AN ADDRESS BY DANIEL WILLARD President of the Baltimore & Ohio Railroad Gimpany AT THE ANNUAL DINNER OF THE TRAFFIC CLUB OF PITTSBURGH MARCH 27, 1914. MEMORIAL HALL, PITTSBURGH, PA. An Address by Daniel Willard, President of the Baltimore cfc Ohio Railroad Company, at the Annual Dinner of the Traffic Club of Pittsburgh, March 27, 1914. My first definite impression of Pittsburgh as an industrial center was gained in 1899. I happened to be here on an inspec¬ tion trip with Mr. John K. Cowen, who was at that time Presi¬ dent of the Baltimore & Ohio Company, and I remember his say¬ ing that the tonnage handled by rail into and out of Pittsburgh per annum was much in excess of all the tonnage handled at that time by the Baltimore & Ohio from all of the stations on its entire line. He further said that Pittsburgh was then the greatest ton¬ nage producing center in the world. Later on, when I was an officer of the Erie Railroad, Mr. Cowen's statement frequently recurred to me, and we, of the Erie, often deplored the fact that our -rails, which went within sixt}' miles of Pittsburgh, fell short by that same distance of reaching the greatest tonnage center in the world. When I re-en¬ tered the service of the Baltimore & Ohio Company in 1910, the impression which I had gained fifteen years before concerning Pittsburgh's industrial importance, was as vivid as when first made, and it has been strengthened, if possible, by my experience during the last four years. I understand that the total freight tonnage shippeil into and out of Pittsburgh via railroads during the calendar year, 1912, and not including tonnage simply passing through, amounted in the aggregate to 104,594,915 tons. The revenue tons carried by the Baltimore & Ohio Company during the same period,' amounted to 09,762,098, or less than one-half the tonnage which was actually handled in this one center,—showing that the condition which Mr. Cowen described in 1899 has become even more acccntuatetl 2 sincû that date. I have recently made inquirie.s concerning the l)u.siness of other large indu.strial cities, and so far as I am able to learn, Pittsburgh is still the greatest tonnage producing center on earth. The enormous tonnage above referred to, however, is not created in Pittsburgh. In a large .sen.se the raw materials required are brought here from the iron mines in IMinne.sota, from the coal mines in Pennsylvania, Ohio and We.st Virginia, and from the forests and quarries located at other places more or less remote, and after the crude material has been manufactured and put in commercial .shapes, it is then sent to the four corners of the earth as a market. It is interesting to recall in this connection that Washington, when on his first trip to the head waters of the Ohio, is said to have written in his diary while camping on the point of land be¬ tween the junction of the IMonongahela and Youghioghenj' rivers, that "here would be a good place to build a mill;" another in¬ stance, if such were needed, of the remarkable foresight and prophetic vision of the revered father of our country. With the conditions just referred to in mind, it is clear that Pittsburgh should be,, and we know it is, deeply interested in transportation, using the word in its broadest sense, and it is par- ticularh' interested in that kind of transportation represented by the steam railroad. The railroads that are fortunate enough to reach this great manufacturing center with their own rails, are, in turn, equally interested in anything that affects the success and continued development of Pittsburgh. You have doubtless list¬ ened many times, upon such, occasions as this, to statements dwelling in much detail upon the varied phases of Pittsburgh's greatness, and you have no doubt been told, just as oftenj of the enormous business done bj' the railroads that enter your citj'. It is not my purpose, however, at this time, to speak further con¬ cerning either of the subjects just mentioned. I desire rather to talk for a short time about certain phases of the railroad question which have been under general discussion of late, and on that ac¬ count more or less in the public mind, and part of what I shall say in that connection will apply more particularly to those rail¬ roads located east of the Mississippi and north of the Ohio and Potomac rivers, and in that "part of the United States which traffic men are accustomed to speak of as Official Classification territory. 3 "It has gradually come about that under scisting conditions the rates and charges now in effect in Official Classification tearitory, do not yield sufficient revenue to properly meet the situation, and the railroads are endeavoring, at the present time, to obtain per¬ mission to advance their freight rates approximately five per cent. I shall not recite the causes which have.brought about the present situation, because I assume you are already familiar with that phase of the subject. Neither is it my purpose to emphasise, at this time, the arguments that have been presented in the case now before tbe Interstate Commerce Commission, but I cannot dm- cuss my subject fully and freely unless to some extent use is made of information wMeh has already been developed in that connec¬ tion. In the present rate ease, it has bemx shown, for instance, in statements presented to the Interstate Commerce Commiasion, that thirty-five roads ir. Official Cla.ssification territory have actually added to their property investment since 1910, for additional facilities" and equipment, over $659,000,000, but as.a result of opm'ations in 1913, although the gross earnings of the thirty-five railroads were $186,775,000 greater than in 1910, the net earnings after paying operating ejqjenses and taxes, werè actually $16,311,000 less than in 1910, showing that not- only had thœe particular companies failed to earn any return whatever upon the new capital invested, but they actually had $16,311,000- less net as return upon their previous investment, than was the case before the large additional amount of money had been put into the plant, and of couree it is unnecessary to say. to you, as business men, that no business enterprise can continue on such a basis. It. has been stated by men who have given this matter careful consideration, that the growing needs of the commerce of this country will require an additional expenditure by the railroads for new equipment and facilities, of upwards of a billion dollars a year for some years to come, and