t»t (Hi nwtvrffsnYOFiLHWOf' -> Jii'^isi: THE OUTLOOK An AddrcM H. u. Mypcif President, Rock Island Lines Delivered at the Nineteenth Annual Dinner of the Commercial Club of Kansas City in Commemoration of the John Jay Treaty Kansas City, Missouri November 19, 1913 0^ J r The Outlook yo By H. U. MUDGE The subject assigned me offers a wide range of possibilities. The "Outlook" depends so much upon the viewpoint. In view of the many changes that are coming about in the regulation of our industrial and commercial life, he who would treat the subject at short range and would define the present outlook with any degree of certainty would be, indeed, a prophet, and, as we are told that ' ' a prophet is not without honor except in his own country," I prefer to treat the subject at longer range, and I will ask your indulgence while I diverge slightly from the direct subject, and discuss briefly what appears to me to be the three essentials for the ultimate prosperity of this country. There is a saying of Lord Bacon's that has been quoted many times, but it so aptly and tersely states the conditions I have in mind, that I cannot refrain from repeating it. He said, in the quaint language of his time: "There be but three things which one nation selleth to another: The commodity as nature yieldeth it; the manu- facture, and the vecture, or carriage. When these three wheels go, wealth will flow as in a springtide." Nations were smaller in Lord Bacon's day than they are now, but what was then true of nations is now true of communities. You men of Kansas City, and particularly you men of the Kansas City Commercial Club, are engaged in a great work; you are building up commercial institutions, factories and vari- r>c ous industries giving employment to a large number of people; ^ you are also beautifying the city and making it a comfortable and pleasant place in which to live. It is your business to make C the business and social conditions of the city attractive, in order ^ that people from other cities and people from the country will ^ be induced to locate within the city. Hundreds of other commercial organizations are engaged in ^^e same work and you are all doing a good job, with the result y that the population of the country is being rapidly concentrated i in the cities. It would seem, therefore, that the second of the ^ three items is being well taken care of, if not overworked, by . the commercial organizations. "' We come now to the first item, i. e., "the commodity as f nature yieldeth it." What are we doing to increase the things that nature produces? S In these days when civilization and business are so complex, it is well for us to remember that Mother Earth is the source of all material wealth, and from her must be drawn the neces- sities and luxuries that meet our physical needs. These come from the mine, the forest and the soil. When a mine is exhausted, there is nothing left but a hole in the ground; when a forest is cut over, it takes at least two generations to raise a new crop, but the soil annually produces its priceless contribution to human needs and will continue to do so indefinitely, if properly and scientifically treated. Farming is mankind's greatest industry, and the soil its greatest physical asset. In agriculture is the hope of the nation. It is generally conceded by every authority upon the subject that our agricultural methods must be redirected along scientific lines ; that we must produce from a given area larger returns, at less cost, and with less expenditure of manual labor. Scientific methods will enable the farmer to do this. The need for it is shown by the ever-increasing cost of living. Population is rapidly overtaking production. We now consume ninety-one per cent of our wheat and ninety- eight per cent of our corn. Exporting of food products is reach- ing the vanishing point. Six years ago we exported 525,000 cattle; last year we exported only 105,000, a loss of seventy-five per cent in six years. The number of beef cattle in this country six years' ago was 51,500,000. It is now approximately 36,000,000, a loss of about thirty per cent. In fifty years from now, when the population of this country has reached 200,000,000, it may be a serious question what we will eat. The average yield of wheat for ten years in the United States is fourteen bushels per acre ; the average yield per acre in west- ern Europe is thirty-two. The average yield at our experimental stations is thirtj'-two bushels per acre, showing that what has been done in Europe can be approximated here. The agricultural colleges and experimental stations have done a great deal toward the education of young farmers. Many of the railway companies have also done a great deal of experi- mental work, and have met with great success, but this work only reaches those farmers who are enterprising enough, or who have the time, to attend the lectures and demonstration trains. The urgent necessity is that this scientific knowledge and demon- stration shall be carried onto each and every farm, and into each and every farm home. The farmer must be shown that he can do this work scien- tifically himself; that he can raise on his own farm the same 4 average crops that are g^o^vn on the experimental farms and do it with less labor than he