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  THE RAILWAY LIBRARY

  1909


  A COLLECTION OF NOTEWORTHY CHAPTERS, ADDRESSES
  AND PAPERS RELATING TO RAILWAYS, MOSTLY
  PUBLISHED DURING THE YEAR.


  COMPILED AND EDITED BY

  SLASON THOMPSON

  MANAGER OF THE BUREAU OF RAILWAY NEWS
  AND STATISTICS
  CHICAGO


  CHICAGO
  THE GUNTHORP-WARREN PRINTING CO
  1910




TABLE OF CONTENTS


                                                                Page

  INTRODUCTION                                                     3

  PRE-RAILWAY ERA IN AMERICA                                       5
      By F. A. Cleveland and F. W. Powell.

  FIRST ANNUAL REPORT OF THE CHIEF ENGINEER OF THE PENNSYLVANIA
  RAILROAD COMPANY                                                21
      By J. Edgar Thomson.

  RAILWAYS AND THE PACIFIC NORTHWEST                              45
      By James J. Hill.

  SOUTHERN RAILWAYS AND THEIR NEEDS                               58
      By John F. Wallace.

  PROBLEMS CONFRONTING AMERICAN RAILWAYS                          66
      By Daniel Willard.

  THE RAILROAD SITUATION OF TO-DAY                                80
      By Frank Trumbull.

  TRANSPORTATION CHARGE AND PRICES                                90
      By Logan G. McPherson.

  THE FREIGHT RATE PRIMER                                        107
      Issued by the N. Y. C. & H. R. R. R. Co.

  PROGRESSIVE SAFETY IN RAILWAY OPERATION                        116
      By A. H. Smith.

  RAILWAY MAIL PAY                                               142
      By Julius Kruttschnitt.

  THE DIMINISHED PURCHASING POWER OF RAILWAY EARNINGS            165
      By C. C. McCain.

  THE RAILROADS AND PUBLIC APPROVAL                              199
      By Edward P. Ripley.

  RAILROADS AND THE PUBLIC                                       205
      By John C. Spooner.

  RAILROAD PROBLEMS OF TO-DAY                                    211
      By J. B. Thayer.

  THE RELATION OF THE RAILROADS TO THE STATE                     220
      By W. M. Acworth, M. A.

  RAILWAY NATIONALIZATION                                        238
      By Sir George S. Gibb.

  CONCERNING ADVANCES IN RAILWAY RATES                           261
      By the Senate Committee on Interstate Commerce, 1909.

  STATISTICS OF AMERICAN RAILWAYS FOR 1909                       291
      By Slason Thompson.

      I     Mileage in 1909                                      306

      II    Equipment                                            314

      III   Employes and their Compensation                      321

      IV    Capitalization                                       337

      V     Cost of Construction                                 342

      VI    Ownership of American Railways                       345

      VII   Public Service of the Railways                       346

      VIII  Earnings and Expenses                                358

      IX    Taxes                                                363

      X     Damages and Injuries to Persons                      365

      XI    Locomotive Fuel                                      367

      XII   The Safety of American Railways                      368

      XIII  Railway Receiverships in 1909                        384

      XIV   Cost of Railway Regulation                           385

      XV    Statistics of Foreign Railways                       386

      XVI   Growth of Railways                                   391

            Recommendations                                      393


  INDEX                                                          395




INTRODUCTION


In the following pages is presented a number of the more timely
papers and addresses of the year 1909 on the present railway
situation, together with chapters from two books of current interest
on the same subject. As the object of the compilation has been to
present in permanent and accessible form information in regard to
American railways worthy of more than the ephemeral life of newspaper
or pamphlet publication, it has been thought well to accompany the
messages of today with a brief glance at the conditions on this
continent before the days of railways. Happily for this purpose
the first two chapters of Messrs. Cleveland and Powell's "Railroad
Promotion and Capitalization in the United States," fresh from the
press, afforded the very background needed, and the first report
of the engineer of the Pennsylvania Railroad provided the glasses
through which the reader can look forward from the small beginnings
to what is now known as the greatest railway system on the globe.

After this study of conditions as they were, and of the opportunities
that invited the railway pioneers of 1848, it is instructive to
read the utterances of the latest of our empire builders, whose
foresight and indomitable will anticipated the development of our
Pacific Northwest with railway facilities that already lag behind the
necessities of its amazing growth.

Of the other addresses and papers it is unnecessary to say more than
that they reflect the prevailing sentiments of all thoughtful railway
officials respecting conditions of the gravest import to the great
industry upon which the entire fabric of our national prosperity
and well-being depends. Only the shallowest student of our social,
economic and political system can view the persistent attacks upon
the American system of transportation without serious alarm for the
results. This alarm is the prevailing note of these papers and it
comes from men who are at the helm and who see the financial breakers
upon which the fierce blasts of political exigency are driving the
railways.

The papers by Sir George S. Gibbs and Mr. A. M. Acworth, the leading
authorities on British railways, discuss the alternative to wisely
regulated railways--nationalization of railways. With a continuance
of unwise and burdensome regulation of railways, which strips
responsibility of all discretion, nationalization is inevitable.

The Bureau's statistics of American railways for the year ending June
30, 1909, is included in THE RAILWAY LIBRARY because it affords the
latest data not only as to the railways of the United States but for
the world.

Acknowledgments are made to the authors and publishers of the various
papers, and especially to the publishers of the two works from which
important chapters have been extracted by their courteous permission,
as well as that of their authors.

If this publication fulfils the purpose of its compilation, it will
be succeeded by annual volumes of like character under the same title.

  S. T.

  Chicago, June 1, 1910.




PRE-RAILWAY ERA IN AMERICA

    From Chapters I and II of "Railroad Promotion and
    Capitalization in the United States," by F. A. CLEVELAND and E.
    W. POWELL. Longmans, Green & Co., 1909.

    (By permission of the authors.)


Inland transportation, as we know it, is the product of the last
century. It had its beginning in the industrial revolution. In
England at the close of the eighteenth century the manor as a
productive agency had been supplanted by a system of domestic
production, and this in turn was giving place to the factory. The
combined influences of increasing capital and invention had operated
to centralize the industrial population in the towns. Ocean commerce
was comparatively well developed, and manufacture was fast being
established upon a modern basis; but inland transportation was
still encumbered by such primitive methods as to make difficult the
utilization of the resources of the interior. A century and a half
before, Lord Bacon had called attention to the three great elements
necessary to make a nation great and prosperous--"a fertile soil,
busy workshops, and easy conveyance of men and things from one
place to another,"--but the significance of this reflection was not
appreciated until after the middle of the eighteenth century. The
controlling force of custom--social inertia--had stood in the way of
progress.


IN ENGLAND.

Until about the opening of the nineteenth century the principal
manufacturing towns of Great Britain were situated on or near the
coast; for in the inland country goods were still carried on the
backs of men, or hauled in carts over heavy roads. Said Lardner: "The
internal transport of goods in England was performed by wagon, and
was not only intolerably slow, but so expensive as to exclude every
object except manufactured articles, and such as, being of light
weight and small bulk in proportion to their value, would allow of a
high rate of transport. Thus the charge for carriage by wagon from
London to Leeds was at the rate of £13 ($63.31) a ton, being 13½d.
(27 cents) per ton per mile. Between Liverpool and Manchester it
was 40s. ($9.60) a ton, or 15d. (30 cents) per ton per mile. Heavy
articles, such as coal and other materials, could only be available
for commerce where their position favored transport by sea, and,
consequently, many of the richest districts of the kingdom remained
unproductive, awaiting the tardy advancement of the art of transport."


IN AMERICA.

Before the Revolution the American colonists lived in almost complete
isolation. Travel by land was limited, for water communication
presented fewer obstacles to progress. Population was arranged along
the seaboard, or in isolated groups a short distance inland. Living
narrow, self-centered lives, each community developed a distinct
dialect and characteristic customs and dress. Social activities were
limited to going to mill, market and church, or exchanging friendly
calls; traveling on foot or on horseback along wooded trails. Even
between seacoast towns there was little interchange of products or
population; and a citizen of one colony going to another was at once
struck with the many local peculiarities. It was less than twenty
years before the Revolutionary war when the first stage line was
opened between New York and Philadelphia, and three days were then
required for a single trip. It was ten years later when the first
stage line was established between Philadelphia and Baltimore.


METHODS OF TRAVEL AND TRANSPORT.

Between towns of considerable size there were country roads over
which vehicles could pass when the weather would permit. The stage
coach, which was the only public land conveyance, plied along the
coast and between a few inland centers, but the coaches of that
day were rude boxes swung on wheels by leathern straps instead of
springs, with seats for a dozen or more and accommodations for a
limited amount of baggage. The rate of travel was from two to six
miles an hour, according to the condition of the roads and the
importance of the route. On the farm the mud-boat or stone sledge was
in common use, and at times it was even employed to carry produce to
local markets. In more progressive communities two-wheeled carts and
wagons were to be found. The best of roads, however, were nothing
but "mud roads"; and the wagons, commonly of the linchpin type, were
clumsy and awkward. Some of the more primitive wagons had wheels made
of cross sections of trees, trimmed and centered to roll on axles of
wood. Those who traveled had little thought of time; companionship
found expression in story-telling, gossip and tippling; and an
emergency which required all to get out and "take a wheel" only added
spice to the trip.

We have the following description of the roads about Philadelphia,
the metropolis and commercial center of the New World: "On the best
lines of communication the ruts were deep, the descents precipitous.
* * * Near the great cities the state of the roads was so bad as to
render all approach difficult and dangerous. Out of Philadelphia
a quagmire of black mud covered a long stretch of road near the
village of Rising Sun. There horses were often seen floundering in
the mud up to their bellies. On the York road, long lines of wagons
were every day to be met with, drawn up near Logan's hill, while
the wagoners unhitched their teams, to assist each other in pulling
through the mire. At some places, stakes were set up to warn teams
of the quicksand pits; at others, the fences were pulled down, and
a new road made through the fields." Transportation facilities were
either entirely lacking or such as to make travel both expensive and
hazardous. It is difficult to realize that as late as 1780 the roads
over a large part of Pennsylvania were narrow paths which had been
made through the woods by Indians and traders.


ABSENCE OF ROADS IN THE INTERIOR.

The isolation of interior settlements finds apt illustration in the
Wyoming valley. This rich region along the Susquehanna had been
until 1786 almost completely cut off from the outer world. A small
colony had moved in from the East, and taking color of title from
Connecticut, disclaimed the sovereignty of the Quaker proprietary.
War consequently broke out between this isolated settlement and the
Pennsylvania government. Several military expeditions were sent out
to reduce the "Yankees" to submission; but the absence of roads
and the necessity of carrying provisions on horseback left the
determined pioneers masters of the situation when the larger issue,
the Revolutionary war, suspended local strife. The spring after
Burgoyne's surrender at Saratoga the settlers of the Wyoming valley
learned that a detachment of Johnson's "Royal Greens" and Butler's
"Rangers," with a company of Tories, had allied themselves with the
Seneca Indians, and were preparing to descend upon the valley. A
courier was despatched to congress, and appeals for aid were made to
the neighboring states, but the isolation which had before served
for defense now brought disaster. With the June freshet the British
allies came down from Tioga, and nothing but ruins were left to mark
the scene. One of the reasons urged for the removal of the state
capitol from Philadelphia to Harrisburg in 1799 was the cost of
travel, which bore heavily upon legislators from the interior.


THE ROADS OF NEW ENGLAND.

The early settlers of Springfield, Massachusetts, were obliged
to send their household goods from Roxbury around by way of Long
Island Sound and the Connecticut river, but they themselves were
able to proceed on foot along an Indian trail. In time this trail
was widened, and as the "Bay path" and the "Boston road" occupied
an important place among the transportation routes of the colonies.
It was, however, little more than a narrow wagon path until after
the Revolution, and so indistinct was it that travelers frequently
wandered off the route. A curious stone post marks the place
near the national armory at Springfield, where in 1763 a western
Massachusetts merchant lost his way, and set up a guide for other
travelers. Even as late as 1795 there were but two stages between
Boston and New York, and a week was required for the journey. John
Bernard, the English actor, thus described a typical New England
road in 1797: "Though far better than in any other quarter of the
Union, the frequent jolts and plunges of the vehicle brought it into
sad comparison with the bowling-greens of England. Very often we
surprised a family of pigs taking a bath in a gully of sufficient
compass to admit the coach. As often, such chasms were filled with
piles of stones that, at a distance, looked like Indian tumuli. The
driver's skill in steering was eminent. I found there were two evils
to be dreaded in New England traveling--a clayey soil in wet weather,
which, unqualified with gravel, made the road a canal; and a sandy
one in summer, which might emphatically be called an enormous insect
preserve." Such testimony makes real the difficulties which attended
travel over the important routes, and enables one to understand how
it could have required Washington nearly two weeks to make the trip
from Philadelphia to Cambridge at the outbreak of the Revolution.


AFTER THE REVOLUTIONARY WAR.

Before the Revolution the subject of road improvement was seldom
considered in public assemblies, and the early laws contain few
provisions even for common roads. Those who proposed measures for
general improvement met with little encouragement. As early as
1690 William Penn suggested the practicability of a waterway from
the Schuylkill to the Susquehanna. In 1762 David Rittenhouse of
Philadelphia, and Provost Smith of the University of Pennsylvania,
proposed a similar project, and made surveys of the route by the
Swatara and the Tulpehocken; in 1769 the American Philosophical
Society interested itself in a canal survey between Chesapeake Bay
and the Delaware, recommending the enterprise to the public. In 1768
Governor Moore of New York projected a canal around the Canajoharie
Falls of the Mohawk. But to none of these suggestions was there any
active response, for the time was not ripe for such undertakings.

Contributing to the road-making impulse immediately after the war of
independence was a newly awakened community interest. At the time of
the adoption of the constitution there were two distinct classes in
the United States: a highly localized class of the seaboard and of
the inland trade routes, and a widely distributed agricultural class.
American commerce was largely confined to American products. England,
France and Holland monopolized the trade of their colonies, and in
other ways favored their own merchantmen in foreign trade. Such
being the condition, our commercial advantage lay in the development
of our own resources. The settlement of the Middle Atlantic states
and of the valleys of the interior only served to strengthen the
interdependence of the people, who found a common interest in
internal improvements. To the agriculturist, cheap conveyance to
market was a prerequisite to profitable industry. To the commercial
class on the seaboard and on the leading trade routes, inland
improvement was at that time no less important.


FIRST ERA OF ROAD MAKING.

There was a notable change in the popular attitude toward road making
after the war, and all public-spirited men now saw in better means
of communication an instrument for the establishing of American
supremacy over the western continent. Legislatures made generous
appropriations for highways. An active migration set in from New York
and northern Pennsylvania to the West. In 1738 the first regular
mail service was established between Albany and Schenectady. In 1793
the horse path from Albany to the Connecticut valley was widened to
a wagon road. Like activity in road making was shown throughout
southern and western New York, middle Pennsylvania, Maryland and
Virginia.

In 1785 Pennsylvania appropriated $10,000 to lay out a road from a
point near the mouth of the Juanita to Pittsburgh. In 1786 an act
was passed appropriating $1,500 "to view and open a road from Lehigh
Water Gap to Wyoming," which was the first road into that valley
from the Delaware. In 1787 another road was authorized between the
Susquehanna and the Delaware. Activity in opening communication
with the interior increased until by 1791 the movement had assumed
proportions to be styled a "mania." By a single act over $150,000 was
appropriated for the improvement of eleven rivers and over a score
of roads in different parts of the state. Other acts were passed at
the same session, granting charters and appropriations for various
transportation enterprises. New York in 1797 authorized the raising
by _lotteries_ of $45,000 for the improvement of various roads
throughout the state. As if by common impulse, all the states now
became interested in road improvement, and congress was asked to aid
by this means the opening up of the resources of the interior.


BEGINNING OF THE CANALS AND PIKES.

The low cost of water transportation had early directed popular
attention to canals as a means of overcoming obstructions in natural
water courses, thereby serving the needs of the inland population,
and also providing the means for diverting trade from one seaport to
another. The Revolutionary war was hardly over when Charles Carroll
organized a company to open a canal about the obstructions in the
lower Susquehanna.

Those who took the most active interest in canal construction at this
time were men who, like Washington, viewed the future with patriotic
interest. This interest, however, was one which did not appeal to the
private investor. An enterprise based upon such public consideration
required government support.

This period also marked the beginning of turnpike construction. The
first turnpike road in this country of which we have a record was
built between Alexandria and the Lower Shenandoah. It was begun in
1785-6, and its completion was the cause of great satisfaction to
Jefferson and other public-spirited men of Virginia, who had labored
in the cause of a "broader national life." Alexandria was at that
time an important competitor of the other seaboard cities. Across the
Maryland peninsula on the Chesapeake lay Baltimore, a commercial
rival of both Alexandria and Philadelphia. In 1787 the grand jury
sitting at Baltimore called attention to the deplorable condition of
the roads leading to that city, and urged the authorities to take
immediate action. As a result, the county government ordered the old
Frederick, Reistertown and York roads turnpiked at public expense.
To the west of Philadelphia lay the Susquehanna valley. The natural
outlet of this growing region was down the Chesapeake to Baltimore.
To attract traffic to the Quaker City a company was organized in
Philadelphia in 1792 to build the Lancaster pike, which was the first
turnpike in this country built by voluntary subscription.


