bills affecting railroads were introduced in states reached by the
Burlington System, including those proposed at Washington. So far
this season, 272 such bills have been presented. It is too early now
to venture even a guess as to how many of them will become laws,
but until we know just what to expect, you can clearly see, I am
sure, that we will not feel like incurring any new or unnecessary
obligations.
Among the bills so far introduced are two in Illinois, called
the full-crew bills. These two bills, if passed, will increase
the cost of operation on the Burlington Road alone $96,000.00 a
year, on basis of present business. In Nebraska a similar bill
is under consideration. It is true that the two Illinois bills
if they become laws will not necessarily make our operations in
Illinois unprofitable, but that class of legislation will do much
to discourage new developments, by making such developments more
difficult, or rather, less profitable; and besides, in my opinion,
such laws are not necessary.
As Burlington employes, you may be interested in what I am now going
to tell you about the development of the coal business north through
Galesburg. I need not tell you how much it has increased during
the last four years, for you have seen it grow from practically
nothing up to its present proportions. Some six or seven years ago
the Burlington officers gave careful consideration to the problem
of increasing the Company's business, and you must bear in mind
that freight shipments do not just _happen_ to go this way or that.
Well, they finally decided that the most promising opening was to
try and develop a coal movement from Southern Illinois to the cities
of St. Paul and Minneapolis, and the Northwest generally, where the
winters are severe and fuel supply limited. It was found that if
coal from Illinois was taken to the Twin Cities it would have to be
sold in competition with coal from Pennsylvania and other eastern
states shipped by water to Duluth. It was also found that the coal
from Franklin and Williamson Counties in the southern part of the
state, while of very good quality, would not bring the same price
on the market in St. Paul as the eastern coal. It was also found
that in order to be sold at a sufficient profit to the dealer, in
competition with the eastern coal, the railroad would have to carry
it from Herrin, Ill., to St. Paul, 648 miles, for not more than $2.10
per ton, or 3.2 mills per ton mile. It was also found that it was
impossible to do this at a profit to the railroad, as conditions
then were; that is to say, we could not haul coal at that rate and
make money on a road full of one per cent grades. The engineers were
put to work, however, and an estimate was prepared showing what it
would cost to put the line from Savanna to Herrin all to a standard
grade not exceeding sixteen feet per mile, the line above Savanna
being all right. It was believed that it would pay to make the
improvement--and you know the rest. The line was built from Centralia
to Herrin, the Fenton-Thompson cut-off was built, grades were cut,
and, altogether, more than $5,000,000 were spent to put the road
in shape to haul coal to St. Paul in 3,000-ton trains. Of course,
many new engines were bought, as well as new and high capacity cars
suitable for the coal trade. It is a low rate business, and as you
know, the cars as a rule return empty, but handled over low grades
and in full trains it pays a fair profit; but every additional item
of cost, of course, reduces the profit.
Now to show the effect of proposed legislation. In Nebraska a bill
has been introduced placing the limit of cars that can be legally
handled in one train at fifty. If this bill becomes a law, how long
will it be before somebody will want a similar one in Illinois,
and if you are going to fix a limit so as to make it necessary to
run more trains, and consequently employ more men, and that is the
undoubted purpose of the bill, how long will it be before the limit
will be reduced to forty, or even twenty-five? Where will the thing
end, and when? With the mere possibility of such legislation looming
up in the future, can you expect improvements such as I have just
described to continue? Would you recommend them if in my place?
How long will such legislation find favor in our halls of Congress?
Just as long as your representatives think you want it--by you
I mean the majority of their constituents--and no longer. Your
representatives and senators are human. They seek to obtain political
preferment at the polls, and desire to remain in office. They must
have a majority of the votes to be elected, and naturally they will
shape their course so as to meet your wishes, as they understand
them, because by so doing they hope to retain your support.
No one today questions the right of the properly constituted
authorities to supervise the railroads. No one defends the rebate,
or discrimination of any kind, but, as the Supreme Court of the
United States has recently well said, "_It must be remembered that
railroads are the private property of their owners; that, while
from the public character of the work in which they are engaged, the
public has the power to prescribe rules for securing faithful and
efficient service and equality between shippers and communities, yet
in no proper sense is the public a general manager_."
