facilities ana Terminals. Address at annual dinner of Railway Business Asso- ciation, New York, December 19, 1912. Theory of Railroad Stock Issues Every one knows that railroad securities are divided into two classes, stocks and bonds ; very few people apprehend as plainly as they should the distinction between the two, or understand the real nature of a share of railroad stock. As to the real nature of a railroad bond, there is no doubt at all. It is essen- tially a note made by the company a promise to pay a certain amount of money, say one thousand dollars, at a specific date of maturity, and to pay interest at specified rates in the meantime. The obligation is definite. The value is limited by the terms of the in- strument. But a share of railroad stock is of a different and more complex character. It represents two things instead of one: That a certain sum has been paid in, and that the holder of the stock has a certain share in the ownership of the property, of whatever value that may prove to be. The second of these things is what ultimately gives the stock certificate its value. In the case of a railroad bond the fact that if calls for one hundred or one thousand dollars is a determining factor in what it is worth. But in the case of stock, the fact that the certificate represents one hundred or one thousand dollars is far from being the deter- mining factor. It is but one incident among many. Even in theory it purports merely to show that this was the amount originally paid by the subscriber when the road was built. It does not create an obli- 170 gation to pay its face value, nor does that face repre- sent its money value as a share. The value varies with the development of the property as a whole. If it has been wisely located and well managed it will be worth more than the amount it represents. If it has been unwisely located or badly managed it will be worth less than the amount it represents. The shareholder chose his investment, elected his manage- ment, and took his risks. If he acted unwisely and fares badly, he has no claim that the public should indemnify him. If he did well, the public cannot either rightly or wisely fail to recognize and reward his foresight, so long as his road is managed with proper regard to the interest of the community and for the development of the traffic which it carries. The principal of a bond is a fixed sum, its interest a fixed charge. The value of a share of stock is essen- tially variable, its profit essentially indeterminate. Report of Railroad Securities Commission, 1911, Arthur T. Hadley, Chairman. New Issues of Bonds It seems to be generally agreed that no limitation should be placed on the price at which bonds can be sold; but any discount should be canceled or amor- tized during the life of the bonds by the appropriation each year, out of annual income or surplus accumu- lated after the issue of the bonds, of not less than the proportionate amount of the discount In the case of convertible bonds, the same provision should hold good, with the additional restriction that after con- version the laws governing the amortization of dis- count on stock sold below par should apply also to the unamortized discount on convertible bonds. While the convertible bonds themselves may be sold below 171 par, the conversion price of the stock should equal its face value, except, of course, in case of shares with- out par value, where no limit as to conversion price is necessary nor any amortization after conversion. The premium on bonds redeemed before maturity or the unamortized discount on bonds thus redeemed should be charged to profit and los^s, and provision made for the gradual cancellation of this charge out of income. Issues of convertible bonds should be offered to stockholders pro rata, in the same manner as stock itself, to the extent to which they may choose to avail themselves of the privilege of subscription.