EFFECT OF EUROPEAN WARS ON AMERICAN SITUATION.

The outbreak of the European wars in 1793 was followed by a marked
change in the American industrial situation. The immediate effect
upon the grain growing of the West was to increase the demand for
wheat. Prices of cereals rose to twice their former height. The
average price of flour during the seven years from 1785 to 1793 had
been about $5.40 a barrel; the average price from 1793 to 1806 (the
two years of peace, 1802 and 1803, excluded) was $9.12. Such was the
inducement to grain growing during this period.

Back from the North Atlantic coast radiated rich valleys--large
tracts of agricultural lands which were well adapted to grain
growing. A rush set in for the unclaimed resources of New York,
Pennsylvania and Maryland, and for a time the tide of migration moved
to the westward along the Ohio, and the border of the Great Lakes.
Those who cultivated lands near the coast shared in the increased
prosperity due to the European disturbance, but unless they could
obtain better means of transportation, those who had located inland
soon found that they could profit little. Grain as compared with
cotton and tobacco was a low priced product. At best, the cost of
transportation was ten dollars a ton for each hundred-mile haul; in
many places it was much higher.


AMERICANS TURN TO HOME MARKETS.

Before 1807 the country had come to be divided into three sections:
the commercial, shipbuilding East, the cotton and tobacco exporting
South, and the isolated grain growing interior, linked with which was
a languishing manufacturing interest on or near the seaboard. Beyond
a limited range the producing proportion of our population could not
participate in the profits of the European trade. The grain growers
demanded a market, and the manufacturers saw their profits swept
away by an influx of foreign goods. These were the interests which
suffered from the diversion of capital to shipbuilding and foreign
trade. Both looked to internal improvements as a solution of their
troubles; their only hope was in a _home market_--in better roads,
and in the development of the resources about them.

In the United States agriculturist and manufacturer turned to the
national government for relief. But so long as the administration
remained in the hands of the foreign trade party, the way was blocked
to internal improvements. During the first three administrations
after the adoption of the constitution, the individualistic
republicans had been unable to gain control of the government; but
with the admission of Kentucky, Tennessee and Ohio and the settlement
of the parts of the sea coast states remote from transportation
facilities, the anti-commercial constituency gained the balance of
power. It was to the voters of these new regions that Jefferson owed
his success. It was to satisfy the demands of the West for an outlet
to the gulf that Louisiana was purchased. To satisfy the insistent
demand for internal improvements the national government also built
the Cumberland road, and contributed to many other transportation
projects. It was the open hostility of the West and South toward
the commercial East which forced the embargo, and broke down the
domination of the seaboard interests in national affairs.


RIVER TRAFFIC DEVELOPED BY PRIVATE CAPITAL.

The inland routes which required the least capital to utilize in
a primitive way were the rivers. Here the chief obstacle was the
current. In the early nineteenth century long lines of rafts,
flat-boats and "arks" might be seen floating down the Connecticut,
the Hudson, the Susquehanna and the Potomac. There were 2,800 miles
of rivers tributary to the Atlantic seaboard which were navigable,
or which needed only to be cleared of snags and rocks to render
them available for use by small craft. It was estimated that on
the eastern slope there were about 25,000 miles of streams which
might be utilized by the construction of locks and canals. In the
Mississippi valley there were 14,000 miles of navigable rivers, and
about 75,000 more which were considered possibilities. But with a
three or four-mile current it was impracticable to row, pole or
warp a boat and cargo upstream for a long distance. The result was
that along those streams which nature had provided as highways the
producer first built his boat out of the timbers of the forest, then
loaded it with the produce of his farm or mill, and floated down
stream to market. Upon reaching his destination, he abandoned his
craft and returned by stage or on foot. This was indeed an expensive
process--expensive in time, expensive in funds and expensive in human
effort. It was an expense of production, however, and one which did
not require capitalization.

It was not until 1807 that the steamboat became a commercial success.
At this time New York was becoming well settled, and as the Hudson
was a natural highway a boat which could drive against wind and
stream had every promise of success. Robert Fulton, who had been
interested in the problem of steam navigation since 1802, returned
from Europe after several years of investigation, and brought back
one of Watt's engines. He obtained the financial co-operation of
Chancellor Livingston, and together they obtained a monopoly of
steam navigation in New York waters. A boat was fitted with the Watt
engine, and a successful trip was made from New York to Albany and
return. The route yielded large profits from the start, and other
boats were built. By 1813 six boats were doing a profitable business
on the Hudson. The success of Fulton and Livingston proved attractive
to others. Crowded out of New York's waters by the monopoly, John
Stevens, in 1809, took a steamboat around from Hoboken into the
Delaware. The Phoenix now found business so good in those waters
where Fitch had failed that it was soon followed by two other boats.
Soon the whole Atlantic seaboard, including the St. Lawrence, was
supplied with steam craft.

But enterprise in steamboat navigation was not confined to the
coast. Business opportunities in the Mississippi valley attracted
the attention of one Nicholas Roosevelt, who proposed to Fulton and
Livingston that he would make a trip to New Orleans to survey the
prospects for an inland water route, with the understanding that
they should finance a steamboat line if his report was favorable. So
favorable was it that he was placed in charge of the construction of
a river boat at Pittsburg, and in 1811 the _New Orleans_ made her
maiden trip down the Mississippi. Thereafter Roosevelt's boat took
a regular route between New Orleans and Natchez. Other boats were
added, but it was not until 1815 that a voyage was made upstream
from New Orleans to Louisville and Cincinnati. After assisting
Jackson in the campaign about New Orleans, the _Enterprise_, taking
advantage of high water, steamed to Louisville in _twenty-five
days_. In 1817 the _Washington_ accomplished the same feat while the
river was within her banks, and the public became convinced of the
practicability of upstream navigation. The same year the _Shelby_
reduced the time to twenty days, and by 1823 _fifteen days sufficed_.
With the success of the steamboat, the Middle West was opened to
rapid communication with the gulf.


WAGON ROADS INTO THE INTERIOR.

From 1807 to 1815 two changes had a marked effect upon the national
attitude toward internal improvements. Before the outbreak of the
European wars manufactures had made some progress in New England and
in Pennsylvania. During the first struggle, and before the peace
of Amiens, the only serious obstacle to American industry was the
tendency to divert capital to wheat raising, shipbuilding and foreign
trade. Prices were high, and the makers of goods found encouragement
in large profits. With the cessation of hostilities American
manufacturers looked to Congress for protection, for foreign goods
poured into the country in such quantities and at such prices as to
threaten the destruction of domestic production.

At the most, however, the manufacturing population was relatively
small, but the disturbances to industry from 1815 to 1818 were
such as to throw many out of employment, and to bring to the
verge of bankruptcy and starvation those who had been engaged in
shipbuilding and foreign trade. A great exodus to the interior was
the result. In wagons, on horseback, or on foot--sometimes using
handcarts, sleds and wheelbarrows to carry their provisions and
light luggage--emigrants crowded the wooded paths that led to the
West, where they might find conditions more favorable to independent
livelihood.

All these conditions conspired to increase the depression in the
East, and drive her people into agriculture and the development of
the interior; while the opening of the Mississippi by the steamboat
added to the attractions of the rich valleys in the Middle West.
But upon his arrival in the West the newcomer found himself beyond
the range of any market except New Orleans. To reach this market he
"would produce or get together a quantity of corn, flour, bacon
and such articles. He would build a flat-bottomed boat on the shore
of some river or large creek, load his wares into it, and, awaiting
the rise, with a few of his negroes to assist him, would float down
to New Orleans. The voyage was long, tedious and expensive. When
he arrived there he found himself in a strange city, filled with
sharpers ready to take advantage of his necessities. Everybody
combined against him to profit by his ignorance of business, want
of friends or commercial connections, and nine times out of ten he
returned a broken merchant. His journey home was performed on foot,
through three or four nations of Indians inhabiting the western parts
of Mississippi, Tennessee and Kentucky. He returned to a desolate
farm, which had been neglected whilst he had been gone. One crop
was lost by absence and another by taking it to market. This kind
of business was persevered in astonishingly for several years, to
the great injury and utter ruin of a great many people." It was the
demand for safe transportation arising out of this situation which
made Roosevelt's steamboat enterprise a success.


DEVELOPMENT OF COASTWISE COMMERCE.

The British blockade of our coast during the war of 1812 had a marked
effect upon the development of inland routes of transportation, as
may be seen from the following: "The interruption of the coasting
trade was indeed a very serious affair. For years past that trade had
given occupation to thousands of coasters and tens of thousands of
sailors. The shoes made at Lynn, the Yankee notions of Connecticut,
the cotton cards, the domestic cottons, the playing cards produced
in New England, the flour of the Middle States, the East India goods
brought in from abroad had found a ready market at Charleston,
Savannah and Augusta, whence great quantities of rice and cotton
were brought North. On the arrival of the British fleet this trade,
no longer to be carried on in safety by water, began of necessity
to be carried on by land. At first some merchants at Boston, having
chartered a few wagons, despatched them with loads to Philadelphia,
and even to Baltimore. This was enough. The hint was taken. A new
industry sprang up, and by early summer the roads leading southward
exhibited one continuous stream of huge canvas-covered wagons tugged
along by double or triple teams of horses or of oxen. No distance was
then too great, and hundreds of them would make their way from Salem
and Boston to Augusta and Savannah. An estimate made towards the
close of the year (1814) places the number of wagons thus employed at
four thousand, and the number of cattle, horses and oxen at twenty
thousand; nor does this seem excessive, for a traveler who drove from
New York to Richmond declares that he passed two hundred and sixty
wagons on the way."


THE CAPITALIZATION OF TURNPIKES.

Both overland trade and westward migration drew attention to the
importance of good roads, both swelled the receipts of turnpike
companies, and gave encouragement to investment of local capital
in transportation improvement. By 1804 the Lancaster road had been
extended to Pittsburg, and a regular stage line established which
made a trip each way once a week. State governments lent every
encouragement to the building of turnpike roads, _even to the
extent of subscribing to their stock_. From contemporary writings
and charter grants, it is estimated that nearly eight hundred
turnpike companies were organized before the end of the war of 1812.
Pennsylvania was pre-eminent in granting liberal charters, and toll
rights, thereby encouraging the people of the more thickly settled
districts to make such improvements for themselves. The corporations
thus formed had little difficulty in obtaining capital subscriptions,
whether for the construction of turnpikes or bridges, or for the
operation of ferries. To the stock of these corporations several of
the states subscribed in varying amounts. Although a few toll roads
were constructed before that time, the turnpike movement may be said
to date from the opening of the nineteenth century. Turnpikes (so
called from the revolving, or turning bar, or pike which, when set
across a toll road, prevented passage until charges were paid) were
macadamized or otherwise improved at a cost varying from $500 to
$10,000 per mile. Almost without exception they followed in a general
way the old lines which had been worked out when travel on foot or
on horseback was the chief method of communication, but wherever
possible they were made straight, going over and not around hills
and other obstacles. When the Boston and Salem turnpike was built a
small but deep pond was encountered, but instead of going around the
road crossed on a floating bridge. The construction of bridges and
the operation of ferries were parts of this larger turnpike movement,
and like the turnpikes themselves, they were usually disappointing
to those who had invested with the hope of large dividends. At
best, this movement did but little to supply the great need for
improved transportation. To passenger service it was a great boon,
in that it added much to personal comfort, though the time and cost
of travel were little reduced. _It required five dollars and fifty
cents to pay tolls from Philadelphia to New York, besides the hotel
bills and other expenses of the road._ It took a week to go from
Philadelphia to Pittsburg. What the country most needed--a cheap
method of handling the bulky products of the interior--was not
supplied. Freight was carried upon the turnpike with great difficulty
and expense, and heavy goods were compelled to remain untouched on
account of the high tolls.


REVIVAL OF CANAL CONSTRUCTION.

To meet this situation, canals had been proposed long before the
period of turnpike building, and some surveys had been made, but
because of lack of capital, construction was deferred. The earliest
projects were for short cuts around rapids or falls, or between
neighboring waters, but bolder plans followed. The first canal of any
importance actually begun in the United States was the two-mile cut
through the rocks about the South Hadley falls of the Connecticut.
The Massachusetts legislature passed an act in 1792 incorporating
the "Proprietors of the Locks and Canals on Connecticut River." Work
was begun at once with Dutch capital, and in two years the canal was
completed.

The Santee canal in South Carolina was the first large work of this
kind constructed in the United States. It connected the Santee river
with the Cooper river at Charleston, and it was opened in 1800. Its
length was twenty-two miles, and its cost $600,000.

A much more important project was the Middlesex canal in
Massachusetts, a charter for which was obtained in 1793. This canal
extended from the Charles river to the Merrimac, twenty-seven miles,
and was designed to attract to Boston the trade normally tributary to
Portsmouth. Work was begun in 1794, and ten years later the canal was
opened for traffic, though it was not entirely completed until 1808.

The successful completion of the Erie canal, which became an assured
fact long before its actual accomplishment in 1825, stimulated
similar projects all over the country. The local strife between
trade centers, combined with the local demand for outlet, set
a number of private projects in motion. Boston, Philadelphia,
Baltimore and Georgetown were successfully appealed to for support
for transportation routes which would enable them to compete with
New York for the trade of the West. The Blackstone Canal Company,
chartered by Rhode Island and Massachusetts in 1823, began the
construction of a canal along the Blackstone river to connect
Providence and Worcester, and this route was opened for traffic in
1828. Another New England project started at about the same time
was for a canal to extend from New Haven northwards to Northampton,
and on up the Connecticut valley into Vermont. Two companies were
chartered for this purpose, the Farmington canal in Connecticut in
1822 and the Hampshire and Hampden canal in Massachusetts in 1823.
The Farmington canal was completed in 1830; but the work on the
Hampshire and Hampden project was for a time abandoned for want of
funds, and the canal was not cut through to Northampton until 1835.
While carrying a large traffic this canal, like the Blackstone canal,
was more beneficial to the general business of the section traversed
than to those who held its stock. Other private works of this period
upon which large sums were expended were: The Delaware and Raritan
canal, connecting Philadelphia with New York; the James River and
Kanawha, an unfinished canal project in Virginia; and the Chesapeake
and Ohio canal, which was not extended further west than Cumberland.


SCARCITY OF CAPITAL FOR CANALS.

On account of local needs, few canal or navigation companies had
difficulty in obtaining their first subscriptions, but most of them
experienced trouble in collecting assessments and in obtaining
additional subscriptions. This timidity of investors, it now appears,
was not without ground, for few of the private canal companies were
able to bring their construction work to completion, and fewer still
paid any dividends to their stockholders. The Middlesex canal was
profitable until the building of a parallel line of railroad; the
Montague canal, also in Massachusetts, yielded a fair return during
the first twenty years that followed its completion in 1800. The
Delaware and Schuylkill canal may be cited as a third exception. But
it early became evident that public works of the number and magnitude
required could be constructed only at national expense. As the
constitution contains no direct provision for internal improvements,
the subject became a party question.

From the first Congress had appropriated money for lighthouses,
public piers, buoys and other aids to navigation, and about such
action there had been no dispute, for it was agreed that these
matters lay strictly within federal jurisdiction. From the first,
also, Congress had been petitioned for appropriations for internal
improvements. Most of these demands were local in character, and so
were easily disposed of; but when the directors of the Chesapeake and
Delaware canal asked Congress to supply the funds which they had been
unable to obtain from sales of shares, the question was forced to an
issue. Two facts were incontestable, the general importance of the
work, and the ability of the national government to carry it on in
view of the revenue surplus in the treasury.

In another way Congress had already committed itself to the support
of public works. So long as the country was made up of states
bordering on the Atlantic seaboard, improvements were matters of
interest to all alike, but with the admission of new states in the
interior, and the prospect of future accessions to the westward as
the country expanded, an element of injustice seemed to enter these
appropriations, which benefited the seaboard states at the expense of
all. The feeling of discontent was intensified by the fact that the
favored states were more thickly settled, and therefore better able
to incur the expense. With the admission of Ohio, however, this was
remedied by the establishment of the five per cent. land fund, and
the self-interest of the seaboard was appealed to by the argument
that the building of roads into the West would so stimulate sales of
the public lands as to increase the national revenues.

