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Railroad
Questions
Answered
h
> Association of Railway
i Executives
61 Broadway New York
Üb
IT is the declared purpose of the
United States Government to re¬
store the railroads to private manage¬
ment on March 1, 1920.
The Association of Railway Execu¬
tives represents those upon whom at
that time responsibility would largely
rest for the prompt and successful
movement of the country's commerce.
Those constituting this Association
are keenly conscious of their accounta¬
bility to the public in resuming direc¬
tion of the railroad service.
Their experience has made it clear
that certain facts and principles are
of paramount moment in assuring
railroad service such as the public
needs and should have.
The gist of the whole situation is
that if the future conduct of the rail¬
roads is to be successful the business
must be placed upon a basis which
will enable the different companies
to attract new capital necessary for the
proper development of existing lines
and the construction of new lines.
Proper service on existing lines is
vital and the proper adjustment of
conditions surrounding the operation
of existing lines is of extreme import¬
ance, but the paramount considera¬
tion is that our system of railroad
regulation should assure the continued
development of the railroad facilities
which will be adequate for the needs
of a growing country.
Public discussion of every phase of
the railroad situation is to be encour¬
aged, for the railroad problem must
be solved—and solved properly soon,
if our country is to prosper.
ASSOCIATION OF RAILWAY
EXECUTIVES
T. DEWITT CUVLER, Chairman
'Railroad
Questions Answered
I
What do railroad managers consider the
primary aim of a correct national railroad
policy?
To secure the best possible transportation at
the lowest possible cost.
What is the controlling consideration in
shaping an effective railroad policy?
To make sure of being able to obtain in the
future the necessary money with which to
develop existing railroads and build new ones.
Why is this controlling?
Because our country, as a whole, is still unde¬
veloped and railroads have been and will con¬
tinue to be the chief instrument of develop¬
ment of our natural resources, opening up
territory that needs only railroads to become
more productive, and making in every part of
the country a market for the goods produced
in any other part of the country. Further¬
more, in highly developed parts of the country
growing railroad service demands more track
facilities and better terminals. Such develop¬
ment means prosperity, which can be obtained
in no other way.
*Reprinted from advertveimnt in the Saturday Evening Poet,
Why is that of importance to people not
dependent upon railroad jobs?
k
Because unless the country continues to grow
and new markets are opened up businesses can¬
not expand and new and better jobs will not*
be available. On the other hand, as new pro¬
ducing areas are opened up, as more products
are made available in every part of the country,^
the standard of living of each citizen, however
humble he may be, will be raised and the cost^
of living made continually more reasonable.
Inadequate railroad facilities curtail the pro¬
duction of the necessities of life and thuss.
cause an increase in the cost of living.
II
a
What has been the guiding principle on
which American railroads have been de¬
veloped ?
To reduce unit costs. In other words, to
build such powerful locomotives, such heavyj
tracks, such large freight cars, and such ade¬
quate terminals, and to encourage the car¬
riage of freight in such great quantities, that"
each ton of freight could be carried at such a
low price as to make it possible for farmers and
for producers, especially of manufactured
products, to place their goods in any market
upon a basis wherein the freight charges would ^
be relatively negligible.
Just what does that mean in its practical ^
application?
It means that the farmer can ship his cattle,"
corn and wheat long distances and help to
keep down the price of food in the great cities;
that the fruit growers can place their products
9 in the markets thousands of miles distant at
prices which will permit a greater use ; it means
that fuel, lumber and raw materials for build-
' ing and manufacturing can be moved long
distances, and that manufactured articles can
be widely distributed, thus giving the con¬
sumer access to many markets and the benefit
of competition.
Ill
What is the average charge the railroads in
the United States make to the public for
r carrying a ton of freight one mile?
About one cent. Two tons are carried one
^ mile for the price of a postage stamp. That
is the average charge; heavy articles, like coal
and ore, are carried at lower rates because
they can be handled in great bulk.
^ How does this cost compare with the freight
rates in other parts of the world ?
The average freight rate on the American
railroads is lower than on the railroads of
any other country in the world.
How about passenger rates?
The passenger rate in the United States is
three cents per mile for travel on a first-class
coach. The rate in England for first-class
travel is six cents a mile. In both countries
the charge for parlor or sleeping car accommo¬
dation is additional. Second-class rates in
h: most of the European countries run about
four cents a mile, and third-class rates about
t
three cents a mile, but the second and third-
class accommodation, as it is in Europe,
would be highly unsatisfactory to American
travelers.
Have rates steadily declined in the United
States?
Up to 1918 there had been a continuous re¬
duction in the average freight rate charged
on American railroads, for a period of thirty
years. This was made possible by the con¬
tinued attention to development of railroads,
building new lines, opening new markets, and
making possible a constantly growing amount
of freight to be carried at a continually de¬
clining unit of cost. The recent increases
made under govermental control have been
due to conditions brought about by the war.
IV
Were there not evils attendant upon this
development of American railroads?
Without question; but the fact that these
evils were incidental and not inherent is shown
in the fact that American railroads have had
the lowest capitalization per mile of any of,
the great countries in the world, have paid
the. highest wages of any railroad system in
the world, have paid the highest taxes in pro¬
portion to investment of any railroad system
in the world, yet have given their service to
the public at a lower price than any other
great railroad system in the world.
