THE UNITED STATES RAILROAD
To assume infallibility or even great accuracy in sketching a regional
railroad plan for the United States would be of course ridiculous. We have
just had the mere suggestion of twenty-five or twenty-six railroads, some
of them non-competitive monopolies and others quite completely
competitive, in form at least, which is about all that our so-called
competitive railroads are to-day. Still the great transport god of our
transport world apparently must continue to be appeased. Form seems to
please him. We shall grant him that. But in a national transportation plan
which begins to assume any real form of high organization we shall not
permit the component parts of it to indulge in internecine struggle. It is
too expensive business.
So probably we shall begin the operation of our regional plan, which you
already have seen outlined geographically, by first taking our thousand or
more separate railroads--nearly 265,000 miles of line--and thrusting them
together into a great single organization. This we might easily call the
United States Railroad, even though it is to be in one sense not a
railroad, from an operating point of view at any rate. For once we have
centralized our great rail transport plant, we shall at once begin to
decentralize it. We shall make many railroads of it. We shall follow in
the main the scheme used by those vastly successful private organizations,
Standard Oil and the Bell Telephone, and the equally successful government
institution, the Federal Reserve Bank, and set up regional and highly
autonomous separate organizations. I began my planning of the regional
railroad for this country with the number of separate units fixed at
about the same as of these three organisms that I have just
mentioned--approximately an even dozen. Gradually I found, however, that
in as intricate or as extensive a business as railroading in the United
States twelve or fourteen or even sixteen regional companies would not be
enough. Perhaps twenty-six is not even enough. After all, that is but a
detail. What we really are seeking now is the proper method of
organization.
Our regional railroads, recentralized and each provided with a president
and other directing and operating officers extremely local and sensitive
to the territory which they would serve, would have left something behind
them in the central organization which was created primarily for the
business of rearrangement. For having transacted that immediate business
the United States Railroad still would continue to exist as a permanent
body, with its headquarters either in New York or in Washington. Its modus
operandi would be the virtually continuous sessions of vice-presidents
designated from its constituent railroads--one vice-president for each
road, especially chosen for this purpose--together with the occasional
meetings of the presidents and other executive officers. These men would
form a congress whose powers along almost all phases of our national
railroad would be virtually supreme.
Its greatest power--its greatest responsibility, if you please--would be
the proper financing of our railroad structure. That problem is far too
big to-day to be handled locally, even in the locality which we know as
Wall Street, New York. And Wall Street has shown itself capable of taking
care of some pretty large financing problems. Before we are done with our
railroad financing, it may be necessary for no less a hand than Uncle
Sam's to take hold of it, either by assuming the bonded indebtedness of
the roads and against this issuing his own bonds at a slightly higher rate
of interest, or else by direct and complete ownership of the carriers.
I am not going into this vexing and highly controversial phase of the
railroad question in America further than to say that I do not feel that
this country is ready yet to accept government ownership and
operation--particularly the latter. Please note that I have differentiated
between these two. It is not often done. And yet in that very shading of
difference may yet rest the solution of our entire railroad problem. At
the conclusion of this book I shall refer to this again.
According to a man who has made a critical inspection of the outstanding
securities of our American railroads and of whose ability and impartiality
there can be no doubt whatsoever, these are represented chiefly in about
ten billion dollars' worth of perfectly good bonds and about five billion
dollars' worth of good stock, at least normally returning dividends. About
$100,000,000 might be written off in poor bonds, that either are
fraudulent or else never should have been issued, while there are four or
five billion dollars par value of stock certificates which to-day may be
regarded as fairly hopeless. Out of all these securities three quarters
would assay, which after all does not compare so badly with the estimate
of value of from $18,000,000,000 to $20,000,000,000 which the railroads
themselves place upon their properties.
These "good securities" in normal time average a return of from
$750,000,000 to $800,000,000 each twelvemonth. Suppose that our Uncle
Samuel, heeding what seems to be a rather certain voice of his people at
this time to avoid both government ownership and government operation,
should arrange that the "good" stock of the present railroads be turned in
for that of the United States Railroad, which might either keep the stock
issue in its own name or else at the proper moment divide it pro rata
between its constituent regional roads? This certainly would not be either
government ownership or government operation.