The matter of national aid to internal improvements was again brought
before Congress in 1816 by Calhoun, who presented a bill providing
for the direct construction of roads and canals and the improvement
of waterways out of a fund to be created by setting apart the bonus
and dividends received by the government from the United States bank.
This bill, which was drawn up by Clay, passed through Congress in
1817, but it was vetoed by Madison, who, though favorably disposed
toward public works, had inherited from Jefferson a doubt as to the
rights of Congress to participate in their construction without a
constitutional amendment specifically granting the authority. And
Monroe, holding the same opinion, vetoed a bill for the repair of
the Cumberland road, and submitted to Congress a long statement of
the principles involved in his decision. In the meantime, weary of
waiting, New York had succeeded in building the Erie canal. Its
success shifted the whole plan of promotion. With credit established
abroad, internal improvements were taken up by the states, and for
the next two decades transportation interest centers in state funding.

It was during this period of struggle for means of transportation
facilities adequate to meet the demands of those whose fortunes had
been cast in the remote interior that the railroad became the subject
of serious economic interest.

       *       *       *       *       *

(In subsequent chapters, Messrs. Cleveland & Powell trace the
beginnings of the railroad, the physical and financial difficulties
that beset them at every turn; the indomitable spirit with which
they were projected, promoted and built into every quarter of the
Union, until through the investment of billions of private capital
the United States has been furnished with the best system of internal
transportation in the world. To their pages the reader is referred
for the continuation of this most interesting narrative.)




FIRST ANNUAL REPORT

OF THE CHIEF ENGINEER OF THE

PENNSYLVANIA RAILROAD COMPANY

June 12, 1848.

By J. EDGAR THOMSON. Chief Engineer.

    ENGINEER DEPARTMENT, PENNSYLVANIA R. R. CO.

    _Philadelphia, June 12, 1848._


  To the President and Directors of the
  Pennsylvania Railroad Company:

GENTLEMEN--I have the honor to communicate to you the following
Report of the operations of this Department since it was committed to
my charge, now something more than a year.

Under the organization of the Engineer Department, as adopted
previous to my acceptance of the office you have conferred upon me,
the Road was to be divided into three divisions, Eastern, Western and
Middle: Edward Miller, Esq., as associate engineer, was assigned to
the Western, and W. B. Foster, Jr., to the Eastern division. These
gentlemen had entered upon the survey of their respective lines,
previous to my arrival, under instructions from the president, each
with two full corps of assistants. The middle, or mountain division,
not having been provided for, I concluded after a full consideration
of the subject that the interest of the Company would be best
promoted by so altering the organization as to abolish it altogether,
and extend the eastern and western divisions to the summit of the
Allegheny mountains, the natural boundary between them. Under this
arrangement, the surveys have since been prosecuted.

The Board having directed me to cause a location of the whole line,
from Harrisburg to Pittsburg, to be made at the earliest practicable
period, I at once commenced a reconnoissance of that portion of the
intervening country, over which it seemed--from an inspection of a
map of the State--that the Road would probably pass, for the purpose
of determining the best plan of operations to carry out their views.

The Legislature, in their grant to the Company, wisely left the
choice of a route for the Road, between its termini, entirely free,
throwing upon the Board the responsibility of selecting, upon
the wide field that was opened to them, a line for their great
work, which would offer the cheapest railroad conveyance for the
transportation of freight and the most expeditious for travel that
could be selected between the west and the northern Atlantic cities.

Such a route, it was believed from previous surveys, lay within
the borders of Pennsylvania, an expectation which has been fully
justified by the results obtained from our examinations.

Of the several routes proposed, I found no difficulty--after a
careful inspection of the plans of the various surveys, made under
the authority of the Commonwealth, and my reconnoissance of the
country--in coming to the conclusion that the valley of the Juniata
offered advantages for a line which, whether we consider the low
gradients that may be obtained along it or its general directness,
the desiderata required, is without a rival.

This stream has its source in the Alleghenies, and consequently
severs, as it flows towards the Atlantic, all the secondary mountain
ranges that lie east of them, and it heads opposite to the Black
Lick and Conemaugh rivers, both of which sever those on the west,
leaving the main Allegheny only to be surmounted, which would have
to be encountered upon any other _direct_ route, in addition to many
of the inferior mountain ranges. A more northern route, by the west
branch of the Susquehanna (which has its source beyond the Allegheny
mountains), would have encountered less elevation at the principal
summit, but its great increased length precluded its adoption; while,
on the other hand, a southern route, though not indirect, was equally
objectionable on account of the rugged character of the country, and
the high gradients necessary to overcome the numerous summits upon
it. A partial examination of one of the proposed southern routes
was made, which followed the Cumberland Valley Railroad to near
Shippensburg, and thence, crossing to the west side of the valley at
Roxbury, it passed through the Blue Mountain, by a long tunnel, into
Path valley; thence, following around the point of Dividing mountain,
it crossed this valley and passed through Tuscarora, by another
tunnel, to the valley of Augwick creek. Thence it would have been
traced between Broad Top and Sideling mountains, and up Dunning and
Bob's creeks to the summit of the Alleghenies at Bob's Creek gap;
or, turning west by Bedford, crossed the Alleghenies at the head
waters of the tributaries of Castleman's river, where the mountain is
still much more elevated.

A line leaving the Cumberland Valley Railroad at Chambersburg, and
turning the end of Blue mountain, thence seeking the low depression
at Cowan's gap in Tuscarora, would be too circuitous to compare
favorably with the bolder line from Shippensburg, already described.

But that line would encounter engineering difficulties of the
most formidable character; leaving out of view its objectionable
gradients, and considering it in reference to its cost, and the local
accommodations it would extend to a large portion of the State--at
present in a great measure deprived of the advantages of the State
improvements--(the strongest argument in favor of the route), it
will be found that equal accommodations could be extended to that
region with a _less_ expenditure of _capital_ by placing the main
stem of the road on the Juniata, and running a branch along one of
the comparatively level valleys that lie between most of the parallel
mountain ranges that we pass.

The facilities that railroads offer for extending their benefits to
remote districts by means of lateral lines constitute one of their
chief advantages over canals, and should prevent the error, too
frequently committed in locating leading routes, of turning from a
direct course to accommodate local interests to the injury of the
great object intended to be accomplished.

Other modifications of the Juniata route have been suggested, and
their merits fully considered, but, upon examination, all of them
tended to confirm our preference in favor of the river line.

These conclusions were communicated to the Board, and the general
route recommended having been adopted by them, I proceeded at once
to make arrangements to have the line surveyed throughout. For this
purpose three additional corps of engineers were organized--one for
Mr. Miller's division, under the immediate direction of Mr. G. W.
Leuffer, to operate on the summit and western slope of the mountain,
and two upon Mr. Foster's, the first of which was placed in charge
of Edward Tilghman, Esq., to whom was assigned the district between
Lewistown and the confluence of the Raystown branch and main Juniata
rivers.

The other corps was given in charge to S. W. Mifflin, Esq., a
gentleman of well-known professional skill and experience, to whom
we committed the surveys of the region from the Raystown branch to
the summit of the Alleghenies, embracing the most important and
difficult district upon the whole route to Pittsburg.

These parties did not take the field until the close of July, but
they prosecuted their examinations with so much energy and success
that we were enabled to determine the general line of the eastern
division in season to place the most difficult points upon it under
contract in November of last year.

While these arrangements were in progress, the parties previously
in the field were actively engaged in examining the country between
Harrisburg and Lewistown.

At the instance of a number of gentlemen from Perry county, a
line was tried up Little Juniata creek, leaving the Susquehanna
at Petersburg, thence near Bloomfield and along Sherman's valley
to Concord gap, where it passed the Tuscarora mountain, thence it
followed Tuscarora valley to Shade creek, and down that stream to
Augwick creek, along the valley of which it was carried to Drake's
ferry on the Juniata. The advantage promised for this route was a
considerable saving of distance. The result, however, demonstrated
that not only would we have had to encounter gradients running up
as high as sixty feet per mile, but the length of the line would be
increased four miles by its adoption. It was consequently abandoned.

After a careful examination of the country bordering on the
Susquehanna and Juniata rivers, a line has been located as far up as
Huntingdon, which is believed to be the best that can be obtained.

If the valleys of these streams had not been preoccupied by other
improvements, a route would have been selected differing somewhat in
its details from that adopted. Even for the short distance that we
are brought into close proximity with them, the cost of the grading
of the Road has been greatly enhanced by the confined ground we have
been forced upon.

The located line commences at the Harrisburg and Lancaster Railroad
depot; thence, passing through Harrisburg, it follows the sloping
ground between the canal and the capitol ridge four miles, when it
crosses the canal and, touching the point of Blue mountain, recrosses
and passes to the west side of the Susquehanna river by a bridge
3,660 feet in length, and 44 feet above low water at grade line,
which enables us to place the road on the top of the bridge. Thence
we pursue this bank of the river through the villages of Duncannon
and Petersburg to the Juniata, along the southern side of which it is
continued through Newport and Perrysville to a point a short distance
above Lewistown. Here the line crosses to the north side of the
river, and within a short distance recrosses, to save nearly a mile
of road, and one hundred and eighty degrees of curvature, together
with some difficult ground along the bluff shores on the south side
of the stream.

After regaining the southern side we follow the river slopes,
over favorable ground, to Mr. Harvey's, about seven miles above
Waynesburg, where the line again crosses to the north side, and
passing back of Newton Hamilton, cuts through the neck of land in the
great bend of that stream, 40 feet in depth at the summit and 3,100
feet in length at grade. Descending along the eastern slope of the
river, we once more cross it at Shaeffer's aqueduct, and continue
upon its southwestern bank through Jack's narrows, without meeting
any serious difficulties, and finally pass to its north side, along
which it is continued through Huntingdon to the Little Juniata, above
Petersburg. Above Huntingdon, a preliminary location has been carried
up the Little Juniata to Logan's narrows, at which point this stream
divides Bald Eagle and Brush mountains in its passage from Tuckahoe
valley.

Along the Little Juniata, from Dorsey's forge to the Narrows, the
line encounters much difficult ground, owing to the circuitous
character of the stream, and the high hills and mountains which bound
its course. To obtain a route with easy curves we are forced, within
this distance, to tunnel the point of Tussey's mountain, and to
cross the river twelve times. To follow the line recommended by Mr.
Schlatter through this region curves of 400 feet radius would have
had to be resorted to, which I deem wholly inadmissible upon a road
of the importance of that you have in view.

At Logan's Narrows we reach the valley that skirts the whole eastern
base of the Allegheny mountains. Here it becomes necessary to
determine the plan to be adopted to overcome the great barrier that
separates us from the West. If it is to be surmounted by a road, with
the gradients of the western division, the ascent must commence at
this point, and gradually wind its way to the summit, by an almost
continuous gradient, along the declivities of the mountains for
nearly thirty-two miles, crossing the several streams that issue
from it, by high bridges, and cutting through or tunneling their
dividing summits.

Mr. Schlatter, in his Report to the Canal Commissioners, estimates
the cost of grading the road, on this ascent, at $1,496,146, which I
consider too low for a line with the gradient he adopted, but with
the increased maximum grade found necessary on the western division,
and a somewhat lengthened line, it would probably prove sufficient.

Upon my first reconnoissance of this portion of the country it
occurred to me that its peculiar topographical features were lost
sight of in the adoption of this plan of ascent, which seemed to look
to the single object of obtaining a line with a particular gradient,
without regard to the magnitude of the obstacles to be overcome to
procure it; while, by pursuing a course from the Narrows, nearly in
a direct line to Sugar Run gap (which we shall hereafter show is
the best point to cross the mountain), the line would pass through
a beautiful valley over comparatively favorable ground, gradually
gaining elevation through its whole course, without exceeding the
maximum inclination required on the line below, until it reaches the
summit of the valley at Robinson's, a distance of fifteen miles. At
this point we attain an elevation of 1,174 feet above tide, leaving
but 980 feet to be overcome to reach the height found most suitable
for passing the mountain, which is attained by a continuous gradient
of 80 feet per mile, encountering no _very_ formidable difficulties.

A resort to a gradient of 80 or more feet per mile is by no means an
unusual expedient on leading railroads.

Upon the Western Railroad, in Massachusetts, their maximum gradient
is 83½ feet per mile. On the Baltimore & Ohio Railroad they now
have, between the waters of the Patapsco and Potomac, on each side
of Parr's ridge, gradients of 82 feet per mile, and from the greater
elevation of the Allegheny mountains at the place they must cross, it
is to be presumed that their gradients at that point will still be
increased to a higher rate.

Many other instances might be cited, some running up to 120 feet per
mile, but it seems unnecessary to extend the list. Theoretically,
the power necessary to overcome a given height is the same at all
inclinations of the plane of ascent, but in practice, it is to some
extent dependent upon the kind of power to be applied.

In the case under consideration, the locomotive steam engine will be
the medium used, where the power is carried with the train, and forms
part of the load to be moved, consequently, the cost of power on a
plane ascending 80 feet per mile is greater than upon one of a more
moderate inclination of equal height, by the difference between the
gravity of the engines required to carry the same load on both planes.

As a general principle this would be true when the lengths of the
roads to overcome the same height are equal, and it is necessary to
carry the locomotives, required for the high gradient, over the same
distance that they must run upon the low gradient.

But in one of these cases the maximum gradient due to the line below
Logan's Narrows is carried to within 12¼ miles of the summit of the
mountain--requiring extra power for that distance only--and in the
other it ends 32 miles from it.

To explain more fully the relative value of the maximum gradients
used on the different divisions of our Road, I have prepared the
following table:


  Table headings:
  Col A: Division of Road.
  Col B: Maximum Gradient, ascending westwardly, per mile.
  Col C: Maximum Gradient, ascending eastwardly, per mile.
  Col D: Gross load of a 20 ton freight locomotive,
         exclusive of engine, and a tender of 10 tons. Friction
         8½ lbs. per T. Adhesion ½.
  Col E: Load of merchandise for a 20 ton freight engine,
         the cars being estimated at 4/10ths of their
         weight and load.
  Col F: Relative load of locomotive on each gradient,
         level being unit.
  Col G: Number of locomotives of equal power necessary to carry
         the same load up each gradient.

  ====================+========+========+=======+=======+=======+=====
          A           |   B    |    C   |   D   |   E   |   F   |  G
  --------------------+--------+--------+-------+-------+-------+-----
  From Harrisburg     | { 16   |        | 346.6 | 207.9 | 0.534 | 1.87
    to Lewistown,     | {      |        |       |       |       |
    60-7/10 miles     | {      |   8    | 454.3 | 272.6 | 0.697 | 1.42
  --------------------+--------+--------+-------+-------+-------+-----
  From Lewistown      | {      |        |       |       |       |
    to foot of        | { 21   |        | 300.7 | 180.4 | 0.464 | 2.15
    Allegheny Mts.,   | {      |  10½   | 414.6 | 248.8 | 0.640 | 1.56
    72 miles          | {      |        |       |       |       |
  --------------------+--------+--------+-------+-------+-------+-----
  From foot to summit | {      |        |       |       |       |
    of Allegheny      | { 80   |        | 105.6 |  63.4 | 0.163 | 6.13
    Mountains,        | {      | Level  | 648.0 | 388.8 | 1.000 | 1.00
    12-3/10 miles     | {      |        |       |       |       |
  --------------------+--------+--------|-------+-------+-------+-----
  From summit to      | { 47   |        | 172.4 | 103.4 | 0.266 | 3.76
    Pittsburg, 106    | { 50   |  50    | 163.7 |  98.2 | 0.252 | 3.95
    miles             | { 52.8 |  52.8  | 156.2 |  93.7 | 0.241 | 4.14
  --------------------+--------+----------------+-------+-------------

It will be perceived from the foregoing table that three locomotives
are fully sufficient to transport the same load up the 80 feet
gradient that two will carry on the gradient of the western division,
and one on the eastern; hence the practical working of the road on
the two methods of ascent would be to run two locomotives with the
load brought from below from Logan's Narrows to the summit, say 31¾
miles, up the 50 feet gradient; while, on the other, the same engine
that brought the load from Harrisburg would continue with it to
Robinson's (15 miles), where it would accompany the two destined for
Pittsburg to the summit of the mountain and return.

In the first case the engines together will have traveled 63½ miles,
and, in the other, the three 51¾, leaving a difference in distance
to be traveled by the moving power due to each full train, from the
east, 11¾ miles in favor of the 80 feet gradient.

In practice it will therefore be seen--chiefly on account of
the actual distance saved--that transportation can be afforded
cheaper, in this case, on the 80 feet gradient than on the 50,
without bringing into the estimate the interest on $841,000 that
the latter would cost to obtain it more than the former. Under
these circumstances we did not hesitate when the choice of routes
was reduced to a selection between these two methods of overcoming
the mountain, to decide in favor of the line by Robinson's, which
has the additional advantage of bringing us within 6-1/3 miles of
Hollidaysburg, where a connection may be made with the Allegheny
Portage by a branch line, passing over favorable ground.

The distance from Harrisburg to Robinson's summit is 132-2/3 miles;
upon the whole of this line, the only extraordinary impediments
to the easy graduation of the road bed are the bridge over the
Susquehanna, a deep and long cut near Newton Hamilton, and a tunnel
1,200 feet in length through a point of Tussey's mountain, and in
this distance the maximum ascending gradient to Lewistown is 16 feet
per mile, and descending 8 feet. Thence, to Robinson's summit, they
are increased to 21 feet ascending, and 10-1/8 feet descending.