-pReporf of Railroad Securities Commission, 1911. What Constitutes a Reasonable Return We hear much about a reasonable return on capital. A reasonable return is one which under honest ac- counting and responsible management will attract the amount of investors' money needed for the develop- ment of our railroad facilities. More than this is an unnecessary public burden. Less than this means a check to railroad construction and to the development of traffic. Where the investment is secure, a reason- able return is a rate which approximates the rate of interest which prevails in other lines of industry. Where the future is uncertain the investor demands, and is justified in demanding, a chance of added profit to compensate for his risk. We cannot secure the immense amount of capital needed unless we make profits and risks commensurate. If rates are gt>ing to be reduced whenever dividends exceed current rates of interest, investors will seek other fields where the hazard is less or the opportunity greater. In no event can we expect railroads to be developed merely to pay their owners such a return as they could have oh- 172 tained by the purchase of investment securities which do not involve the hazards of construction or the risks of operation. Report of Railroad Securities Commis- sion, 1911. Amount of Additional Capital Required There is a widespread belief, based on imperfect examination of the evidence, that the amount of capi- tal needed for the future development of our railroad system is small in proportion to that which has been required in the past; that the profits on such added investments of capital are reasonably well assured, and that we can therefore fix attention predominantly, if not exclusively, on the needs of the shipper without interfering with the necessary supply of new money from the investors. It is quite possible that the building of additional railroad mileage will be far less rapid in the future than it has been in the past, but the capital needed for the development and the improvement of the mile- age already existing is enormous, even if we built no new mileage at all. The outstanding stock and debt of the railways in the United States averages less than $60,000 a mile of line. This figure is bound to be greatly increased in the immediate future. As our population grows denser, we shall need more and more to approximate European standards of construc- tion by the increased amount of double track, the abolition of grade crossings, the development of sta- tion* facilities, both for passengers and for freight, and many other improvements scarcely less funda- mental. While our railroads are perhaps even better equipped than those of Europe for the economical handling of large masses of long-distance freight, they are far from being adequately provided with appli- 173 ances to secure the convenience of the public or the safety of passengers and employees. The cost of all these things is very great. The average capitaliza- tion per mile of railroads in Germany is $109,000; in France, $137,000; in Belgium, $177,000; in Great Brit- ain, $265,000 ; and, contrary to the commonly received opinion, much of this excess of cost as compared with American roads, is due to other causes than the price of real estate an item in which our companies have had a great advantage. The cost of European roads has been largely due to improvements which we have not yet made and many of which we must make in the future as population grows denser. The thousands of millions of dollars needed for these purposes must be raised by the sale of securities. Report on Railroad Securities Commission, 1911. GOVERNMENT