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SCIENTIA
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THE GIFT OF
Supt. of Documents
JUN 7 1919
HE
51
2757
1919
M113
STATEMENT
OF
Hon. Wam,
Gibbs
McADOO
DIRECTOR GENERAL OF RAILROADS
BEFORE THE
Interstate Commerce Committee
OF THE
UNITED STATES SENATE
JANUARY 3, 1919
13619-3Q.
UNITED STATES RAILROAD ADMINISTRATION,
WASHINGTON, D. C.
RAILROAD CONDITIONS WHEN GOVERNMENT TOOK CONTROL.
GENTLEMEN :
To review the results of the past year of Federal control, it is help-
ful first to survey the railroad conditions that immediately preceded
that control.
(1) For several years railroads in seasons of heavy business had
developed conditions of transportation stringency similar to the con-
ditions of financial stringency that characterized our banking situa-
tion prior to the passage of the Federal Reserve Act, but the periods
of transportation stringency were even more frequent and more pro-
nounced. It was impracticable for the scores of different railroad
companies to depart from their competitive practices and join in a
co-ordination of facilities and effort so as to meet the traffic demand
བ made upon them and enable them to handle their "peak load" suc-
cessfully. These competitive rivalries prevented any sort of central
control of the traffic itself. Therefore it was impossible to stop the
loading of traffic which could not be promptly disposed of at destina-
tion, or to encourage movement to destinations where the traffic could
be promptly handled. To an important extent there was inadequacy
of terminal facilities and a serious lack of co-ordination and use of
those in existence.
In the fall of 1916 the transportation stringency reached
such a point that traffic was almost paralyzed through inability to
dispose of it at destination. In the fall of 1917, despite strenuous
efforts, and yet under a larger degree of co-ordination than had ever
before been attempted to prevent such a situation, a paralysis of the
transportation situation again occurred. These conditions were most
aggravated in the territory east of Chicago and St. Louis and north
of the Ohio and Potomac rivers, but the acute conditions in this ter
ritory reacted unfavorably on the transportation situation through-
out the rest of the country, damming up the traffic on connecting
lines and producing congestion and distress throughout the country.
The seriousness of the situation is shown by the fact that on Jan-
uary 1, 1918, there were reported on all roads a total of nearly 145,-
000 cars accumulated on account of the congestion which prevailed
in the territory east of Chicago and St. Louis and north of the Ohio
and Potomac in excess of the normal movement.
341554
4
Very serious conditions of car shortages existed both in the fall
of 1916 and in the fall of 1917. In 1916 the situation became so
critical that a special investigation was inaugurated by the Inter-
state Commerce Commission, with the result that under date of De-
cember 28, 1916, Commissioner McChord made a report in which
he stated that "in some territories the railroads have furnished but
a small part of the cars necessary for the transportation of staple
articles of commerce, such as coal, grain, lumber, fruits, and veg-
etables." He added: "In consequence, mills have shut down, prices
have advanced, perishable articles of great value have been destroyed,
and hundreds of carloads of food products have been delayed in
reaching their natural markets. In other territories there have been
so many cars on the lines of the carriers and in their terminals that
transportation service has been thrown into unprecedented confusion,
long delays in transportation have been the rule rather than the ex-
ception, and the operation of established industrial activities has
been uncertain and difficult."
In its report of December 1, 1916, the Interstate Commerce Com-
mission, after reviewing the car-shortage situation in detail and tell-
ing of investigations into conditions at widely separated points, said:
"Substantially all told the same story of failure of transporta-
tion facilities and resulting embarrassment and losses. It abun-
dantly appeared that the movement of loaded cars was in the main
and on the whole very slow. The time of movement of grain from
Iowa points to Chicago was shown to be as low as two days and as
high as twenty-five days, the greater part taking from four to eight
days. Serious delays to loaded cars in switching to points of un-
loading at large terminals and in passing through such terminals
out to other cities, explained much of the failure in car service.”
I need not recount the varying expedients adopted by the rail-
roads under private control to bring order out of the railroad chaos,
none of which was adequate or successful. The railroad executives
of the country tried valiantly during 1917 to solve the problem.
Most of them patriotically sought to find means of keeping the trans-
portation system functioning. Competitive and private control, how-
ever, were unequal to the task.
(2) The great movement of traffic overseas without satisfactory
co-ordination of rail and ocean transport, the heavy building opera-
tion in the way of construction of cantonments, ship-building plants.
storage depots, munitions plants, etc., the transfer to war activities
of the ships and tugs of the coastwise service, thereby throwing still
another new burden on the railroads, the increasing and exacting
movement of troops,-all these operated to accentuate difficulties and
5
10
develop the grave weaknesses inherent in the unco-ordinated competi-
tive activities of all the different railroad companies.
(3) These difficulties were further accentuated by inability to
get promptly new locomotives which had been ordered (but which
could not be delivered because much of the locomotive output was
being devoted to our Allies) and to an entire absence of any locomo-
tives in the reserves of the railroad companies."
Many lines had entirely inadequate facilities for repairing the
locomotives they own. This is shown by the fact that up to Decem-
her 14th the total number of locomotives sent to other line shops
for repairs were 2,220. For instance, 423 locomotives of the Balti-
more & Ohio were repaired in the shops of other lines, while B. & O.
shops repaired only 24 locomotives belonging to other lines, leaving
the net assistance received by the B. & O. 399 locomotives. 201
locomotives of the Penna. Lines West were repaired in other line
shops, while the shops of the Penna. Lines West repaired only 55
locomotives belonging to other lines, leaving the net assistance re-
ceived by the Penna. Lines West, 146 locomotives. 36 locomotives
of the Central Railroad of New Jersey were repaired in other line
shops, whereas they repaired no locomotives of other lines.
Prior to Federal control the railroads had voluntarily transferred
into the congested eastern territory 107 engines from the west and
south. The Railroad Administration, in addition, put into service
in the east 130 locomotives constructed for lines in the west and
south. In addition, the Railroad Administration relocated 215
locomotives already in the east. This ability to place locomotives
promptly where they were most needed regardless of the interest of
any particular line greatly assisted in bringing order out of chaos.
Notwithstanding the tonnage handled during the year, which has
been the heaviest ever known, there are now stored in good condition ·
and ready for winter service 1189 locomotives, while one year ago
there was not a single serviceable locomotive in storage. This im-
proved condition has been due largely to the co-ordination of shop
work, which has resulted in an average increase of 20.93% each week
in the number of locomotives receiving classified repairs.
(4) The relations with labor were of the most unsatisfactory and
threatening character. The cost of living had greatly increased.
Insistent demands were urged by railroad labor for corresponding
increase in wages. There was no method for an amicable adjust-
ment of labor disputes. To a large extent there appeared to be a
lack of confidence on the part of labor in the management of the
railroad companies, if not an actual hostility thereto. There was
imminent prospect of the most serious strikes that had ever threatened
the railroad situation.
6
(5) The financial situation of some of the railroad companies
was precarious. The rapid increase in operating costs, due to in-
creased prices of materials and supplies, and the increased expense.
of operating under the conditions of transportation stringency, were
threatening to impair the ability of many railroad companies to
meet their interest and dividends, so that the railroad plight was a
serious menace to the general financial situation. Even if rail-
road credit had been at its best, instead of at its poorest, it would have
been difficult at the time to raise funds for urgently needed capital
expenditures because of the credit demand of the Government and
the high rates prevailing for money.
(6) The country was at war. Its industrial power was being
turned into war channels. The volume of traffic to be transported
for war purposes was steadily growing and promised to keep growing
to a degreee which could not be foreseen. The nation's success in
the war was largely dependent upon the transportation machine
functioning with an efficiency surpassing anything which had ever
been known in the past. Yet all the factors were rapidly converging
to produce a prolonged and serious transportation paralysis.
For these reasons the President took possession and control of the
railroads on December 28, 1917.
Simultaneously with his proclamation the country entered upon
ten weeks of the worst winter that had ever been known, and, trans-
portation which before was slowing down in an alarming way, was
confronted with the danger of almost complete stoppage.
These were the conditions under which the United States Railroad
Administration began its work.
CONDITIONS UNDER GOVERNMENT CONTROL.
The principal railways and transportation systems of the country
have now been under the control of the Government for one year,
a year marked by the participation of the United States in the
greatest war in history, a year in which the railroads were required
to carry a greater burden both of freight and of passenger traffic than
ever before in their history, a year which began with terrific blizzards
and an alarming coal shortage, a year in which enormous amounts
of foodstuffs and other supplies had to be transported through the
United States to the seaboard for shipment abroad, a year in which
an army of millions of men had to be transported from their homes
to camps and cantonments and then to the seaboard in order that
they might take their places on the battlefields of France and
Belgium.
7
The year is now behind us. In the last few months there has been
an entire absence of any transportation stringency, although the
traffic carried was the heaviest of even this unprecedented year. The
contrast between transportation conditions during the autumn just
passed and the autumns of 1916 and 1917 is marked.
I shall recount some of the things that have been accomplished:
THE MOVEMENT OF TROOPS.
From January 1st, 1918, to November 10th, 1918, a total of
6,496,150 troops were moved over the American railways, 4,038,918
having been transported on special trains. These movements re-
quired a total of 193,002 cars of all types, including 167,232 coaches
for draft and regular train movements. These troops were trans-
ported in comparative freedom from accident, due largely to the
steadfast maintenance of a reasonable rate of speed.
To insure proper care and orderly movement of the immense body
of men comprising the American army and navy, a special organi-
zation has been built up, including a railroad representative stationed
at the office of each State adjutant general to cooperate in the trans-
portation of drafted men, a man in charge of troop movements on
each principal railroad, and a central organization under the Rail-
road Administration in Washington.
An average of 12.2 cars per train was used in the movement of
troops and the speed was kept down to an average of 20 miles per
hour. The special troop trains averaged 443 men.
To allow soldiers and sailors on leave to visit their families at
home, the Railroad Administration put into effect a special rate of
one cent a mile for men on furlough--an accommodation which
added to morale and permitted many soldiers and sailors to see their
loved ones who otherwise could not have afforded it. A special rate
of 75 cents for meals costing civilians $1.00 and $1.25 was made for
soldiers and sailors. No certificates were required for such meals, the
uniform of a soldier or sailor being all that was necessary.
After the signing of the armistice and the beginning of demobili-
zation an effort was made to have the War Department to discharge
the men at their homes, but this plan having been rejected, and the
travel and sustenance allowance fixed by Congress having been lim-
ited to 32 cents a mile, the Railroad Administration continued the
75-cent meals for discharged soldiers and sailors and allowed them
a reduced rate of 2 cents per mile while returning home.
Hardly had the movement of troops overseas gotten well under
way before the armistice was signed with the Central Powers and
8
the work of demobilizing was begun. It is estimated that to de-
mobilize troops under arms will involve the transportation of not
less than 7,250,000 men; for the creation of the army and the send-
ing of approximately 2,000,000 men to the points of embarkation
involved the movement of 7,800,000 men.
At the peak of the activities incident to the prosecution of the war
it was necessary to provide for the daily movement to and from
industrial plants and camps of 205,587 persons in each direction.
To perform this work 2,319 passenger equipment cars were in
daily use.
MOVEMENT OF FOOD TO EUROPE.