No doubt there may be much in connection with railway management
in the past (and for that matter at the present time as well) to
criticise; but please tell me what line of human undertaking since
the world began, be it industrial, educational or religious, has
been free from criticism; and, granting all that is said against
the railroads, then what? This is what we find: That the railroad
rates in this country are the lowest in the world, with few minor
exceptions not worth considering; that the wages paid railroad
employes in the United States are higher than anywhere else in the
world, and that the capitalization of American railroads per mile,
as reported by the Interstate Commerce Commission, is but one-fourth
as much as that of English railroads, and one-half that of the
railroads of Germany and France, and one-third that of Belgium; and
this has all been accomplished in a country where a high protective
tariff obtains, and where everything the railroad uses costs more
on that account. It is claimed that our manufacturers must have the
protection of a high tariff in order to enable them to meet the
prices of their foreign competitors and pay American wages; but the
American railroad sells its product, that is, transportation, for
less than any other nation and still pays higher wages. A locomotive
engineer, for instance, receives $4.01 per day here as against $1.62
per day in England, and $1.01 per day in Belgium.
It is sometimes said that railroads have received great help from the
people in the shape of land grants, and on that account should give
much in return. Let me give one instance of how this has worked with
the Burlington Company. In order to induce the original projectors
of this line to extend the road through Iowa, this Company was given
359,000 acres of government land in that state, selling at that time
at $1.25 per acre, amounting to less than $450,000 cash value. By an
act of Congress, passed over thirty-two years ago, a reduction is
made of 20 per cent from the mail pay on all land grant roads. At the
present time the amount so deducted from the Burlington, because of
the Iowa grant, amounts to over $65,000 a year, and since the law was
passed has amounted in the aggregate to over $1,500,000, or more than
three times the original value of the entire grant. Not only that,
but it goes on without end. Do you think that is fair?
We do not ask for favors. We wish to be treated fairly; that is
all. No one can possibly be more interested in the prosperity of
the railroads than the railroad employes. From every dollar earned
by the railroad forty-two cents go directly to pay wages of railway
employes, while only twenty-one cents, or one-half that amount, go
to pay interest and dividends. In no other country in the world
does the railroad employe get so large a share and the security
holder so little. Why should not the man who invests his money in
railroad stock receive as much return in shape of dividends as the
man who invests his in a farm or factory? The last census report of
the government, that for 1900, showed that money invested in farm
lands in the United States earned an average return of over 10 per
cent, and money invested in manufactures earned over 19 per cent.
The governor of Iowa, in a printed article over his own signature,
appearing in the February, 1907, number of "Farming," gave a number
of specific instances where money invested in farm lands in Iowa
earned from 18 to 23 per cent, and he referred to such cases as
typical. The last report of the Interstate Commerce Commission shows
total earnings of all railroads in the United States for year ending
June 30, 1907, to have been $2,589,105,578. It also shows total
capitalization as $13,053,974,156, and money paid as interest and
dividends $551,128,713, equal to 4.2 per cent on capitalization.
Certainly this does not seem excessive when compared with profits in
farming and manufacturing as given above.
We are glad to know that our farmers and manufacturers are
prosperous, because we have long since learned that when they are not
prosperous the railroads cannot prosper. I fear they have not yet
fully realized that it is better for them, also, that the railroads
should prosper. We hear no complaints in Congress or elsewhere
because our farmers and manufacturers are prosperous; in fact, we are
all inclined to boast about it.
The last annual report of the Interstate Commerce Commission gives
the aggregate capitalization of the railroads in the United States
as over $13,000,000,000, showing that the railroad investment in
our country is second in amount only to that in agriculture. It is
estimated that the number of railroad stockholders today is over
400,000. We know that in 1907 over 1,600,000 men were employed on
American railroads. Do you know of any good reason why this army
of railroad men, together with the 400,000 stockholders, should not
receive as fair consideration from government and people at large
as the farmer and manufacturer receive? And yet the government in
effect lets the one have money without interest to buy his land, and
by means of a tariff makes you pay more for much that you buy, so
that the other can pay his employes good wages. Personally I make
no complaint because of either of these things; but so far as I can
learn no one in Congress has suggested that railroads should raise
their rates so that you might receive higher wages, and yet the two
things, rates and wages, are very closely related.
If anything I have said has helped you to a better understanding
of the railroad problem, I am glad. If it has caused you to take a
renewed or deeper interest in the subject, I am glad. I could go on
and multiply cases in confirmation of what I have said had I the
time, but what I have said already is perhaps sufficient. Do you
intend to make railroading your life business? Are you interested in
the prosperity of railroads, and particularly of the Burlington? Do
you clearly see the relation between rates and wages? Do you think
wages are too high? If not, perhaps you do not agree with one of
your congressmen in Washington, who has just recently, on the floor
of the house, urged that the Interstate Commerce Commission be given
more power over rates, which means power to reduce them still more,
because they have never, so far as I have heard, exercised their
power over rates in any other way. Personally, I am glad I can claim
to be a railroad man, and not only glad, but proud of it as well. I
think the American railway is the one great institution above all
others that Americans should be proud of.
Mr. W. R. Lawson, an Englishman, who investigated our railroads in
1903, wrote upon his return, in his book on American Industrial
Problems: "The science of transportation is going to be the special
contribution of the American people to political economy."