The descending gradients are generally so short that they will not be
found, in practice, to decrease the load going east much below what
is due to a fair _working_ load for a locomotive on a level.

The maximum ascending gradient above Lewistown is determined by the
deep cut near Newton Hamilton. The ascent of the Little Juniata
seems, however, to require--to obtain an economical line--the use
of this inclination, without much intermission, from Dorsey's forge
to Robinson's summit. Below Lewistown the gradients are fixed to
accommodate the increased trade that would fall upon the line between
that place and Harrisburg, without increasing the number of trains.

These low gradients insure to us the important advantages of a single
pair of drivers for the passenger engines, upon the eastern division,
and, with these rates of inclination, we are enabled to make the line
conform to the natural features of the country (above high water
mark) without decreasing the curvature below 955 feet radius, except
at the east end of the Susquehanna bridge, where a radius of 880 feet
has been admitted.

All of our efforts to save distance, by deviating, temporarily, from
the immediate valley of the river, involved either the use of high
gradients, not justified by the distance saved, or an increased
cost that was equally unwarranted. The beautiful valley of the
Kishacoquillas offered the greatest temptation to leave the river
route; but here we would have had to encounter gradients, in both
directions, of 26-4/10 feet per mile, a bridge over Mill creek, 1,200
feet long, 111 high; another over a small tributary of the Juniata,
850 feet long and 150 feet in height, together with several others,
or embankments of great magnitude, across ravines in the north
slope of the river hills. These difficulties, added to 342 feet of
additional elevation to be surmounted at the Allentown summit, so
greatly overbalanced the small increase of curvature and distance
(7/10 of a mile), by the river route, that it could not be adopted.
It was also ascertained that by the _use of the maximum gradients_
required on the valley route, the shortest line could have been
procured by the river, and at the least cost. A fact, conclusive in
itself, as to the proper route.

I deemed it unnecessary to make further instrumental examinations of
the Stone mountain route, feeling satisfied that even if a line could
be obtained in that direction which would approximate to an equality,
in an engineering point of view, with the route selected--which,
from a reconnoissance of a portion of the line and an examination
of the plots of Mr. Schlatter's surveys, I should consider _quite_
improbable--that its additional cost would entrench so much upon the
means of the Company as to place it entirely out of the question.

A line was traced from Huntingdon to the Frankstown branch of the
Juniata, below Williamsburg, across Tussey's mountain, by which a
saving of distance could have been made nearly equal to the Stone
mountain route, but its high gradients, cost, and the length of time
that it would require to build the road over it rendered it equally
objectionable. The valley of the Frankstown branch was also surveyed;
the route by it joining the Little Juniata line at Robinson's ridge,
but it proved both longer and more expensive than the latter. The
searching examinations made of the whole region offering any chance
for a more practicable route, on the north or south of the Juniata,
leaves no doubt upon my mind but that the best line has been procured
for the eastern division. Its comparatively easy curvature and low
gradients, adapted in their inclination to the direction of the
largest business, and extending from the eastern terminus of our
Road to the foot of the great barrier that divides us from the west,
give it advantages that are not equaled by any other route proposed,
between the east and west, and can not be too highly appreciated by
the Company.

Before determining the point to pass the mountain, a full examination
of its crest was made, from Cedar Swamp summit on the south, to
Three Springs Gap at the head of Moshannon creek on the north,
embracing a distance of 44 miles. The following table will show the
elevation, above tide, of each summit within that distance; also,
that at Emigh's Gap, on the northern route, and at the head waters of
Castleman's river on the southern:


_Tabular Statement of Depressions of Allegheny Mountain._

  ===================+=============================+================
                     |                             |
        Name.        |      Waters Divided.        |   Authority.
                     |                             |
  -------------------+-----------------------------+----------------
  Summit of Chesa. & |                             |
    Ohio Canal       | Castleman's and Potomac     | U. S. Engineers
  Albright's Summit  |     do.           do.       |
  Sand Patch   do.   |     do.           do.       | J. Knight
  Chambersburg and   |                             |
    Pittsburg Survey |                             | H. Hage
  Cedar Swamp Gap    | Raystown Branch of Juniata  |
                     |   and S. Fork of Conemaugh  | S. H. Long
  Bob's Creek  do.   | Raystown B. and Conemaugh   |    do.
  Big Spring   do.   | Juniata and Conemaugh       |    do.
  Laurel       do.   |       do.          do.      |    do.
  Adams        do.   |       do.          do.      |    do.
  Portage and Summit | Juniata and Clearfield      | C. L. Schlatter
  Sugar Run Gap      |                             | S. H. Long
  Burgoon's  do.     |       do.          do.      | C. L. Schlatter
  Kittanning do.     |       do.          do.      |    do.
  Dry        do.     |       do.          do.      |    do.
  Hamer's    do.     |Little Juniata and Clearfield|    do.
  Schultz    do.     |       do.          do.      | E. Miller
  Cock Run   do.     |       do.          do.      |    do.
  Maple      do.     |       do.          do.      |    do.
  Bell's     do.     |       do.          do.      |    do.
  Three Springs Gap  | Little Juniata and Moshannon|    do.
  Emigh's       do.  |       do.          do.      | C. L. Schlatter
  -------------------+-----------------------------+----------------

  {table continued}
  ===================+============+============+======
                     | Feet above | Feet below | Feet
        Name.        | Sugar Run  | Sugar Run  | above
                     |    Gap.    |    Gap.    | Tide.
  -------------------+------------+------------+------
  Summit of Chesa. & |            |            |
    Ohio Canal       |     476    |            | 2739
  Albright's Summit  |     141    |            | 2424
  Sand Patch   do.   |     129    |            | 2412
  Chambersburg and   |            |            |
    Pittsburg Survey |     264    |            | 2547
  Cedar Swamp Gap    |            |            |
                     |     160    |            | 2443
  Bob's Creek  do.   |     213    |            | 2496
  Big Spring   do.   |     314    |            | 2597
  Laurel       do.   |     222    |            | 2505
  Adams        do.   |     175    |            | 2458
  Portage and Summit |      41    |            | 2324
  Sugar Run Gap      |       0    |            | 2283
  Burgoon's  do.     |      80    |            | 2363
  Kittanning do.     |      75    |            | 2358
  Dry        do.     |      67    |            | 2350
  Hamer's    do.     |     177    |            | 2460
  Schultz    do.     |            |      17    | 2266
  Cock Run   do.     |            |      55    | 2228
  Maple      do.     |            |      61    | 2222
  Bell's     do.     |            |      12    | 2271
  Three Springs Gap  |            |      53    | 2230
  Emigh's       do.  |            |     240    | 2043
  -------------------+------------+------------+-----

It will be perceived that the lowest point in the mountain, except
at Emigh's, is Maple Gap, from which issues Bell's Run (a branch of
the Little Juniata), on the east, and Sandy Run of Clearfield, on the
west. This point is 61 feet below Sugar Run Gap and could be further
reduced 150 feet by a tunnel 700 yards in length. If the ground had
been favorable beyond the summit, this route would probably have
offered the greatest advantages to cross the mountain, but it opens
westwardly upon the deep valley of Clearfield, a descent into which
would involve the necessity of a resort to as steep a gradient on
the west side of the mountain as that required on the east; and
the elevation thus lost would have to be regained by following up
the valley to Laurel Swamp or Munster summits, in the ridge that
separates Clearfield from the Conemaugh, which is here the true
backbone of the country.

Any attempt to carry a line along the west slope of the mountain, to
avoid the descent to Clearfield, would, from the rugged character of
the ground, prove impracticable, without a vast increase in its cost,
length and curvature. No other point offers equal advantages to cross
the mountain until we reach Sugar Run Gap, which is 41 feet below
the Portage Railroad summit, and may be reduced 120 feet more by a
tunnel 2,000 feet in length. Emigh's Gap, which is still lower than
Maple Gap, could not, on account of its gradual slope, be reduced by
a tunnel of moderate cost, and it is also too far north for a direct
route to Pittsburg. South of the Portage the Alleghenies become the
watershed of the Union, dividing the streams that flow into the gulf
from those that empty into the Atlantic. They here assume a more
elevated character than while separating only the tributaries of the
Susquehanna, affording no opportunity to pass them by a line adapted
to locomotive power--unless by a tunnel of immense extent--until we
reach Bob's Creek Gap. The accompanying profile, which exhibits the
crest line of the mountain (for 44 miles) will give a more definite
idea of the relative height of these summits.

The mountain on each side of Bob's Creek Gap rises to a considerable
height, making it appear, to a casual observer, a very deep
depression; and, from this circumstance, it has generally been
considered by the residents of the adjoining country to be the lowest
pass in the Alleghenies, and, as it falls off rapidly on either
side, it has also been supposed that it could be farther reduced by
a tunnel of moderate extent. The several surveys of the mountain,
however, prove it to be 212 feet higher than Sugar Run Gap, and, to
reduce it to a level with the surface of the ground at the latter
point, which is 120 feet above the grade of the adopted line, it
would require a tunnel 1¼ miles in length, to be constructed under
very disadvantageous local circumstances.

Cedar Swamp Gap, still farther south, is 53 feet lower than Bob's
Creek Gap, but it falls off on each side so gradually that it could
not be reduced conveniently more than 40 feet.

Neither of these points, therefore, which are the only passes worthy
of notice south of the Portage Railroad that lie within the region
over which a direct line to Pittsburg must necessarily traverse,
afford depressions that will compare favorably with those farther
north; nor does the ground leading to them, east or west of the
mountains, offer equal facilities to obtain a line of uniform
ascent to the summit. The distance from the Conemaugh is too short
to overcome the elevation with the gradient used on the western
division, and, from the Juniata, the greater height to be ascended
would continue the line so long upon the mountain steeps that it
would be exceedingly expensive to procure a roadbed with a gradient
even higher than 80 feet per mile.

From the foregoing description of the most favorable mountain passes,
it will be seen that Sugar Run Gap offers the greatest facilities to
cross the Allegheny.

It now becomes necessary to consider in what direction the Road can
be carried thence to Pittsburg. From an inspection of a map of the
State it will be seen that a straight line, drawn from this gap to
Pittsburg, will fall on Munster, Beulah, and follow the valley of
Black Lick for nearly its whole extent, and intersect the Conemaugh
near Blairsville; thence it crosses the country lying within the
elbow formed by the Kiskeminetas and Allegheny rivers, passing the
Loyalhanna and Crabtree waters, and following, generally, the high
and broken ridge parting the Allegheny and Monongahela rivers. That
line, which would approximate most nearly to this course, would--all
other things being equal--be the most desirable for the Road.

The operations of the different corps, on this division, have been
confined to surveys that were necessary to determine the point of
crossing the mountain and to the regions between the Conemaugh and
Pittsburg, west of the Chestnut ridge. Our examinations have not yet
been sufficiently extensive to enable me to give a full description
of that part of the country between the mountain and Blairsville,
and I shall therefore leave it for a future report, with the simple
remark that, from the information before me, I am satisfied that a
practicable line may be obtained by the valleys, either of the Black
Lick or Conemaugh, within the maximum gradient used upon the western
division.

The district of country over which it will be necessary to carry the
road from the Conemaugh to Pittsburg is one of remarkable intricacy.
It lies wholly within the coal measures, and has, at some period,
evidently been nearly a level plane of vast extent, covered by the
ocean. The discharge of the waters from this wide spread field seems
to have been sudden, forming numerous circuitous channels in every
direction, cutting deeply into the soft horizontal strata of this
region, in their descent to the tributaries of the Ohio, leaving the
intervening ridges washed into so uneven a surface as to render the
passage of a railroad along them entirely out of the question. A line
following the Conemaugh--which bears northwest from Blairsville--to
the Allegheny would avoid this difficult country, but the length
of the route would be increased fully 50 per cent., and it is,
therefore, inadmissible.

A route with higher gradients than those adopted on the Juniata
throughout this division seems to be called for by the topography of
the country.

In his report upon the western division, Mr. Miller gives the
following account of the surveys, conducted under his direction by
Messrs. Day and Pemberton, his principal assistants: "If a straight
line be drawn from Blairsville to Pittsburg, it will be seen that
Turtle creek is the only stream that approximates to the proper
course of the road, whilst the Loyalhanna, the chief tributary of
the Conemaugh, crosses it nearly at right angles, and Spruce Run,
Roaring Run, Porter's Run, Beaver Run and others intersect it at
various angles of obliquity. Much time and labor were bestowed by
Mr. Schlatter and his principal assistant, Mr. Roebling, upon the
investigation of this district, and their maps and profiles, loaned
to us by the Canal Commissioners, have been of much service in
our examinations. From a careful investigation of Mr. Schlatter's
preferred route on the ground, it appeared possible to avoid some
of the most formidable obstacles which he encountered by adopting
a higher gradient than his maximum of 45 feet per mile, and by a
reasonable increase of distance at a few points.

"Our trial lines confirmed this, and, in the location made, a maximum
of 1. in 100, or 52-8/10 feet per mile, has been used at several
places. The cheapness of fuel throughout the whole extent of the
western division renders this increase of gradient less objectionable
than elsewhere. Bituminous coal, of the best quality, is everywhere
abundant, and can be delivered at the depots at from 56 to 84 cents
per ton."

The principal changes made in the route referred to in Mr.
Schlatter's report Mr. Miller describes as follows:

"Upon the White Thorn our line keeps the left bank, entirely to its
mouth, avoiding a tunnel of 600 feet, leading into the valley of Buck
Run, and a high bridge over White Thorn creek, and reducing that over
the Loyalhanna, from 90 to 50 feet in height. West of Buchanan's
summit we run level round the hill, between Porter's Run and Beaver
Run, avoiding the Still House summit entirely, where a tunnel of
1,000 feet was proposed, with a cut of 70 feet at its western end,
running out to grade in a distance of 1,700 feet.

"Passing Burnt Cabin summit, by a deep cut, the line descends along
Turtle creek to the Monongahela.

"Below Murraysville the creek makes a double bend, like the letter
S. The former line crossed one of these bends, by a tunnel 600 feet
long, whilst ours crosses the other by a short, deep cut, following
a remarkable pass by which the hill is nearly cut through. These
changes have reduced many of the deep cuts, avoided several bridges,
saved three tunnels, and reduced the length of a fourth, amounting in
all to a reduction of 2,300 feet of tunneling."

After reaching the Monongahela, two routes present themselves,
one following the bank of the stream to Pittsburg, and the other
ascending along the slope of the river hills, enters a valley leading
by Wilkinsburg and East Liberty. Thence, following this valley, it
descends Two Mile Run, and enters the city on the Allegheny side.
The latter, though the longest route, and requiring gradients of 50
feet per mile, has been adopted as it presented the only apparently
feasible route by which a connection could be formed with a road
extending towards the great west.

The comparative cost of grading and damages, upon the two lines,
would be rather in favor of the route adopted.

A line has also been located from the junction of Turtle and Bush
creeks, which passes up Bush creek and through Greensburg to
Bernhard's summit, thence by the valleys of Fourteen Mile Run,
Sauxman's and Magee's Runs, to the Conemaugh, at the gap through
Chestnut ridge.

If the Conemaugh route, by Johnstown, should be adopted, the line by
Greensburg will be about 3¾ miles longer than that by Turtle creek,
but passes east of the Loyalhanna, over much more favorable ground
than any other line examined.

Its advantages, in relation to the local trade of a rich and populous
section of country, west and east of Chestnut ridge, through the gap
formed by the Loyalhanna, give it strong claim for consideration.

Whether the increased length of the line and the difficulties west
of Greensburg will be sufficient to counterbalance these local
advantages we will leave undecided until the comparative estimates
have been fully made out. Another line was traced, leaving Greensburg
and passing into Ligonier valley, through Chestnut ridge, at the
Loyalhanna Gap, thence north of this ridge along Coalpit and
Kendrick's Runs, to the Conemaugh, which resulted unfavorably.

Further examinations will be made through Ligonier valley, striking
the Conemaugh higher up. The Black Lick and the country between it
and the Conemaugh will also be examined during the season.

The following summary statement will exhibit the estimated cost and
distances of a continuous railroad from Harrisburg to Pittsburg, via
Johnstown and Blairsville, graded for a double track, and a single
track and turnouts laid.

The estimate is based on prices that are believed to be ample to
finish the road in a substantial manner. If the work should be pushed
with _cautious energy_, it may be completed for a somewhat less sum.

The width of the roadbed at grade line in thorough cuts of earth is
32 feet, in rock 26 feet and on embankments 25 feet.