The food situation in the allied countries of Europe became ex-
tremely critical in February last, representations being made by
Great Britain, France, and Italy that unless the program of food
deliveries promised by the Food Administration was kept pace with,
Germany and her associates inevitably would win the war. While
the facts could not be told at the time, because of the possible effect
on the morale of the nations fighting the Central Powers, it was
nevertheless true that, according to official word received from the
Entente Allies, the outcome of the war depended upon the ability of
the American railways to transport sufficient supplies of foodstuffs
to the Atlantic seaboard for shipment abroad. This problem was
met. It was no time for half-way measures. The safety of the
world hung in the balance. Empty box cars were rushed from all
portions of the east, south, to the southwestern grain States. Con-
flicting traffic of all kinds was held up. Every facility of the Rail-
road Administration and of the railroads under its jurisdiction was
thrown into the balance. Officials and employees worked day and
night. The result was magnificent. By March 15th the vessel capac-
ity of the Allies had been satisfied and there was available at North
Atlantic ports an excess on wheels of 6,318 carloads of foodstuffs.
exclusive of grain on cars and in elevators.
Since that time there has never been any danger of the American
railways failing to transport the necessary amount of food supplies
for Europe. It perhaps is not too much to say that this was one of
the turning points in the war.
In the period from July to November, 1918, 135,000 more cars
of grain were handled than in the same months of 1917, thus demon-
strating the enormous extra strain placed upon the railroads by this
one item alone.
9
COAL.
Another critical situation which faced the railroads during the
year just passed and was met, had to do with the coal supply. Con-
stant predictions have been made that the railroads would not func-
tion sufficiently to transport enough coal to supply the Nation's
needs; these predictions have not been realized. New England's
demands have been met, and 28,153,317 tons, the largest tonnage of
coal ever known, has been moved to the Lake Erie ports, and trans-
ported to the Northwest. In 1917 only 26,826,000 tons were moved
over this route; in 1916 only 24,692,000 tons, and in 1915 only
21,507,000 tons.
Some indication of the freight traffic problems facing the rail-
roads in the year just passed may be gained from the fact that there
was a net increase of 741,666 cars or approximately 37,083,300 tons
of bituminous coal loaded during the ten months ending October
31, 1918, as compared with the same ten months in 1917. This in-
crease was achieved despite the fact that the severe weather conditions
prevailing in January, 1918, resulted in a decreased production, due
largely to car supply, of 65,594 carloads. The severe weather con-
ditions continued throughout February and part of March, but never-
theless the railroads recovered themselves and in February, 1918,
loaded an increase of 24,366 cars of bituminous coal over February,
1917.
MOVEMENT OF OTHER ESSENTIAL SUPPLIES.
At the same time special attention was being given to the move-
ment of fruits, of cotton, of oil, of iron, and of the other principal
products of the farms, the factories, and the mines of America.
Wherever necessary, special trains were utilized to transport these
staple articles, and other methods were made available which resulted
in fully meeting the situation.
For instance, in April, conditions were chaotic in the oil industry
and a great many of the refineries in the Mid-Continental fields, in
particular, were shut down or only partially operating account of
shortage of equipment. The Railroad Administration arranged to
consolidate oil shipments into train loads, symbol it, and move it
through to destination or breaking point in solid train loads. So
effective were these measures that Mr. W. E. MacEwen. Chairman of
the Transportation Committee of the Western Petroleum Refiners'
Association, voluntarily wrote on December 16, 1918, as follows:
"Without going into the details of the matter. it suffices to
say that within thirty days there was such an improvemert.
10
that from that time on there was never a shortage of tank cars
in the oil industry in the Western field. There never was a
demand made upon the Western oil industry that they were
not able to meet so far as transportation facilities were con-
cerned. There never was a time that there was not at least
a day and a half's loading of cars on hand. During the first
10 months of the year there was loaded from the Mid-Con-
tinent field 256,082 cars, compared with 200,603 cars for the
same period 1917, an increase of 55,479 cars, with practically
no increase in the amount of equipment. From April 20th
to November 30th, inclusive, there was loaded from the Mid-
Continent field a total of 3,585 solid trains of oil, containing
100,530 cars.
"In the month of January the mileage per car per day on
tank cars of Western refiners was 26.16; in June 56.27, and in
September 58.4,-an increase of one hundred per cent in
the mileage performance. What was accomplished in the
oil industry is one of the most concrete illustrations in the
history of railroading of the economic gain by the co-opera-
tion between the shipping public and the railroads."
BUREAU FOR SUGGESTIONS AND COMPLAINTS.
In order to furnish the public a medium for communicating
directly with the Railroad Administration concerning bad service,
the Bureau for Suggestions and Complaints was established with very
helpful results. Many constructive criticisms have been received
and acted on. A total of 1,328 commendations and 714 complaints
of individual discourtesy or incompetence have been received during
the 16 weeks since the formation of the Bureau to December 24,
1918. The commendations have outnumbered the complaints
almost two to one. This in itself is a tribute to the railroad employees
of the Nation. Other letters have been received calling attention to
"organic" defects in railroad service. A sharp decrease in the num-
ber of complaints has marked the return of peace and the consequent
improvement of service.
PROPERTY PROTECTION.
Promptly after the inauguration of Federal control, attention was
directed toward minimizing the enormous drain upon railroad rev-
enues as a result of loss as well as damage to freight and the activities
of thieves. When this work was begun, it was found that shipments
of all kinds were being tampered with and stolen. Goods of all kinds
were taken, even Army supplies, Red Cross shipments and Belgian
Relief shipments. While there are not available authentic statistics
as to the volume of thefts from carriers in recent years, for 1914,
11
carriers reported to the Interstate Commerce Commission, a total of
$10,310,780.41 of thefts of merchandise from cars and terminals,
including concealed and unlocated losses. The principal thefts have
been of four classes:
(1) Thefts of merchandise from cars and terminals.
(2) Thefts of tools, machinery, appliances, brasses, etc.
(3) Padded payrolls.
(4) Embezzlements.
The following statistics reflect the activities as far as reported to
the Railroad Administration of the police agencies of the carriers
under the direction of the Railroad Administration from April 1,
1918, to December 1, 1918:
Arrests for thefts..
Convicted
Pending
•
Employees arrested
Value of goods recovered
Number of sentences imposed of one year or over...
Fines imposed..
10,530
6,069
2,075
3,241
$667,578.54
1,095
$150,509.63
ECONOMIES.
During the war period, essential war necessities had to be met
regardless of cost. In peace time, naturally, one of the chief aims of
railroad operation should be the saving of money. But even though
expense could not be made the first consideration during the war,
strict attention was given to this point and orders were issued to
effect savings wherever possible without interfering with the war-
program. Many of the economies brought about, such as re-routing,
common use of terminals, etc., will be reflected but slightly in the
operating income accounts of the carriers for the year 1918. They
will appear fully in the statements for the year 1919. Nevertheless,
reports so far received from five of the seven Regions show that on
a group of selected principal items, savings totaling $85,576,424.71
have been effected in the period from December 31, 1917, to Decem-
ber 31, 1918. Reports from the two remaining regions are not yet
available.
The specific items which produced this saving include the unifica-
tion of terminals and stations, the elimination of passenger service,
reductions in organizations, and miscellaneous economies.
Equipment has been saved by the elimination of non-essential
passenger trains; by the common use of freight cars; the common
12
use of repair shops; the emergency use of the Pennsylvania Hudson
River tubes for the movement of anthracite coal from the Jersey
Terminals to Long Island, a step which could not have been taken
under private control; the introduction of the coal zone plan in co-
operation with the Fuel Administration, which resulted in the saving
of car miles and permitted the production and transportation of
several million tons more coal than would otherwise have been pos-
sible; the utilization of the Cape Cod Canal for the transportation of
coal to New England; the operation of locomotives under steam from
factories to the point of delivery, instead of hauling them as dead
freight in the past; the introduction of the "sailing day plan" for
less than carload freight; the establishment of special organizations
to handle refrigerator and tank cars and the elimination of circuitous
routes.
During the first seven months of Federal control alone, an aggre-
gate of 21,000,000 passenger train miles a year was done away with
in the territory west of Chicago and the Mississippi River, while in
the Eastern territory, 26,420,000 passenger train miles were elimi-
nated. Without this saving in motive power and equipment the
moving of millions of troops could not have been achieved success-
fully.
UNIFICATION OF TERMINALS.
It having been shown that bad terminal conditions were proving
a serious handicap to the necessary transportation business, Terminal
Managers were appointed at the larger terminals with jurisdiction
over the facilities of all lines. Successful efforts have been made to
route freight so as to arrive at the specific terminal where it was to
be disposed of. Interchange switching in terminals has been largely
eliminated. The report on operations and the reports of the various
regional directors will give in detail what has been accomplished in
this respect, but it is worth noting at this point that at the Chicago
Terminals it has been the practice in the past to reconsign practically
all coal after arrival. Under Federal control, as a result of co-opera-
tion with producers, sixty-six per cent of the coal arriving in Chicago
during August was consigned directly to consumer from the mines
and cross-hauling between terminal lines was greatly reduced
through the same co-operation.
Marked convenience to the public resulted from the utilization
of the Pennsylvania Station at New York by the Baltimore & Ohio
and Lehigh Valley passenger trains.
13
SOLID TRAINS.
In order to meet the extraordinary war demand, and rush food
and other supplies through to destination, arrangements were made
early in the year for the forwarding of consolidated trains of export
freight, principally war supplies, of food, grain, munitions, etc.
Under this arrangement, a total of 5,090 special export trains have
been handled from Western terminals, containing 124,198 cars of
export freight, in the Eastern Region, the trains being filled out with
other freight to make the full trainload as required. With the con-
currence and co-operation of shippers, plans were made to put into
effect in June for assembling live stock, fresh meat, live and dressed
poultry, and perishable freight, in solid trains, and forwarding them
from Chicago, St. Louis, Cincinnati, Buffalo, and other Western
points, on specific days of the week, via roads best fitted to handle
them, resulting in a reduction in the feeding requirements for live
stock and in the number of fast freight trains required to handle. In
the Eastern Region, the decrease in Chicago alone has been 11 trains
per day, and the average cars per train of high-class and perishable.
freight has been increased from 23 to 36. Grain, oil, and cotton are
being consolidated and forwarded in trainload lots from Western
points, resulting in a large saving in labor, in switching, eliminating
cross hauls and facilitating movements. In the Eastern Region
alone, a total of 981 special oil trains have been run since June 1st,
containing a total of 25,034 cars.
ELIMINATION OF CIRCUITOUS ROUTES.
One of the most wasteful practices in railroad operation in the
past has been the use of circuitous routes in the handling of freight
traffic, often for competitive reasons. General Order Number One di-
rected that everything possible be done to alter this condition. In
order to economize in rolling stock and motive power comprehensive
studies were undertaken for the purpose of developing new routes
which would not only be shorter but more economical and efficient.
As a result, car, engine, and train miles have been saved, and the ship-
ping public has been benefited, because more cars have been avail-
able and more expeditious movement of traffic has been secured.
