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This national interchange of present views has in a number of aspects forecast what the public disposition is likely to be. It also has en- larged for thinking men their basis of reflection and discussion. The President urges Congress to expedite its quest for a solution, with the alternative that he may release the roads to their owners before the expiration of the 21 months prescribed for their return in the Control act. It has therefore seemed desirable to the Railway Business Associa- tion's Committee on Railways After the War, under whose direction publications dealing with transportation have for some time been under analysis and classification, to present as promptly as possible to the rail- way supply industry and others concerned a digest of comments upon the President’s remarks, together with some pertinent material dated previous to the message. The Association offers no recommendations of its own at this time. This digest, which is the work of the Secretary of the Association, makes no attempt to embrace every relevant aspect of the problem, but deals especially with the phases which have been made prominent by the utterance of the President. In an endeavor to obviate the burden of searching a series of quota- tions for what bears on the phases particularly interesting to each . reader, the material is grouped not by authors or by sources but by topics. . . . . We believe that this contribution will substantially serve the con- venience of business men and others necessarily overwhelmed with a miscel- . laneous mass of statements and arguments, yet feeling the compulsion to form intelligent conclusions. W. W. SALMON, Qhairman ALBA B, JOHNSON, President 30 Church Street, New York Dec. 11, 1918 “Modified Private Control 9 3 or Government Ownership? Compiled by FRANK W. NOXON, Secretary c AILWAYS, the President said to Congress on Dec. 2, may be (1) restored * ~ * * º A S among these possibilities com- - ment almost universally assumes that the President himself as at pres- z. ent advised would prefer “modified private control,” and Washington … correspondents report that this is the ... preference of an unmistakable pre- 3: ponderance in the present and next C. Congress. ? ...,” :J iſ: For the Neact Congress SENATOR UNDERWOOD of Ala- bama, a member of the Joint Com- # mittee On Interstate Commerce, pro- ſº nounced it impossible for the present Congress to act because of lack of ºf time, hence the President’s attitude Y’‘will result in throwing this prob- lem into the lap of the next Congress, which the Republicans control,” and “if the President does not call an extra session . he will, under * his language today, return the roads to their owners in lieu of Congres- sional action.” Senator Smith of South Carolina, Chairman of the Y Joint Committee, predicted that - “Congress will immediately address sitself to the task of drafting and pass- ing such legislation,” but the gener- ally accepted view was that the de- termination of policy would be the work of the next Congress. * * : ; ... . . * {} º: ; *. § --~~~~ **.s\ *~ s t st Present and Coming Chairmen THROUGH the change in party control Mr. Smith will be suc- ceeded after March 4 under the sen- - iority rule by Senator Cummins of Iowa, who may thus be the leading figure in the legislative branch in the solution of the question. Mr. Cum- mins said: “Congress should go for- to their former status, (2) taken permanently by the government, or (3) put under “modified private control.” ward immediately with a painstaking, conscientious and exhaustive inquiry into the whole problem and pursue it with the utmost diligence until a con- clusion has been reached.” Senator Cummins for a number of years has let it be known that he was leaning toward government owner- ownership, but the war experience is said to have convinced him that gov- ernment operation would involve the danger of elections turning on rail- way wages. In a statement under his name in the New York Herald on the morning of Dec. 2, he said: ‘‘It should be constantly borne in mind that government or public own- ership with a guaranteed return on the capital does not necessarily imply government operation; ’’ and he has been reported as nearly ready to in- troduce a bill for government owner- ship, with leases to private operating corporations. . . . * * The next House Chairman of In- terstate and Foreign Commerce under the seniority rule will be Representa- tive Esch of Wisconsin, who is for ‘‘modified private control.” This is the view also of Mr. Smith, present Senate Chairman of Interstate Com- merce, while Mr. Sims of Tennessee, present House Chairman, long an ad- vocate of government ownership, in comment upon the message gives no indication that he has changed his mind. -- Other Senators SENATOR NORRIS of Nebraska is reported to have a bill proposing a single corporation for government op- eration and control, the stock to be offered to the public and the govern- ment to own what remains unsub- scribed. Senator Hoke Smith of Georgia was ‘‘especially pleased with the Presi- dent’s indication of a purpose to en- courage the speedy return to the owners,’’ and introduced a bill (ex- plained at another point in this di- gest) which has not, as some corre- spondents mistakenly assumed, any bearing on permanent government control. Other Senators approving ‘‘modi- fied private control” were Messrs. Kellogg of Minnesota, Watson of In- diana and Sherman of Illinois, the two latter being for “government control, with private ownership.” Representative Gray of New Jer- sey has introduced a bill which would give existing railway com- panies the opportunity to take out federal charters under which direc- tors would include representatives of the government, the bondholders, the stockholders and the employees, all four elements to share in sur- plus earnings. The measure looks to a regional system of operation. Organized Labor Mr. Cooper of Ohio, a member of the House Committee, a former loco- motive engineer, is quoted as favor- ing “regulation.’’ He says the era of high wages has made the labor unions strong for the government keeping the roads, but believes “this sentiment is not as strong as it was” and looks “for it to recede consider- ably as a result of the President’s message.” (Numerous railway organi- zations before the President’s message had memorialized Congress for per- manent government ownership.) Judge Hughes and Mr. Bryan CHARLES E. HUGHES in an ad- dress at Columbia University the week previous to the President’s mes- sage, said: “It is regrettable, but it it true, that governmental enterprises tend constantly to inefficiency . & I do not mean to imply that the rec- ord of private enterprise is an agree- able one, but on a fair examination of conditions where governmental management has been maintained I believe that from the standpoint of efficiency the comparison favors pri- vate enterprises and that this country cannot afford to ignore the fact that inefficiency is the blight on our pub- lic undertakings.” William J. Bryan has been advo- cating dual ownership—the Federal government to take the trunk lines and each state to take the local branches. Shippers SHIPPERS declared for return to private ownership in the largest gathering ever held by them in this country—the Reconstruction Congress of War Service Committees in Atlan- tic City Dec. 4-6. There was a regis- tered attendance said to reach 6,000. The Chairman of the Congress, Harry A. Wheeler of Chicago, President of the Chamber of Commerce of the United States, had said in his opening address on Dec. 4: “I do not feel that we have as yet all the informa- tion needed to enable this conference to offer more than the most super- ficial reommendation in respect to fu- ture control and ownership of rail and Ocean transportation,” Resolu- tions, however, coming up from the “related group’’ conferences through the “major group’’ conferences, to gether with conversations among the delegates, led the “Clearance” (Res- olutions) Committee, headed by Jos- eph H. Defrees, former President of the Chicago Association of Commerce, to perceive that the Congress was nearly if not quite unanimous on the main question. The resolution which Mr. Defrees reported on the floor brought to his feet a Massachusetts delegate who urged that such action be omitted at that time. The delegates, about 4,000 present in the hall, list- ened impatiently to his speech and on a rising vote amid great enthusiasm of the affirmative, only four voted No. The National Industrial Traffic League, composed of traffic directors of bureaus of city business bodies and traffic managers of individual indus- trial concerns, recently reiterated at Cincinnati its opposition to govern- ment ownership and authorized a com- mittee to draft legislative recommen- dations. - The National Grange in convention at Syracuse, N. Y., Nov. 22 “unani- mously defeated a motion to support government ownership.’’ Security Owners THE National Association of Own- ers of Railway Securities, of which the President is S. Davies War- field of Baltimore, with Samuel Un- termyer as general and Elihu Root as special counsel, has asked the Joint Committee of Congress for a hearing when it will advocate return of the properties to and permanent retention by their owners. Mr. Untermyer, in an address before the American Bank- ers Association at Chicago in Sep- tember, 1918, repeated his well-known advocacy of government ownership, but explains that he is consistent in his legal service of Mr. Warfield’s association because the immediate task is to restore the properties to their owners upon equitable terms and con- ditions. N. L. Amster of Boston, President of the National Railroad Security-Holders Protective Associa- tion (in a statement which is dealt with under its appropriate heading) declares for a certain form of private control. John B. Lunger, Vice-Pres- ident of the Equitable Life Assurance Society, on Dec. 6, before the Associa- tion of Life Insurance Presidents, re- ferred to a resolution favoring gov- ernment ownership recently intro- duced in the Senate by James Hamil- ton Lewis of Illinois as the “enter- ing wedge, which, if allowed to de- velop, can lead only to the complete overthrow of representative democ- racy.” - The Investment Bankers’ Asso- ciation Dec. 9 approved a report submitted by a committee of which the Chairman was John E. Oldham of Merrill, Oldham & Co. of Boston, declaring the pre-war plan of rail- road regulation a demonstrated fail- ure and recommending elimination of conflict between state and federal bodies, repeal of federal and State anti-trust laws in their application to transportation, assumption by the government of responsibility for adequate earnings and credit. The resolution favored early return to permanent private ownership and operation. Financiers A LEADING Chicago financier, * John J. Mitchell, President of the Illinois Trust Co., some days before the President’s message, held a con- versation which got into print as a declaration in favor of government ownership. After the message Mr. Mitchell exclaimed that he had merely spoken of government ownership as the less of possible evils and does not favor it. George M. Reynolds of the same city, President of the Continen- tal and Commercial National Bank, regarded “modified private control under governmental regulations as the best solution yet advanced.” An- other Chicago banker, Ernest A. Hamill, President of the Corn Ex- change National, thinks “individual ownership and management is more efficient as well as more economical ultimately.” Otto H. Kahn of Kuhn, Loeb & Co., in an address before the National Industrial Conference Board on Oct. 10, favoring non-government owner- ship and operation, remarked that he knew “not a few large holders of railroad securities who from the standpoint of their selfish interests” believe “a reasonable guarantee Or other fixed compensation by the gov- ernment would be preferable to the financial risks and uncertainties un- der private railroad operation in the new and untried era which we shall enter after the war.” The same thought is made prominent by the New York Globe: “The railroad OWIlerS ... are likely to think twice before seeking to get their prop- erty back. The costs of unrestricted competition, the new wage-scales and the difficulties of financing improve- ments make a resumption of the old status almost impossible. eral public is not greatly enamored of public operation, but if the rail- road owners join radical elements in favor of public ownership some scheme based on it may be counted upon as almost certain of success.’’ Mr. Kahn’s partner, Paul M. War- burg, former member of the Federal Reserve Board, warned the Recon- struction Congress of War Service Committees of the danger which “we are facing at the moment of our proudest triumph. It must be our serious concern that a national effort, born in idealism, shall not bear the seeds of national decline.” Recon- struction legislation, he declared, must be of a kind which will provide safety for our future political life and cited as an example laws “which will be to the railroads what the Federal Reserve act is to the banks.” Railway Ea:ecutives T HE Railway Executives’ Advis- ory Committee, the organization which under the chairmanship of Frank Trumbull suggested the crea- tion of the Joint Committee of Con- gress on Interstate Commerce; which laid before that Committee plans for correction of defects in railroad reg- ulation; and which since the passage of the Control act has devoted itself to negotiations of the standard con- tract for guaranteed return during control, now under the chairmanship of T. DeWitt Cuyler of Philadelphia has resolved that “private initiative, enterprise and responsibility in the creation, extension, improvement and operation of American railways should, as a matter of national policy, be fostered and preserved and that government ownership and operation The gen- \ | ; $ | | of these facilities is not conducive to the highest economic efficiency of the country.” At a largely attended meeting of corporate executives and counsel this expression was adopted with