Upon the stock portion of this trade our good Uncle Samuel would arrange
to guarantee a 4 per cent. dividend annually (possibly 4-1/2 per cent.)
and try to standardize and pay a 6 per cent. one. That sounds a little
different from the Transportation Act, does it not? As a matter of fact,
it is hardly conceivable that even a 4-1/2 per cent. guarantee would ever
become a serious drain upon the United States Treasury, while the fact
that the stock end of the capitalization of this railroad which is not a
railroad would never be permitted to exceed more than 35 or 40 per cent.
of the whole would be a real help in the situation.
If the roads that belonged to the United States Railroad found themselves
earning more than 6 per cent. upon the entire property a tripartite even
division could be arranged of the excess between their stockholders, their
employees, and the Government. It is hardly conceivable, however, that
such a condition would long continue without a demand arising for a
downward revision of the rates. It is a question that would settle itself
rather automatically most of the time.
* * * * *
The stock distribution of the new centralized company of the holders of
the existing stock-certificates of the present companies would be in the
ration of the new standard dividend of 6 per cent. to be paid by the U. S.
R. R. to the dividends maintained by the present companies for an average
period of a certain number of years before the adoption of the scheme.
Thus the stockholders of the Santa Fe railroad who have been receiving 6
per cent. would probably have a chance to make an exchange upon even
terms; those of the Northern Pacific, who have been receiving 7 per cent.
would gain one and one sixth shares of the new stock for one share of the
present. New York Central stockholders would have five sixths as many
shares of the new stock as of the old.
"Do you think that many stockholders would be willing to exchange their
certificates upon this basis?" asks my querulous old railroad friend from
out of the West.
I do not _think_ anything of the sort. I believe that they would have to
form many lines to the right of the security-holders who could not get to
the places of transfer quickly enough. Uncle Sam holding the bag? Uncle
Sam's credit back of our transportation system? Let me ask you, Old
Railroader, if you have any fondness for Liberty bonds in your own
strong-box?
While the stock would be called in and reissued, the bonds of the American
railroads--between ten and eleven billion dollars' worth and returning an
average of 4.30 per cent. during the period of government control--would
be called in, principal and interest, by the United States Treasury, and,
as we have just seen, new government bonds issued against them--at just
enough lower interest to make the thing a profitable banking transaction
for our Uncle Sam.
The essentials of this plan are not my own. They are those of the Hon.
George W. Anderson of Massachusetts, a most hard-headed and far-seeing
jurist, who has had a remarkable experience in transportation law,
including some years as a member of the Interstate Commerce Commission. I
am putting it forward here for just what it is worth--nothing more. It is
most interesting, and seemingly most workable. Judge Anderson and I
differ, however, in one large essential. Trained Federal officer that he
is, he sees centralization as the one panacea for the situation, which is
a characteristic attitude of the Federalist, from the days of Alexander
Hamilton until these.
I believe myself that the United States Railroad, should it be found
necessary to incorporate it, should be made a Federal corporation and
nothing else. The State charters of the present-day railroads would be
made virtually null and void once the roads ceased to operate as separate
concerns. It is possible, I will admit, that litigation might arise in
regard to this delicate point. But in the steady decline of States' rights
in all our political life I can have no great anxiety as to the final
outcome of such litigation. Apparently the Federal Government and not the
separate State has the power to-day.
I hold myself that once the centralized organization has been created--and
I shall refer to its opportunities again in a moment--prompt
decentralization is quite as essential to the situation. The Boston and
Albanys, the Lackawannas, the Bessemers, all the other successful small
railroads of our present-day situation arise to bid me go very easily
indeed when I suggest any national centralization of actual operation or
of the actual relationship between the carriers and their workers. And
Sentiment also crooks a warning finger. I know what she means by her
glance.
It would be pathetic, nay tragic, to remove an American railroad name like
the Pennsylvania or the Northwestern, to try to paint out the red cars of
the one line and the yellow ones of the other. New York Central is too
good a name to be scrapped. The same is true of Baltimore and Ohio. How
can we prate of morale and then dare to take from under it the things that
are its chief support? After all does sentiment count for nothing? And
tradition? Have we not possibly become a little too materialistic a
nation?