Shippers were not responsible for the former extensive use of circuit-
ous and uneconomical routes, as this routing was largely influenced
by the agents of the interested railroads. Shippers have gladly re-
sponded to what are now the combined efforts of all railroad repre-
14
sentatives under Federal control to influence the use of direct and
economical routes, and consequently the original routing as specified
by shippers is now, generally speaking, in accordance with the es-
tablished routing instructions, and extensive diversions are unneces-
sary. Therefore the increase in efficiency cannot be measured by the
car miles saved through diversions of freight in transit. The sav-
ings in distance via many of the new routes is so great as to merit
special mention. One from Los Angeles to Dallas and Fort Worth
is over 500 miles shorter than the one formerly used; another from
the oil fields of Casper, Wyoming, to Montana and Washington State
points is 880 miles shorter; fruit from southern California to Ogden
is hauled 201 miles less; and a new route between Kansas City and
Galveston has been developed which is 289 miles shorter than the
1,121 miles previously traversed via one of the lines. The ore traffic
moving from Minneapolis and Michigan mines to Lake Superior
and Lake Michigan ports was rerouted with gratifying results. Dur-
ing the ore shipping season, a total of 64,770 loaded and empty cars
were rerouted with a saving of 3,577,464 car miles. A few other
typical cases of shortening of routes follow:
15
Saving
Between-
And-
Long Route.
Miles.
Short Route.
Miles.
in Miles.
Billings, Mont..
Butte, Mont..
Great Falls.
Clinton, Iowa.
Duluth, Minn..
Duluth, Minn..
Chicago, Ill..
Chicago, Ill.
Chicago, Ill.
Chicago, Ill..
Chicago, Ill.
Chicago, Ill.
Chicago, Ill..
Chicago, Ill.
Chicago, Ill.
Minneapolis..
Minneapolis.
Minneapolis.
Minneapolis..
Minneapolis..
Portland, Ore..
Portland, Ore..
Everett, Wash..
Billings, Mont..
Chicago, Ill..
Kansas City
Kansas City
Milwaukee, Wis..
Mason City, Iowa.
Ft. Dodge, Iowa.
Little Rock.
St. Louis, Mo.
Minneapolis...
St. Paul, Minn..
Des Moines, Iowa.
Kansas City, Mo..
Omaha, Nebr..
Peoria, Ill.
St. Louis, Mo..
Ogden, Utah
St. Paul, Minn..
Spokane, Wash..
Butte, Mont..
Spokane, Wash.
C., B. & Q.-N. P.
606
Şoo Line
465
141
Milwaukee, Wis..
C., M. & St. P.-N. P.
499
Soo Line
376
123
•
C. G. W.
596
A., T. & S. F.
458
138
C. & E. I.-M. P.
573
C. & A.
483
90
Soo Line
145
C., M. & St. P.
85
-60
C. & A.-M. & St. L..
485
C., M. & St. P..
356
129
C. & A.-M. & St. L.
490
C. G. W.
373
117
C., R. I. & P.
1,277
C. & A.-M. P.
633
644
C., R. I. & P. & St. L...
361
C. & A.
284
77
C., R. I. & P.
524
C. & N. W.
408
116
I. C.-M. & St. L..
503
C., M. & St. P.
412
91
C., B. & Q.
614
C., R. I. & P.
270
344
C., M. & St. P.
666
C., R. I. & P.
494
172
C., B. & Q
736
C., St. P.. M. & O.
377
359
Soo-C. & A..
609
C., R. I. & P.
458
151
Soo-C. & A..
742
C., B. & Q.
617
125
S. P. Lines.
1,339
U. P. Lines.
857
482
U. P.-C. G. W.
2,127
S. P. & S.-G. N.
1,815
312
N. P.
444
G. N.
306
138
G. N.
405
N. P.
236
169
G. N.
762
N. P.
613
149
C., M. & St. P.
387
G. N.
171
216
Chicago, Ill.
Chicago, Ill.
Sioux City, Iowa.
C., R. I. & P.
259
C. & N. W
138
121
C., B. & Q.
615
I. C.
509
106
16
In a few instances it has been necessary to increase the length of
hauls temporarily to avoid accumulations.
By rerouting, a total of 16,863,633 car miles has been saved in
the Eastern and Northwestern Regions alone.
BETTER OPERATION.
The operating results may be summarized briefly: The railroads,
during the first ten months of Federal control, produced 1.9% more
ton miles with a decrease of 2.1% in train miles and a decrease of
5.8% in loaded car miles. The average trainload increased from
655 tons to 682 tons, a gain of 4.1%; and the average carload in-
creased from 26.8 tons to 29.0 tons, a gain of 8.2%.
The increase in traffic in 1918 was accomplished by the use of ap-
proximately 3.4% more freight cars and approximately 1.4% more
freight locomotives than in 1917. Compared with 1916, the 1918
increase in freight cars was 6.9% and the increase in freight locomo-
tives was 2.4%.
It should be explained that the total ton miles handled are much
less than they would have been in the past for a corresponding
volume of traffic by reason of cutting out circuitous hauls. The gen-
eral statement may be made that the actual transportation produc-
tion is greater than is indicated by ton-mile statistics. In whatever
degree the actual performance of moving tons from one place to an-
other place as required is accomplished by moving the tonnage over
shorter routes, to that degree the ton-mile statistics understate the
real performance when they are compared with a period when the
shorter routes were not used.
THE PERMIT SYSTEM.
Probably it would not have been possible to meet the enormous de-
mands made upon the transportation system during the past year
without the utilization of the permit system, which prevents the load-
ing of traffic in the absence of assurance that it can be disposed of at
destination. This is a reform which under Government control
would succeed in peace times as well as in war times and is one of
the most important means of preventing transportation stringency or
congestion. It means controlling the traffic at the source, in the
public interest, instead of letting the traffic choke the public interest
at destination.
17
WAR CHANGES.
Some of the means used to bring about the desired result were
strictly war measures and probably could not or should not be utilized
in time of peace. For instance this is true with regard to the elim-
ination of many passenger trains, although passenger trains run
merely for competitive reasons are often wasteful and do not give
the needed service to the public.
The Exports Control Committee, which has played a vitally im-
portant part in the proper handling of supplies for overseas ship-
ment, probably could not be operated under peace conditions, al-
though under unified control an important adjustment of traffic ta
port capacity will be practicable, even under peace conditions.
REFORMS WHICH SHOULD BE CONTINUED UNDER PEACE CONDITIONS.
Many of the changes in railroad operation inaugurated during the
period of the last year should prove of permanent value and should
continue if possible whatever form of control is decided upon for
the railroads. Such reforms include:
1. The maintenance of the permit system so as to control the
traffic at its source.
2. The maintenance of heavy loads for cars.
3. The pooling of repair shops.
4. The elimination of circuitous routes.
5. The unification of terminals.
6. The maintenance of the "sailing day plan."
7. The consolidation of ticket offices.
8. The utilization of universal mileage tickets.
9. The standardization of equipment.
10. The maintenance of the uniform freight classification intro-
duced by the United States Railroad Administration.
11. The maintenance of common time tables between importaut
points.
12. The maintenance of high demurrage rates and uniform rules.
13. The establishment of through waybilling freight from point
of origin to destination.
14. Rendering unnecessary the rebilling by connecting or inter-
mediate routes.
15. The elimination of the old practice of paying in mileage or
per diem rental for the use of freight or passenger cars of one carrier
by another.
16. The simplification of the old practice of apportioning interline
passenger revenue.
18
17. The utilization of water routes for the relief of crowded rail
lines.
WASTEFUL COMPETITION.
Some of these reforms can be continued should the roads be re-
turned to private operation; others cannot. Competition and self-
interest dictate that when the roads are under private control, each
carrier gets as much business as possible and keeps it regardless of the
fact that the aggregate result may be wasteful and uneconomical.
For instance, where two or more competing lines operate between two
important cities the convenience of the public can best be served if al-
ternating trains be operated at short intervals over the different roads.
Competition, however, always results in each of the roads "bunching"
their trains at the times when the demand for transportation is the
heaviest. Competing lines can hardly be expected to route freight
over the lines of competitors even though these competing lines may
have the shorter route and be able to handle this particular traffic
more economically. Lines with advantageous terminal facilities
cannot be expected under private control to place such facilities at
the disposition of competitors operating under less favorable circum-
stances. One company will not forego loading and hauling traffic,
even though this seriously embarrasses the general situation, because
its connections cannot conveniently receive and dispose of the traffic.
Private carriers may not enforce rules which, although designed to
bring about efficiency and economy, might drive business away from
their lines. All the waste resulting from these practices and run-
ning into huge costs is paid for by the public in the form of in-
creased rates.
PUBLIC-SERVICE FREIGHT BUREAUS.
Under private control of railroads, and for competitive reasons,
practically all railroads maintain so-called off-line agencies, the orig-
inal function of which was solicitation of traffic. These off-line
agencies were abandoned by the Railroad Administration for the
reason that the competitive causes which gave rise to their establish-
ment no longer existed. It was found, however, that in some meas-
ure these agencies had performed real service to the public, and
therefore the establishment of public-service freight bureaus has been
begun with a force trained to handle for shippers matters which were
formerly handled by the off-line agencies.
LABOR.
The participation of America in the European war, with the con-
sequent shortage in man-power available in this country and the
19
increase in the cost of living, has made the railroad labor problem
a difficult one during the past year. However, the great bulk of
railroad labor has demonstrated a fine spirit of patriotism and has
co-operated heartily with the Government. The labor troubles which
were facing the railroads when they went under Government control
were practically all eliminated, and, with a few exceptions, there has
been quiet in the railroad labor world during the last twelve months.
In order to place railroad labor upon a living wage and provide
fair working conditions an investigation into labor conditions on the
railroads was begun immediately after the carriers were taken by
the Government, with the result that many reforms in working con-
ditions, decreases in the hours of labor and increases in the rates of
pay have resulted. These investigations have been continued since
the machinery was set up for the thorough investigation and hearing
of all grievance and representations about wages and working con-
ditions. This machinery generally has recognized the so-called “bi-
partisan" principle of equal representation of employer and em-
ployee on boards. Decisions, however, have always been made by
the Director General, since he is charged with that responsibility as
the chief representative of the Government. A Director of Labor
was appointed in the person of W. S. Carter, President of the Broth-
erhood of Railway Engineers and Firemen, who was placed on an
equal footing with the heads of other divisions.
The critical labor conditions are strikingly brought out in the
report of the Railroad Wage Commission, composed of Honorable
Franklin K. Lane, Secretary of the Interior; Charles C. McChord,
William R. Wilcox, and J. Harry Covington, appointed January
18th, 1918, to "make a general investigation of the compensation
of persons in railroad service, the relation of railroad wages to wages
in other industries, the conditions respecting wages in different parts
of the country, the special emergency respecting wages which exists
at this time, owing to war conditions and high cost of living, as well
as the relation between different classes of railroad labor."
This commission heard representatives of every class of employees,
railroad officials and experts on the subject and examined hundreds
of written statements and personal letters from employees. The re-
quests presented to the commission for wage increases, if granted,
would have involved an outlay of something over one billion dollars
per year in excess of wages paid in 1917. In its report the com-
mission, after reciting the various demands for wages made by rail-
road labor in 1916 and 1917 and reviewing increases given by the
railroads under private control, said:
"But these advances were not in any way uniform, either as to
20
employments, or as to amounts, or as to roads, so that one class of
labor benefited much more than another on the same road, and as
between roads, there was the greatest divergence. The situation has
been dealt with as pressure made necessary, and naturally those who,
by organization or through force of competition, could exert most
pressure fared best. Things came to a head just before the Govern-
ment took over the railroads. Another three months of private man-
agement and we would have seen much more extensive concessions
in wages, or there would have followed an unfortunate series of labor
disturbances. The Government therefore has now to meet what
would have come about in the natural course.