Mr. Neville Priestley, an English gentleman and Under Secretary to
the Government of India, Railway Department, came to this country
in 1904 for the purpose of investigating our American railroads.
His report was submitted to the English government and printed.[C]
Among other things he said: "American railway men are quick to see a
new idea. They are quicker still to try it. They take a great pride
in their profession and are striving to get at the science of it.
That their methods are not always perfect is what might have been
expected, but they have managed to do what no other country in the
world has done, and that is, carry their goods traffic profitably at
extraordinarily low rates, notwithstanding the fact that they pay
more for their labor than any other country. It is in the study of
how they do this that much benefit can be derived by other countries."
Mr. Leroy Beaulieu, a distinguished French economist, who visited
this country in 1905 and made a careful examination of American
economic conditions, wrote as follows upon his return to his native
country: "All in all, the prosperity of the American railway system
as well as the excellence of service it renders, is undeniable. If,
therefore, one were in search of model railway methods, it would be
wise to turn to those practiced under the free American system, not
to those illustrated by a system operated under the debilitating
control of the state."
It has been well said that "a prophet is not without honor save in
his own country and in his own house."
FOOTNOTE:
[C] A condensation of Mr. Priestley's able report was made for the
Bureau of Railway News and can be had on application.
THE RAILROAD SITUATION OF TODAY
BY
FRANK TRUMBULL
PRESIDENT OF THE COLORADO & SOUTHERN RAILWAY COMPANY.
An Address to the Western Society of Engineers at their Annual
Dinner, Chicago, Jan. 5, 1909.
_Mr. President and Gentlemen of the Society_:
I shall not attempt to deal with any technical phase of the railroad
industry, and in saying this I am emboldened by a declaration which I
find in the Constitution of your society, to-wit:
"This Society shall neither endorse nor recommend any
individual or any specific or engineering production, but the
opinion of the Society may be expressed on such subjects as
affect public welfare."
The American railroad administration of today has abundantly
demonstrated its ability to solve all engineering and mechanical
problems, and we may rely upon it that the same American enterprise
and valor which have gridironed the continent with shining bands of
steel will solve any technical problem that may be ahead of us for
which money may be had.
I therefore proceed at once to engage your thought for a few minutes,
if I may, upon what seems to me to be the great problem of the
American railroad situation of today; that is, how to satisfactorily
settle the relations between private capital and the users of the
railroads.
FOUR YEARS' RETROSPECT.
During the last four years the American railroad has been in a
seething cauldron of publicity; a good deal of refuse has risen to
the surface and has needed to be skimmed off,--but I think I do not
violate any confidence in saying that not all of it has come from
the body of the railroad. Part of it seems to consist of political
bacteria and defunct statutes which attempted to violate the voice of
the people,--the Constitution which legislators had sworn to support.
And in this connection, perhaps I ought, in passing, to say a word
which has rarely been spoken in defense of the railroads, by pointing
out the shame of putting them to the great cost of proving in the
courts the unconstitutionality of statutes which ought never to have
been enacted because they were never valid. In the last four years
there has been much noise; the air has been filled with shouts and
cries, and more or less dust. Hysteria and virtue, although really
not at all alike, became confused, and a very large percentage of
the public absorbed the idea that the railroad highways are public
property, forgetting that all of us are absolutely dependent upon
private capital for the American railroad of today. Again, we seem to
have been upon a storm-tossed ocean. Fortunate are we that through
it all has run the Gulf Stream of our wonderful American resources.
If it were not for that, we should all have been ruined. We have
survived, but the pity of it is to think how much better off we might
be, if "We, the People of the United States," would, in financial
legislation, railroad regulation and other matters, only exercise our
wisdom as much as we do our power. Legislation has been restrictive,
not constructive. There is very little in it, thus far, to help the
railroad. Nearly everything seems to have been thought of, except
provision for money or for improving credit so as to command cheap
money. The country has been flooded with conflicting laws and still
the cry goes up for more bureaucratic power and more statutes. It
reminds me of an immigration meeting in Mississippi:
The court-house was filled with an assemblage of white people, and
when the meeting adjourned an old darkey asked one of the gentlemen
who came out of the court-house what the meeting was for. The reply
was that it was an immigration meeting. "What is dat?" asked the
darkey, to which the gentleman responded, "We want to get more white
people from the North and East to settle here." Whereupon the darkey
said, "Foh de Lawd's sake, Majah, dars moh white people in dis county
now dan us niggahs can support!"