On the other hand Southern Pacific means but little to-day as the name of
a railroad which reaches as far north as Portland, Oregon, and as deeply
into the heart of the country as Ogden. The Californian railroad has a
sense of dignity that ought to appeal to every man of that great State.
Such a sense too has the Puget Sound Lines.
What's in a name?
Everything. Sentiment. Tradition. Morale. Progress. Dollars and cents, if
you will force me to be materialistic.
* * * * *
But the far greater thing to be gained is the intimacy of contact
resulting by the location of a railroad president with large authority
within but a few hours reach of the people that he is endeavoring to
serve. Why should the man of Concord, New Hampshire, or he of Lewiston,
Maine, have to go farther than Boston for the adjudication of even his
most serious differences with the railroad? Or he of Madison or Racine
further than Chicago? And when it comes to the contacts with his
fellow-workers, how can a railroad president in our Federal capital city
of Washington be expected to know of living conditions in Great Falls,
Montana, or in Wichita Falls, Texas? Incidentally that is the chief issue
upon which the Pennsylvania is to-day fighting the Railroad Labor Board in
the courts. It wishes the right to meet its own workers, in its own way.
This is real regional thought. The people in control of the Standard Oil
and the Bell Telephone companies came long ago to bless the day when
legislation embarrassing to them at the time, forced the regional system
upon them. They now know its real advantages. The intimacy of labor
control alone is worth all the trouble and all the expense.
There is little or no dispute among those who really know the situation
that nine tenths of the solution of the railroad labor problem as it
exists in this country to-day rests in better contacts between the
employers and the employed. A predicament such as we saw but a little time
ago--the general manager of a great railroad unable to get his proposals
to his shop-workers--would hardly be possible in a road whose limits were
not too great. A certain high executive of my acquaintance is going to
take extreme exception to my suggestion that the regional trunk-lines in
the immediate district between New York and Chicago be broken at Buffalo,
at Pittsburg, and the Ohio River.
"I can sit in my office," he says, "and each morning within an hour talk
with each of my subordinate executives--in Pittsburg, in Cleveland, in
Detroit, in Chicago, in St. Louis, in Cincinnati."
Yet that is just the trouble. Too many railroads in this country have been
operated on the long-distance telephone principle. Ten minutes' talk over
a copper wire is hardly equivalent to a day of personal contact, once
every ten or twelve or fourteen days. That the men who are at the very
tops of our largest railroads have done wonders with the long-distance
telephone I shall not deny. But I do not think that they have accomplished
intensive railroad direction with it, or anything like intensive railroad
direction. And I have not noticed them accomplishing any remarkable
results in bettering their relationships with their workers, or with
raising the morale of their roads.
* * * * *
Yet just as regional operation and a pretty well divided regional
operation, is essential to the best operating results in our American
railroads, so on the other hand is centralization fairly vital to any
large traffic or financial results.
It will be argued always against any plan for the centralization of our
railroads that it makes an easy first step toward government ownership.
Such argument is foolish. Yet if it might be good business for the Federal
Government in some distant day to take such a step, why is it not good
business to undertake it to-day? Particularly when it is in a position to
command valuable governmental assistance in the taking of the step. Here
is the real nub of this question.
For few practical railroaders will deny certain vast advantages to be
gained by the complete centralization of our rail properties--not only in
financing and in rate-making, but also in traffic solicitation and
control, in expert staff study of mechanical and operating problems, and
in the production of proper personnel, particularly for the filling of
future executive positions. All of these functions and more too, the
United States Railroad could and would undertake. In contentions which
might arise from time to time between the regional roads, its word of
decision would be absolute, its authority supreme. And nowhere is this
more necessary to-day than in the vexed question of rates--particularly of
freight-rates.
The expert traffic executives of this super-railroad would settle these
rate questions, and be subject only to revisions, in the strict legal
points involved, by the Interstate Commerce Commission, which then would
become almost exclusively a high court of railroad law, in turn subject
only to revision in its decisions by the United States Supreme Court
itself. The traffic experts of the United States Railroad would control
absolutely the routings of through business where it passed over the lines
of two or more of the regional carriers. But as an immediate beginning the
best construction step that they possibly could make would be the creation
of a real scientific freight-rate structure for this country.