"Indeed, the patience of the men was only allayed, after Govern-
ment intervention, by the assurance that the matter of wages would
be promptly taken up and that the awarded increases would be
retroactive as of January 1st of this year.
The Commission also said:
""
"It has been a somewhat popular impression that railroad em-
ployees were among the most highly paid workers, but figures, gath-
ered from the railroads, dispose of this belief; 51% of all employees
during December, 1917, received $75.00 per month or less, and 80%
received $100.00 per month or less. Even among the locomotive
engineers, commonly spoken of as highly paid, a preponderating
number received less than $170.00 per month, and this compensation
they have obtained by the most compact and complete organization,
handled with a full appreciation of all strategic values. Between
the grades receiving from $150.00 to $250.00 per month, there is
included less than 3% of all the employees (excluding officials), and
these aggregate less than 60,000 men out of a grand total of
2,000,000.
"These, it is to be noted, are not pre-war figures; they represent
figures after a year of war and two years of rising prices. And each
dollar now (the report was made April 30, 1918) represents in its
power to purchase a place in which to live, food to eat, and clothes
to wear, but 71 cents as against the 100 cents of January 1, 1916."
WAGES.
Wage increases granted during the year are estimated to aggregate
between $600,000,000 and $700,000,000 per annum and in a large
part were retroactive from January 1, 1918. These wages were fixed
not upon the theory that the railroads, a permanent industry, should
compete in prices paid labor with the transient war industries, many
of which paid very high wages in order to attract labor. Rather
the effort was made to find a just and equitable basis which would
21
outlive the war and which would give a living wage and decent work-
ing condition to every railroad employee. Efforts have been made
to eliminate inequality, and, while this work has not been finished,
it has been chiefly done.
CONDITIONS OF EMPLOYMENT.
On February 21 General Order No. 8 was issued, containing
among other things, the following:
"No discrimination will be made in the employment, retention,
or conditions of employment of employees because of membership
or nonmembership in labor organizations".
This has had the effect of many railroad employees joining labor
unions who previously were not affiliated with them. At the same
time, equal consideration has been shown employees who were not
members of unions and individual employees have been heard on an
equality with representatives of the unions. The principle of the
eight hour day was recognized early and strengthened whenever
possible.
Special efforts have been made to better the working conditions of
the women in railroad service, and a special Woman's Section was
established in the Labor Division to investigate conditions surround-
ing women so employed and apply remedies where unfavorable con-
ditions were found to exist. In General Order No. 27 it was ordered
that:
"When women are employed the working conditions must be
healthful and fitted to their needs. The laws enacted for the gov-
ernment of their employment must be observed and their pay, when
they do the same class of work as men, shall be the same as that of
men."
In the same order it was provided that where negroes perforrned
the same service as whites, they should receive the same pay as
whites.
LABOR SHORTAGE.
The necessity for manning the American Military Railways in
France with trained American railway men, and the induction into
other branches of the Army and Navy through voluntary enlist-
ments or through the draft, of many railroad employees, added to
the difficulties throughout the year, since at no time in the history
of the American railroads has there been a greater need for trained
and skilled railway help than during the war period. This difficulty
was greatly increased by the influenza epidemic during the last half
of the year, which very seriously interfered with the operation of
the railroads for several months.
22
EXPENDITURES FOR CAPITAL ACCOUNT.
On February 2, 1918, all lines under Federal control were di-
rected to prepare and send in budgets of improvements immedi-
ately required to increase capacity and efficiency and to promote
safety in operations; and in the letter of instructions the following
policy was prescribed:
In determining what additions and betterments, including
equipment, and what road extensions should be treated as
necessary, and what work already entered upon should be
suspended, please be guided by the following general princi-
ples.
(a) From the financial standpoint it is highly important
to avoid the necessity for raising any new capital which is
not absolutely necessary for the protection and development
of the required transportation facilities to meet the present
and prospective needs of the country's business under war
conditions. From the standpoint of the available supply of
labor and material, it is likewise highly important that this
supply shall not be absorbed except for the necessary purposes
mentioned in the preceding sentence.
(b) Please also bear in mind that it may frequently
happen that projects which might be regarded as highly
meritorious and necessary when viewed from the separate
standpoint of a particular company may not be equally
meritorious or necessary under existing conditions, when
the Government has possession and control of the railroads
generally, and therefore when the facilities heretofore sub-
ject to the exclusivc control of the separate companies are
now available for common use whenever such common use
will promote the movement of traffic.
The budgets submitted in response to this called for expenditures
chargeable to capital account-that is, exclusive of large sums charge-
able to maintenance-amounting in the aggregate to $1,329,000,000
which, upon careful revision was reduced to $975,000,000. This
amount has been increased from time to time by new and unfore-
seen requirements, and particularly by large orders for locomotives
and freight cars, until the improvements definitely authorized to
December 1, 1918, amounted to $1,254,396,158. Of this amount
$551,925,525 is for Additions and Betterments; $656,048,745 for
Equipment, and $46,421,888 for construction of Extensions,
Branches and Other Lines.
The expenditures thus authorized were for improvements classi-
fied as follows:
23
Class of work.
Capital
Improvements expenditures
authorized
to Dec. 1, 1918.
made to
Nov.
1, 1918.
Additions and Betterments.
1. Widening Cuts and Fills, Filling Trestles, etc.
2. Ballasting
3. Rails and other Track Material.
4. Bridges, Trestles, and Culverts.
•
5. Tunnel and Subway Improvements.
6. Track Elevations or Depressions.
7. Elimination of Grade Crossings.
8. Grade Crossings and Crossing Signals.
9. Additional Main Tracks..
10. Additional Yard Tracks, Sidings, and In-
dustry Tracks
11. Changes of Grade or Alignment.
12. Signals and Interlocking Plants.
13. Telegraph and Telephone Lines.
14. Roadway Machinery and Tools.
$7,639,469
$3,694,433
9,852,098
4,017,570
32,755,702
13,024,510
40,637,677
20,970,333
4,041,957
879,371
15,278,146
3,126,307
12,175,753
3,546,618
3,570,222
993,300
62,532,363
25,378,978
125,806,775
47,534,458
9,089,621
2,887,221
16,796,192
5,339,360
5,789,737
2,395,406
• •
1,979,206
1,167,706
15. Section Houses and other Roadway Buildings
16. Fences and Snowsheds.
3,058,495
2,119,588
•
2,198,411
835,903
17. Freight and Passenger Stations, Office Build-
ings
47,963,570
15,690,785
18. Hotels and Restaurants.
754,674
297,803
19. Fuel Stations and Appurtenances..
8,236,725
3,197,554
20. Water Stations and Appurtenances.
11,879,643
5,046,824
21. Shop Buildings, Engine-Houses, and Appur-
tenances
•
57,229,566
22,627,659
22. Shop Machinery and Tools..
23. Electric Power Plants, Substations, etc.
24. Wharves and Docks...
25. Coal and Ore Wharves.
26. Grain Elevators and Storage Warehouses..
27. Real Estate
•
28. Assessments for Public Improvements.
34. All other Improvements..
•
21,585,247
6,383,153
22.454,729
5,742,126
5,163,966
874,390
•
5,532,284
3.621,739
•
•
2,747,663
2,111,911
4,298,182
1,205,014
3,063,271
1.385,321
7,814.181
4,473,332
Total (Excluding Equipment)
•
$551,925,525
$210,568,673
Equipment.
35. Locomotives, Steam
$118,051,766
$57,256,639
Locomotives, Steam (Ordered by Railroad Ad-
ministration)
76,873,355
28,621,655
36. Locomotives, Other
2,360,538
888,772
37. Freight-train Cars
97,186,852
70,221,661
Freight-train Cars (Ordered by Railroad Ad-
ministration)
289,460,000
59,193,472
38. Passenger-train Cars
15,866,432
11,028,462
39. Work Equipment
7,677.891
1,748,404
40. Motor Car and Trailers.
·
587,558
42. Miscellaneous Equipment
41. Floating Equipment
43. Improvements to Existing Equipment..
Total Equipment...
44. Construction of Extensions, Branches, and
Other Lines
5,415,350
58,164
650,411
629,621
276,169
41,939,382
18,499,064
$656,048,745
$248,442,873
$46,421,888 $18,199,466
Total all Work...
$1,254,396,158
$477,211,012
24
In planning improvements chargeable to capital account other
than for war purposes, the rule adopted was that the first considera-
tion should be safety in operations; and secondly, increased capacity
where that was needed; and that any improvement not required for
these purposes should be deferred until after the war unless excep-
tional circumstances should make it necessary earlier. Improve-
ments designed to effect permanent economies have been left for the
favoring times and conditions of peace, unless the economy was so
great that substantially the entire cost could probably be saved dur-
ing Federal control.
That effect of the foregoing policy is shown by the above state-
ment, from which it appears that much the largest item was for ad-
ditional yard tracks, sidings, etc. The second largest item was for
shop buildings, engine houses, and appurtenances; and the third
for additional main tracks; and by the large orders for equipment
almost wholly for locomotives and freight cars.
In addition to the locomotives and freight cars under order by the
railroad companies at the time the Government assumed control,
additional orders were placed for 1,430 locomotives for 1918 de-
livery, at an estimated cost of $78,193,200, of which 542 have been
delivered by the builders; and also an order for 100,000 freight cars
for 1918 delivery at an estimated cost of $289,460,000, of which
there has been completed and delivered to date 14,650 cars. An ad-
ditional order for 600 locomotives for 1919 delivery has also been
placed, involving an expenditure of approximately $37,842,268.
At the time these orders were placed it was supposed that the war
might last much longer than the year 1918. Practically all of this
equipment has been assigned to those railroads whose need for addi-
tional power and equipment appeared to be the greatest.
COST OF COAL AND OTHER SUPPLIES.
The cost of coal and practically all other supplies used by the
railroads increased enormously during the year just passed, as com-
pared with the cost during the year 1917. The increased cost of fuel
for the first ten months of the present year was $140,000,000 over
the cost for the same ten months in 1917, and during the same
period, the cost of crossties and lumber increased approximately $65,-
000,000. The added cost of coal to the railroads increased in spite of
the fact that economy in the use of coal was exercised to such an ex-
tent that, for instance, on the Chicago & Northwestern Railroad dur-
ing the month of October, the number of pounds of coal per passen-
ger locomotive mile was 110.9 this year as compared with 124.3 last
year, and the number of pounds of coal per passenger train car mile
1
25
was 19.2, this as compared with 21.3 last year, and yet the cost of
locomotive fuel per locomotive mile was 34.9 cents in October, 1918,
as compared with 27.9 cents in October, 1917. On the Union Pacific,
during the same month, the number of pounds of coal per passenger
locomotive mile this year was 115.6 as compared with 131.8 last year.
On the same line, during the same month, the number of pounds of
coal per passenger train car mile was 13.6 this year as compared with
18.2 last year, and yet the cost of fuel per locomotive mile was 33.2
cents in October, 1918, as compared with 32.6 cents in October, 1917.
On the Chesapeake & Ohio Railroad the number of pounds of coal
per passenger locomotive mile during the same month was 142.6 this
year as compared with 136.1 last year. The number of pounds of
coal per passenger train mile on the same road during the same
month was 24.4 this year as compared with 24.9 last year, and yet
the cost of fuel per locomotive mile was 35.3 cents in October, 1918,
as compared with 29.8 cents in October, 1917.