Has the possibility of improper practices
under private management of railroads
been eliminated? ,
The possibility of dishonesty in any line of
business can never be altogether eliminated,
but under public regulation, as iavored by
railroad managements today, there is the
utmost possible protection to the public
against dishonesty, burdensome rates or in¬
jurious practices.
V
What, as the railroads see it, has heen the
chief weakness in the system of regulation
as practiced up until now?
That it has been punitive for past errors
rather than constructive in encouraging de¬
velopment of new railroads against the in¬
creasing demands of commerce.
Have not the railroads in recent years heen
developing fast enough to take care of the
normal demands of trade?
They have not. Most of the money spent
on railroads in recent years has been in build¬
ing up old lines with assured traffic rather
than building into new territory and opening
up the undeveloped parts of the country.
And even on the old lines the expenditures
have not been adequate to keep pace with the
growth of business.
In what way is this shown?
By one fact, for example, that it has for
several years past been practically impossible
for an American railroad to sell new stock in
the purchase of which the investor took any
chance whatever; practically for the past ten
years investors in railroad securities have
insisted upon obtaining bonds involving an
actual lien upon the property. That is, no
one would invest money in railroads as a
business for the sake of the possible profit. ï
They could only lend money on a mortgage
bond or a short-term note for the sake of the
interest return. This has resulted in a steady
depletion of railroad credit and a constantly
increasing difficulty for the railroads to obtain
new money for further development.
What has been the result? *-
Walker D. Hines, Director-General of the
Railroads, in a public statement issued at t
Washington, recently, said:
"Even prior to the war, railroad facilities
were not equal to the demands. During the ^
war, the addition of new facilities was greatly
restricted by scarcity of material and labor.
Since the war, it has been impossible to enter
upon or carry out any extensive program for
enlargement of railroad capacity, because of
the uncertainty as to the status of the rail¬
roads."
0
Would not the railroads have fared better
if their managers, instead of saying so
much about declining railroad credit, had
assumed an optimistic attitude and given
encouragement rather than discourage- ^
ment to those who might invest in railroad
securities?
The railroad managers have sought to present
the situation as they see it; they could not
have justified themselves in painting a glow- y
ing picture of promised profits if their expert
knowledge and experience showedil them
clearly that the tendencies atjjwork in the J
business were in the other direction.
What has been the most serious of those
tendencies?
The constant increase in expenses, but with
no power on the part of the railroads, with¬
out permission from regulating bodies, to
increase their charges for service.
VI
Do not the managers of the railroads main¬
tain that they should have unlimited
earnings?
Certainly not. They believe it to be in the
public interest that rates should be reasonable
and be regulated by public authority in the
public interest.
But how does the business situation of the
railroad manager differ from that of the
manufacturer or the merchant?
The merchant may increase his prices when
he sees his costs going up, and as a matter of
fact all merchants and manufacturers have
increased their prices in recent years. The
tendency of railroad regulation, however, has
been to hold down railroad charges in spite
of the steady increase in expenses, with the
result that though there has been a very great
increase in railroad business in recent years,
the railroads themselves and investors in the
railroads have found themselves confronted
with restricted net earnings.
How much more were the expenses of the
railroads in 1919 than they were in 1917?
Expenses increased from $2,850,000,000 in
1917 to $4,695,000,000 in 1919. In other
words, though the railroads rendered less
service in 1919 than they did in 1917 the
actual cost of rendering that service was
approximately $1,800,000,000 more.
Do the railroads favor a reduction in the
wages of railroad employees?
No! The railroads are distinctly in favor of
all employees receiving the highest wages it ,
is practicable to pay, realizing—as the managers
do—the important nature of the service, the
risks that are run, and the extraordinary •
value of having competent men in the service
enthusiastically interested in doing efficient
work. ■■
What do the railroad managers propose as
a way of meeting the railroad problem? i
The key to the problem, as they see it, is in
the recommendation of the Association of^
Railway Executives that Congress pass a law
directing the Interstate -Commerce Commis¬
sion and all rate-making authorities to pro-j
vide a system of rates for the railroads of this
country which will enable them to pay
adequate wages, provide a fair return on the"
investment and accumulate a surplus to pro¬
tect railroad service in lean years and thus
attract the additional capital necessary to^
provide the facilities required by the public.
Are the railroads in favor of public regula-*
tion of the issuance of railroad securities
and for complete accounting of the pro-,-
ceeds of all sales of securities?
Yes; the railroads have embodied a recom-.^
mendation to that effect in a communication*
to Congress.
What is the general recommendation of
the railroad companies to the people of the
' United States?
As railroad experience in this and other
I countries clearly points to the fact that
private management secures the greatest
economy of operation, the most competition
' in service and provision of adequate facilities
for public requirements, it is our recommen¬
dation that—
4.
1. Expenses should not be placed arbitrarily
upon railroad properties without making
• proxdsion to meet them.
2. There should be complete publicity about
^ railroad management and thorough-going
regulation in the interests of the people,
and,
* 3. A sufficient margin between expenses and
earnings should be allowed to attract the
capital necessary to provide the facilities
which the public needs.