Up to the present time this has been deemed an impossibility, by traffic
experts outside of the ranks of the railroads as well as those within
them. But it has only been an impossibility because of the lack of proper
central organization or authority among our railroads as they exist
to-day. Such a plan in the main--called the block-and-zone system--has now
been in successful operation for a number of years in both our parcel-post
and express services. I was in the express business myself when it first
came into being there. Up to the very hour of its arrival the
tariff-sheets of the express companies were veritable Chinese puzzles;
they were nearly as complicated and as obsolete as the freight
tariff-sheets of our American railroads of to-day.
The extremely gifted and far-seeing mind of the late Franklin K. Lane
devised the block-and-zone tariff system for the express. Some of the
older men of the express companies then felt that the blackest day in
their history had come to hand. Within a twelvemonth the most reactionary
of these had been converted to the new scheme. They saw its simplicity,
its fairness, its utility, its economy.
What was done for the express nearly half a dozen years ago should be done
for the railroad freight situation here immediately. At the time of his
retirement from office Director-General McAdoo already had begun to plan a
national freight-rate structure. He had engaged to perfect its details
Edward Chambers, vice-president of the Santa Fe, and one of the ablest
traffic men that this country has ever known. The Chambers plan was worked
out quite fully but was never made public. It is known, however, that it
follows very closely the general scheme of both the parcel-post and the
express block-and-zone tariffs varying from them only in its intricacies
of detail due to the vast range of commodities that a railroad finds
itself obliged to carry upon its cars.
For a centralized traffic bureau of our railroads there is also a huge
international opportunity. The representation of our American roads
overseas is to-day a woeful thing indeed. The Southern Pacific has an
office of its own in Paris. Perhaps there are others. If so I have never
seen them. But in my long months of residence in that old city the
railways from all quarters of the world save the United States have called
to me appealingly from their shop-windows along the boulevards. So it is
in London; so in other great capitals of Europe. It is only America--only
that lovely great quarter of North America that we call the United
States--that is deaf and blind alike to the possibilities of the traveler
and the freight from overseas. In April, 1921, I picked up the time-table
of a prominent American railroad in the chief hotel in Madrid; in its
familiar colorings it seemed like an old friend, indeed. It was an _old_
friend. It was dated December, 1916--and so were all of its fellows from
the U. S. A. in the time-table rack of the man from Cook's.
The United States Railroad would represent adequately every mile of
railroad in the United States in every great city of the world. Its
offices would be the outposts of American commercial enterprise. They
would be filled with adequate and up-to-date information for the tourist
and shipper alike. It might be that they would sell through tickets and
through bills of lading to the most humble and sequestered of American
communities, while to-day the scarcity of information that the European
may readily acquire upon even important towns of our U. S. A. is
appalling. Contrast such service, or lack of it, with that rendered, let
us say, by the Swiss Federal Railroads in the City of New York, where one
may go and find the fullest and the most accurate information in regard to
the smallest of Swiss villages.
Already I have hinted upon the valuable work that this United States
Railroad might do in the technique of the business, both in studying of
constant new inventions as well as in working out better operating methods
from the tools already at hand. This last certainly would include the
constant study of a far better correlation between our steam railroads,
our highways, and our inland waterways. It probably would result in not
only the complete study of the most efficient and economical container but
the actual ownership of several millions of them. It might be well for the
title of all our freight-cars as well as our present Pullman sleepers to
be vested in it. The advantages of a pooled ownership of these fleets of
wheeled carriers, so extremely valuable in inter-railroad communication,
have long been realized by our hard-headed railroad executives. The United
States Railroad could accomplish such point ownership, and with a minimum
of fuss and feathers. In the long run it might even accomplish the
tremendous feat of establishing a through fast passenger-train between New
York and Seattle. Who knows?