THE INCREASE IN RATES.
The increases in wages and the greatly enhanced cost of coal, iron
and steel and other supplies necessary for the railroads, made neces-
sary the increase of both passenger and freight rates during the
period of Federal control. Flat percentage increases were necessary
to obtain the required revenue, but continuing and successful efforts
have been made since to eliminate inequalities naturally incident to
the adoption of such a plan. These new rates did not go into effect
until practically six months of Federal control had passed and there-
fore only approximately six months' benefits have been gained from
them during the past year, whereas increased cost of labor, coal and
other supplies has operated during the entire year. Economies in
operation and in organization have resulted in enormous savings,
but have not fully met the difference between the cost of operating ·
the railroads and the income, for the reason stated. The benefit of
these savings will not be fully realized until the operations for the
year 1919 are completed. Very little benefit has been received in the
year 1918.
INCREASED COST NECESSARY.
The increases in cost of operation which have occurred in the
period of Federal control undoubtedly would have been equally
operative had the roads remained under private control. If the
private owners had operated the railroads during the past year they
either would have had to increase the rates as the Government did or
they would have had to face an enormous deficit.
26
FINANCIAL.
From the reports of operations for 10 months ending October 31,
1918, and with November and December estimated, the net operating
income of the roads under Federal control will be less by approxi-
mately $136,000,000 than the standard return or annual rental
which under the law the Government pays for the use of the rail-
roads. This deficiency is remarkably small in the circumstances
because the increases in freight and passenger rates were in effect
for only a little more than 6 months of 1918, whereas increased
wages and increased cost of fuel and all other railroad supplies were
in effect for the entire 12 months. If the increases in freight and
passenger rates had gone into effect January 1, 1918, or at the same
time that the increased wages and cost of fuel and supplies went
into effect, it is estimated that there would have been a substantial
surplus for the year of at least 100 million dollars to the Govern-
ment.
For the year 1919, with all wage increases granted in 1918 operat-
ing for the entire 12 months and upon the assumption that the
traffic for 1919 is substantially the same as in 1918, and that the
cost of fuel and supplies remains the same, it is estimated that there
should be a surplus to the Government over and above the standard
return of approximately $100,000,000. It is to be expected, how-
ever, during the year 1919 the cost of material and supplies may be
reduced, and it is also reasonable to expect that with improved opera-
tion, under normal conditions, relieved of the intense pressure and
excessive cost incident to the war necessity, and with a general im-
provement in operations and use of facilities and equipment that
may be reasonably expected in peace time, many more economies
can be effected. Since the object of the Government should be at
all times to operate the railroads not for profit, but at cost, and to
render at the same time the best possible service, I confidently be-
lieve that it will be possible during the year 1919, or certainly at the
end of the year 1919, to effect a considerable reduction in rates unless
the traffic for 1919 should be much less than it was in the year 1918.
INLAND WATERWAYS.
Hundreds of millions of dollars have been expended by the Na-
tion, the States, and citizens for the pupose of developing our in-
land waterways and for the construction of canals. Thousands of
miles of rivers, canals, lakes, and bays are ready to assist in moving
our products. These waterways, with the exception of the Great
Lakes, are not being extensively used.
With the assumption of my present task, I appointed a committee
to make a prompt investigation and to suggest a definite plan for the
1
27
additional use of internal waterways, for the economical and expe-
ditious movement of the traffic of the country, so as to relieve or
supplement the railways under the conditions caused by the war.
This was the beginning of a program which has been constantly
pursued, and while the greater urgency for raw materials in war
work interfered with the construction of steamers and barges, 160
steel, wood, and concrete vessels are now building and 50 steel and
wooden craft have been purchased. The total appropriation for
old and new floating equipment exceeds eleven and three-quarter
millions.
The increased responsibilities of this country in the family of
nations will demand greater commercial activity on our part. Trans-
portation is a major problem, for, on account of the extensive area of
our country, we have a longer average haul to seaboard than other
industrial commonwealths. It has seemed to me evident that by
developing transportation on the waterways and co-ordinating and
articulating them with a unified railway system, we shall bring
about a correct solution of the rail-water controversy, which has been
in progress for fifty years. This is possible with the railways under
Federal control. I doubt if any of our rivers or canals will become
active factors of transportation if the railroads are turned back to
private control. The old methods of railway competition with the
waterways doubtless will be revived and the waterway experiment
may not be able to survive that competition.
In furtherance of the plans for waterways transportation a Di-
vision of Inland Waterways, with two subdivisions, was created.
The Mississippi-Warrior and the New York and New Jersey Canal
sections.
Mississippi River:
Service on the Mississippi was inaugurated September 28th with
thirty-four vessels. Of these, twenty-three are leased and eleven
were purchased. The service is developing satisfactorily and as
tariffs for joint rates with the railroads have just been promulgated
the valley will be afforded traffic privileges not possible in the days of
railroad competition. Six steel steamers or towboats and forty (two-
thousand-ton) steel barges are under construction for this service.
The capacity of the Federal fleet between New Orleans and St. Louis
will approximate a million tons annually.
Warrior River:
Nine steamers and twenty-four barges were purchased for Warrior
River service. Six steamers and twenty barges are about to be con-
28
structed. This fleet will be capable of carrying six hundred thou-
sand tons southbound and about one hundred and fifty thousand
tons northbound. The Federal improvements on the Warrior are
complete as to six feet of water, and will shortly be completed as to
eight feet navigable craft.
New York Barge Canal:
The congestion existing on the railroads in the early part of 1918
and the war emergency made it essential to prepare, so far as possi-
ble, for such use of this important waterway as might be necessary to
assist the railroads, and although it was announced officially that the
canal was completed, there was practically no private building of
equipment for use on the canal, and many of the old boats were
being diverted to other uses. During the season the Railroad Ad-
ministration leased and operated upward of 200 barges on the New
York State Barge Canal, and contracted for the construction of 51
steel and 21 concrete barges. Delivery of the new barges began in
December. Construction was delayed on account of the war re-
quirements for steel. It turned out that the canal had only 7 feet
navigable depth at the opening and it was not until midsummer
that all the boats could be loaded to full capacity for operation, and,
as the terminals and rail connections were unfinished, an economical
operation was not possible. In fact 8/2 feet of navigable depth was
the maximum in the canal during the season. The rail congestion
of last winter was relieved before the canal season opened. The sus-
pension of imports, the decrease in road and industrial building, and
the deficiency in the grain crops of 1917, affected very seriously
tonnages that under normal conditions are available for this water-
way. In compliance with very urgent requests of the people of the
State of New York a local packet freight service was installed be-
tween Troy and Buffalo. As suitable boats were not obtainable, and
as the terminals were in some cases unfinished and in others in-
accessible, it was apparent that the operation would not be profitable,
and results justified this view. It is to be noted that, although the
enlarged canal was in operation all season, no activity was displayed
on the part of individuals or corporations to build vessels. The Rail-
road Administration has repeatedly announced that it does not
assume to control, nor does it in any way discourage, the operation of
pivately operated barges; nor does it fix the carrying rate for inde-
pendent vessels. When the canal and its facilities are completed,
and when modern vessels are available, it will be possible to ascer-
tain the cost of transporting traffic on this waterway. The results
obtained during this formative stage, with the unavoidably anti-
29
quated equipment, are not a criterion of what can be accomplished
with a completed canal and modern equipment. The adjustment of
shippers and their facilities to the use of the canal is also a matter of
time, which could not be progressed rapidly with the conditions ex-
isting during the present season.
Delaware & Raritan Canal:
The Delaware & Raritan Canal, connecting the Delaware River
with New York Harbor, from 1913 up to the present year suffered
a steady decrease in business. In 1917, 272,734 tons of freight were
moved. The limited draft of water and small lock structures pre-
vented profitable transportation operation on this waterway. It be-
came evident last spring that there would be a marked decrease in
the use of the canal for transportation of coal, due to the fact that
coal was to be shipped via other routes, but there was an unusual
demand for transportation of miscellaneous freight between New
York and Philadelphia by this route. The canal has for many years
been under lease to the Pennsylvania Railroad Company and came
under Federal control as part of its transportation system. In July
the New York-New Jersey Canal Section took charge of the floating
power equipment of the Railroad Administration on the canal and
December 1st the operation and maintenance of the canal was trans-
ferred to that section. The Railroad Administration also operated a
fleet of packet freight ships during a part of the season. There are a
number of private transportation agencies operating on this canal.
In spite of the loss of coal tonnage, the total freight movement on the
canal will slightly exceed 1917.
Chesapeake & Ohio Canal:
The Chesapeake & Ohio Canal, connecting Chesapeake Bay with
Pennsylvania and West Virginia coal fields, has been operated at a
loss for several years. At the beginning of the season of 1918 it ap-
peared that unless action was taken to support navigation on this
canal the increasing costs would cause it to ceasc, while the pressure
of traffic at that time upon the railroads bringing coal to Washing-
ton and vicinity was so great as to make it very undesirable that they
have the additional burden of transporting the coal previously car-
ried by the canal. The Railroad Administration therefore for a
time assumed the cost of canal tolls on coal, and later on made an ar-
rangement with the only company operating boats on the canal,
which insured the maintenance of the service, the Railroad Adminis-
:
30
tration paying the actual cost of the service over and above the
freight charges which were paid by the shipper at the same rate as
for rail shipments. The Railroad Administration also furnished ten
new barges which were leased to the operating company.
Ohio River:
The Railroad Administration has established an office in Cincin-
nati, Ohio, for the purpose of co-operating with shippers and vessel
owners and studying traffic conditions with shippers and vessel
owners. In view of the fact that the projected locks and dams on the
Ohio River between Pittsburgh and Cairo are not completed (the
movement has not been finished even between Pittsburgh and Cin-
cinnati) it does not seem a proper time to consider any new equip-
ment for this route.
Lake Keuka-New York:
The service formerly operated on this lake by the Lake Keuka
Navigation Company had been discontinued, and in order to move
the grape crop of 1918 the Division of Inland Waterways operated
equipment of the Lake Keuka Navigation Company during the
grape season.
Intracoastal Waterways:
The intracoastal waterway from Philadelphia to Beaufort, N. C.,
will be susceptible of greater commercial development. The pro-
jected improvement between Norfolk and Beaufort will not be com-
pleted for some time and it will require at least two years to modern-
ize the Chesapeake & Delaware Canal. The improvement ought to
be authorized promptly and I hope that the Congress may grant the
necessary appropriation and power to deal with the matter. The
fleet operating along this route was commandeered to a considerable.
extent during the war, but the vessels are being slowly returned to
the owners. The fleet seems to be sufficient for normal conditions.
The capacity can be considerably increased by the introduction of
modern terminal methods. Ultimately, packet freight service on
this route may be practicable.
COASTWISE SHIPS.
The fleets of vessels of railroad ownership were augmented on
April 13, 1918, by the taking over of the vessels of the Clyde, Mal-
lory, and Southern Steamship Companies and the Merchants and
31
Miners Transportation Company, comprising 64 passenger and
cargo-carrying vessels, operating in coastwise service between various
ports-Boston, Mass., to Galveston, inclusive. The operation of the
vessels was at times seriously interfered with by German submarines.