OWNERSHIP AND VALUATION. What State Ownership Means State railroad ownership too often means not the ownership of the State as a whole, but of a small body of men who happen to hold political power at the time ; it is neither more nor less than the substitution of a ring of political managers for a ring of railroad managers. Its practical success varies according to the condition of the civil service. But the Govern- ment is, as a rule, less responsible than a private cor- poration, instead of more so. If there is any lesson which is clearly taught by the history of railroad man- agement from the beginning until now, it is that pub- licity and responsibility are more important than any set of laws or regulations. Arthur T. Hadley: Ameri- can Railroad Legislation. Harper's Magazine, June, 1887. President Wilson's Position Society can by no means afford to allow the use for private gain and without regulation of undertakings necessary to its own healthful and efficient operation, and yet of a sort to exclude equality in competition. Experience has proved that the self-interest of those who have controlled such undertakings for private gain is not coincident with the* public interest; even enlightened self-interest may often discover means of illicit pecuniary advantage in unjust discriminations 174 175 between individuals in the use of such instrumentali- ties. But the proposition that the Government should control such dominating organizations of capital may by no means be wrested to mean by any necessary im- plication that the Government should itself admin- ister those instrumentalities of economic action which cannot be used as monopolies. In such cases, as Sir T. H. Farrar says, "there are two great alternatives : (1) ownership and management by private enterprise and capital under regulation by the State ; (2) owner- ship and management by Government, central or local." Government regulation may in most cases suf- fice. Indeed, such are the difficulties in the way of establishing and maintaining careful business man- agement on the part of the Government that control ought to be preferred to direct administration in as many cases as possible in every case in which control without administration can be made effectual. Wood- row Wilson: The State. President Taft's Views v' This presents the question of Government ownership of public utilities which are now being conducted by private enterprise under franchises from the Govern- ment. I believe that the true principle is that private enterprises should be permitted to carry on such pub- lic utilities under due regulation as to rates by proper authority, rather than that the Government should itself conduct them. This principle I favor, because I do not think it in accordance with the best public policy thus greatly to increase the body of public servants. Extract from President Taft's special mes- sage to Congress, February 22, 1912. 178 Justice Hughes Opposed I do not believe in governmental ownership of rail- roads. But regulation of interstate transportation is essential to protect the people from unjust discrim- inations and to secure safe, advantageous, and impar- tial service, upon reasonable terms, in accordance with the obligations of common carriers. Statement made by Hon. Charles E. Hughes, Justice of United States Supreme Court and ex-Governor of New York, in an address on January 31, 1908, in New York City. 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I "'I' '''* 212 CD IQ oo K IO IO iH rH TH CO W I CO Q W fc s H O > ^ 9 1 1 3 X |8'S 8 S 8 8 WTHC<|CO(N ID-i r- 1 TH rH Tl T-H rn rH I pr, o -S w g o ^ s CO g II H 4) OJD C 4> 8' 8 S" 8f 213 I O -ft v> ^ O a H ^ CO g t 4 o H^ g "" CO fe 1 I o i 214 CO co S H !