  ================+===================================+=======+==========
                  |                                   | Dist. |
       Items.     |       Places.                     |  in   |   Cost.
                  |                                   | Miles.|  Dollars.
  ----------------+-----------------------------------+-------+----------
                  | {Between Harrisburg and Lewistown | 60.70 |   705,610
                  | {  "  Lewistown and Huntingdon    | 36.70 |   582,342
                  | {  "  Huntingdon and Robinson's   | 35.20 |   703,000
  Graduation      | {  " Robinson's and Sugar Run Gap | 12.25 |   655,000
                  | {  " Sugar Run Gap and Johnstown  | 28.50 |   875,000
                  | {  " Johnstown and Blairsville    | 28.   |   445,000
                  | {  " Blairsville and Brush Creek  | 33.   |   925,000
                  | {  " Brush Creek and Pittsburg    | 15.   |   145,000
                  |                                   |-------+----------
                  |                    Amount         |249.35 | 5,035,952
                  |                                   +-------+
                  |         Superintendence, &c.              |   250,000
                  |         Contingencies                     |   350,000
                  |                                           |
                  |{Single track, including an average of 450 |
  Superstructure. |{  feet of turn-outs, per mile             | 2,792,722
                  |        Interest account                   |   551,000
                  |        Land damages and fencing           |   170,326
                  |                                           +----------
                  |                    Grand Total            | 9,150,000
  ----------------+-------------------------------------------+----------

That part of the line below Huntingdon has been located permanently;
thence to Logan's Narrows the calculations are based on a preliminary
location, and between this point and Blairsville upon an experimental
survey, with liberal allowances for contingencies. Between
Blairsville and Pittsburg the road has been carefully located. Upon
that portion of it, between Blairsville and Turtle creek, gradients
of 52-8/10 feet per mile have been admitted, which may be reduced to
50 feet per mile, by the expenditure of an additional sum of $40,000.

Our measurements of distances commence at the depot of the Harrisburg
and Lancaster Railroad Company, 106¾ miles from the corner of Vine
and Broad streets, in the city of Philadelphia, and terminate at the
intersection of Liberty street, in the city of Pittsburg. Those made
for the Commonwealth, under the direction of Mr. Schlatter, began
at State street, in Harrisburg, and ended at Two Mile Run, on the
Monongahela river, giving a difference in favor of Mr. Schlatter's
line of about 1-8/10 miles in the points of starting. Between
Blairsville and Pittsburg our distance has been actually increased
2-8/10 miles over that proposed by Mr. S., after making allowance
for about 6/10 of a mile of an unaccountable discrepancy in the two
measurements. This increased distance is incurred to save three
tunnels, and other expensive work, amounting, together, to $280,000,
or $100,000 per mile.

The whole difference between Mr. Schlatter's and Mr. Miller's
measurements, supposing the points of starting and ending to have
been the same, is 4-3/10 miles. The difference between the points of
starting of the two surveys, on Mr. Foster's division, is about 2/10
of a mile. From Harrisburg to Huntingdon we lose, by following the
river route. 7/10 of a mile[A] on Mr. Schlatter's line, and save,
from thence to the summit of the mountain, about four miles.

As a connection with the Allegheny Portage Railroad would insure to
us most of the advantages of an independent road to the western base
of the mountain, it is evidently the policy of the Company to make
it at the earliest practicable moment. Our location falling within
6-1/3 miles of that road, it becomes a very small matter to effect a
junction with it. If the present means of the Company, however, would
justify the expenditure, the connection could readily be made at the
foot of Plane No. 4, on the west side of the mountain, thus saving
7 out of 10 of the inclined planes. This could be effected for the
additional sum of $1,250,000, or for $950,000 a junction might be
made at the summit of the Portage, avoiding the five eastern planes.

The branch to, or above, Hollidaysburg is, however, the cheapest and
most speedy way of effecting the connection, and when our road is
carried over the mountain it will remain a good feeder to the main
line, and a fair investment of the capital of the Company.

The following is an estimate of the cost of a continuous road from
Harrisburg to Pittsburg, in connection with the Allegheny Portage
Railroad, graded for a double track throughout, except the branch to
Hollidaysburg:


  ================+===================================+=======+==========
                  |                                   | Dist. |
      Items.      |           Places.                 |  in   |   Cost
                  |                                   | Miles.|  Dollars.
  ----------------+-----------------------------------+-------+----------
                  | {From Harrisburg to Robinson's    |132.67 |$1,990,952
                  | { " Robinson's to Hollidaysburg   |  6.33 |    32,000
  Graduation      | { " Hollidaysburg to Johnstown    | 36.67 |
                  | { " Johnstown to Pittsburg        | 76.00 | 1,515,000
                  |                                   |-------|----------
                  |                   Total           |251.67 | 3,537,952
                  |                                   +-------|
                  | Superintendence and Contingencies         |   419,754
                  |                                           |
  Superstructure. | Including turn-outs on 215 miles          | 2,408,000
                  |                                           |----------
                  |             Cost of Road                  |$6,365,706
                  |       Interest account                    |   450,000
                  |       Land damages and fencing            |   154,294
                  |                                           |----------
                  |             Grand Total                   |$6,970,000
  ----------------+-------------------------------------------+----------

To the above amount should be added, for the purchase of depot
grounds, erection of warehouses and shops, and the construction of
cars and locomotives, as follows:

  Warehouses, including ground at depots    $475,000.00
  Shops and machinery                        185,000.00
  Locomotives                                510,000.00
  Passenger and burden cars                  820,000.00
                                           ------------
      Total                               $1,990,000.00

Making the whole cost of the Road, graded for a double and a single
track laid, including outfit, $8,960,000.00.

It will not be necessary to expend the whole of this amount until
some time after the Road is in use to Pittsburg. As the business
increases the turnouts must be lengthened, depots and shops enlarged,
and the number of locomotives and cars added to. These will not
reach the sum estimated until probably four years after the Road is
completed, in connection with the Allegheny Portage. We shall also
reduce the cuttings and embankments to a single track width, wherever
the character of the excavations or a deficiency of material for
embankment will justify the curtailment. This will effect a saving,
in the first outlay, of about $450,000, which will not be required
until the business demands a double track.

The expenditure for the outfit, when the Road is opened through, will
not exceed $1,340,000, leaving $650,000 of the estimate for this item
to be disbursed after the Road is finished, to meet the demands of
the increased business for the _time_ stated.

This will leave the cost of the Road and outfit, when opened for use,
in connection with the Portage Road to Pittsburg, as follows:


  Cost of Road, with single track and turn-outs, as
    estimated                                               $6,365,706.00
  Less estimated cost of unfinished grading required to
    prepare the Road for double track                          450,000.00
                                                            -------------
  Leaving cost of grading and superstructure of Road        $5,915,706.00
  To this add interest account                     $450,000
  And land damages and fencing                      154,294
                                                   --------
                                                               604,294.00
  Also, cost of locomotives, shops, depots and cars          1,340,000.00
                                                            -------------
     Total                                                  $7,860,000.00

The Board having wisely determined in no event to enter into
engagements beyond their ascertained means, I have thought it best,
thus early, to present an estimate of the cost of the whole work
for their guidance. It will be recollected that the estimate for
the grading is made, in part, upon experimental surveys, with full
allowances for contingencies. By the close of the year we hope to be
able to give an estimate of the whole Road, in detail, from actual
location, which may show a somewhat reduced cost.

Under the contemplated connection with that road, the Allegheny
Portage becomes an important part of our line, and, for the
information of the Board, I insert the following description of it,
extracted from a pamphlet written by S. W. Roberts, Civil Engineer:

"The Portage Railroad consists of eleven levels, or graded lines,
and ten inclined planes. The ascent from Johnstown to the summit is
1,171.58 feet, in a distance of 26.59 miles, and the descent, from
the summit to Hollidaysburg, is 1,398.71 feet in a distance of
10-1/10 miles. There are five inclined planes on each side of the
mountain, varying, in inclination, from 4° 9´ to 5° 51´, or from 7.25
feet to 10.25 feet elevation to each 100 feet base. They are numbered
eastwardly, the one nearest Johnstown being No. 1; that nearest
Hollidaysburg, No. 10. The following table shows the length, rise and
fall of each 'Level' or grade line, and each inclined plane."


  ============+=============================+=============+============
              |                             |             |       Feet
  Level No. 1 |From Johnstown to Plane No. 1|   4.13 miles|Rise, 101.46
  Plane     1 |Ascending                    |1607.74 feet |      150.00
  Level     2 |Long Level                   |  13.06 miles|      189.58
  Plane     2 |Ascending                    |1760.43 feet |      132.40
  Level     3 |Ascending                    |   1.49 miles|       14.50
  Plane     3 |Ascending                    |1480.25 feet |      130.50
  Level     4 |Ascending                    |   1.90 miles|       18.80
  Plane     4 |Ascending                    |2695.94 feet |      187.86
  Level     5 |Ascending                    |   2.56 miles|       25.80
  Plane     5 |Ascending                    |2628.60 feet |      201.64
  Level     6 |Summit of Mountain           |   1.62 miles|       19.04
              |                             |             |    --------
              |                             |Total rise   |     1171.58
  ------------+-----------------------------+-------------+------------
              |                             |             |      Feet
  Plane No. 6 |Descending                   |2713.85 feet |Fall 266.50
  Level     7 |Descending                   |     15 miles|       0.00
  Plane     7 |Descending                   |2655.01 feet |     260.50
  Level     8 |Descending                   |    .66 miles|       5.80
  Plane     8 |Descending                   |3116.92 feet |     307.60
  Level     9 |Descending                   |   1.25 miles|      12.00
  Plane     9 |Descending                   |2720.80 feet |     189.50
  Level    10 |Descending                   |   1.76 miles|      29.58
  Plane    10 |Descending                   |2295.61  feet|     180.52
  Level    11 |To Hollidaysburg             |   3.72 miles|     146.71
              |                             |             |   --------
              |                             |Total fall   |    1398.71
  ------------+-----------------------------+-------------+-----------

In conformity with resolutions of the Board, eighteen miles of the
grading on the eastern and fifteen on the western ends of the Road
were placed under contract in July last. In November the contracts
upon the eastern division were extended to Lewistown, and on the 17th
ult., to Huntingdon, together with a few miles of heavy work along
the Little Juniata, embracing altogether 106 miles.

Very little of the grading, on the western division, has been
executed, as there appeared to be no sufficient reason for pressing
that portion of the Road until the means of the Company would justify
a larger expenditure upon it than they have heretofore.

The work upon the eastern division has been retarded from the
scarcity of labor. Time seems to be required to collect the necessary
force upon the line. With the exception, however, of the Susquehanna
bridge, the grading will be prepared for the superstructure, to
Lewistown, this year. The masonry of that important job was first
allotted to contractors. The principal of the firm, though highly
recommended by the officers of the Reading Railroad, proved unequal
to the task he had undertaken, and their contract was abandoned. In
consequence, the remnant of last season, after the contract was let,
was mostly lost.

The work has been re-let to Holman, Simons and Burke, who have
carried it forward satisfactorily. The prevalence of high water,
since the season for laying masonry commenced, has prevented as much
progress, at this time, as could have been desired; but we still
entertain hopes that it will be completed before the ensuing winter.
If this is accomplished, the Road can be opened to Lewistown next
spring. Under any ordinary circumstances it will be finished to
Huntingdon (98½ miles) by the close of navigation in 1849--a point as
low down as we may anticipate a profitable use of the Road from.

Our arrangements have been made with a view to the completion of
the Road to the Allegheny Portage, early in the spring of 1850. An
earlier period could not be fixed, owing to the magnitude of some
of the work on the Little Juniata; a portion of which, embracing
the tunnel, through a point of Tussey's mountain, was located
and contracted for last December, to avoid delay and a premature
expenditure of capital on the lighter work, which would have followed
a general letting of the whole Road at that time, or since, even if
it could have been prepared for contract in season.

If sufficient means shall be obtained to prosecute the western
division, I would recommend that the heavy portions of the work,
between the Conemaugh and the confluence of Brush and Turtle
creeks, should be placed under contract, together with the grading,
continuously from the Portage road to the point of divergence of the
line from that river towards Pittsburg, if the Conemaugh route is
adopted.

When the connection is made with the Portage Railroad, from the
east, there will then be a continuous railroad from Philadelphia
to Johnstown, 282 miles in length, and, if opened at the same time
to near Blairsville, it will be extended to 310 miles, with only
43 miles of turnpike thence to Pittsburg, or 75 miles of canal
navigation, giving a line of communication, with the Ohio river, far
superior to any railroad route existing, or any that will at that
time be built. On freight destined to the interior of Ohio but one
transshipment will then be necessary. The canal boats, loaded at the
terminus of the Road, can be conveyed to any point upon the Ohio
canal.

If your Road possesses no other source of revenue than the local
travel and transportation of the rich and populous region to be
traversed by it--secured, as it will be, from competing lines by
_natural barriers_ stretching out on either side from the Susquehanna
to the Potomac--they would be sufficient to justify its construction.
The influence of the Pennsylvania canal has called into activity all
the elements necessary to render the enterprise profitable, and,
in consequence, it will be more successful with that improvement,
as a pioneer rival, than if it was now to enter upon an unoccupied
field. Whatever may be the effect of your work upon the business of
the canal--and I do not believe it will be injurious--there can be
no doubt but that it will add very materially to the revenues of the
Commonwealth.

Important as the local sources of revenue are to the Company, they
will afford but a limited amount of business compared with that to
be derived from the great West. The route of your improvement is
directly on the line that would be most desirable for a railroad
to pass from St. Louis, or the confluence of the Mississippi and
Missouri rivers, through the center of the wealth and enterprise
of the Mississippi valley to the Atlantic. With a map of the Union
before you, it will be found to be impossible to draw a line upon it
that would accommodate so large an amount of population, or an equal
extent of fertile country.

Through the broad bed of mountains that divide the Atlantic from
the Western States--traversed by our route for 190 miles--natural
gorges are found, cutting all of them to their bases, except the
Allegheny, which is passed with comparatively easy gradients, and
without encountering difficulties of a very unusual character.
These favorable features of the country give to us a line which is
the shortest and best that can be obtained between these sections
of the Union, and insures to the Company the whole of the travel
and light transportation, with much of the heavy trade, destined
to Philadelphia and points north of this city, of the vast region
between a line along the southern shores of Lake Erie, touching Lake
Michigan, and extending to the far West, and the immediate valley of
the Ohio river. The distance from Cleveland to New York being 80
miles shorter by this route than by the New York and Erie Railroad,
much of the travel embarked upon the lakes for that city from the
north and west must also be diverted to this line.

In view of these circumstances, can a reasonable doubt be entertained
by any one as to the profitableness of the stock of the Pennsylvania
Railroad Company? Its natural position must give to it more than
sufficient business to make it yield large profits. Indeed, I
confidently advance the opinion that when the Road shall have been
completed that it will not be a question "whether it will pay an
interest on its cost," _but to what point the rates of freight and
passage shall be reduced to give the Company ample revenues and at
the same time make the work most extensively useful to the public_.

Dividends from its revenue can be made of 6, 8 or 10 per cent. by
changing the rates of freight and passage, at the discretion of the
Directors.

From some experience in the management of the business of other
roads, much less favorably situated than this, I feel no hesitation
in making this prediction. I look upon the result as one upon which
there can be no doubt entertained.

The inquiry may be made, "If this Road must prove a profitable
investment, why other works in Pennsylvania, favorably located,
have not yielded remunerating dividends to their proprietors?" In
reply it can be stated that there is no important work, leading from
Philadelphia, that ought not now to divide large profits, if their
stock and funded debts exhibited a fair cash value of the property
represented. Most, if not all, of these works, were commenced with
inadequate capital, for the object in view, and from the anxiety
of the stockholders to realize the large profits promised on their
completion, and the _public_ to _enjoy the use_ of the improvement,
they have been pressed forward faster than true economy, or the
funds of the company, would justify. Engagements were made, relying
upon fortune, or accident, to provide the means to meet them. These
resources failing, they were thrown upon the mercy of either the
contractors or the money lender. And, in consequence, the cost of the
works has been rolled up to an amount not anticipated, and, in many
cases, debts incurred, under the pressure of the moment, in the most
objectionable shape, to meet which the whole of the receipts of the
companies have necessarily been mortgaged.

In New England, and also in New York--where railroads have,
in many cases, been deprived of the privilege of carrying
freight--judiciously located roads have invariably paid well. Their
success has not been caused by the exercise of any peculiar skill
or economy in their management, as generally supposed, for, in this
respect, though they stand deservedly high, there is none that
conduct their business, under all circumstances, with as much economy
as the Baltimore and Ohio Railroad, or some other southern companies.

In closing this communication it gives me much pleasure to
acknowledge the zealous and cordial co-operation that I have received
from my Associate and Assistant Engineers in carrying on the
important work that you have committed to our charge.

  Respectfully submitted, by
  Your obedient servant,
  J. EDGAR THOMSON,
  _Chief Engineer_.

Note.--By way of "Then and Now" contrast, the income account of the
Pennsylvania Railroad Company for the year ending June 30, 1909, from
Interstate Commerce Commission Bulletin No. 5 is subjoined.

Revenues and Expenses of the Pennsylvania Railroad Company for the
year ending June 30, 1909.