In supporting the war policy of the Nation, the steamships under
Federal control were used in war work to the maximum extent. The
properties of the Clyde, Mallory, and Southern Steamship Com-
panies and the Merchants and Miners Transportation Company were
relinquished from Federal control on December 6th, as they are no
longer necessary to the war purpose.
CAPE COD CANAL.
The Cape Cod Canal was taken under Federal control July 25,
1918, and it is earnestly hoped that it will be operated in the future
by the Government. Formation of shoals had reduced its navigable
depth to 17 feet at mean low water when the Government took con-
trol, but the Railroad Administration immediately provided $250,-
000 for dredging, piling, bank protection work, etc., and on October
23 the Canal was opened for vessels drawing twenty feet six inches
of water, and the dredging necessary to restore the original depth of
twenty-five feet at mean low water is expected to be completed by
February 15, 1919. Improvements have been made, including the
installation of bank protection by granite rip-rapping. In spite of
the fact that the work on the Canal has not been entirely completed
there has been an increase of 56.4 per cent in the number of vessels
handled and 114 per cent in the cargo tonnage transported through
the Canal in 1918 as compared to 1917.
STANDARDIZATION OF LOCOMOTIVES AND CARS.
Before Government control, practically every important railroad
had its own specifications for cars and engines. Practically all were
different in details. Although the facts are not obtainable, it has
been said that there were 20,023 different styles of freight cars and
almost as many different styles of locomotives included in the equip-
ment of American railroads prior to the war. Complete standard-
ization of course is impossible, but, as rapidly as existing rolling stock
and engines wear out, it ought to be practicable to replace them by
standard types. During the period of Federal control progress has
been made. Some twelve standard types for freight cars have been
agreed upon, and it has also been decided that hereafter only six dif-
ferent types of locomotives of two weights each shall be purchased.
The parts of these various locomotives and freight cars respectively
32
are interchangeable. The importance of this is forcibly illustrated by
an instance where a leased locomotive was held out of service until
over $4,800.00 had accumulated, awaiting a part which would cost
not to exceed $30.00. Where peculiar conditions exist, however, and
where special types of locomotives are necessary, permission has been
given to depart from the standardized type of locomotive.
CIVILIAN INCONVENIENCES.
While such a great work was being performed, inconveniences to
civilian travelers and some interferences with the transportation of
ordinary freight in the United States were unavoidable. The war
necessity came first; the civilian needs of America second. With
a limited supply of passenger and freight equipment available, and
with a large proportion of this equipment needed for the movement
of troops and war supplies, there were not sufficient cars and locomo-
tives remaining to fully meet civilian needs; nor was there time,
nor materials nor labor to build them. This was explained to the
country early in the year, and during the period of the war the
people generally, when they realized the situation, patriotically ac-
cepted it and made sacrifices accordingly.
Whatever inconveniences have resulted are due entirely to war
conditions and are in no way related to the fact that the railroads.
were under Government control. Such inconveniences undoubtedly
would have been greater under private control, for the supply of
equipment was augmented by the ability of the Government to
shorten routes, to combine facilities, to pool equipment and motive
power, and to introduce economies which the roads under private
control could not, and would not, have introduced.
I desire to make this point as clear as possible, for it is necessary
for the American people to understand the facts of the railroad
situation, if this big problem is to be dealt with intelligently. Pas-
senger equipment while crowded during the war, was crowded be-
cause much of the equipment had to be used in the transportation
of troops; it was not crowded because the Government had control
of the railroads. As a matter of fact, many thousands of passenger
train miles were saved by the ability of the Government to achieve
results which private owners of the roads could not or would not have
achieved. During the period of Federal control, every possible econ-
omy was exercised in order to save both passenger and freight equip-
ment and make as many cars and locomotives as possible available
for the war need first, and for the needs of the civilian population
next.
33
SERVING THE PUBLIC.
While putting the paramount war needs of the Nation first,
nevertheless, every possible effort has been made by the railroads
under Federal control to serve the public adequately and furnish
every possible facility for carrying on the ordinary passenger and
freight business of the Nation. The railroads are public servants,
and in time of peace the first consideration should be to furnish ade-
quate service at the lowest possible cost. To keep in touch with the
public during the period of Federal control and see to it that their
needs were given every possible consideration, the Division of Pub-
lic Service and Accounting was established soon after the railroads
were taken over and Hon. Chas. A. Prouty was made Director of
the Division. With this object in view, traffic committees were
early established, upon which the public was given representation.
While these committees have no authority to change rates, never-
theless their advice and recommendations are most helpful. What
the shipping public desires above everything is stability of rates and
reliability and adequacy of service. In the past thousands of rate
changes have been made each month which were worse than un-
necessary. While passenger and freight service was of necessity
interfered with during the war, efforts have been made during the
past year to keep in touch with State railroad commissions and other
local bodies to make certain that well-grounded and important com-
plaints should receive prompt attention.
I have given you a statement of the transportation conditions a
year ago, of the transportation achievements under Federal control
during a year of war, and of the present situation.
THE FUTURE.
What remains to be considered is what permanent solution of the
railroad problem should be adopted and what shall be the temporary
form of railroad control pending a permanent solution.
In December, 1917, there were about 180 separate operating rail-
road companies in the United States with operating revenues of
$1,000,000 or more per year each; 73 of these companies had oper-
ating revenues of $10,000,000 or more per year each. There were
several hundred companies whose respective operating revenues were
less than $1,000,000 per year.
34
POSSIBLE SOLUTIONS.
Broadly speaking, there are three general permanent solutions of
the railroad question. The first is to send the railroads back into the
private control of the several hundred old companies. The second is
to have outright Government ownership and control of all the rail-
roads. The third is to reconstruct the railroad map along logical
lines, so as to wipe out these hundreds of different railroad companies
and substitute a comparatively few companies, which under strict and
close Government control can be expected to combine the advantages
of Government control, including unified control of those things
where it is needed, with the advantages of the initiative of private
management. I am not committed to any particular plan. I wish
to lay before you certain reforms which I think are indispensable
and without which any so-called solution of the railroad problem will
be a mere disappointing makeshift.
POLICY.
I am frank to say I do not believe that these important reforms
can possibly be accomplished if we are to have in the future several
hundred different railroad companies as we have had in the past,
or even a hundred, or even fifty different railroad companies. I be-
lieve they can all be accomplished either through a comparatively
few railroad companies or through single Federal control. If the
country prefers to continue in existence the hundreds of different.
railroad companies as in the past, I believe it will be necessary for
the country to abandon the hope of obtaining most of the funda-
mental reforms which I propose to point out.
THE TERMINAL PROBLEM.
One of the most difficult and important railroad problems in this
country is the problem of terminal facilities. It probably means more
to the producing and consuming public in the matter of delays,
inconvenience, and transportation burdens than any other phase of
transportation. It is generally understood that the delays and exces-
ive costs do not occur principally on account of insufficiency of
facilities on the road, but on account of inadequate terminals and of
the heavy terminal costs.
35
It is not unnatural that this should be the case. It is a far simpler
proposition to haul a train over a railroad than it is to break up that
train in a terminal and distribute its cars to the connecting carriers.
For one thing, it is easier to provide adequate track capacity on the
railroad itself, most of which runs through the country, than it is to
provide adequate track capacity in a terminal, which is generally in
the midst of a great city. But an even more important point is that
when the train is being carried over the railroad between terminals
it is being handled exclusively under one managament and on a
railroad which has been planned with unity of purpose. But the
moment a train gets into a terminal where its cars must be separated
and delivered to connecting lines, then we have to deal with facil-
ities which have not been planned with unity of purpose and which
under private control are not operated under a single management.
The ability of one company to get rid of the business depends upon
what its connecting companies have provided in the way of terminal
tracks and other terminal facilities, and upon the way in which those
connecting companies carry on their operations. It is human nature
that each company is much more interested in looking after its im-
mediate exclusive interests, both in the facilities which it provides.
and in the way it operates them, than it is in building and operating
its property so as to help its connections.
Generally speaking, the cities of this country and the railroad
traffic that passes through them have wholly outgrown the railroad
terminal facilities, which were provided many years ago without any
conception of the growth of the country's traffic. It is difficult to
get the land to expand the terminals of any one railroad and each
railroad company is jealously trying to prevent some other railroad
from getting the advantage in new terminal facilities. Each rail-
road company wants to plan its new terminals so as to help its own
business and so as not to help its rivals. It is true that at times under
pressure of critical necessity some of the railroads at some cities try
to combine a portion of their terminal plans into a joint terminal
enterprise. But it takes years for the railroads to agree on any such
matter, and the comprehensiveness of the particular plan is gen-
erally interfered with by the selfishness of some particularly pow-
erful railroad which feels that it can preserve certain advantages by
refusing to put into the joint plan certain facilities which ought to
be put there in the public interest.
The effect is that when it comes to terminal properties we get a
clear-cut conflict of interest between the public and any particular
railroad company. The public wants terminal facilities comprehen-
36
sively planned and carried out so as to promote the greatest conveni-
ence and economy for all concerned, but each railroad company is
anxious to preserve any particular advantage which it already has
and to increase that advantage when practicable. This clash of in-
terests between the public and any particular railroad company, and
between the different railroad companies serving a particular ter-
minal, operates to produce deadlocks which to a large extent prevent
terminals from being developed so as to meet the business necessities
and so as to serve the public to the greatest advantage.
The condition exists, and is largely accounted for by the reasons
above given, that the outstanding shortcomings in railroad trans-
portation are inadequacies in terminal facilities. The great unnec-
essary burdens in the matter of inconvenience, delay, and cost for
which the producing and consuming public have to pay are largely
due to these terminal conditions. There can be no successful solu-
tion of the railroad problem which does not provide a solution for
these terminal difficulties. The greatest opportunity to reduce rail-
road costs for the future and to promote public convenience in trans-
portation for the future will be found in the solution of these ter-
minal problems.
CINCINNATI-AN EXAMPLE.
A concrete illustration will help to emphasize the present diffi-
culties. Cincinnati is an important gateway between the North and
the South.
Three important railroads, the Chesapeake & Ohio, the Louisville
& Nashville, and the Cincinnati Southern, reach Cincinnati by cross-
ing the Ohio River. Four other important railroads, the Big Four,
the Baltimore & Ohio, including the old Cincinnati, Hamilton &
Dayton, the Pennsylvania, and the Norfolk & Western, reach Cin-
cinnati on the north bank of the Ohio River. The interchange of
traffic between these lines at Cincinnati is enormous, and the general
public has a vital interest in this interchange being accomplished
with the least possible delay and expense. Yet conditions are such
that in times of heavy traffic Cincinnati is badly congested with
freight, and the ability of all the railroads mentioned, not only with
respect to handling traffic through Cincinnati, but with respect to
handling other important traffic, is largely hampered by the inability
to get rid of the traffic which must pass through Cincinnati.