^ s OP < v* O co ' JD Q ooi H to | fe fe o -5 CO g o *3 CO I W) la .2 C3 . t- O O I- t- 'c'S-^CDt^THOiCM &. g Cj 0) ! HifSffti * ' 2> *3 * a H H 45;A & > ; 216 RAILWAY BUSINESS IN 1912. Statement of the Bureau of Railway Economics. During a period of expanding business, profits at first usually rise more rapidly than expenses. That this has not been the case with the railways of the United States during the recent high tide of traffic is shown by their returns for the calendar year 1912. The total operating revenues are their total receipts from freight and passenger traffic, from carrying mail and express, and from miscellaneous sources. Operating income is the amount which after all expenses have been paid remains for rentals, interest on bonds, appropriations for betterments, improvements, new construction, and for dividends. That the funds available for developing and extend- ing the railways have not kept pace with the growth in traffic or the increased expenses of operation is shown by the following percentages: For the railways of the East the total operating revenues increased 7.2 per cent, operating expenses 8.3 per cent, and taxes 8 per cent, leaving an increase in operating income of 4.3 per cent. For the railways of the South total operating revenues increased 4.9 per cent, operating expenses 8.4 per cent, and taxes 2.8 per cent, leaving a decrease in operating income of 4 per cent. The unusual traffic of the West enabled the railways of that section to ob- tain an increase of 8.4 per cent in operating income, which just about balances ^he losses sustained during 1911. 217 ' 218 a\ H *s O Itf -M S 219 CO W H P H a B H PH O co CO M 0> i e , s CO O H-t 13 HH S ^ g O ^g i & M r^ O I I O O ^ M 4> ss CD C0 220 i en 1 I H 75 -g S 1 S 'S 's 5 J ! d to 5 g 2 8 1 1 . : "S ail iJIHil ii! If J S S 2 - i 221 58 00 S '^ K 1 8 8 2 N . ^ CO r. C"J ^N t CO "2 n o> 1 .S H 3? O M P 1 t w W <-> X ll H u o y O d ^ "co -4 -. ^ E^ > t-H STATISTICS OF RAIL Causes of Principa brakeman : TT*nilnra fn cof hrnlrAS j 5 S i t J II II t D | '! J . ii ; | 1 . c/ 11 i 4 > f. II dispatchers, operators, etc. : Wrong orders Failure to deliver orders Signal incorrectly set. . . Switch misplaced Other errors other employees. . 222 g s ft" H a 1 s 1 s * < 8 H | a , 1 "2. a ad i S 9 1 ; i STATISTICS OF RAI] Pi "S c 09 O E O QJ 3 3 ^ i "S fc< 4) Sf i * 2 :3 1 fi ^ i si oe I I 5 1 3 g 3 d 8 ta C3 S a 0! .2 3 ao i ^M *s ^g S ? i s 5 5 r- s * ^ 1. | " S ii a, ^ i ^ 223 CO H W H 5 M *M CTv O M O M" CO ~ CO *O GO iH t- C^ C5GO b-GO 10 00^ O r-^ ^ CTr}^ IO T-T (M TH GO" CO (M CO CO ^t CJ D 1 S S3 U "^ iliii 3 d 5 -naMDo 0) a 224 1 zs a ft! O td as H w O 5 I s (N $ i l rH 00 i 00 K3 i Ci i CO si CO a QB ^ fl bO a a s CO rH CO 00 CO o 1 i i i ^ 5 ) T-1 lies of line ope at end of yea CO CO iO o t^ CO O5 t>- CO CO T3 O rH ^ rH CO CO CO CO rH CO CO CO CO i I CO rH CO rH CO rH rH CO CO rH CO ii CO O w s H >m Official Reports. ed and Privately O Year er June Decembei Decembei Decembei 11 1 1 Decembei Decembei Decembe] Decembe] Decembe] Decembe] Decembei Decembei Decembe] \Y MILEAG * 2 CO 05 .

i- 1 1 1 Private . . . 1 T f rH Switzerland. / State I Private . . . v^ g i 1 (3 ' 1 Private . . . 226 227 w H I g a 05 rH CO w a a CD O 2 8 CO s S 8 CO <^ Lr 10 %a < rH* o $5 i rH 1 M Jj i ' P^ 1 I 1 03 \ to s g \ "c ^ n k* O y c 1 B 1 C 8 . 4> ' E Bs M {25 h-t OQ i tern district : Railway main Improved fan them district : "Railwav TYiiiir 1 ' n ri : c i,! i is 'f ) -C ; -s g > fl g j- s ^ ' - CD C o CS I lO 5 CD J 1 ^ 03 ^ o"^ Jd o ,.,'*-' > 1C unts of transportation p Corn. fifi 2 !i ^M H IP 03 ^ r* Q M T^ r * S5 ^- 3 rS - S ^ j Oi^ t- ^, CO k H d 2 >l J .2 "-4J i I- ' JJ to P 03 . 