  Miles operated                                            4,087

  Operating revenues                                 $138,449,119
    From Freight                     $100,356,160
         Passengers                    28,774,281
         Other transportation           8,438,972
         Non-transportation               879,706

  Operating expenses                                   97,107,751
    For Maintenance of Way and
          structures                  $16,503,246
        Maintenance of equipment       27,225,887
        Traffic                         1,844,365
        Transportation                 48,064,176
        General                         3,470,077

  Net operating revenue                                41,341,368

  Taxes(a)                                              2,370,314

  (a) Exclusive of some $1,790,000 taxes paid on leased lines.

  Observe that the amount expended on maintenance of way and structures
  in 1909 was more than double the total estimated cost of the road
  from Harrisburg to Pittsburg in 1848.

  The amount expended during the calendar year 1909 in revision of
  grades and alignment, and for additional tracks, yards and other
  terminal facilities, abolition of grade crossings and improvement of
  equipment was $5,581,809, exclusive of $4,000,000 applied towards
  construction of New York Terminal Extension.

  This road as it exists today is a living monument to the sound policy
  of the American railway practice of a dollar for improvements for
  every dollar of dividends.

  S. T.


FOOTNOTE:

[A] By an alteration of the line, since made, the distance lost by
the river route is reduced to four-tenths of a mile.




RAILWAYS AND THE PACIFIC NORTHWEST

BY JAMES J. HILL.

    [On the occasion of the completion of the Spokane, Portland
    & Seattle Ry., connecting Portland with British Columbia,
    Mr. Hill delivered three noteworthy addresses at Portland,
    November 6, 1908, at Tacoma November 9 and Seattle November
    10. The speech at Portland was an earnest plea for a more
    intelligent and economical cultivation and conservation of the
    vast agricultural resources of the Pacific northwest; the other
    two related largely to the part played by the railways in the
    development of that territory. The portions of these addresses
    which follow are taken from the full reports which appeared in
    the Seattle and Tacoma newspapers the next days.]


MR. HILL AT SEATTLE.

After Mr. Hill had been introduced and warmly applauded as the
"Empire Builder," who had been intimately associated with the
development of the northern tier of states from the Lakes to the
Pacific Ocean, and he had acknowledged his obligation to the
indomitable spirit of Seattle and its people, he began his address
by disclaiming the ownership of the Great Northern railway. "Fifteen
thousand people own it." said he. "The average holding is about 120
shares. Over 6,000 women are owners in the Great Northern railway,
and I have to manage their affairs." Then he proceeded:

"It is three years since I was here, and I never expected that three
months would pass without my coming to Seattle, but three years
have passed and what do I find? I think the city in three years has
doubled. I think it has doubled in everything that goes to make a
city. Just look at the streets lined with commercial houses which
would be a credit to any city in the world. It is far beyond what I
expected to find, and I think that Seattle has a future. Seattle is
entitled to her growth, and if the same spirit that has moved her
citizens in the past continues, if the mantle of the older men falls
on the shoulders of the younger men, Seattle cannot help but thrive.
You have behind you one of the richest states in the Union; one of
the very richest.

       *       *       *       *       *

DEVELOPMENT OF RAILWAYS.

"Now, to come back to the relation of the railway to the development
of the country. Next to the cultivation of the soil itself, in the
amount of money invested and in the importance to all the people, is
the railway property of this country. It is on a little different
basis, I am sorry to say, from the general attitude of the public,
from any other property. From what Judge Burke says as to the Golden
Rule, if you can have it fairly applied, it would make our hearts
glad.

"We frequently hear about railroad watered stock. It is a hackneyed
phrase which is used with which to catch gudgeons, and it has
caught a great many. Now, let us see. You can open a bank--five of
us sitting here, if we had the money, could open a bank, put up
the building and draw our checks, and that is disposed of. We have
a million or a million and a half of capital, and, conducting the
business of the bank within the law applied to bankers, we can earn
any dividend we like, and we can divide it, even up to 40 or 50
per cent., and it has been done, and nobody finds any fault. Now,
we might start a manufacturing establishment and we can divide any
profits that we can legally make up to 40 or 50 or 100 per cent., or
we can start a mercantile establishment and conduct it so as to bring
any profit--there is no limit so long as we are within the laws of
trade. But take the railroad.

"Now, remember, you can run your manufacturing establishment
twenty-four hours a day, or you can run it one day in the week, or
you can run it half the time and you can close it and it will not
affect you, or you need not run it at all; and if you do not like
the business you can dispose of it. You can liquidate your bank and
go out of business; and so with the mercantile establishment, you
can close it at any time. But when you have invested your money in
a railway, you have undertaken an obligation to serve the public;
you have taken a business risk that is greater than the business
risk of any other business in the world. If you do not run it, move
your trains with regularity, move your trains so as to accommodate
the business, the courts will appoint a receiver and will issue
receiver's certificates to an extent that would wipe out your
investment. If there were anything left they would hand it back, but
the chances are altogether that if you could not make it pay the
receiver could not.


RAILROAD BIGGEST RISK.

"Now, I mention this simply to show that the business risk in
building or operating a railway is greater than it is in any other
business. There is nothing guaranteed, and sometimes you are told
what appliances you may use; you are told what you must not use;
you are told whom you can hire, and you are told when you can
discharge him, and it has been at least hinted as to what you should
pay him--what his wages and condition of work shall be. So that
the only privilege that was left for the railroads was to pay the
bills. That they are always expected to do, and it would be a great
disappointment if they were not able to.

"In the section of this country, the portion of this country east
of Chicago, I do not know anywhere north of the Ohio River, where
a railroad, built with the greatest care and economy, could pay
one per cent. on its cost; that is, a new road, built between any
of the large cities of the west to the large cities of the east,
paying the present price of real estate and terminals and the cost of
construction, the cost of eliminating great profits, the cost of the
necessary expenditure of money to make life and limb safe.

"Take, for instance, a railroad from New York to Chicago. I had
curiosity enough to inquire from the leading real estate man who
was getting the additional property for the New York Central, their
terminals, what it would cost from Thirty-eighth street to Harlem
River, a narrow strip of blocks on the East Side, say ten blocks,
from Thirty-eighth to Forty-eighth street, to be used as a terminal.
He told me it ought to be secured for $200,000,000, but he would not
like to take the contract. Now, follow that up through Albany and
Syracuse, Rochester and Buffalo and Erie and Cleveland and on to
Chicago, and if you can get into Chicago and get out of New York with
any reasonable cost I want to say that when your road was finished,
at the present rate, it could not pay 1 per cent. on what it cost in
money.


NO ROOM FOR MORE ROADS.

"Now, what chance is there for more roads between New York and
Chicago, or between any Atlantic city and any large city in the west?
During the ten years from 1898 to 1908 the railroad mileage in the
United States increased about 24½ per cent., the passenger business
increased 125 per cent., and the freight business increased 148 per
cent. The additional burden was placed on the railways, with an
increase of over 148 per cent. in the tons moved. What is it costing
the Pennsylvania road to get into the City of New York? I do not know
the exact figures, but I have seen it estimated from time to time at
one hundred millions of dollars to secure passenger facilities in
the City of New York. When I think of these things and see what you
have here I think that we have reason to congratulate ourselves, and
I think that we had a narrow escape from being compelled to do our
business west of Commercial street in place of where we are today.
There are no places that I know of today where there is any room or
any use for any other large railway enterprise.

"The Milwaukee & St. Paul are coming to the Coast--and we are glad
they are there. At different times, when people largely interested
in that enterprise talked with me, I said, 'By all means build to
the Coast; extend your road--if you do not, somebody who has more
enterprise than you will take the business and will keep it on
their own rails and you will not get a share of it.' But when that
enterprise is finished, I do not know, north of the Platte River,
where there is room for another railroad or occasion for one. There
will be branches built, and they are necessary for the development
of the country. You had expended, and there is being expended now, a
very large sum during the last two years.

"The Northern Pacific and the Great Northern, within the State of
Washington, have spent millions of dollars between Portland and
Spokane. It ought not to frighten you; it will not wipe you out; you
have your roots deep in the ground and they will stay there.


TACOMA IS WAKING.

"Now, I find in summing up the present population of the new country
between Blaine and Vancouver--Portland is on the other side of the
Columbia, although, fortunately, the state line does not limit our
commerce or our right to trade with each other--there are over
700,000 people living on the line of the railway between Blaine and
Vancouver. Portland claims 200,000, and I feel sure that she must be
near that figure. Portland has grown rapidly, and I think possibly
the young men have taken a sheet out of your book. There was a time
when they were altogether too wealthy in Portland. Every man had
business of his own to attend to and was so deeply engaged in it that
he overlooked the business of the city. They did not take hold. You
could come there if you were willing to bear all the expense and take
what you could get. But Portland has had an awakening, and I believe
that Portland, notwithstanding its remoteness from the sea, will have
a good growth. It has a good country behind it and there is no reason
why it should not have a good growth.

"Another city down here where we were beautifully entertained last
night, Tacoma--I remember when we came out here they really did
not need us and we did not want to force ourselves on them, and
so we stayed right here. But I think, and I hope, that Tacoma is
getting its eyes open and that it wants more railways. We don't ask
much; we want the privilege of a place for foothold, a place to do
our business at our own expense; and I think that we will probably
succeed in getting it--I hope so.


GROWTH PLEASES HIM.

"I wanted to come back to your city here. I was more than surprised
at your growth and I am more than gratified. I rather gathered that
you had grown fast and that possibly you wanted a resting spell, but
I don't see that there is any rest for you now. I think that you will
go on as you have begun, and I was more than glad to see what you are
doing in the way of adjusting your street grades. It is inexpensive;
the burden may be hard upon some people, and difficult to carry, but
it will cost infinitely less to do it now than in five or ten years,
after those streets were lined with buildings that had cost a great
deal of money and you could not afford to throw them away. Lay your
foundations right and the structure will take care of itself.

"It will grow by degrees, and, when it is finished it will be part of
a complete whole and you will be glad you did it. We have a good many
communities to take care of along our railway, and with every one
of them we have always the feeling that their prosperity means our
prosperity. They have to earn the money before they can pay it to us,
and what they do pay us we think is a small part; but we expect the
railway business must depend upon close management and small savings.

"Take the dividend of the Great Northern railway. _Three copper cents
in moving a ton of freight ten miles pays our dividends._ A ton of
freight on a country road would be a fair load for a farmer's wagon,
and ten miles would be a fair day's work if he returned the same
night. We do that. Our dividend amounts to about 3 cents--a little
less than three copper cents--for moving that load of freight. We
find that we have neither poisoned the air nor the water and you
have all the highways that you had before we came, but we give you a
better one and a cheaper one.


MUST HAVE MONEY.

"And remember that you never can injure the railway without injuring
yourselves. The railway has only two sources from which to get
money. It must either earn it or borrow it, and if it borrows, and
borrows judiciously, the rate of interest ought not to be high, but
whatever it is, high or low, you pay it. Sometimes people who do not
know better think that they are serving a good cause to stick the
railway--the company is rich--a personal injury case or something of
that kind--but it is a railway and they can afford it--stick them.
Now, who pays the bill? Can we charge that up to the construction of
a station?

"It is a part of the expense, and the law says that you must pay us
for the use of our property enough to pay our expenses and our taxes,
and a reasonable return upon the investment, so that all is charged
in your bills.

"We had in one thriving city on the Great Northern, I recall, a suit
for $20,000. A young brakeman stumbled against a pile of cinders that
it was represented the trackmen threw out from between the rails and
poured water upon it, and it froze in the winter and was solid, and
as he was running alongside of his train he stumbled and fell and
was injured--some great injury to the spine that wrecked his entire
nervous system, and we inquired and found out how the coal got there,
and our experience and education have made us suspicious; we took
the cinders to the laboratory and had them analyzed and absolutely
they were anthracite, and there never was a ton of anthracite coal
burned in a locomotive in the State of Minnesota; we followed it up
and we found that the man who brought the suit--a professional suit
bringer--had, with a brakeman and his own son, taken the cinders from
his own office and piled them there and poured water on them. Now, I
speak of that just as an illustration of some applications of that
Golden Rule.


COMPARES RAILWAY COST.

"Your future growth will depend on yourselves hereafter, as it has
largely depended upon your own efforts in the past. The commerce
going to and from the Pacific Coast cities by the sea is being
largely carried in foreign bottoms. There was a time when the
American nation was a nation of seafaring men, but that does not
apply any longer, and I am sorry that that is so. I believe that the
people of the United States, I believe that the genius of the country
is just as able to carry upon the sea as upon the land. As matters
stand today, any bay or inlet where a foreign flag can force its way
inland into our country they can call to us to drop the bundle and
they take it from us and we can't help ourselves. Now, we ought to be
able to help ourselves, for on the land we have so far surpassed the
others that there is no comparison.

"In Great Britain their average railway cost is $234,000 per mile.
In the United States it is a little less than $60,000 per mile. In
Germany it is about $110,000, in France about $140,000, in Austria
about the same. Now let us see what they do with their two hundred
and thirty-four thousand dollar machine and their one hundred and
ten and one hundred and forty. In Great Britain they move an average
of five hundred thousand ton miles to the mile of road at a cost
of $2.16 for every hundred miles. In Germany they move about seven
hundred thousand ton miles at a cost of a trifle under $1.36 for
every hundred miles. In France 450,000 ton miles at a cost of $1.40
for every hundred miles. In Austria the cost is $1.50 for moving a
ton of freight a hundred miles, and in the United States the cost is
74 cents and a fraction.


AGAINST SHIP SUBSIDY.

"Now we in the United States move the business for less than half
the average cost of Europe. We pay from twice to four times the rate
of wages, and we do it with an investment of about a third of their
average. If we can do that on land, why can't we do it on the sea? I
know that if the ships of the United States had the same care and the
same opportunity that the ships of other nations have they would do
it, and until then no subsidy, no ship subsidy, will ever enable them
to compete with other business, because in principle it is wrong to
tax all the business of the country--to put your hand into the public
treasury and hand out to one particular business a cash subsidy in
order that it may live.

"I want to tell you that a steamship line that cannot live without
a cash subsidy will make a mighty, mighty lean race with one. It
ought to rest on a business foundation. That is the only reason for
running ships, because they can be made to pay, and if we can make
our railways pay and work at the low rates that the railways in the
United States do carry and pay the scale of wages that they do pay,
why can't we succeed on the high seas? If we can't, let us hand that
business over to somebody who will do it cheaper and better; but I
don't feel that the case is a hopeless one, but, on the other hand, I
do feel that it would only limit the efforts of those who were trying
to make and to build up a merchant marine for the United States; it
would only limit their efforts to extend a subsidy to a few ships
engaged in the business.


FOREIGNERS GET SUBSIDY.

"I remember on one occasion that I went home from here and there was
no tonnage to move the stuff we had to send to the Orient. Absolutely
no tonnage was available, and when I got home there was a reception
to one of our public men, and the late Senator Mark Hanna was there.
I took up in a few remarks the question of a subsidy, and I said. 'If
we are going to have one, let us pay a subsidy for something that is
going to do us some good. Let us pay a tonnage on the actual products
that reach a new market.'

"That would have done some good. The tonnage of the products that
does not reach a new market, we wouldn't have anything to pay on
that, and on that that does we could afford to pay. Now, we were
driven out of the business on the Atlantic, but we might retain a
hold upon the business of this ocean. Immediately there was a scheme
for Congress for an appropriation, I think of $9,000,000, for ship
subsidies, and they found that 80 per cent. of it would go to one
line, under the bill that was being then drawn--and that line on the
Atlantic Ocean--and I know that the men and most of the officers
lived on the other side of the Atlantic, and the stock was owned
on the other side of the Atlantic. Now that would not build up a
merchant marine for us.

"A company over there has disposed of this old boat to our people
and taken what new money they got and built new boats. That was all
and that was celebrated--a portion of that was celebrated as the
inauguration of a new merchant marine for the United States. Think of
it!

"But some of our statesmen were wise enough to believe that it was
going to succeed, but it did not. It fell ingloriously. When we have
a merchant marine it will be because there is a reason for it. But
until that time comes, just put up with the business that we can get,
and let the others carry it who can carry it lower and better than we
can in this country.

"But bear this in mind: That all your great harbors in the country
when compared with the railroad yards sink into insignificance in the
tonnage that they move. I think that, in Seattle, I would be safe in
saying that twenty tons are moved by rail where one goes by water,
unless you can count saw logs. And I had occasion to look up St.
Louis. The Mississippi at St. Louis has from eight to twelve feet of
water for nearly nine months in the year and boats run in and out of
St. Louis, and we are all anxious to make a deep water channel from
there to New Orleans.

"Now, in looking up the amount, I found that, notwithstanding they
had from eight to twelve feet of water for nine months in the year,
or about nine months, less than 1 per cent. of the tonnage that came
into St. Louis moved by water; and out of over 1,500,000 tons of
coal--and if there is any article among all the shipments that could
be moved by water easily and cheaply it would be coal--not one ton of
coal moved out of St. Louis by water last year.