Each of the three railroads approaching Cincinnati from the South
has a bridge across the Ohio River. The Cincinnati Southern bridge
and the Chesapeake & Ohio bridge are so light that they cannot
37
accommodate the heavy locomotives which are used on those roads,
so that there must be delay and cost and congestion due to the neces-
sity for changing engines south of the Ohio River on those two
roads. The Louisville & Nashville has the use of a bridge which
has only a single track and is therefore entirely too restricted in ca-
pacity to handle the traffic. The topographical conditions in Cin-
cinnati are such as to make it exceedingly difficult to find suitable
ground upon which to construct terminal facilities, and the densely
populated area makes terminal facilities extremely costly. A con-
siderable part of the important terminals in Cincinnati is subject to
overflow in times of high water. To a very large extent the traffic
which any one railroad brings into Cincinnati is traffic which must
be moved beyond Cincinnati by some other railroad, so that more
than one railroad generally has an interest in providing proper
facilities for all the traffic moving through Cincinnati, and all the
railroads reaching there have a common interest in avoiding the con-
gestion at Cincinnati which in the past has constituted one of the
most serious traffic situations in the country. Yet each of the rail-
road companies has its separate facilities, and while there have been
various particular arrangements of a joint character, it still remains
true that in all the years that have passed, the railroad companies
under private management have never been able to get together and
put into effect any comprehensive plan which would result in ter-
minal facilities equal to the situation. It seems fair to conclude from
the failure of the railroad companies in the past to accomplish this
result that they probably never will accomplish it in the future under
corresponding methods of private management.
At the present time there are perhaps from 25 to 30 freight houses
in and around Cincinnati which, generally speaking, have been pro-
vided primarily for the particular use of separate railroad companies
and without any purpose of combining all the freight-house facil-
ities so as to serve the general public to the best advantage and at
the least cost.
NECESSITY OF FINDING REMEDY.
It is evident that in view of the common interest which the rail-
road companies have in the traffic passing through Cincinnati some
comprehensive plan ought to be worked out. No one railroad com-
pany can live to itself alone in a terminal like Cincinnati. No one
important structure should be planned simply from the standpoint
of a particular railroad company. The entire situation should be
dealt with from the standpoint of the general public interest and
38
the selfish interests of any particular railroad company ought to be
subordinated to the general interest. Yet under private manage-
ment there is no way whatever in which the public can properly
assert and accomplish its needs, and the result both in construction
of facilities and in operation is left to the haphazard play of the
conflicting ideas of seven or more separate railroad companies and
plans of the utmost importance are subject at any time to be de-
feated by the disagreement of one or more of these companies.
$45,000,000 NEEDED AT CINCINNATI.
It is estimated that there ought to be spent in the near future
about $45,000,000 in the rehabilitation of Cincinnati terminals, so
as to make them equal to modern public needs, with probably $25,-
000,000 additional for passenger terminals. This involves the build-
ing of a new bridge and the reconstruction and enlargement of two
other bridges, the construction of convenient and commodious
freight houses, the provision of adequate belt lines and adequate
facilities for intercommunication between the different railroads.
Practically every item of this large expenditure involves, directly or
indirectly, the interests of two or more separate railroad companies.
In fact, virtually the whole expenditure has to be made in the com-
mon public interest and without making the interest of any one
railroad company paramount as to any particular item. If this
matter is left to be worked out by the separate railroad companies,
without any controlling public authority to shape up the whole situ-
ation for the benefit of the general public, there is no reason to be-
lieve that it ever will be successfully worked out. Certainly the
railroad companies have had many years in which to work out the
problem and they have never done so. If the problem is not ade-
quately solved, the result will be that a great burden of delay and
inconvenience, uncertainty and cost will continue to rest upon the
people of the United States, simply because a thing which ought
obviously to be done at Cincinnati in the public interest is not done,
and it will not be done because the power of Government which
ought to be exercised to promote the public interest is allowed to
remain dormant and subordinate to the separate interests and to the
disagreements of various privately managed railroad companies.
SAME CONDITIONS ELSEWHERE.
What is true of Cincinnati is true to a large extent of every impor-
tant terminal in the country, particularly of Chicago and the ter-
39
minals around New York harbor. In the aggregate these situations
constitute a great burden and menace to rail transportation and a
serious obstacle to convenience and certainty to the public in the
performance of that transportation. These situations must be met
if transportation in this country is to be performed at a reasonable
cost and without the intolerable congestions and delays which have
periodically arisen in the past.
Nor is there any just reason why railroad companies should fear
that such a comprehensive development of terminals is going to inter-
fere with any legitimate separate interests of the railroad companies
in the event they shall eventually be turned back into the old form of
private control. Any comprehensive plans of terminal improvement
which are for the general public good will in the long run turn out
to be advantageous to every separate legitimate railroad route in the
country. No matter if the railroads do go back into the old form
of private control, with anywhere from 100 to 200 separate manage-
ments, it is inevitable that in the long run, and perhaps as the result
of long years of hardship upon the public, there must be some com-
prehensive legislative solution of these terminal problems in the gen-
eral public interest. The railroads will not be injured, but, on the
contrary, will be benefited by a prompt public dealing with these
matters.
OTHER EXAMPLES.
As a simple illustration, it is evident that the fact that the Balti-
more and Ohio passenger trains are now taken into the Pennsylvania
passenger terminal in New York has not resulted in injur-
ing the Baltimore and Ohio or in causing any injury to the
Pennsylvania, of which it has any right to complain. The
public has been enormously convenienced. If private control
should return, it is not to be anticipated that the public would
again be subjected to the inconvenience and delay and expense
incident to the Baltimore and Ohio going back to the use of its old
and inconvenient passenger terminal at Communipaw, N. J. These
terminal reforms, which are done in the public interest, will not only
be of immediate and lasting benefit to the public, but they will also
turn out to be more than acceptable to the railroad companies them-
selves.
TRANSPORTATION STRINGENCY THROUGH FAILURE TO CONTROL
TRAFFIC.
The situation exists in this country that the transportation needs
of the people are national and interdependent, despite the fact that
40
the railroads are local and independent. Practically every commu-
nity in the country is dependent upon a national and not a local
transportation service. It is not true of any community that it can
depend wholly, or even principally, upon its local railroad to trans-
port what it produces and what it consumes, because, directly or in-
directly, what it produces must in some form go far beyond that
railroad and what it consumes must in some form originate beyond
that railroad. Failure of transportation at the Atlantic seaboard
causes economic waste and suffering at points far beyond those served
by the railroads which reach the Atlantic seaboard. Extensive fail-
ure of transportation in any part of the country has corresponding
reactions in many other parts of the country.
Unavoidably the amount of transportation to be performed fluctu-
ates from season to season and between good years and bad. At
certain seasons, especially in prosperous years, the railroads are con-
fronted with a "peak load", or a maximum load, which they have
not been able in recent years to handle satisfactorily under private
management. There has been widespread congestion of cars, both
loaded and empty, in certain sections, the most acute shortage of
cars in other sections, an inability to furnish transportation urgently
demanded, an inability to get the freight which has been accepted
for transportation to destination in reasonable time. In short, we
have been confronted with periodic conditions of transportation
stringency. Diversified private management has proved that it can-
not avoid or meet these conditions.
Perhaps the greatest single difficulty is that under private manage-
ment, with each company trying to prevent any traffic going to a
rival, the amount of freight loaded has been dependent almost wholly
upon the desire and opportunity of the consignor to load a shipment
and get a bill of lading for it, without any regard whatever to the
ability of the delivering railroad to dispose of the traffic at destination
at that time, or of the ability of the consignee to receive the traffic,
if delivered. The result has been the indiscriminate throwing into
the stream of traffic of everything which consignors wished to
throw into it, and this has led to the most acute congestion at or
near destination, analogous to an "ice-jam" or "log-jam" in a river.
This consequence has been injurious to the public as a whole, be-
cause it has reduced transportation capacity far below what it ought
to be; has led to the greatest uncertainty and delay and consequent
interruption and injury of business, with direct disadvantages to
labor and to the producing and consuming public. It is apparent
that this fundamental difficulty has not been effectively dealt with
41
under diversified private management. It is difficult to see how any
railroad company would be willing deliberately to prevent the load-
ing of traffic on its own line, when it is able to handle that traffic,
simply because eventually the traffic may be a source of embarrass-
ment to some connecting line. Indeed, it has been found prac-
tically impossible for a railroad company, which is itself congested
with traffic which it cannot deliver, to show sufficient courage to
refuse to continue receiving traffic and to insist that the traffic must
go forward by competing lines.
MET BY UNIFIED CONTROL.
These conditions have been substantially met under unified con-
trol by the routing and distribution of traffic over the available lines
and by the establishment of the "permit system," whereby traffic
involving potentialities of congestion is not allowed to be loaded ex-
cept upon showing that it can be delivered to and taken care of by
the consignee at destination. During the autumn months of 1918,
when traffic was at its heaviest, there was practically a complete
absence of transportation stringency, which in the immediate pre-
ceding years had amounted almost to transportation paralysis. This
condition was due largely to the "permit system". The ability to
use this system in the public interest and regardless of any actual
or apparent embarrassment to any particular railroad is probably
the most important thing in preventing traffic congestion. It is
feasible and easy under unified control.
One of the essential reforms, therefore, is the adoption of some
system to control traffic in the common interest.
As far as railroad tracks are concerned, the mileage of road tracks
(as distinguished from terminal tracks) appears to be sufficient to
take care, generally speaking, of a much larger tonnage than can be
handled through the terminals. At times, however, particular rail-
roads may become embarrassed by a surplus of traffic, even though
it may be possible to care for the traffic at the terminal. Under
unified control, in such conditions, the surplus traffic can be di-
verted to some other railroad reaching the same destination. Under
private control this has not been possible. The company which was
able to obtain the routing of the traffic has, generally speaking, not
been willing, even though unable to handle the traffic successfully,
to let it go to a rival railroad. The public ought to be provided with
some system whereby unused railroad capacity may be used in the
common interest in times of stress.
42
EXPORT TRAFFIC.
One of the most important classes of traffic is the export traffic, and
this ought to be greater than ever in the future. The transfer of
such traffic at the seaport from the railroad car to the ship involves
great possibilities for congestion and delay. Under the old form of
private management, a particular railroad company naturally wishes
the traffic to go to its own port, and, even though that port may be
momentarily seriously congested, is unwilling to turn that traffic to
a rival line whose port may be free from congestion. Undoubtedly,
an opportunity exists under unified control, even in peace time, to
apportion the traffic among the ports and co-ordinate rail transporta-
tion with ocean transportation in such way as greatly to relieve the
strain which at times arises from the inability of the particular rail-
road company to consider the interests of ports other than its own
and to co-ordinate effectively with the ocean transportation. What-
ever the solution of the railroad question a way ought to be found
to control this matter in the public interest in times of emergency.
MOTIVE POWER AND CARS.
A further transportation factor of great importance is having ade-
quate locomotives in good repair. In the past each railroad com-
pany has had its own locomotives and, generally speaking, has used
them exclusively upon its own rails. If some of them were tem-
porarily idle, there was not generally any way of allowing them to
be used temporarily by other railroads which were short of locomo-
tives. In cases where there was no surplus of locomotives anywhere,
and where additional locomotives were far more needed, in the public
interest, in some sections than in others, there was under private
management no way under peace conditions of taking locomotives
from the line where the public interest needed them least and put-
ting them into service upon the line where the public interest needed
them most. There was no way in which locomotives could be mobil-
ized so that they can be used where they will do the public the
most good. This, of course, has been accomplished under unified
control and will be to an increasing extent.
The availability of locomotives depends upon their being in good
repair, and the ability to repair them depends upon the shop capacity.
Under private control each railroad company has had its own shops.
If those shops are taxed to their capacity, it is not, generally speaking,
convenient to turn additional locomotives, needing repair, over to the
43
shops of other railroad companies in order to receive the repairs.