10 c^ pp Q > K < hi O g J^ ^ 'Q d ^ h O OH OQ d 03 to j3 co ^ | 04 2 i-H T 1 *- w H 05 O H ^ 1 o 03 0} O J fs J d d o 1 1 1 1 g rH QJ flj Q> *ti ! :k !H \% 2,14 CO 2 rH OO g o" oo~ W H Q 8 S 00 rH^CD cK^co rH rH rH CD rH lO ^JN^J CD T^O^ GO CO y Q Illllil III I 235 P S 5 oo 0^ O i T-T of of 1C CO HH 00 TH Tfr< iO Of 3 g I- 00 O O CD "^t 1 IO CO O 00^ ii^ T-l CD" of C5 TH M 'o .S J 4-> rfi O S 3 S/2 1 t P . rt) n^ JS2 i S G o3 rt M 02 0) bfi bfl d cs ft. 9 o w~ o of _ d ,2 d M cd X O ^ oj *&H H ,926,426,134 4,241,30 !8 IS 8 1 g . d S 2 V.2 g|g 00 (N ITS CO 00 O5 10 < b- > ITS 35! S> Oico TJH O co Tj^S TH GO cojFl^ CO b^-^ CD b- C^^l O TH M- : : 55 . a . 3 a d Tti ^ d t-> i-S s 1 -^ g* 1 ^ a. 3 d a'S e o E S *- a INDEX TO NAMES. Page ACWORTH, W. M., Railway Economist of Great Britain. . 39, 102, 120, 187 ADAMS, H. C., Professor of Political Economy and Fi- nance, University of Michigan ; Former Statistician Interstate Commerce Commission 121 BAKER, RAY STANNARD, Magazine Writer 103 BRISBANE, -ARTHUR, Editor New York Journal 24 BROWN, W. C., President New York Central Lines . 22, 80, 165 BRYCE, JAMES, Former British Ambassador to the United States and Author of "The American Commonwealth". 176 BUREAU OF RAILWAY ECONOMICS 191 BURTON, T. E., United States Senator from Ohio, Chair- man of National Waterways Commission 190 BUSH, B. F., President Missouri-Pacific System 107, 157 CANNON, JOSEPH G., Former Speaker of the House of Representatives 28 CARTER, W. S., President Brotherhood of Locomotive Firemen and Engineers. 164 CECIL, Hon. EVELYN, Member of Parliament 177 CHAMBER OF COMMERCE OF THE STATE OF NEW YORK. . . 96 CLEVELAND, FREDERICK A., Chairman of the President's Economy and Efficiency Commission 159 COMMISSION IN ARBITRATION BETWEEN THE EASTERN RAILROADS AND THE BROTHERHOOD OF LOCOMOTIVE ENGINEERS 44, 66, 68, 137 COMPTROLLER OF CURRENCY, Report of 38 CUNNINGHAM, WILLIAM J., Professor of Political Econ- omy, Harvard University 71, 153 DAYTON, THADDEUS S., Retired Merchant 58 DELANO, F. A., Receiver of Wabash Railroad 89, 121, 193 DEWSNUP, ERNEST R., Professor of Railway Economics, University of Illinois 178 DILLON, SIDNEY, Former President of the Union Pacific Railroad 23 237 238 DUNN, S. O., Editor Railway Age Gazette Ill, 142, 165 ELLIOTT, HOWARD, President Northern Pacific Railway . . 17, 34, 63, 65, 106, 114, 139, 147, 149, 155 EMERSON, RALPH WALDO 26 ESCHER, FRANKLIN, Editor "Investments" 101, 105, 129, 163, 167 FAGAN, JAMES O., Writer and Railway Signalman 36 FINK, HENRY, Late Chairman Norfolk and Western Rail- road A . . 121, 145 FINLEY, W. W., President Southern Railway 29, 69, 83, 112, 122, 146, 182 Foss, EUGENE N., Governor of Massachusetts 184 GAINES, MORRILL W., Economist 12, 133 GUYOT, YVES, Economist ; Former Minister of Public Works, France 179 HADLEY, ARTHUR T., President Yale University, Author of "Railroad Transportation" , 108, 126, 174, 181 HAINES, HENRY STEVENS, Writer on Railway Problems ; Former President American Railway Association . 16, 70, 72 HARRIMAN, E. H 88 HARRISON, FAIRFAX, President Chicago, Indianapolis and Louisville Railway 184, 185 HILL, JAMES J., Former President Great Northern Rail- way 15, 52, 59, 65, 93, 168, 183 HINES, WALKER D., General Counsel Atchison, Topeka & Santa Fe Railway 113, 122, 185 HOLDEN, J. F., Vice-President Kansas City Southern Railway 183 HUBBARD, ELBERT, Editor and Publisher 26 HUBBARD, GARDINER G., Founder of the National Geo- graphic Society 27 HUGHES, CHARLES E., Justice of the Supreme Court. 135, 176 INTERSTATE COMMERCE COMMISSION 41, 109, 120 JANDRON, FRANCIS LYSTER 63 JEFFREY, JAMES C., Attorney 179 JOHNSON, EMORY R., Professor of Transportation and Commerce, University of Pennsylvania 18 JOHNSON, L. E., President Norfolk and Western Railway. 