The railways during the past year have made still further progress in
recuperation from the war, with large rains in efficiency and ability
expeditiously to handle the traffic of the country. We have now passed
through several periods of peak traffic without the car shortages which so
frequently in the past have brought havoc to our agriculture and
industries. The condition of many of our great freight terminals is still
one of difficulty and results in imposing, large costs on the public for
inward-bound freight, and on the railways for outward-bound freight. Owing
to the growth of our large cities and the great increase in the volume of
traffic, particularly in perishables, the problem is not only difficult of
solution, but in some cases not wholly solvable by railway action alone.
In my message last year I emphasized the necessity for further legislation
with a view to expediting the consolidation of our rail ways into larger
systems. The principle of Government control of rates and profits, now
thoroughly imbedded in our governmental attitude toward natural monopolies
such as the railways, at once eliminates the need of competition by small
units as a method of rate adjustment. Competition must be preserved as a
stimulus to service, but this will exist and can be increased tinder
enlarged systems. Consequently the consolidation of the railways into
larger units for the purpose of securing the substantial values to the
public which will come from larger operation has been the logical
conclusion of Congress in its previous enactments, and is also supported by
the best opinion in the country. Such consolidation will assure not only a
greater element of competition as to service, but it will afford economy in
operation, greater stability in railway earnings, and more economical
financing. It opens large possibilities of better equalization of rates
between different classes of traffic so as to relieve undue burdens upon
agricultural products and raw materials generally, which are now not
possible without ruin to small units owing to the lack of diversity of
traffic. It would also tend to equalize earnings in such fashion as to
reduce the importance of section 15A, at which criticism, often misapplied,
has been directed. A smaller number of units would offer less difficulties
in labor adjustments and would contribute much to the, solution of terminal
difficulties.
The consolidations need to be carried out with due regard to public
interest and to the rights and established life of various communities in
our country. It does not seem to me necessary that we endeavor to
anticipate any final plan or adhere to an artificial and unchangeable
project which shall stipulate a fixed number of systems, but rather we
ought to approach the problem with such a latitude of action that it can be
worked out step by step in accordance with a comprehensive consideration of
public interest. Whether the number of ultimate systems shall be more or
less seems to me can only be determined by time and actual experience in
the development of such consolidations.
Those portions of the present law contemplating consolidations ore not,
sufficiently effective in producing expeditious action and need
amplification of the authority of the Interstate Commerce Commission,
particularly in affording a period for voluntary proposals to the
commission and in supplying Government pressure to secure action after the
expiration of such a period.
There are other proposals before Congress for amending the transportation
acts. One of these contemplates a revision of the method of valuation for
rate-making purposes to be followed by a renewed valuation of the railways.
The valuations instituted by the Interstate Commerce Commission 10 years
ago have not yet been completed. They have cost the Government an enormous
sum, and they have imposed great expenditure upon the railways, most of
which has in effect come out of the public in increased rates. This work
should not be abandoned or supplanted until its results are known and can
be considered.
Another matter before the Congress is legislation affecting the labor
sections of the transportation act. Much criticism has been directed at the
workings of this section and experience has shown that some useful
amendment could be made to these provisions.
It would be helpful if a plan could be adopted which, while retaining the
practice of systematic collective bargaining with conciliation voluntary
arbitration of labor differences, could also provide simplicity in
relations and more direct local responsibility of employees and managers.
But such legislation will not meet the requirements of the situation unless
it recognizes the principle that t e public has a right to the
uninterrupted service of transportation, and therefore a right to be heard
when there is danger that the Nation may suffer great injury through the
interruption of operations because of labor disputes. If these elements are
not comprehended in proposed legislation, it would be better to gain
further experience with the present organization for dealing with these
questions before undertaking a change.