The result is that shops of some railroads may be partly or largely
idle and shops on other railroads may be wholly unequal to the tasks
confronting them. Yet private management has never been able to
work out any comprehensive and effective way for "matching up"
the demand and supply of locomotive shop capacity. This impor-
tant matter has been handled with great success under unified con-
trol and can be developed so as to be handled more systematically
and successfully as time goes on.
COMPETITION.
Under private management there has also been an unnecessary use
of locomotive power through duplication of train service for purely
competitive reasons, whereas under unified control trains can be
consolidated so as to release for useful service many locomotives
which before had been used merely in transportation rivalries, and
without carrying loads to their full capacity.
It is obvious that cars cannot be mobilized and utilized to the best
interest of the public as successfully under diversified private man-
agement as they can be under unified control. When each railroad
company is intent upon the traffic which it can obtain for its own
line, it is inevitable that the most carefully drawn rules will not be
fully carried out and that there will be a temptation, frequently
irresistible, for a railroad company to retain cars for its own purposes,
when the public interest requires that those cars should be devoted to
some other purpose. It is also true that the handling of empty cars,
so as to get them in the quickest time to the place where they are
most needed, cannot be handled as well under private control, be-
cause the transportation of the empty car gives the transporting
railroad no revenue, and hence it is not disposed to encourage any
such transportation, except to the extent that it has had the benefit of
the car when loaded and producing revenue. And yet, in many in-
stances, in order to reach the place where it is most needed, the car
ought to be hauled by a line which has enjoyed no revenue from
the car when it last moved under load. The results of unified man-
agement show important advantages resulting from unified control
of the car supply. These advantages are strikingly app arent in the
case of special types of cars, as, for example, tank cars and refriger-
ator cars.
Any permanent solution of the railroad question ought to give the
public the advantage in times of stress of the mobilization of locomo-
44
tives and locomotive repair shops, and of the handling of all equip-
ment in the public interest, including the emergency handling of
empty equipment.
RATES.
In the matter of rates, an immense advantage resulting from uni-
fied control is that rates can be made only so high as may be neces-
sary to protect the situation as a whole, through paying the total ex-
penses and producing only a sufficient resulting operating income to
represent a fair compensation for the property employed. But under
separate management, there is the greatest diversity in the pros-
perity of the railroad companies. Some will prosper on very low
rates and some will fail on very high rates. The result is either
that rates must be maintained on an average basis which, while pro-
ducing high profits for some railroads, will still leave other railroads
in bankruptcy, or must be made sufficiently high to leave a margin
of profit to the less prosperous, with consequently excessive profits
to the most prosperous.
The former course will result in the less
prosperous roads being unable to perform their public service suc-
cessfully. The latter course will result in the public being burdened
with unnecessarily high rates. Under unified control rates which are
sufficiently high on an average, to protect the general situation, will
insure an adequate service on all roads and will, at the same time,
protect the public against rates being made any higher than is neces-
sary to meet the real necessities of the situation. I do not believe
there can be any successful solution of the railroad problem which
leaves in existence the great disparity in the results of the same rates
to different railroad companies because this will always cause ques-
tion as to the propriety of any scale of rates and will keep the rate
question in constant turmoil.
RESULT.
I believe that even under the handicaps of war conditions a suffi-
cient showing has been made to indicate that all the reforms I have
mentioned are desirable as permanent peace measures. Yet it is
clear that the general public has not had an opportunity to appre-
ciate this and to weigh the real value of what has been accomplished.
There has not yet been an opportunity to give the public knowledge
of the facts. In view of the far-reaching importance of any solution
of the railroad question which may be adopted, the public is entitled
to have, before the present Federal control shall be terminated, a
45
reasonably fair test under peace conditions of the advantages to be
derived from these reforms.
When Congress comes to take the responsibility of making a final
decision as to which is the best permanent solution of the railroad
problem, one of the most important considerations to which it must
give attention is the question as to which solution will involve the
least financial burden for the future upon the American public.
This being true it seems to me of the highest importance that Con-
gress should have an opportunity to form an accurate idea as to the
cost of unified control of railroad operations under peace conditions.
In order to have an accurate idea on this subject Congress ought to
have before it at least the operations of the year 1919 under Federal
control. Of course these figures cannot be ready until the spring of
1920. If Congress undertakes to make its permanent solution of this
great problem prior to that time it will do so without any adequate
comparison between the cost of railroad operation under diversified
private control as in the past, and the cost of railroad operation under
unified control during peace time. It is true that the figures for the
year 1918 will be available in about two months, but these figures will
represent the operations under war conditions when the railroad
management was subjected to many difficulties which will not exist
under peace conditions, and when a great deal of traffic had to be
handled regardless of cost in order to meet the insistent emergencies
of war.
It also happens that the year 1918 includes the operations
of the most severe and costly winter that has ever been experienced in
the life of the railroad business in this country, and the cost of clear-
ing up the most serious congestion of traffic in the history of the rail-
roads a congestion existing at the time Federal control was assumed.
Therefore, unless a final solution of this problem is deferred until a
reliable view of the economies which actually arise out of unified
operation can be obtained, the result will be the adoption of a perma-
nent solution in ignorance of one of the most important factors to
be considered.
SHIPPING AND THE RAILROADS.
The glorious victory for democracy in which America has played
such a noble and conspicuous part has given her a commanding
position in world affairs. Our own material development makes it
more than ever necessary that we shall have access upon just and fair
terms to the markets of the world for the disposition of our surplus
products. We cannot meet this situation unless we are prepared to
go forward immediately. Opportunity does not wait for the laggard,
46
whether that laggard be a nation or an individual. America must
go forward immediately and organize her resources effectively for
the purpose if she is to enjoy her share of the fruits of the keen and
friendly rivalries in commerce in which she must engage with other
nations.
Under the provisions of the United States Shipping Act, the great
merchant marine we are constructing is to be under Government
control for a period of five years from the conclusion of the European
War. If our splendid merchant fleet, built with the money of the
people of the United States at a cost of more than one billion dollars,
is to be used successfully in their interest, it must be operated in
effective co-ordination with the great railroad systems of the United
States. They must work together harmoniously and reciprocally.
During this great period of world development, involving the vital
welfare of the American people, it seems to me peculiarly wise that
the period of Federal control of railroad transportation shall be made
concurrent with that of Government ship control. Then we shall
have a great transportation system on land and sea furnishing the
reliable, effective service which will protect the interests of the
American people and carry them forward upon a career of prosperity
and success unequaled in any previous period in their history.
▸
CONCLUSION.
This is why I have urged that Federal control be extended until
January 1, 1924. It will be impossible to view the results of even
one year of Federal control under peace conditions until the spring
of 1920, and it will then be too late for Congress to legislate before
the end of the 21 months' period. Even if it were possible to accom-
plish legislation in the next 12 months, it would be done without
any opportunity whatever to form a reasonable idea as to the advan-
tages of unity in the matters I have mentioned, under peace con-
ditions.
Moreover, the operations under peace conditions with a tenure so
short as the 21 months' period cannot possibly constitute a fair test.
With such a rapidly approaching termination and with every officer
and employee naturally speculating on his relations to the new
management, whatever it may be, it will be impossible to secure the
best results from the railroad organization, and the nearer the termi-
nation approaches the more difficult will be the situation
Indeed, the difficulties with operation during the 21 months' period
will be so serious that I do not see how the Government can be fairly
asked to encounter them. It will be asked to continue an operation
47
deprived of all the elements which would help in making the opera-
tion a success, and I do not see how it can be seriously urged as the
proper course by anyone except those who are anxious at all events
to see the railroads restored to the control of numerous different
companies, just as in the past. It seems to me that anyone who
wishes a fair and dispassionate study made as to what is the best
ultimate solution and as to the extent to which the reforms I have
mentioned are in the interest of the American public, and as to the
way in which those reforms can best be accomplished, if in the in-
terest of the American public, must be anxious to have a reasonable
period of Federal control after the war, under conditions calculated
to make for tranquillity and single-mindedness upon the part of the
Federal railroad organization. I do not mean that this would be
desired in order to accomplish Government ownership, but it seems
to me it would be desired in order to test the utility of various re-
forms in the direction of unification which can be accomplished
without Government ownership, but which cannot be accomplished,
as I view the situation, through an unrestricted return to the old
conditions of management, through from 75 to 100 different impor-
tant railroad companies and several hundred smaller railroad com-
panies.
The 21 months' period will be entirely too short to accomplish
any effective results with respect to improvements, and especially the
terminal improvements which are peculiarly needed. Indeed, with
such an early termination of Federal control, there will be almost
a complete stoppage of improvement work, except what is obviously
needed for the most urgent necessities. The result will be that ter-
minal reforms, which are badly needed in the public interest and
which already have been delayed many years, will be subjected to
further indefinite delay. It will also be true that needed railroad
construction and extensions will be practically at a standstill.
In the nature of things the concurrence of the railroad corpora-
tions cannot be expected in matters of improvements and extensions
during the 21 months' period except as to things of the most urgent
and obvious necessity and where there is no possibility of conflict
with the selfish interest of the particular corporation. This is not
surmise, because the evidences of it are already appearing-notably
in the case of locomotives-where budgets were submitted by the cor-
porations calling for their purchase, and where even now many of
the corporations are challenging the purchase of locomotives made
for their account and within the limits of their requests. It is nat-
ural that each company will prefer to hold all other matters in abey-
ance in the hope that it can make its own plans in its own way at
48
the end of Federal control. This condition will not exist, however,
if a five-year extension shall be granted. During the early part of
that extension comprehensive improvements can be carried forward
in the public interest, and the railroad companies will appreciate
the impracticability of holding everything in abeyance for so long
a period as five years. Of course, as the five-year period nears its
termination, there would be a disposition on the part of the corpora-
tions to postpone matters which had not theretofore been entered
upon, but by the time this condition would arise it is reasonable to
expect that Congress would have been able to make a permanent
solution of the whole problem in the light of an adequate experience
with the present opportunities for unified control.
With the five-year extension it will be practicable for Congress-
say within two years from now-to enter upon a permanent solution
of this question after Congress and the country shall have had before
it the result of a complete year's experience of Federal control under
peace conditions, as well as a year's experience under war conditions.
Congress, with that additional experience, will be able far better than
it is at present to estimate at their real value the reforms which I
have submitted to you as being fundamental, and Congress can then
determine whether those reforms are so important as to make it de-
sirable to adopt some other method of railroad ownership and control
than that of such a great number of different private companies as
has been the case in the past.
VALUATION.
It must be remembered also that Congress has thought it impor-
tant to provide for a valuation of railroad property, and this valua-
tion has been in progress for several years at large cost. I assume
that it will be completed in the next two or three years. There is
widespread conviction that no permanent solution whatever of the
railroad problem can be made which does not put at rest the present
insistent claims as to railroad overcapitalization. The question
therefore arises whether Congress can satisfactorily deal with this
matter in advance of the completion of the valuation which it has
already prescribed, and whether Congress will wish to attempt a final
solution of it before it can have the benefit of the valuation for which
it has already appropriated such large amounts and to which it has
attached so much importance. It is not possible, as I view the com-
plexities of the problem, to effect any marked change in the form of
railroad control that is not based upon a completed valuation of their
properties.
OCT 20 1919
BOUND
DEC 151920
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UNIV. OF Niem.
LIBRARY
UNIVERSITY OF MICHIGAN
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