under existing conditions, the only way in which such money can be obtained is through private enterprise—actuated, of course, by the desire for private gain. Men having nioney to invest will not put it in railroads unle,s.5 they bdieve that money so invested mil upon the whole bring as safe and satisfactory return as might be expected if invested in othra directions, and railroad investments must be made sufficiently attractive to secure new capital, else development, which means new cars, new engines, new stations, new tracks 4 and other facilities will cease, and nothing can more effectually ■'check, if not absolutely stop the growth of commerce than in¬ sufficient transportation facilities. IIow may the new eapital needed be obtained? How may railroad investments be made attractive? By permitting the railroads to impose such reasonable charges for service performed as will, with economical and intelligent operation, yield sufficient net to pay fair and reasonable return upon the cajjital required. The claim is frequently made, and rarely denied, that the American people arc fair, and that ultimately they may be de¬ pended upon to do wliat is reasonable and right. Nevertheless, it sometimes appears as if they were not willing at all times to do what is fair and right toward the carriers, and the question natur¬ ally arises, why should a people of recognized fairnc.ss, be unfair or feel unkind, if they do, towards the railroads? I think this feeling was due largely to the fact that in the past the railroads did things that in the light of present da3- standards, ought not to have been done. I might, in this connection, if it were worth while, urge extenuating circumstances, but within the limited time at mj' disposal, I think it would be more profitable to consider instead the situation as it exists today. It is beyond doubt that there has been a more or less general feeling of hostility towards the railroads, and it was due, among other things, to the fact that the railroads exercised at times, we will say, or at least they were supposed to have done so, a control over some of the people's representatives and public officers, that was not in har- monj' with our democratic ideas of government. Thej' showed I)artiality between shippers and between communities, as regards rates, passenger fares and conditions of service. Thej' were not sufficientlj'^ considerate of the rights of others, and further, financial transactions of an objectionable character were suspected and disclosed in numerous instances. All this finallj' develojied a feeling of pronounced hostilitj' on the part of the public generally towards the railroads and those who represented them, and this feeling found expression from time to time in laws, framed to correct the things complained of. The Interstate Commerce Commission, which came into existence in 1887, was the result of a nation wide clemand that certain abuses should be corrected. The things chieflj- com¬ plained of at that time were, as I have suggested, the misuse of passes, the granting of rebates, the hauling of freight a longer 5 distance for a less amount than was charged for a shorter distance, and the evils connected with the so-called pooling system, etc., all, I may say, the natural fruits of competition. The Commission, then established, has been given the power to correct the things above referred to. The Interstate Commerce Commission is one of the most powerful bodies of the kind in the world, and in it the people have the strongest possible guarantee against misuse of power by the railroads in the future. It has been frequently stated that the railroads, or at least some of them, are incompetently and dishonestly managed. Men engaged in the railroad business are human and no way different from those engaged in other business undertakings. It has de¬ veloped in certain instances, I regret to say, that men holding official positions wth railroads have been unfaithful to their trusts; conditions of extravagance have developed in localities, and uneconomical methods have been disclosed. I suppose the same may be said concerning any other undertaking in connection with which a considerable number of men are employed, because in such cases there is always the element of human weakness to contend with. However, as matters exist today, the railroads are obliged to keep their accounts in accordance with methods pre¬ scribed by the Interstate Commerce Commission, they are, in fact, prohibited by law from keeping them in any otiier way, ami their books must be open at all times for inspection. Under such conditions, it is practically impossible for dishonest methods to be followed for any considerable length of time without detection, and in this connection I wish to state in the strongest manner pos¬ sible that in my opinion there is no more efficient, high minded or honorable body of men to be found anywhere, than those who today constitute the official staff of the American railroads. I do not claim they are better than other men; I do assert, however, that they are just as good, and my belief is based upon an intimate knowledge of an acquaintanceship with the men in mind, of more than thirty years duration. Further, there is no incentive to wasteful or inefficient operation, but on the contrary there is the stronge.st possible incentive to efficient and economical operation. Those who manage the railroads are endeavoring to do so in such a way as to make them profitable to the owners, as well as satis¬ factory to the public. In other words, they arc actuated, we will say, by the feeling of selfishness—the same feeling which actuates each one of us as individuals, in all of our business undertakings. However much we may dislike the word, we must admit that as ü a rulo the real incentive behind the farmer, the merchant and the manufacturer is the desire for private gain, or gain for self. It should be remembered, however, that the railroads, quite unlike the ordinary manufacturing or busine.ss enterprise, extends over many miles of country, and its operations on that account are extremely diíRcult to supervise; and because of its public character, the railroad is constantly required to sacrifice economy in the interest of safety, dispatch or the commercial requirements of the service. All of these features make it difficult to obtain such economy and efficiency in service as might otherwise be ex¬ pected. They do not make efficiency or economy impos.sible, but they