In other words the work of this centralized railroad organization would
not only be analagous to the staff of any army but something considerably
beyond. Expert railroaders, removed for a season, short or long, from the
details and the vexations of everyday problems and working with skilled
technical experts and even recognized theorists, ought to and would
accomplish wonders. I have hinted also at the possibility of a strong
central organization in training and recruiting future executive
personnel. Those possibilities might be carried much further, in the
super-relationship between the American railroad and the rank and file of
its employees. With a proper scheme of representation upon our United
States Railroad--of which more in a moment--it might even be possible to
have it supersede the present rather hapless Railroad Labor Board out at
Chicago and so accomplish a real governmental economy.
Yet remember that the actual hiring and the immediate relationship and
authority between the railroad and its employee--no matter what his
rank--should always remain with the regional organization. For remember
also that it is largely for this purpose that we brought it into being--to
better the human relationship between the human officer of the railroad
and its human patron and its human employees. Contact alone does this. For
this we have gone through to decentralization. We have tried to keep
authority in these human relationships active and alert and acute upon the
immediate ground. If we can accomplish that one great thing, if we can
make our railroad of the United States as a huge mechanism of organization
quickly responsive to the human being and his rights, it will be well
worth the huge expense and trouble of decentralization. Remember all the
while, if you will, that the one very great sore spot of our railroad
problem is that we have thought too much of it always in terms of dollars
and not enough of it in terms of men.
I bear no particular grief for the organized bodies of shippers or for
those of the employees. They are all entitled to fair treatment--and
nothing more. The one group may easily become a pest, the other an
autocrat. Yet a just consideration for the patron and for the employee is
a rock upon which our railroads may stand secure, the lack of it a rock
upon which they may inevitably crash. This may be poor epigram, but it is
a solid fact.
In fact I may go much further and state quite bluntly that no plan for the
reorganization of our railroad system of the United States now has any
real prospect of success that does not recognize in its fundamentals the
need of a radically changed status for labor.
It matters not that there are now five or six millions of workers
temporarily out of employment, that the railroad strike of October, 1921,
was called off because organized labor saw naught but defeat in it; the
fact remains that in the future labor must be given just and proper
representation in the initial management and so must be forced to assume
its own proper share of the responsibility for the uninterrupted and
steady development of our rail transport facilities. That it must be given
a fair wage is now beyond the point of controversial discussion. There may
be, and probably will be, plenty of future discussion as to just what
constitutes the fair wage and the fair working condition for the
railroader, but the fact remains that if these both are not kept fair and
just there will not be sufficient railroaders coming forward to maintain
the human side of the machine. Here is a self-evident fact of which our
reformers sometimes quite lost all track.
With this principle in mind I believe that the directorate of the United
States Railroad, divided into three groups, should have one of these
composed of directors elected by the classified employees of the roads.
Assuming that fifteen or twenty-one would be the right size of
directorate--in order to avoid too clumsy and unwieldy a body--from five
to seven men would represent labor, a similar group the public (probably
being appointed by the President of the United States and confirmed by the
Senate), while the third group would be elected by the stockholders of the
company. It might be found more practicable to have a separate set of
fifteen directors for each of the regional railroads and, by making these
directorates almost exclusively local, so serve still further to keep the
management of these regional roads alert to the service of their
individual roads, right here and now.
The point is that whether there is one board of directors or twenty-five
or twenty-six for the future rail transport organization of the United
States, labor must have its representation there. This, in addition to the
possible sharing of one-third of the dividends over 6 per cent. which
already I have suggested, would form a generous gift to labor. For it
labor must in return make a generous offering. For despite sentiment, I
believe that is the usual economic principle in the making of gifts. The
gift that labor must make in return in this instance is its recognition
that any combination of employees in restraint of trade--no matter under
what name--is illegal and against the public weal. Strikes of any form
unquestionably are combinations in restraint of trade. To-day they are
legal. They must be made illegal, both in law and in universal public
opinion. This, of course, cannot affect the right of the individual
railroader to leave his job if he desires. That, of itself, also is
fundamental. Certain it is that no railroad should want a man who is
disgruntled and dissatisfied for very many hours in its employ.