is now expending, lie should also be shown that the farm home, and the social conditions of the farm, can be made just as comfortable and attractive as the conditions in the cities, and this must be done if the young men and women are to be induced to remain on the farms. When this is accomplished, the problem is solved, and not before. Farming is a difficult and intricate business and must have scientific aid if the best results are to be obtained. The Lever Agricultural Extension Bill, now before Congress, is the most practical law that has been suggested for this pur- pose. This law provides that a trained farm demonstrator, or scientific and practical farmer, be placed in every agricultural county at public expense, to take to the farmer the latest and best methods to employ in his vocation. I am assured by the President of the National Soil Fertility League that this bill will undoubtedly become a law in the early regular session of Congress. It will then remain only for the states to take up legislation that will complete the plan, and this is where the commercial organizations can be of great assist- ance. When completed, it will, in my judgment, be the most beneficial legislation that has been enacted in the last half century. Thus, I consider that the "Outlook" for agricultural prosperity is very bright. Having met the problem of increased soil production, we come now to the third problem, viz., distribution, or, the move- ment of the things that nature yieldeth either direct to the consumer or to the places where it is to be prepared for human consumption and its movement from those points to the farmer or other consumer, wherever he may be located, and this, to my mind, is the most difficult problem of the three. In this country, where there are practically no inland water- ways, this must be met by rail transportation. Without an ade- quate system of transportation that can move quickly and regu- larly the produce of the soil, the mine and the forest to the points where it is prepared for use, and from these points to destination or points of consumption, more scientific farming and manufacturing will avail us nothing, and this problem is the most difficult because of its magnitude. It cannot be accom- plished by individuals, or in small units, but requires the aggre- gate capital of hundreds of thousands of people. On account of its magnitude, it partakes of the nature of a monopoly, and it is difficult, even under the most liberal man- 5 agement, for a private monopoly to secure and maintain the confidence of the people. Since the signing of the John Jay Treaty, which this banquet commemorates, great and wonderful changes have taken place in this country. For more than a half century thereafter, all the territory west of the Mississippi River was a wilderness, and in the whole country there was practically no mode of trans- portation. Since that time an empire has been builded upon what was then considered an unreclaimable desert; a great system of railway lines has been constructed mostly by private capital. It has pushed out beyond population and has been the main instrument of the people in populating and developing this vast country. These railway lines were, however, cheaply built of very light construction, which was tjien thought to be adequate for the prospective traffic to be handled, but, as the coimtry grew, they became entirely inadequate. At first they were cheaply main- tained and operated, because the natural resources of the country were at the disposal of the operators of these railways, the same as they were at the disposal of other citizens. Fuel was to be had for the mere cost of taking it; ties and timber for the mere cost of taking and preparing for use. Wages were comparatively, low because the cost of individual living was low. In more recent years, since the natural resources of the coun- try have been more or less depleted, the cost of everything that goes to make up a railroad has been enormously increased, and as the cost of individual living has increased, great increases in wages of railway employes have taken place. Furthermore, the inadequacy of these early constructed rail- ways has made it necessary to practically rebuild them along much broader lines — heavier rails, heavier bridges, double tracks, larger terminals, large union passenger stations, larger locomo- tives, steel passenger cars, electric headlights and many other improvements made necessary by state or federal laws have made necessary the borrowing of large sums of money for improving the railway systems. While in years past some proportion of the earnings of the railways was put back into the properties, still, it was necessary to borrow enormous sums of money to keep the transportation system up to the ever-increasing demands of manufacturing, commerce and agriculture. Meanwhile, everything purchased by the railways has enor- mously increased in price, while the price of the only commodity 6 which they have for sale has not increased, but has very greatly decreased. Passenger fares in practically all of the western states have been reduced thirty-three and one-third per cent during the past five years, and similar decreases have also been made in the freight rates. It is no more possible to reduce