"There is a scheme to spend the public money and create a channel
fourteen feet deep to the levees at the mouth of the Mississippi, and
there are plans to lath and plaster the bottoms of a great many other
streams throughout the country, and so many that in order to get
any appropriation for an enterprise of great national merit, it is
necessary to divide up and load it down with a lot of appropriations.
These make what is known as the pork barrel, the river and harbor
bill. They load it down with the various enterprises that have no
value to anybody, streams on which the government is called to spend
more money than all the boats would bring if sold at auction, and in
some cases where there have been no boats run for ten years.


LEADS WORLD IN TONNAGE.

"They say they ought to regulate the railroads. Now, when you come
to consider the matter practically, I would rather have a railroad
alongside of a navigable river, or a river with six or eight or ten
feet of water in it, than to have it far away from the river. A box
car will beat any ten-foot channel in the world, but when we get
twenty or twenty-five-foot channels, the box car is not in it in
bulky freight. You have got to have depth of water.

"Some years ago I built six freight steamers on the Great Lakes and
they were considered whales in their day. They could carry 3,000
tons. Today a lake steamer and a double channel through the Soo Canal
carries 12,000 tons, and has two additional firemen and one deckhand,
and that is all the additional crew.

"Sometime I would like to have the city council of the City of
Seattle, if they had the time, run down to the head of Lake Superior,
and see what is the greatest port in the matter of tons moved in
the world. London was, and Duluth and Superior a few years ago were
trailing along fifth or sixth place; but last year it took first
place with the cities of the world, and it handled more tonnage than
any other city. London had 30,000,000 tons and Duluth had 34,000,000.

"Now, to show the enormous importance of that load of tonnage, that
tonnage that is greater than any other city in the world, I undertake
to say, and do say, that there are not 1,000 people, men, women and
children, connected directly or indirectly, with moving that traffic
between the land and the water in both directions. There is such a
thing as doing a very large business without a harbor at all.


SEATTLE SPIRIT WINS.

"Although as far as foreign commerce is concerned, as far as business
is concerned, when we get to the seaside, we have to hand it over
to the ships. It must be done. But the great business is done in
the railroad yards. I would not be without the harbor--far from it,
but don't feel that the harbor is going to make you, and don't feel
as a gentleman in public life in Washington, when a friend of mine
talking with him said, 'You won't get any more railways built along
the policies you advocate.' 'Oh, well,' he said, 'we have got them,
we have got them.' And he was a member of the house committee of
interstate commerce, a rather dangerous statement for him to make."


AT TACOMA.

In his address at the banquet of the Tacoma Chamber of Commerce on
the preceding evening (November 9), Mr. Hill dwelt especially on the
intimate relation of railway and agriculture interests. Among other
things he said:

"The question of terminals means a great deal to a railroad and it is
getting to be more and more full of meaning every year. Some cities,
and large cities, today have all the railroads they will ever get,
simply on account of the difficulty in getting terminals. I think the
Northern Pacific terminals today--I think to buy them on the entire
system--would cost more money than to grade the whole road, and I do
not know but what it would cost more than to grade and put the rails
down. That is a condition and, remember, that you pay the freight.

       *       *       *       *       *


WILL SOON NEED ALL THE WHEAT WE RAISE.

"Within a comparatively short time, I will say that within six years,
I will go on record, you won't send many cargoes of wheat from Tacoma
by sea, simply because the United States wants every bushel that will
be raised within the United States to feed her own people, and will
pay you more money for it. If they didn't pay you more money for it,
it would go to the foreigner, but our own people will pay more money
for it and take it somewhere and grind it into flour. If you look for
greater avenues or greater economy in transportation, but it will
cease to go out as wheat. I will give you an illustration and you can
draw your own conclusions as well as I can: In 1882 the United Slates
raised 504,000,000 bushels of wheat and we had 52,000,000 people and
we exported somewhere between 175,000,000 and 200,000,000 bushels.
Twenty-five years later, in 1907, we raised 634,000,000 bushels. We
increased in that twenty-five years a little less than 25 per cent.
in our wheat yield, or 130,000,000 bushels.

"Our population increased 64 per cent., and converging lines meet
somewhere. Now, if we had 90,000,000 of people--and we have between
88,000,000 and 90,000,000 this year--and use six and a half bushels
per capita, it would take 585,000,000 bushels for bread and seed.
Professor Rogers, of the Minnesota Agricultural College, puts our
consumption for bread and seed for the last few years at a trifle
over or a trifle under seven bushels. I think he uses ten years for
his average, and I use twenty-five to get an average of about six
bushels and forty pounds, and I call it six and one-half bushels.

"On last year's crop, with 634,000,000, we have had about 59,000,000
bushels to sell and we sold about 80,000,000. What is the result?
After the 15th of January wheat was higher in Minneapolis than it was
in Chicago, even up to the first of August, and part of the time it
was higher than it was in New York, because they wanted it to make a
loaf of bread to feed our people at home.

"We have not the great margin that we used to have. The seed on last
year's crop went down to 59,000,000 bushels and, if my figures are
equal to Professor Rogers'--and he is a professor of agriculture
in the Agricultural College and maybe he has more time to look
these questions up more carefully--but with his figures we hadn't a
bushel to sell. Suppose we had 60,000,000 bushels to sell, and we
are increasing in population at the rate of 2,000,000 per year, our
natural figure is between 1,300,000 and 1,400,000, and allow 700,000
for immigration, not eleven, twelve, thirteen or fourteen as we have
been having, but say seven and by 1950 you will have in the United
States, it figures out to be accurate, 208,000,000, but suppose we
have 200,000,000, it might come by 1945, or 1947, or it might be in
1955, but about that time we will have 200,000,000 people, and if
they use six and a half bushels per capita for bread and seed, it
would take 1,300,000,000 bushels to feed them.


PROBLEM OF THE WHEAT.

"That is a little more than twice what you are raising today, and
you haven't any new fields to put a new plow in. From 1882, when
we raised 504,000,000 bushels of wheat, following that time more
than half of Minnesota, all the northern part of Minnesota, was
brought under the plow, all of North Dakota, all of South Dakota,
all of the state of Washington and all of Oregon, except 3,000,000
or 4,000,000 bushels raised in 1882, more than half of California,
two-thirds or three-quarters in Kansas and Nebraska, a large part,
practically all of Oklahoma or the Indian Territory and a large part
of Texas, and take what was raised in 1907 on the new fields that
were opened up, any new territory after 1882, and you will find that
it is approaching 300,000,000 bushels, but the increase in the whole
country in that twenty-five years was only 130,000,000 bushels, so
that the old fields fell off about 170,000,000 bushels.

"Are we increasing our yield per acre? By no manner of means. It has
been a steady and uniform decline for the past thirty years. Now, we
have as good wheat fields as there are anywhere on the continent, and
they will be made better. I am not a disciple of Malthus, because
Malthus was an honest man no doubt, but when he wrote he did not
understand the science of modern agriculture or the adaptation of
the soil or of the seed to the soil, or the commercial value of a
correct analysis of the soil and the adaptation of the soil nor its
commercial value as suited to the crop it is best fitted for. All
these things we have learned, and while you are teaching your young
people let me advise you that the school that is most entitled to
your care and the school that will do the most for the state in
every place and will turn out men and women as they have always in
industry and intelligence and everything else that goes to make good
citizenship, the school attended by the boy on the farm is certainly
as good as the best.

"When your forests are cut and hauled away, and sold to somebody
else you have then, and we will give you a perennial forest, a crop
every year of great value too. But we ought to be able to take
care of our land and we will. I have no doubt about the future.
We will do what other people have been compelled to do. In 1790,
Great Britain was down to fourteen bushels. We are down to thirteen
and nine-tenths now, average. They took the question up and it was
much easier for them to control, as far as territory was concerned,
because the territory was small, in the hands of a few land owners,
mostly rented, and they faced conditions compelling the land owner to
sub-fallow, and fertilize and carry one crop year after year. They
appointed a royal commission and that royal commission went to work
jointly. We have a royal commission, too, and they are able men. One
is a professor at Cornell and another is a publisher of books in
New York, and another is Mr. Pinchot, who is doing a great deal of
work, but he is overrun with the work he has to do. This commission
is to report in time for the meeting of Congress. Now, bear this in
mind, Great Britain started in 1790 trying to keep the people on the
land. The landlord was afraid of the great drift of the agricultural
people to the colonies and the new republic, the United States at
that time. The new republic was going to impoverish them, and leave
them without any rent rolls. They went to work intelligently and in
1810 and 1811 Sir Humphrey David, the foremost scientist of his time,
delivered most intelligent lectures on the qualities of the soil. In
forty or fifty years after they started they had gotten their yield
up to an average of twenty-five bushels per acre. Last year, it was
32.2. Starting at fourteen we ought to get up in place of 13.9 or
14, we ought to be able to get up to 28 or 30, and if we do we will
have grain to feed our 200,000,000 people and to spare, and what do I
hear? 'Some more, and then some?' Now in going over those questions,
I am not worrying about the future of the country. I have more
confidence in it today, the day for cheap wheat has left the United
States, not to return, and we can stand that. This land, this side of
the range, you can devote to better uses than raising wheat. I do not
know why you should not get returns, as I said, that would equal 10
per cent. on $2,000 per acre. You can do it. There is no question as
to that."




SOUTHERN RAILWAYS AND THEIR NEEDS

BY

JOHN F. WALLACE.

    Abstract of Address before Southern Commercial Congress
    Washington, D. C., Dec. 7 and 8, 1908.


This question has been extensively treated by leading railroad men,
statesmen and Press of the South, and admirably covered by addresses
on numerous occasions before various audiences throughout the South.

I therefore feel that the southern railroad situation is gradually
becoming better understood, not only by the public at large, but by
the railway men of the South, who are jointly appreciative of the
fact that the greatest need of southern railroads is the confidence
and support of the communities through which they run and serve.

Therefore, my remarks will be few, and are made in order that certain
fundamentals may be read into the record of this convention.

For the purposes of this address the South is described as that
portion of the United States lying south of the Potomac and Ohio
Rivers and east of the Mississippi.

Shortly after the close of the Civil war, the South realizing the
changed order of things, accepted the situation in the spirit
of American manhood and started on a new era of industrial and
commercial development.

One of the first necessities was a comprehensive system of
transportation facilities. The railroads, which prior to the Civil
war had compared favorably with those in the North, at its close were
practically bankrupt financially and physically, and were more the
shadow than the substance of what they should have been.

Southerners with brains and energy, starting with 11,587 miles of
detached, dilapidated and crippled railways, immediately commenced
to lay the foundation of the present industrial and commercial
prosperity in the South by constructing its lines of railway.

The efforts of these men and the confidence they were able to inspire
in northern and foreign capital are best illustrated by the fact that
today the South is served with 46,434 miles of railroad, serving
eleven states, twenty million people, and representing a total
investment in round numbers of two billion dollars.

Of these 46,434 miles of railroads only 1,134 miles approximately, or
2½ percent, are double track. It is possible that the next ten years
will see at least one-fourth, or over ten thousand, additional miles
of second track.

It must be borne in mind that while transportation is the burden
bearer of both production and commerce, it is only able to perform
the full and complete measure of its functions when properly
nourished and assisted by finance.

In ancient days the birth of civilization started with the ability
to preserve food products. This grew from the temporary necessity of
accumulating sufficient food to last from one chase to another, or to
enable journeys to be performed or winter climates endured, to the
storage of vast quantities of food to enable nations to survive years
of famine, as was exemplified by the storage of grain in Egypt in the
days of Joseph, which period history shows us was the crowning epoch
of Egyptian civilization.

Today the measure of our modern civilization is our transportation
facilities. Safe, efficient and rapid communication, and the economy
of the world's transportation systems, are binding the nations of
the earth closer together day by day, and helping to create the
conditions which will ultimately place the crown of accomplishment
upon our modern civilization.

Coming back to the South, from which we have been temporarily led
astray, it is self-evident to the careful observer that all the
diverse interests of this section--agriculture, mining, manufacture,
commerce and banking--are unavoidably and irrevocably bound up with
the transportation facilities furnished and to be furnished by the
railway systems ramifying its territory and performing a service for
the South similar to that performed by the arteries and blood-vessels
in the body of corporeal man.

It is also apparent to the impartial observer that if the South is to
reach its highest state of development its transportation facilities
should not lag, but should lead the march of progress, and that this
development should be stimulated in every possible way; and men of
the South should never forget for a single moment that _the needs of
the railroads are the needs of the South_.

It has been our custom in America to anticipate future needs in
transportation, and in a measure attempt to forestall and provide for
them.

The policy of foreign countries has been practically the reverse. The
railway systems of England have been constructed to take care of and
supply a demand for transportation facilities that already existed.

The railroads of the United States in the South and West have been
projected and constructed, and to a great extent financed, by men
whose inspiration was a firm belief in an unseen future and whose
assets were largely composed of hope and an undying faith in the
future development of their country.

Now, the future demands for increased transportation facilities in
the South are plainly indicated by past records, showing the growth
of productive activities and the constant increase of tonnage to be
moved.

If these requirements are to be met, demand and supply must move
forward hand in hand. Additional tonnage will justify increased
facilities and increased facilities will stimulate still greater
tonnage.

During the past 25 years the total products of the South, from
agriculture, forest, mines and manufactures, have increased in
valuation over 225 per cent. During the last five years of this
period, ending in 1906, the increase has been 50 per cent.

The common fallacy that a railroad is completed when opened for
traffic has long since passed away, at least in the minds of
intelligent men.

The railroad of today is no sooner completed as a single track, than
it becomes necessary to provide industrial spurs; additional or
enlarged terminals; replace its temporary structures by permanent
ones; widen its excavations; strengthen its embankments; provide
passing tracks, additional shop facilities, enlarged passenger and
freight stations, warehouses, elevators, docks and wharves at water
terminals, additional tracks, heavier rail, rock ballast, elimination
of curves, reduction of grades, block signals, elimination of grade
crossings, heavier engines, larger and better cars, to the end that
the constantly growing requirements and exactions of modern traffic
conditions may be met; all of which requires increased expenditures,
which it is easily seen could not in any event be provided for out of
earnings.

During the next ten years the railroads of the South will require
$1,000,000,000 to enable them to fully provide for the increased
demands for transportation facilities, an average of $100,000,000
per annum. Including the estimated increased mileage and the present
capital investment, the resulting average capitalization would amount
to $53,000 per mile, being $20,000 per mile under the present average
capitalization of all the railroads of the United States today, which
is $73,000 per mile.[B]

Meeting the requirements of the railroad situation in the South by
the expenditure of a round billion dollars during the next ten years,
as outlined herein, would make the total investment in southern
railways at the end of that period three billions of dollars on an
estimated mileage of 56,000.

It would require average earnings of $9,000 gross per mile per
annum, with operating expenses at 70 per cent of the gross, to yield
sufficient net income to provide a return of 5 per cent on this total
investment.

When these figures are compared with the present average gross
earnings of the railroads of the United States, $11,400 per mile
per annum, with an average cost of operation of $7,757 per annum,
resulting in a ratio of operating expenses to gross earnings of 68
per cent, the above estimates appear reasonable and conservative.

Even if this expenditure is made and the results predicted obtained
at the end of the ten-year period, southern railroads will still fall
approximately 25 per cent short of yielding the present average gross
earnings per mile per annum of the railroads of the United States
today.

To provide funds to meet these ever-growing and incessant demands for
additional facilities, the railroad companies must necessarily be
large borrowers.

The prosperity of the South in the next decade, and in those to
follow after, depends upon the ability of the owners and managers of
southern railways to foresee and provide for future necessities, and
upon the promptness with which the work is accomplished.

The ability of railroads to construct these improvements, which are
so essential to the future prosperity of the South, depends upon the
willingness of capital to furnish the necessary funds for the purpose.

While legislation may control and regulate the returns upon invested
capital, there is no process by which it can compel that investment
originally. While investment is easily retarded it is difficult to
attract.

There is probably no form of capital investment more open to attack
or more liable to depreciation through unfair or unwise legislation
than the railway investments of today.

While the speaker is a firm believer in the principles of
governmental control and supervision over the corporate entities
which have been created by the people and for the people, it must not
be forgotten that every shield has its reverse, and that the exercise
of such control and supervision must necessarily be along the lines
of right and justice, which no mere legislative enactment can change.
Any variance brings its own reward, which frequently spells disaster.

The power to control, regulate and supervise necessarily carries with
it responsibilities from which there can be no escape.

Every tax, every restriction, every requirement which costs money
or reduces revenue to our southern railroads is a tax which must
ultimately be paid by the communities which they serve.

The prosperity of the southern railroads and the prosperity of the
South are irrevocably bound together, and the _needs of the South are
identical with the needs of the railroads_.

The basis of securing capital must necessarily be the ability of
the borrower to inspire confidence in the lender that his capital
will ultimately be returned to him intact, and that he will receive
regularly and promptly adequate hire therefor.

No section of our great country has such reputation for united action
as the South. In political matters this unity of action for years has
led to the designation "The Solid South."