115 KELLOGG, C. D., Secretary American Railroad Employees' and Investors' Association 17 KEYS, C. M., Financial Writer 45, 166 KNAPP, MARTIN A., Former Chairman of Interstate Com- merce Commission 65, 143, 157 KRUTTSCHNITT, JULIUS, Chairman Executive Committee, Southern Pacific Railway 40 289 LANE, FRANKLIN K., Former Member of Interstate Com- merce Commission, Secretary of the Interior 11, 71 LAUGHLIN, JAMES LAURENCE, Professor of Political Econ- omy, University of Chicago 36, 144 LEROY-BEAULIEU, PIERRE, Economist 180 LOREE, L. F., President Delaware and Hudson Railroad. 24, , 44, 66, 91, 126, 136 LOVETT, R. S., Chairman Executive Committee, Union Pacific Railway 109, 116, 122, 158 Low, A. MAURICE, Journalist and Author 75, 142 McCALL, SAMUEL W., Member of Congress 110, 161 MCCHORD, C. C., Member of Interstate Commerce Com- mission 57 MCPHERSON, L. G., Director Bureau of Railway Econom- ics 19, 41, 48, 55, 124, 126, 129, 131, 148, 187, 197 MATHER, ROBERT, Former President Rock Island Com- pany 13, 35, 132, 150 MEAD, EDWARD SHERWOOD, Former Assistant Professor of Finance in the Wharton School of Finance and Economy 14 MILLER, DARIUS, President Chicago, Burlington and Quincy Railroad 106, 138 MONEY TRUST INVESTIGATION. 151 MORRISSEY, P. H., Former Grand Master Brotherhood of Railroad Trainmen 65, 67, 73, 164 MOULTON, H. G., Professor of Political Economy, Uni- versity of Chicago 190 MUDGE, H. U., President Chicago, Rock Island and Pa- cific Railway 13 NEWCOMB, H. T., Lawyer and Author of "Railway Eco- nomics" 127 OTIS, CHARLES E., Master in Chancery, U. S. Circuit Court, District of Minnesota . 85 PORTER, HORACE, Soldier, Lawyer, Diplomat, and Railway President 107, 145 POWELL, FRED WILBUR, Economist 94 PRIESTLY, NEVILLE, Appointed by the British Govern- ment to Make an Investigation of the Methods of American Railways 53 PROUTY, CHARLES A., Member of Interstate Commerce Commission 74, 87, 97, 118 RAILROAD SECURITIES COMMISSION 169, 170, 171, 172 RAILWAY AGE GAZETTE 57 RAILWAY RECORD 81, 149 RANKIN, GEORGE A., Writer on Transportation 56, 89 240 REA, SAMUEL, President Pennsylvania Railroad 33, 49, 82, 86, 98, 125 REYNOLDS, A. E., Former President of the National Grain Dealers' Association 32 RIPLEY, E. P., President Atchison, Topeka and Santa Fe Railway 25, 118, 123 ROOSEVELT, THEODORE, Former President of the United States 35, 94, 90 Ross, W. L., President Toledo, St. Louis & Western Rail- road 16, 141, 146 SCHURMAN, JACOB GOULD, President Cornell University. . 176 SEWALL, E. D., Vice-President Chicago, Milwaukee & St. Paul Railway 97 SHONTS, THEODORE P., President Interborough Rapid Transit Company of New York 90 SPROULE, WILLIAM, President Southern Pacific Co. . . 74, 162 STERNE, SIMON, Lawyer and Author 15 STONE, WARREN S., Grand Chief of the International Brotherhood of Engineers 42, 83 STUART, J. C., Vice-President Erie Railroad 72 STUBBS, J. C., Former Director of Traffic of the Southern Pacific and Union Pacific Railroads 21 SUN, NEW YORK 125 TAFT, WILLIAM H., Former President of the United States 136, 175 THOMPSON, SLASON, Manager Bureau of Railway News and Statistics 180 TIMES, LONDON 30, 47, 59 TRUEMAN, CHARLES D., Railway Official 50 TRUMBULL, FRANK, Chairman Chesapeake & Ohio Rail- way 64, 98 VAN DEN BERG, Y., Railway President 123 VAN WAQENEN, A., Writer on Transportation 128 WALL STREET JOURNAL 75, 99 WHITBIDGE, F. W 123 WILLAED, DANIEL, President Baltimore and Ohio Rail- road 60, 123, 140, 152 WILLIAMS, W. H., Third Vice President Delaware and Hudson Company 51, 124 WILSON, WOODROW, President of the United States 174 WINCHELL, B. L., President St. Louis and San Francisco Railroad 92, 154, 160 WORTH INQTON, B. A., President Chicago and Alton Bail- road , 77, 88 THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. THE PENALTY WILL INCREASE TO SO CENTS ON THE FOURTH DAY AND TO $1.OO ON THE SEVENTH DAY OVERDUE. DEC o 1 1996 Mm im? U.C. BERKELEY LIBRARIES UNIVERSITY OF CALIFORNIA LIBRARY