but one dissenting vote, that of Newman Erb, President of the Ann Arbor Co., who said that unless the roads were returned under better con- ditions than prevailed when they were taken over he would prefer to sell to the government. E. P. Ripley, former President of the Sante Fe, dean of railway corpo- ration executives, who has so often predicted government ownership that many have understood him to favor it, now makes the contrary emphatic in an article (to which further ref- erence will be made herein) and in an interview on the message where he says: “My objections to government ownership are not made from the standpoint of stockholders but from the standpoint of citizens. I think it will mean the beginning of the end of our Republic. It is utterly im- possible in a country like ours to i manage railroads without politics, and politics will certainly kill service.” Julius Kruttschnitt, Chairman of the Southern Pacific, assuming that the roads are to be returned to their owners, discusses in a statement Quoted elsewhere in this digest the conditions which he considers desir- able. Samuel Rea, President of the Penn- sylvania, has indicated his faith in non-government ownership and opera- tion, but hoping the properties will not be returned until conditions can be rectified. Samuel O. Dunn, author of “Gov- ernment Ownership of Railroads,” which sets forth experience abroad and pronounces state railways much inferior to non-state, is in Europe, where as editor of the Railway Age he is one of the journalists enjoying the hospitality of the British govern- ment; but in conversation just before sailing Mr. Dunn reiterated not only his own conviction, but also his knowl- the new year. a far-sighted and energetic successor to Director McAdoo can be found in order that this test may be convinc- | Ing. - -* edge of conviction generally among railway corporation and United States Railroad Administration offi- cials favorable to a non-government transportation system. Editors for Government Roads THE New York American predicts that the roads will not be re- turned to private hands, and asserts that “every great civilized nation in the world owns and operates its rail- roads except the United States;” that private ownership ‘‘is a story of rail- road wrecking and the sinking of the hopes of honest men and women who put the savings of a life time in the railroad securities; that it would mean a return to government by in- junction, to strikes and lockouts.’’ “On account of the war,’’ says the Superior (Wis.) Telegram, ‘‘the gov- ernment took over railway operation temporarily and soon found that rates would have to be boosted to prevent a heavy deficit, therefore rates were increased and nobody com- plained. The reason was that it was the act of the government . . . . In view of this attitude of the public mind the belief is growing that na- tional ownership and operation works more satisfactorily than corporate ownership.” Editors for Postponement Posº of the main question is urged by the New York Journal of Commerce, which thinks that the new Congress should return the roads with some immediate cor- rection of defects in regulation, and leave for more deliberate considera- tion all proposals for “destruction of the system or the creation of a new one.’’ - Says the New York Tribune: “There has been no real test under war conditions. The vital test will not fairly begin before the opening of It is to be hoped that 3 5 Editors Predict Private Control THE Times of Scranton, Pa., ob- Serves that the ranks of those who advocate government ownership ‘‘have been increased lately,” but asks: ‘‘Can it be said that there is a great, nation-wide demand for it, however? If there is, its voice does not appear very strong as yet.” The Paterson (N. J.) Morning Call doubts that the owners would Welcome going back to the pre-war status and believes railway employees will favor federal control or even ownership but finds “a sentiment in this country which is against public ownership.’’ ‘‘Middle ground,’’ thinks the Bos- ton Post, ‘‘between the experiment of government ownership and the known poor results of the pre-war conditions undoubtedly offers the best possibili- ties for general satisfaction, and ap- pears to be heartily approved by all concerned.” “The President’s third alternative, accompanied by develop- ment of waterways and highways as parts of the general system of trans- portation seems’’ to the Portland Ore- gonian ‘‘to combine the most advan- tages with the fewest disadvantages.” Competition RETENTION Of competition is ad- vocated by the San Francisco Chronicle. “The crucial question— aside from the control of great voting power—is what shippers and travelers lose by withdrawal of facilities and accommodating spirit which results from competition.’’ Government Operation Inefficient NOTHING, says the Bridgeport (Conn.) Post, could be much worse than a continuance of federal direction as it is, because, first, of ‘‘the possibility of political manipu- lation, wth wages as the lever, by the party in power,” and, second, ‘‘the tremendous advance in cost and the wretched, and unsatisfactory service which in a short time would approach what we now have in other public run departments . To return to conditions existing before the war means a return to the ham- pering acts of 49 commissions, the laws and rules of which have been coldly swept aside by the federal gov- ernment, and action has been taken which the best railroad men advised long ago, but which the demagogues roared about for many decades.” Remarks the New York Commer- cial: “Governments have never been as efficient as private corporations in handling any kind of business. In England the telephone service is wretched and is not patronized by the public as it is in America. When the war came to us our government ar- senals and big gun shops were of little value. Some should be main- tained for experimental purposes but in an emergency we shall always have to rely on private enterprise to fur- nish war materials. . It is reassuring to find that the President recognizes the value of private initia- tive and enterprise.” In another article the same newspaper prophesies that under government ownership “the higher places would become re- wards for political service instead of being the goals which faithful em- ployees might hope to win . . . EIow.many postal clerks or mail car- riers have been rewarded with post- masterships?’’ Political Dangers HE Boston Herald thinks that ‘‘the idea of laying down new railroads on the same theory that we have made river and harbor expendi- tures; of building railroad stations as we have our federal post offices; of employing trained men as we do our political appointees in Washington and elsewhere, could not fail to spell wide-spread disaster.’’ Still further goes the New Bedford (Mass.) Mercury: “The peril lies in the tendency which is manifest on all sides to socialize all sorts of pub- lic activities. Massachusetts is full of Such ideas. This city has been asked to undertake the distribution of fuel, a far more radical thing than the production which the government un- dertook as a war necessity. Such measures will lead to mischief and revolution, the effects of which the average man does not foresee. It would lead to the annihilation of our economic system, the institutions and ideals upon which the nation was founded, destroy individual oppor- tunity and personal liberty, ruin in- vestment, and wipe out the savings of the thrifty who have put aside their earnings in investments, life insur- ance policies and banks.” And the Flint (Mich.) Daily Journal asserts: “Paternalism carried to extremes if the administration permitted it to be persisted in would be extremely bad for the country at this time when there are problems in abundance to be solved of necessity.” Present Control Criticized M ANY editors base their opposition to government ownership . On what they regard as shortcomings of the government control regime. Thus the Cincinnati Enquirer declares that ‘‘government control has demon- strated the weaknesses that now ob- tain and that will be accentuated un- der government ownership.” Two Pittsburgh journals concur in that view. Says the Leader: “Objection to unsatisfactory governmental opera- tion of the transportation system is not a secret. It has been expressed by the individual traveler quite as ex- tensively as by the shipper. Higher costs to the public have been the rule.” And the Dispatch: “There is far from a unanimous verdict that government ownership has been an improvement from a public as dis- tinct from a military viewpoint. Shippers and passengers are being heard from.” The New York Sun says that if the government “cannot do immensely better in the next two years than it has in the last year º it ought to be an easy thing for the American people to decide in 1920 that the railways shall be both owned and operated by private cap- ital, enterprise, energy and brains.” ‘‘We have had,” says the Philadel- phia Press, ‘‘some experiences of full government management and want no more of it at least in time of peace. . . Railroads, like individuals, should have a check on inevitable evil tendencies but within the line of safe- ty they should be given as advantag- eous a liberty as experience has shown to be compatible with the pub- lic good.” An Auspicious Record THE Keokuk (Ia.) Gate City re- marks: “Some advantages of cen- tralized authority are obvious now and it is not unreasonable to believe that others will be apparent long be- fore the roads go back to their own- ers. All can be had under private op- eration if the government will permit For a New Policy the railroads to administer their own affairs along lines approved by rail- road men of the highest ability and character.’’ ‘‘There must,” declares the Buf- falo Evening News, “be a return to the old system of Yankee hustle and competition. It gave America the finest railroad service in the world at reasonable cost. It will do it again.” The Weeklies OF the weekly journals, judged by recent utterances, the Independ- ent is for government ownership of public utilities, including railroads; the Outlook, for government owner- ship of telephones and telegraphs, but for the President’s third alternative with railroads; while aggressively op- posed to government ownership are Leslie’s, Collier’s and the Saturday Evening Post. of Encouragement 4 & O OME new element of policy,” the President said, “is absolutely neces- sary” in order to correct, before releasing the roads to their owners, “the old conditions,” which are “conditions of restraint without de- velopment, with nothing affirmative or helpful about them. What the coun- try chiefly needs is that all its means of transportation should be developed.” A POLICY that would foster as well as correct and restrict was urged upon the President in 1915, with the result that he recom- mended a “fresh assessment of cir- cumstance’’ through a Congres- sional inquiry. The resulting Joint Committee, headed by Senator Newlands of Nevada, until his death, and since by Senator Smith of South Carolina, largely devoted its hearings in 1916 and 1917 to proposals directly or indirectly bearing on the need of assuring railway earnings sufficient for ade- Quate operations and credit. In those hearings a constant and well defined part was taken by Senator Cummins, who, as already noted, will succeed Mr. Smith as Chair- man of the Senate Committee on Interstate Commerce and hence of the Joint Committee. “Rich and Poor Road” As viewed by Mr. Cummins the chief obstacle was the problem of “the rich and poor road”: Where two roads between common points take the same rates how can the revenue of the poor road be made sufficient for adequate service to the people dependent upon it without unduly enriching the road which is already prosper- ous and giving satisfactory serv- ice? In substance this question he put to one witness after another. On Dec. 2 in concurring with the President that the roads ought not to be returned to their owners under the former system, Senator Cummins said: “The defects of that system are obvious and fundamental and failure of Con- gress to substitute some other plan before the 21 months expire will be inexcusable.’’ The present Senate Chairman, Mr. Smith of South Carolina, on the same day urged that some provision must be made by which new roads built through un- developed country can exist until revenue pays “a reasonable per- centage of the capital and labor invested in their establishment.” No Statutory Policy SINGLING out the “new element of policy” affecting revenue as the subject of an editorial, the Wall Street Journal of New York says: “Congress has never declared the nation’s policy toward the common carriers nor has it ever authorized the Interstate Commerce Commis- sion to do so. The most that the law-makers ever said, with the help of the courts, is that rates. . . . must be reasonable.” The Com- mission has said in effect “that it had no power to adjust rates in such a manner as to frame a na- tional policy for the encouragement of railroad construction. That was outside its province. It could practise restriction; it held itself powerless to open the door to development. Federal and state regulatory bodies have long had ample authority to restrict the actions of the carriers, but they have never been charged with that responsibility for results which can- not safely be separated from author- ity. It is just at this point that the railroad policy of the future must depart from that of the past.” In the same vein we read in the Providence Journal: “When the time comes for returning the railroads to their owners Congress will be called upon to repeal laws that have been unduly restrictive expenses. in the past and also to put an end to the old policy of fixing rates that are not based upon legitimate Mr. McAdoo at Once repudiated the procedure of the bureaucratic Interstate Commerce Commission by advancing rates from 25 to 40 per cent and ship- pers were not put out of business when required to pay fair prices for transportation instead of get- ting it at less than cost.’’ - Likewise the Schenectady (N. Y.) Gazette: “The railroads must be built up to give the service the country needs and at the same time there must be a safeguarding of interest that will command the confidence of large and small in- vestors’’; and according to the New York Sun the legislative and ad- ministrative government “while still exercising a proper and useful control, must not force the roads to starve.’’ Report of Commission THE annual report of the Inter- state Commerce Commission ap peared a few days following the President’s message. The Commis- sion indicates the aspects which it now thinks must be dealt with. Among them is this: “Limitation of railway construction to the necessities and convenience of the government and the public, and as- suring construction to the point of these limitations.” The report of the Commission contains no reference to the pro- posal so often made that the statute . should place upon some federal functionary the duty of promoting provision of traffic facilities to meet traffic growth and the authority to fix rates sufficient to yield the revenue required. To Restore Rate Suspension SEATOR HOKE SMITH Of Georgia deals with the method of rate regulation in a bill intro- duced Dec. 3. This would amend 10 the Control Act so as to revive during the period of government operation the power of the Inter- state Commerce Commission to sus- pend rate advances pending investi- gation, such advances being pro- posed on the President’s (Director General’s) initiative. Such a pro- posal aims at the situation created by the Control Act, which in effect gives initiative in rate making, without suspension, to the railway manager, namely, the Director Gen- eral—a power which was taken from the railway managers in 1912. According to the letter of the Control Act, the Interstate Com- merce Commission may review any ‘‘President-made’’ rate after it has but only one gone into effect, ‘‘President-made’’ rate has been set aside by the Commission. This was in a Pacific coast lumber case pending before government control, where the issue was alleged dis- crimination against a region. Be- fore the case was Director General put in a schedule which raised both the rates whose relation was in litigation. The Commission in deciding that the relation was discriminatory and must be corrected was ordering the Director General literally to change one of his own rates. decided the This brought the comment in some quarters that the Commission had “asserted it- self” against the Director General’s authority. Mr. McAdoo did, and in public said, nothing about it. All he had to do to maintain revenue was to correct the dis- crimination by raising one rate in- stead of depressing the other; the Commission had not and has not in any case undertaken as ex- plicitly affecting revenue to exer- cise its power under the Control Act to review the Director Gen- eral’s rates. So under government control in practice, though not necessarily under the terms of the act, the officer who is charged with re- sponsibility for adequacy of facili- ties and service exercises, without supervision, investigation or review (except for abatement of discrimin- ations), the function of adapting rates to revenue requirements; while the Interstate Commerce Commission performs the work of removing discriminations. It is this war-time situation which Senator Hoke Smith would change by restoring the pre-war practice, and he is known to have in this the support of many industrial traffic managers and shippers’ counsel. Plans For Regional Monopolies S am eacample of possibly desirable unification the President cited 7 “regional corporations, wholer which the railways of definable areas would be in effect combined in single systems.” UCH thought and utterance of economists, railway and financial specialists has been ex- pended in the attempt at framing an answer to Senator Cummins’s question about the “rich and poor road.” The Senator at various stages of the Joint Committee hearings asked witnesses how the strong line could be made to ab- sorb a “connecting’’ weak line and whether regional monopolies were feasible. The Senator is quoted as having said in conversation that he never got an answer on the stand. Some of the correspondents attri- bute to the rumored Cummins bill, not yet published, acceptance of regional railway monopolies; but various persons who have talked with the Senator have understood him to prefer some method of 11 merging weak with strong roads which would preserve competition in every region; and they quote him as earnestly desirous of keep- ing his present ideas tentative until he can obtain the views of com- petent specialists in the several fields by which to test his own. Various Regional Schemes REGIONAL monopoly plans are based upon the idea that sur- plus income of those roads which have any could be spread over all the roads serving an area. The weak lines would be merged with the strong. Five “regions’’ figure in the plan which for about ten years has been advocated by W. W. Cook, General Counsel of the Mackay Companies. Mr. Cook in 1917 filed with the Joint Committee of Con- gress a bill setting forth his scheme. Samuel O. Dunn, editor of the Tailway Age, outlined in Collier’s Weekly for Mar. 9, 1918, a re- gional plan dividing the country into not less than five nor more than ten districts. E. J. Tisman, a New York in- vestment banker, proposes from eight to fifteen regional corpora- tions, the government “to en- courage the consolidation of com- panies within each region and if necessary to enforce consolidation.’’ Another New York investment banker, John R. Hall of Hallgarten and Co., proposes one unified Sys- tem of railroads merged and Or- ganized under a federal charter and operated by means of a central controlling body with regional direction and supervision. These plans appeared in the in- vestment section of the Railway Age, which on Nov. 15 published comment upon these schemes by E. P. Ripley of the Santa Fe. Mr. Ripley is inclined to favor a num- ber of regional roads, which might limit to something like 10,000 or 12,000 miles the length of line to be managed by any one man. Francis H. Sisson, Vice-President of the Guaranty Trust Co. of New York, sees but one alternative to a return to the old conditions or government ownership, namely, “regional railways under private ownership” and delimited on “natural traffic divisions.” N. L. Amster of Boston, Chair- man of the Executive Committee of the Rock Island and President of the National Railroad Security Holders Association, would have a central corporation composed of representatives of the government, of the shippers, of the employees and of the security holders. This corporation could “assimilate the railroads.” Newman Erb, President of the Ann Arbor, proposes a central cor- poration owned by regional cor- porations. Mobilization of Credit - AS bearing on Messrs. Hall, Erb and Amster’s thought of ulti- mate central and single ownership, the possibilities of spreading sur- plus income over all the roads is indicated not by regions but na- tionally by a distinguished rail- way corporation official, who asks that his name be not given at present. His plan “for mobiliza- tion of the credit” of the roads, bears date of November, 1917. For that calendar year the net income available for interest, he remarks, WaS Say . . . . . . . . * @ ſº gº & © tº $950,000,000 Requirements for inter- est on debt say. . . . . . 