Of late it has rather become the fashion among many otherwise thinking
people of a degree of mentality to ascribe the many troubles of our
railroads in this country either to the "high" wages that they are paying
their employees or to over-regulation on the part of various governmental
commissions, both State and Federal. Of the wage question I have said my
last words in this book. Nor is the highly controversial question of
regulation--or of so-called over-regulation--worth much discussion.
From time to time some gifted (but uninformed) soul bursts into the public
prints with the highly original suggestion that we should in some
mysterious and occult fashion return to the days before 1887 when
regulation of our rail carriers was an unknown art in these United States.
It all has a rather fascinating sound, particularly to such people who may
have been the witnesses or the victims, direct or indirect, of some of the
ridiculous rulings that these commissions--particularly the State
ones--occasionally hand down. Unquestionably there have been many foolish
decisions. Unquestionably many of them have contradicted and offset one
another. And the dabbling of the professional politician into the delicate
centers of a transportation machine, of which he really knows nothing at
all, has brought us a very great deal of trouble. But--
I do not believe that any thinking railroader or patron of the
railroads--no matter what his job or what his degree or station in
life--really would go back voluntarily to those uncouth, unregulated days
of 1886 if he could possibly avoid it. In thirty-five years many things
are forgotten. It once took our magazine muck-rakers nearly two decades
to set down the great business evils that arose in those very days that
now seem halcyon to us largely because thirty-five years have aided us so
largely in the business of forgetting.
Then there is the chap who cries for the return of a Hill or a Harriman--I
do it myself at times; I had and still have much admiration for each of
them--a Hill or a Harriman who with the wave of some mystic, magic wand
will make all transportation things right once again. We Americans fairly
worship a character of that sort, even though we may have largely created
him within our own imaginations. We love to fall prone at his feet.
Yet even as one of those who from time to time cry aloud for a Hill or a
Harriman, I am quite ready to admit that perhaps the slow but certain
progress of our American civilization has now brought us beyond the
necessity of bold, blunt captains of industry such as these two big and
picturesque figures of our recent history. It is possible, please
remember, that if either of them had been given the supreme control of all
our railroads they might not have made such an overwhelming success of it.
It is possible that even under their wizard hands there might have arisen
distrust and discontent, both upon the part of the patrons of the
railroads and of their workers. Remember that we do move. And 1922 cannot
be 1886. Or 1896. Or 1906. Or even 1916. And perhaps it is just as well
that it should never be any of these years. Why turn the clock backward
anyway? It is much better to be looking forward.
Looking forward may yet bring us government ownership and operation of our
railroads. Just now I do not see it. Yet sometimes we move pretty rapidly
here in the United States and charge about face, with an astounding
swiftness.
It is probable, however, that before we adopted both government ownership
and operation, as a permanent policy, at least, we should swallow but one
of the pills. It is not necessary in the present event to take both at
once. If it did become necessary it probably would be that of ownership,
and possibly somewhat along the lines that I have indicated for the
formation of the United States Railroad. In which case it would be
necessary to contrive some plan for the leasing of the regional railroads
to private corporations, for operation solely. This has been done already,
notably in India, but never with a pronounced success. It is also the
method used by the City of New York for the operation of its newer rapid
transit lines, and again without success. It has many complications, many
potential difficulties in its pathway. And it is hardly conceivable that
it will come into use ahead of a scheme for a centralized, privately-owned
and operated railroad.
Yet despite all these possible complications and difficulties, in the eyes
of the average man who thinks, it still is to be preferred to the
double-dose of government ownership plus government operation. That the
first of these offers large opportunities for the proper financing for the
steady growth and the future development of our rail transport I think
that I have shown you already. It is the stronger of the twins. Of the
second it is hard, as yet, to speak with much enthusiasm. To say that he
is untried is putting the thing both mildly and with extreme politeness.
To say that the American public of to-day even wants to try him, would be
making a large statement, a very large statement indeed. Without joining
in the shrieks for the coming of a second Hill or a second Harriman or the
wholesale murder of all the regulatory commissions, I honestly believe
that our American public to-day wishes a little safer, a little surer
panacea for its transportation ills, than government operation. It is not
the solution that it really desires for its railroads of to-morrow.
End of Project Gutenberg's Our Railroads To-Morrow, by Edward Hungerford