I admit there have been many evils in railroad administration, but
I modestly affirm that there have been no more than in other lines
of business. The railroad industry of this country is young and it
acquired some children's diseases. Many people think the railroads
would have recovered from measles, mumps and whooping cough without
prescriptions from forty-seven varieties of doctors--forty-six
states plus the Federal government. It has seemed many times that
the railroad patient has been like the man who fell ill in some
mysterious way. The consulting surgeons determined that an operation
was necessary. They could not locate any definite malady, but they
found five hundred dollars on him so they operated on him for that!
Of one thing, however, we may be absolutely sure--that is that the
law of compensation is always at work. If we have an excess of
regulation, there is less of something else. It is entirely probable
that if there had been no political regulation of railroads, the
people of this country would have more roads, far better and safer
roads, and a greater distribution of wealth than they have today.
But I must not forget that, according to the subject assigned me, we
are here not to look backward, but to look at the present, and then
perhaps take a little look forward.
SOME CONTRADICTIONS.
From a mechanical and traffic standpoint the American railroad of
today is one of the wonders of the age. I give one illustration only:
Compare its splendid performance with a report I have here of the
Northeastern Railway of England, which has a large mineral traffic.
This report shows average contents of loaded freight cars to be 5.72
tons, and average contents of freight trains to be 114.7 tons.[D]
On the other hand, the American railroad situation in its political
and governmental relations is a bundle of contradictions. If you were
to engage your money in merchandising or manufacturing, you would
no doubt be appalled if you should discover that some one entirely
outside of your line of business could fix the prices at which you
must sell your product, and that the burden of proof that the prices
so fixed are confiscatory, is upon you,--and that you could not
abandon your operations. Yet this is precisely what may happen if
you invest your money in a railroad. The contradiction is that there
are no reciprocal assurances in your behalf. Neither the State nor
the Federal government will give you any financial aid, nor will
they guarantee you anything, nor will they even protect you against
competition, as France has long since been wise enough to do.
A second contradiction is that although there was a four years'
war to prevent a division of this country, and although thereafter
our American genius connected up remote sections of our common
country, and although the work of the railroads has been splendidly
national, the attempt to regulate them has been lamentably local and
Lilliputian. I need only cite the conflicts between the enactments
and rate-making of different states and those of the federal
government. We hear more or less these days about the "twilight
zone" between the states on the one hand and the Federal government
on the other; but for those who administer the affairs of a great
railroad system, the phrase "twilight zone" is too polite a term. It
is instead a jungle in which the wayfaring railroad man may easily
lose his way, and possibly be actually devoured by "laws with teeth
in them." We hear a great deal about the simple desire that the
railroads shall obey the law; but who is wise enough to say what the
law is, when only yesterday the Supreme Court of the United States
left an important case unsettled, so far as it was concerned, because
it was divided four to four. These uncertain and conflicting laws and
changes in rates confuse the railroad manager more than the public
has ever realized.
A third contradiction is the attempt, by anti-trust laws, to maintain
the competitive idea alongside regulation, as if unrestricted
competition were compatible with compulsory uniformity in rates and
service. The President of the United States and other high officials
have spoken in no uncertain terms concerning the absurdity of a
situation like this, and yet thus far there is no relief.
A fourth contradiction is found in the great increase in cost of
producing transportation without the corresponding increases in
selling prices which have taken place in other kinds of business in
which private capital is engaged. The erroneous impression seems to
prevail that the supply of capital for the railroad industry is an
inexhaustible reservoir, regardless of the compensation which it
shall receive and the conditions under which it shall perform its
work.
A fifth contradiction is the effort to connect up rate-making with
physical valuations. If it will be a satisfaction to the politicians
to have a physical valuation of all the railroads in the United
States, and the people are willing to be taxed to pay the great
expense of obtaining it, perhaps no great harm will be done; but I
believe all of us here would concede that valuations by the ablest
engineers, if separately made, would not agree, and that before such
valuations could be finished, they would be out of date. Some of us
probably think that for rate-making purposes the Government may as
well be employed in making a physical valuation of farms and farm
improvements in order to ascertain what is a fair price for wheat;
or, for that matter, perhaps be as well employed in adding up car
numbers. I know something of a piece of railroad out west, which
in a great mining excitement was built through rocky and tortuous
gorges, and with four per cent grade hung upon the precipitous sides
of awful mountains in a climate described by one of the inhabitants
as consisting of three seasons--July, August and winter. Later the
boom evaporated and the business of the road got down to one train
a day. In the low ebb of traffic a brakeman one day "sifted" into
the trainmaster's office and asked for a job. The trainmaster put
him through the catechism, and among other things inquired, "What
would you think if you saw a train carrying green signals?" to which
the applicant promptly responded, "I'd think business was picking
up." Now, can any of us tell what they would do in Washington with
a physical valuation of a road like that? Its rates today are only
about one-fifth what they were at first.