420,000,000 Remainder ........530,000,000 Any banker or financier, he thinks, would say, “This is, as a whole, a solvent situation.” Yet every railroad in the country, he pointed out, was at that moment appre- hensive about the future and many in actual distress. Why not, he asked, mobilize credit as facili- 12 ties had been mobilized by the Railroads’ War Board or as bank- ing reserves were mobilized by the Act of 1913? The author of this plan, how- ever, proposes not national unity of ownership but regional. He suggests five districts, New Eng- land, Eastern, Southeastern, North- western, Southwestern. Computing, for illustration, the financial situ- ation of the five regions as if they were a single system, this economist figures that allowing the highest stock prices quoted dur- ing the three-year period ended Dec. 31, 1916, new stock issued in exchange for old would aggregate say $6,500,000,000 upon which divi- dends at 5 per cent would require $325,000,000, “leaving $205,000,000, half to go to shareholders or to a reserve fund, the other half to be used for extension of facilities.” Against the Regional Plan OPPOSITION to the regional plan was expressed by Julius Kruttschnitt, for many years the leading lieutenant of the late E. H. Harriman on the side of opera- tion, and now Chairman and cor- porate President of the Southern Pacific. Mr. Kruttschnitt says: “My objection to the regional plan as I understand it is that it would start with a forced alienation of the properties at what would no doubt be a sacrifice of values, and would result in a practical de- struction of all competition. For what purpose? Apparently for the purpose of securing the benefits of unified control and the efficiency of federal operation. Is it not well to ask whether the price to be paid for these benefits is not too high and whether they cannot be secured at a lower price? “There is no reason whatever, as has been proven by past experi- ence, why with a modification of the federal control which existed in the past, the public cannot secure the unquestioned benefits of private initiative and of efficiency equally as great as, or greater than, that shown by the Federal Rail- road Administration. The latter has made more intensive use of all the methods the railroads origin- ated in the way of securing greater Carloading and greater train- loading, rendered possible by the exercise of powers which had al- ways been denied through private control. These benefits can be provided under private control with such governmental regulation as will make the results possible. “Railroad officers generally be- lieve that the absolute suppression of competition contemplated by the regional plan, as well as by govern- ment ownership, would result in stagnation, and that there would be no stimulus for the roads under such a plan to strive continually to better their service; whereas uñder competition regulated by the government, all of the benefits aris- ing from the desire of private own- ers to increase the traffic and earnings of their roads would follow.” Mr. Kruttschnitt referring to the President’s statement that the roads had been “unequal to their tasks,” continued: “In handling the traffic which the Federal Railroad Administration has handled during the present year and which it is claimed is the largest ever handled in the history of the country, the railroad plants—including locomo- tive, cars, main line and terminals —were substantially those provided for under private control. . . If the railroads, starved as they were under regulation as it existed prior to federal control, could meet the demands made by developing in- dustry as well as they have done, what might they not have accom- plished under intelligent and con- structive control which it is hoped Congress will now provide?” g 13 Inter-Subsidiary Rivalry *** C ONTAINED in the anonymous draft quoted above is this reply to misgivings lest a regional organization occasion loss of rivalry and of striving for excel- lence: “Operating management would be continued in a spirit of rivalry but under general direction, divi- ding lines of a region for actual operation in the most rational way. This would permit comparisons of one line with another as to train- load, operating costs, etc.” As illustration the author cites the subsidiaries , f the Steel Corpora- tion. Another reply is suggested by E. JP. Ripley: ‘‘a healthy rivalry as to the accommodations and facilities offered the public, even though in an entirely different part of the country, so that the customs pre- vailing in New England, for ex- ample, may be compared with those of the Middle West or Pacific states. Competition of this kind alone would have its influence, but there would be direct competition in many cases which would hav its effect also.” - Decemtralization and Mechanical Progress V ALUE of preserving many in- dependent operating units was pointed out to the Director General by the Railway Business Associa- tion in February, 1918, from the point of view of “reasonable ex- pedition in the demonstration and introduction of improvements.” In that communication it was stated: ‘‘Manufacturers of railway goods have borne an honorable part in promoting the progress of trans- portation science. What they have achieved for the public in safety, comfort, speed and economy of railway operation has been accom- plished in an atmosphere of keenest competition. We could try per- suasion upon one independent rail- way manager after another until the test was made and a demon- stration afforded. Our work has been marked by variety, elasticity, development. The inventor, the executive and the salesman have been inspired by the hope of ex- celling, roused to efforts by the exertions of rivals. Under such conditions our industries and the country with them have progressed and thriven. . . . We believe that the preservation of decentralization in our dealing is not only important for the immediate present but vital as a precedent for an ultimate ad- justment after the war.” Partial Consolidation IT is known that a number of influential men who are not yet ready to publish plans are studying the “rich and poor road” problem along the line not of regional monopolies at the one extreme or mergers of connecting and non- competing lines at the other, but of mergers within an area or be- tween termini such that a number of lines would be consolidated not all into one but by pairs, one weak road with one strong road, preserv- ing competition. - Others say that consolidation has already proceeded far enough. They would like to keep all the present operating units independ- ent, rehabilitating the weak lines either through rate advances or re- organizations, according to the de- gree of their financial feebleness. Government Guarantees STREN GTHENING of railway credit is not hoped for by all the debaters merely from “mobi- lization.’’ Government guarantee of stock dividends is a part of Mr. Cook’s plan, Mr. Dunn’s, Mr. Sisson’s, Mr. Ripley's, and of the anonymous plan quoted above. Mr. Cook’s proposed regional companies 14 “could obtain the money’’ (for ac- quiring stock control) “by the issue of their own stock, with from 3 to 5 per cent dividends, guaran- teed by the government, with a possible extra per cent if earned, all over 6 per cent to go to the government.” Mr. Dunn would guarantee stockholders a minimum return of say 5 per cent or require the Interstate Commerce Commis- sion so to fix rates that they would yield a specified minimum return. The anonymous plan has the gov- ernment guarantee of 5 per cent on the stock of regional corporations. Objections to maximum as well as minimum limits on stockholders’ returns were set forth in 1916 by George A. Post, then President of the Railway Business Association, now Chairman of the Railroad Committee of the Chamber of Com- merce of the United States. Speaking before the New York State Bankers Association, Mr. Post said: “Some would limit profits, but guarantee a minimum dividend by the government to subscribers to stock, the government to take all above the maximum dividend al- lowed. The guaranteed minimum has been suggested as 3 per cent and the maximum 6 per cent. Such theories are repugnant to what I conceive America to be. My soul revolts at the thought that this country, the land of opportunity, the land of great risks and great rewards, shall say to investors, in- ventors, executives, and the rank and file of workers in the railway realm : “We insure you against failure, but we estop you against great success! . . . How shall we spur on the naturally lazy and shiftless or curb the reckless if they are sure of being 3 per centers without determined effort or the exercise of prudence? How shall we keep blazing the fires of ambi- tion in eager souls if naught of brilliance, indefatigable energy, thrift, and self-denial can overleap the hurdle of a beggarly 6 per cent return for the best that there is in them? - . “Eſow can capital be lured from its hiding places in vaults to build railroads and factories, tunnel the mountains or develop mines, if the possible rewards are not commen- Surate with the risks? How can we raise industrial giants and incul- cate intrepidity of commercial spirit on a 6 per cent diet.” - Adequate Transportation Rates N9; do all the sponsors of uni- fied and regional corporations rely upon guarantees. Mr. Lisman declares that “the act must provide that the rates in all cases be high enough to enable. the companies to earn interest on their Outstanding debt, as well as a fair rate of interest, say 6 per cent, on the outstanding capital stock.” Mr. Hall thinks “the adjustment of rate questions should be made as free from Covernmental inter- ference as is consistent with the necessity of reserving to a regula- tory body the power to handle ef- fectively exceptional needs for rate adjustments.’’ Stock of the “cen- tral” corporation in Mr. Hall’s scheme “should be issued in an amount which would permit the conservative distribution of regular dividends at a rate sufficient to attract capital under most condi- tions when funds are needed for development.’’ Mr. Amster would have securi- ties “limited to a certain fixed in- come,” the rate to be “not less than 4 per cent per annum, with a graduated scale for increased busi- ness and profit. If the earning power of this federal corporation should prove insufficient to pay operating expenses and the fixed income on securities under the present freight and passenger rates, 15 then the trustees who would man- age this federal railroad corpora- tion, composed of representatives of the government, the shippers, the employees and the security holders, would find no difficulty in estab- lishing charges such as would en- able the railroads to operate and meet expenses and pay the fixed income on the securities.” Government in the Management C ONTROL of management under Supposedly non-government Operation presents one of the least discussed of all phases. Senator Cummins in his New York Herald statement of Dec. 2 said that “government ownership with a guaranteed return upon the capital does not necessarily imply government operation.” He has not disclosed in public whether he is considering a guarantee of divi- dends to stockholders in the lessee operating corporations or whether he would give the government representation on the boards of operating companies. Most of the single-unit and regional-unit schemes specify government direc- tors or involve a guarantee of divi- dends which has been assumed to entail government directors. Various authorities have raised, first, the question whether a guar- antee would ever get popular and Congressional sanction if it did not carry with it control of the board; second, the question whether an owner, creditor or guarantor would long refrain from exerting an in- fluence upon selection of managers and framing of policies. The Interstate Commerce Com- mission in its 1918 annual report mentions as a desirable feature of modified private control the “emancipation of railway operation from financial control.” The prob- lem of which a solution has been asked from advocates of govern- ment ownership, government loans or government guarantees is the preservation of operation from political control. - The answers thus far given may be summed up in the suggestion that if the government were to acquire an anxiety about sufficiency of railway revenue for operations and credit the government could stabilize the situation quite as well by putting the cost upon users in the form of rates and upon economies in the form of less rigid insistance upon wasteful competi- tion as by putting it upon the tax levy to meet losses under govern- ment ownership or deficits under government guarantee. It is alleged. that there would be an added ad- vantage in leaving management completely responsible in its sphere and regulation completely respon- sible in its. Wider Scope for Federal Regulation 4, 6 | / ULTIFORM regulation by both state and federal authorities” was mentioned by the President as an outstanding aspect of “the old, conditions” which must be modified. E. VERY one of the regional plans set forth in the foregoing con- templates federal charters. The resolution of the Reconstruc- tion Congress of War Service Committees urges early return of the roads to their owners “under federal charters.’’ This was the proposal of the Railway Executives Advisory Com- mittee before the Joint Committee of Congress. The aim was to 16 unify exclusively in federal hands the regulation of security issues, and to avoid dispute over validity where federal and state restrictions conflicted by abandoning state charters. Federal incorporation was op- posed by the National Association of Railway and Utility Commission- ers through Max Thelan, President of the California Commission, who argued that it would lead to the complete displacement of all state control over railways even in the sphere of local “police’’ regula- tion. Mr. Sims of Tennessee, House Chairman of Interstate and Foreign Commerce, made this comment on the President’s message: “I am satisfied that Congress will never accede to the proposal to wipe out local regulation by means of fed- eral incorporation. . Regula- tion from one place, I believe, will not be tolerated. There are local questions which must be handled by local bodies.” Federal Rate Jurisdiction ENLARGEMENT of the federal scope in regulating so-called “state rates’’ is the proposal to which the state railway commissioners most object. The courts have sustained the In- terstate Commerce Commission as su- preme in abating discriminations. It is claimed, however, by advocates of wider federal jurisdiction, that Con- gress has not acted but constitution- ally could act to bestow upon the Interstate Commerce Commission ex- plicit power to go beyond discrimina- tions and regulate state rates where one state was directly or indirectly depressing total revenue of an inter- state carrier and hence not paying, as among the states, its proper share of the cost of transportation. The suggestion, with which Inter- state Commerce Commissioner Meyer is identified, has for some time been urged that the federal and state au- thorities should cooperate. Some of Mr. Meyer’s colleagues are known to hold the view that where there is a dispute upon which the federal and state authorities cannot or do not agree, “cooperation” fails and one or the other of the authorities must have power to decide. The Commission in its 1918 report phrases its thought in this language: “Establishment of a relationship between federal and state authorities which will eliminate the twilight zone of jurisdiction and under which a harmonious rate structure and adequate service may be secured, state and interstate.” The jurisdiction proposal laid be- fore the Joint Committee of Congress by the railway executives was that federal regulation should extend to the whole instrumentality of inter- state commerce and any or all of its business that can have material effect upon interstate commerce. .-- To Do Away with Wasteful Competition & 6 OUCH alterations of the law as will permit wasteful competition to be avoided” is one modification which the President deems essential if non-governmental control is to be the policy. Rºº. of advantages real- ized under the present govern- ment control is generally acclaimed. ‘‘Return of the railroads to their owners,” asserted Representative Sims of Tennessee, “without legisla- tion allowing them to operate so as to confer the benefits government op- eration has conferred would be the strongest possible force operating for the creation of conditions that could be remedied only by the government taking over the railroads.” Senator Watson of Indiana said the roads should be “nationalized” under government control with pri- 17 vate ownership but operated by pool- ing as a unit under a common equip- ment Zone plan. Representative Esch of Wisconsin thinks “government operation has demonstrated the wisdom of open or common terminals in the large cen- ters, the free interchange of cars and engines, the short routing of freight so as to save time, the consolidation of offices, the control of issues of stocks and bonds and the payment of generous but not extravagant salaries to officials in charge of the manage- ment of transportation.’’ Terminal Consolidations THE Reconstruction Congress of - War Service Committees favored ‘‘federal regulations permitting the elimination of wasteful competition, pooling of equipment, combination or consolidation through ownership or otherwise in the operation of termin- als, and such other practices as will tend to economies without destroying competition in service.’’ “The disjointed operation of the railroads,” said Otto H. Kahn, “each one considering merely its own sys- tem (and being under the law prac- tically prevented from doing other- wise) will, I am sure, not be permit- ted again.” To the continuation of joint ticket offices Lewis J. Spence, Traffic Di- rector of the Southern Pacific, adds this: ‘‘Eliminate extravagant dupli- cation of passenger service and insure continuation of shipping cars loaded to maximum capacity.” The press generally agrees with the Cincinnati Enquirer that “it has been demonstrated conclusively that it was a fallacious principle of government to compel competitive conditions rather than cooperative,’’ and with the Indianapolis Star that “the Pres- ident is right in saying that we can- not return to the old order of re- pressive and destructive laws.’’ What Congress Could Do CONGRESS authorized and the President issued on Dec. 28 last, we are reminded by the New York World, “an order that the transpor- tation systems should remain subject to all statutes and findings of the In- terstate Commerce Commission and to all statutes of the states, but ‘any or- ders, general or special, hereafter made by such director shall have par- amount authority and be obeyed as such.” There was the point. That is what did the business . Con- gress can do in peace what the Pres- ident did in war, if it will, and al- most as expeditiously . . . By one act with fewer words than those used by the President in his procla- mation it can create a new and com- petent agency of control to supersede the stupid bureaus which have stag- nated, and nullify the mass of un- wise laws and regulations which all but wrecked the country a year ago.” Construction of Equipment by Indi- vidual Roads NO difficulty appears to be seen by the Interstate Commerce Com- mission in preserving the advantages of unification in certain forms while keeping construction of equipment on the list of functions which each of the several roads can perform inde- pendently. The Commission urges ‘‘the most efficient UTILIZATION Of equipment,” but is careful to specify ‘‘provision for distributing the bur- den of FURNISHING equipment on an equitable basis among the respect- ive carriers.” 18 RAILWAY BUSINESS ASSOCIATION COMMITTEE ON RAILWAYS AFTER THE WAR W. W. SALMON, Rochester, Chairman Pres. General Railway Signal Co. J. C. BRADLEY, Buffalo STEPHEN C. MASON, Pittsburgh Pres. Pratt & Letchworth Co. Sec. McConway & Torley Co. A. H. MULLIKEN, Chicago Pres. Pettibone, Mulliken Co. W. G. PEARCE, New York E. B. LEIGH, Chicago Pres. American Brake Shoe and Pres. Chicago Railway Equipment Co. Foundry Co. E. J. KEARNEY, Milwaukee Sec. Kearney & Trecker Co. H. H. WESTINGHOUSE, New York Chairman Westinghouse Air Brake Co. R E Q U E S T S F O R C O PIE S of this pamphlet will be welcome from all those desiring to place it in the hands of their representatives or friends. Copies fur- nished or sent direct to lists upon applica- tion to Frank W. Noxon, Secretary Railway Business Association, 30 Church Street, New York. Forrm C 123 Illi 5847 10 li- O È (/) Cr. –）- –-, ==--~~==== --Æ ---> -）--> –）-=== →== ---- •）=）--> ！=）=== --◄EF ---- O Lſ) <！-- 8 © UNIVE |||||| THE UNIVERSITY OF MICHIGAN DATE DUE Syracuse, N. Y. PAT. JAM. 21, 1908 și ºſº ſ ſaei， ſºs， |× §§ ºſº • 8 - sº F'. . º, º sº * . . . . .