the purchasing power of the dollar in all commodities except one, and leave that stationary, or increase it in that single commodity, than it is to change the laws of gravity. For some time past, practically all of the new money secured by the railways has been borrowed at high rates of interest and bonds issued therefor, it having become impossible to sell fur- ther shares of stock to the public at any price. We are, it is true, a nation of borrowers. The tendency is to issue bonds on which to secure funds for almost every kind of improvement, but it must be perfectly clear that this plan cannot go on in- definitely. Whether it be a farmer, a manufacturer or a transportation company, if every dollar put into the property for improvements and betterments is provided only through the increase of the funded debt, there will, sooner or later, come an adverse year when the institution will find itself unable to meet its fixed charges, but before that time, it will find itself unable to borrow further funds, except at excessive rates of interest, if at all. Some of the railways have already reached this point and are unable to secure funds on any basis, and others are unable to secure sufficient to take care of their needed improvements. It is as necessary for the transportation systems to put back into their properties a fair portion of their earnings as it is for the farmer or the manufacturer to do so, and this is the only possible means by which a proper transportation system can be built up and kept up by private capital. This country has the best transportation system, at the low- est rates, and operated by the highest paid employes, of any system in the world. It would still have this if a slight increase was made in the rates of transportation. The railway stockholders of this country are made up of hundreds of thousands of all classes of our citizens. On the Pennsylvania Railroad more than one-half of the stockholders are women, but I am making no plea for the stockholders — they can probably take care of themselves, and it is because I fear that they will take care of themselves and leave the railways to shift for themselves, that I am disturbed regarding the rail- way situation. K private capital continues to be withheld from railway 3 0112 062003717 investments, as it is now doing, government ownership will be the only alternative, and while this will probably be the ultimate solution of the problem, I do not believe the country is ready for it yet. Pending the time when the people are ready for that, the splendid railway system which they now have should be kept intact and improved in accordance with the necessities of com- merce, in order that when it is taken over by the government, it will not have deteriorated so that the government will have to tax the people for its rehabilitation. It may also be set down as a certainty that if there is no change in the conditions when the government does take over the railways, one of three things must happen — either the rates will be raised, wages reduced or the deficit will have to be made up by taxation. Fortunately, our people have the experience of other coun- tries to guide them. There is practically no government owned and operated railway in the world that has not increased its freight or passenger rates during the past five years and there is, I believe, more dissatisfaction among the shippers on govern- ment railways than on private railways in the same countries, or, for that matter, in any country. The eastern railways have asked permission to increase their freight rates five per cent, and the matter is now before the Interstate Commerce Commission. This, of itself, would not recoup them for the increases in wages that have been made during the last five years, but it would give renewed confidence ; would enable them to renew purchases and improvements, and thus start manufacturing on a better scale. There seems to be no great opposition on the part of the shippers to this increase, and it is believed by those who have the situation in hand that such a showing will be made as to justify the Interstate Commerce Commission in granting the increase. The railway "Outlook," therefore, seems encouraging. Some of the laws that have been passed by the present Con- gress will, undoubtedly, prove beneficial, and others are probably needed, but this may be safely said, that whether we have high tariff or low tariff, an income tax collectible at the source, a change in the currency laws, or whatever else may be passed, the people of this country will go on eating, drinking, "marry- ing and giving in marriage," "multiplying and replenishing the earth," as they have done in the past, in spite of what is said to be the worst currency system in the world, and other similar conditions, but they cannot live comfortably unless the products of the soil are increased to correspond with the increased popula- tion, and unless they have the means of preparing this produce for consumption and the means for carrying it from originating point to the point of consumption. Therefore, I place the three problems referred to by Lord Bacon as paramount in importance to all the other commercial problems of this country. "When these three wheels go wealth will flow as in a springtide."