What the railroads in this section need today is _a solid South
behind and beneath them_; a solid South taking a calm and rational
view of the immense factor the railways have been and always will be
in the development of its future greatness.

The recent reversion of sentiment in the State of Georgia, brought
about by a calm and deliberate analysis of the present situation by
the business men of that State, should be the keynote of the future
action of the solid South.

_The adoption of a policy of fairness and liberality towards the
railroad interests on behalf of all the Southern States, and the
ability to convince the financial world that this action is sincere
and genuine and will be permanent, is the great paramount need of the
railroads of the South today._

Prompt action along these lines will enable the railroad companies of
this section to successfully compete in the markets of the world for
the capital needed to carry out the improvements outlined, and thus
provide the facilities which will enable the producers of the South
to ride the crest of the wave of coming prosperity.

In its calls for capital the southern railroads must come into
competition in the markets of the world, not only with the railroad
requirements of the North, of the East and the West, but with all the
lines of human industry and endeavor throughout the wide world.

The difference between the five or six per cent paid by southern
railroads for the money which goes into their additional facilities
or equipment, and the three or four per cent which may be yielded
by the high-class world investments, is merely the gauge by which
the confidence of the capitalist is measured in the integrity of his
investments.

Today it is difficult to secure money for railroad development,
either South or North, at any ordinary rate of interest. Why? Is it
because money is scarce? No.

I can best answer this by a story of the panic of '93, when a citizen
of Chicago dropped into the office of Lyman Gage, of the First
National Bank of that city, and inquired of Mr. Gage if money was
tight. He replied, "No, the bank had plenty of money." The citizen
said, "That's fine; can I secure a loan of $100,000?" Mr. Gage
replied, "Yes, you can have it; we will loan it to you. What is your
collateral, what security can you give?" It is needless to say that
the loan was not made.

The customer afterwards remarked to a friend that he had found that
the trouble was not that money was tight, or that money was scarce,
but was due to the scarcity of collateral or security, which is only
another designation for guaranteed confidence.

This is the situation today. There is not a railroad in the South,
North, East or West that could not secure all of the funds necessary
for any development it might desire to make provided it could show
the capitalists to whom application for the loan was made that it
could furnish security which would insure the repayment of the loan
and the interest thereon as due.

I doubt if there is a single southern railway system, the officers of
which would not gladly today take up, consider and block out a scheme
for the improvement and betterment of their property, and commence
preparations to enable their system to fully perform the increased
functions of a common carrier, which the abundant years of the
immediate future promise to require, if they could be sure, and in
turn could assure their financial backers, that the earnings of their
road would be amply and safely sufficient to provide for, and take
care of, the investment necessary.

Therefore, _remember that the needs of the railroads are the needs of
the South_.

I presume there is no planter, miner, manufacturer, producer of any
sort, banker, merchant or professional man in the wide South who
would not say in a moment that every thousand dollars of capital
invested in his vicinity, or in his town, or in his state, would
be gladly welcomed and eagerly sought for, by the planter paying
eight per cent and the merchant and miscellaneous producer from six
to eight per cent, and that approximately one billion of dollars
injected into the commercial channels of the southern states during
the next ten years would bring a relative measure of prosperity to
every man, woman and child within its borders.

When it is considered that this amount of money could be invested in
additional railroad improvements and facilities; that under proper
conditions it could be secured at a rate not in excess of five per
cent; that approximately eighty per cent or more would be spent for
southern labor and southern material, and would find its way through
every artery and vein of southern trade and commerce, it would seem
that the solid South would be thoroughly alive to the burning fact
that--_The needs of the railroads are the needs of the South_.

I might talk to you for hours about the evil and unfairness of
legislative enactments to retard and make unproductive railway
investments; of the injustice of any body of men attempting by
legislation, without giving the railroad corporations proper hearing,
to arbitrarily adjust their rates of toll for either passenger or
freight simply because politicians consider it a popular thing to do.

I might suggest a multitude of things which could be done to increase
the credit of railroads throughout your section.

I might mention a multitude of things which have been done to injure
and impair and prevent railroads securing the necessary capital to
provide for their needs.

I might also attempt to enumerate the ill-advised actions of railroad
managers and employees toward the public.

I might expatiate upon the foolishness and unwisdom of a
corporation--the creature of the public--attempting to dictate to its
master or declining to obey its commands.

It is doubtful, however, if the enumeration of the errors and
shortcomings of the fellow-members of the same family ever tends to
a better understanding or more harmonious relationships. The need
of the hour is a recognition of the interdependent relations which
exist between us all, and to remember--intensely, actively, potently
remember--that an "injury to one is an injury to all," and that
"united we stand, divided we fall."


FOOTNOTE:

[B] This includes $15,000 per mile of duplicated capital.--S. T.




PROBLEMS CONFRONTING AMERICAN RAILWAYS

BY DANIEL WILLARD,

PRESIDENT OF THE BALTIMORE & OHIO RAILROAD.

    [An Address delivered at Galesburg, Illinois, to Burlington
    Railroad Employes, February 20, 1909, by Mr. Willard, then
    Second Vice-President of the Chicago, Burlington & Quincy
    Railroad Company.]


A short time ago I had occasion to explain to some of your associates
who happened to be in my office, some of the difficulties the
railroads had been contending with during the two years just past,
and I was asked if I would be willing to come to Galesburg and
explain to other Burlington employes the things I had endeavored to
make clear to them. I replied that I would be very glad to do so, and
I suppose that is how I happen to be here tonight.

I understand that this audience is composed largely of employes of
the Burlington Railroad Company, and I am glad that that is so, and
what I shall say will be addressed particularly to them.

So much has been said and written about railroads during the last
two years, and by many well qualified to do both, as well as by some
not qualified to do either, that it can hardly be possible that any
new thing remains to be said, and I fear I shall only be able this
evening to repeat to you collectively the same things I have already
said to many of you individually.

Under the Burlington plan of organization the Second Vice-President
has direct charge of the operation of the line (responsible, of
course, to the President), and for the last five years I have had
the privilege and honor of holding that office. I refer to this only
that I may by so doing establish my relationship with the various
matters to which I shall later specifically refer, because I propose
to confine my remarks chiefly to home matters; that is to say, to
matters pertaining directly to the Burlington Company. I feel that I
ought to be qualified to speak clearly on that subject, and while I
have naturally read much concerning the general railroad question as
a whole, the same sources of information have also been open to you,
I have no doubt many of you have given the general subject as much or
even more study than I have.

In October, 1907--16 months ago--the Burlington Company did the
largest business in its entire history--ran the most trains, earned
the most money and employed the most men. During that month the names
of 53,000 men appeared upon its pay-rolls; and the same condition
existed quite generally throughout the entire United States. There
was a well-nigh universal complaint of car shortage and lack of
motive power.

Four months later, reports from the Car Efficiency Bureau in Chicago
showed a surplus of over 325,000 freight cars on the American
railroads. In the meantime the Burlington Company had reduced
its force by nearly 18,000 men and it was estimated that the
transportation business of the country had fallen off more than 30
per cent.

What caused this unprecedented change? Men far abler than I have
undertaken to explain, and many reasons have been given, all, I
presume, more or less in harmony with the facts, but influenced no
doubt by each man's point of view. I say, candidly, I do not know
what caused it; that is, assuming that there _was any one cause_, but
I think I can point out to you _some_ of the _contributing_ causes,
at least so far as the Burlington Company is concerned.

A railroad, as you all well know, is a living, growing thing. It is
never finished, or if we think we have finished some certain part,
as was probably thought when the original stone engine houses were
built here some years ago, or when the first bridge was built across
the Mississippi River at Burlington, it always happens that heavier,
larger, and longer engines come along in course of time, forced upon
us by the changed conditions, and our engine house which was built
for all time becomes too short, and our bridge is too light, and
both must be rebuilt. The same thing is going on in every department
of railroad operations--ballast, ties, rails, coaches, station
buildings, even grades and curvature, all come within the changing
influence of time and progress. I referred to the engine house
specifically simply to illustrate my point.

Because of the constant change or evolution which is going on, it is
necessary that Railroad Companies, if they expect to keep abreast
of the times, should make annually large expenditures for such
improvements as from time to time become desirable or necessary, if
the standard of service is to be raised, or even maintained. These
are called extraordinary expenditures, and it is customary on this
Line to prepare each year, as of January 1st, what is called a
Budget, being in effect a list of the more important improvements
considered necessary by the officers of the Road. The Budget shows
the separate items, with description of each, and also estimated
cost. It may and does include such items as new cars or engines
needed, additional sidetracks, new terminal yards, such as you have
here, water treating plants, new coal chutes, etc.

On January 1, 1907, the sum total of the Burlington Budget, as it
stood approved by the President on that date, amounted to something
over $16,000,000.00. It included some new equipment and also some
quite large improvements, such as new yard at Lincoln, grade
reductions between Galesburg and Savanna, etc.

The Burlington System is over 9,000 miles in length, and goes through
parts of eleven different states. On the 1st of January, 1907, the
legislatures in all of the eleven states, I think, were in session.
The Federal Congress was also in session at Washington. Bills having
special reference to railroads were being introduced daily in some of
the legislative bodies above mentioned. I cannot say now that all of
them were against the railroads, but I feel I am justified in saying
that while perhaps some of them if passed might not have injured the
railroads much, none, or at most very few, were intended to help the
roads. In fact, the attitude of the Federal Congress as well as of
most of the state legislatures was considered by nearly all railroad
owners, and officers as well, as distinctly hostile. This belief may
or may not have been justified by the facts--at any rate it existed.
The owners of the Burlington Company believed it. Its executive
officers believed it. I believed it.

The number of bills affecting railroads introduced in the
legislatures of the eleven states above referred to, and in the
Federal Congress, during the session of Winter of 1906-1907 was
over 800--at least, over 800 such bills were actually laid upon my
desk. Among these were bills reducing the passenger fares in several
states; others about reciprocal demurrage--if any one can explain how
such a matter can be made reciprocal; still others fixing the speed
of stock trains, and the size of caboose cars; fixing the hours of
labor for men in certain branches of the service (and I wish to say
here that that part of the Federal law fixing limit of hours for men
in train and engine service has my hearty support); bills having
reference to the liability of the railroads to their patrons and
employes, etc., etc. I do not wish you to understand that I criticise
all, or for that matter, any, of the bills by this enumeration. I
am now simply reciting the facts. But whether the bills were good or
bad, desirable or undesirable, it was clear if some of them became
laws that the expenses of the railroads would in consequence be
largely increased, and no way was provided whereby the revenue or
earnings would be correspondingly raised--in fact, there seemed to be
a demand from all directions that rates should be reduced, and they
were reduced in many states.

Another important movement was also under way at the same time, and
that was in the direction of a general wage increase in practically
all departments. This one item alone cost the Burlington Company
$3,000,000.00 a year.

Now, what effect do you suppose all these things had upon the Budget
and similar questions? Just the same effect that the same kind of
questions in a personal way would have had upon you and your personal
affairs.

You will remember that I said the Budget amounted to $16,000,000 on
January 1, 1907. That was just before this wave of anti-railroad
legislation referred to had fully developed; but when we saw what
was happening, when we read the bills that were being passed
daily, and the others that were under consideration, we became
very much concerned. It seemed clear to us that even if business
continued good--and remember this was ten months before the panic of
November--that our earnings would probably be considerably reduced
by the reduction of freight and passenger rates in various states,
and our expenses were certain to be much increased by some of the
legislation and also by the advance in wages, and it was necessary
to consider where the money was coming from to pay the large bills
that would come due in connection with the Budget program. After
considering the matter very carefully early in January, we decided,
first, not to authorize anything further in the way of improvements
unless actually necessary; and, second, to stop as many things
already authorized as it was possible to get along without. Among
the things so put off or deferred were the building of a new engine
house and necessary shop buildings at Clyde; the construction of a
new line about 55 miles in length from Herrin to the Ohio River;
double track between Galesburg and Bushnell; new passenger depots at
Monmouth and several other places; work on new terminals at Lincoln,
etc. Of course, it may not have seemed to you at the time that we
were stopping, because we still had so many things under way, and you
cannot prudently stop large undertakings all at once--for instance,
we could not stop work on the new yard at Galesburg when it was half
done, and you will recall that it required more than two years to
complete the plan, but we did slow up as much as possible; that is
to say, we tried to finish up such things as were authorized before
January 1, 1907, and which were still considered necessary, but we
did not start any new things. The effect of this is best shown by
the size of the Budget on January 1, 1908--it was then a little over
$8,000,000.00, or about one-half what is was twelve months before.
In the meantime the November panic of 1907 had come upon us, and it
seemed not only best, but necessary, to continue the policy decided
upon in January of that year, and on the 1st of January, 1909, the
Budget, as it then stood, and as it now stands, amounts to a little
less than $1,000,000.00; and this brings us up to the present time.

In February, 1907, I had the honor to be invited to the annual
banquet of the Commercial Club at Clarinda, Iowa, and I was asked
to speak about the railroad situation. After referring to some of
the proposed laws that were then under consideration in the various
states, I continued as follows: "I will not speak of the probable
effect of such a public policy as I have referred to, on the general
railroad situation, as others are much better qualified to do that,
but speaking for the Company which I represent, we view the situation
with much concern, and we have done, I think, what any prudent
manager would do if he saw confronting him conditions which he was
certain would increase his cost of operation a large but unknown
amount and at the same time reduce his revenues--we have planned to
curtail our expenditures wherever possible. I do not mean that we
shall let the property suffer, or lower the character of the service,
but we will not undertake extensions or large improvements until we
can see more clearly where the money is coming from, or if it comes
at all. How far reaching this policy of retrenchment, or perhaps I
should say curtailment, will be, I, at least, cannot say; it will
depend upon the future. Certain it is that our expenditures in that
direction will be much less this year than last, which means, of
course, fewer men employed and less material purchased." It is two
years since that was written, and I regret to say that circumstances
have not yet seemed to justify any considerable change of policy.

The Burlington Company has on its pay-rolls today about 38,000 men,
15,000 less than in October, 1907, and 7,000 less than in February,
1907. We are doing all the things that we consider necessary for the
safe operation of the trains, and for the proper maintenance of the
property, but conditions so far have not seemed to us to justify a
resumption of the policy of betterments and extension followed during
1906 and the preceding years. I do not know absolutely that it is so,
but I imagine that the other Railroad Companies have been pursuing
much the same course as we have here. The latest reports indicate
that the total railroad mileage of the United States is about
230,000, so that the Burlington's mileage is about one-twenty-fifth
of the whole, and if you multiply what has happened on this road
by twenty-five, you will get a result for the whole country which
will probably not be far from the truth. In fact the Eastern roads
suffered much more from the actual business depression than we did in
the West.

It has been stated by men who should be competent judges that from
one-third to one-half of all manufactured steel and iron is used
either directly or indirectly by the railroads, and that fully
one-half of all the lumber manufactured is so used. When it became
necessary for the railroads to stop buying new cars and engines, and
also to stop all new construction and improvements, when possible
to do so, you can well understand the effect that that course must
have had upon the two particular lines of business just mentioned. Of
course, many other lines were similarly affected, and it would seem
logical that no full and real resumption of business can be expected
until the railroads are again able to resume the policy which they
were forced to abandon early in 1907.

When will that time come? I do not know. What will bring it about?
I do not know that either, but I do know what will help matters
greatly, at least so far as the Burlington Company is concerned;
but before saying what I have in mind in that connection, I will
digress a little, and briefly explain something of the financial
responsibilities of a large Railroad Company, because in spite of
all we hear about corrupt management, stock watering, etc., it is
still a fact that the railroads did cost something, and the money
that was used for that purpose was all, or very nearly all, furnished
by private persons like yourselves, and it was furnished by them
for investment because they thought or hoped such an investment
would be profitable to them, for there is, there can be no other
reason for investing money in anything, unless it be invested for
charitable purposes. The Burlington System today, as I have said, is
over 9,000 miles in length. It has large terminals in Chicago, St.
Louis, Kansas City, and the other great cities it reaches. It owns
1,600 locomotives, 1,200 passenger cars, and 52,000 freight cars.
The last annual report shows that its bonded debt (or the size of
its mortgage) amounts in round numbers to $165,000,000.00, equal
to about $18,000.00 a mile. This mortgage is legally entitled to
interest at the average rate of 4.185 per cent per annum, because
it is so specified in the bond, and that interest must be paid,
or the mortgage would be foreclosed just as would happen if you
failed to pay the interest on a mortgage, in case you happened
to have one on your home. In addition to the bonded debt above
referred to, there is outstanding $110,000,000.00 of stock in round
figures, or about $12,000.00 a mile, making a total capitalization
of $30,000.00 per mile. We are constantly told that the American
railroads are overcapitalized, and yet the Burlington Road could
not be replaced today for twice its capitalization. I doubt if it
could be duplicated for three times its outstanding capital. The
stock, as you know, receives as interest or dividends whatever sum
the Directors may decide to pay, out of what is left after paying
the operating expenses, taxes, and interest on the mortgage. If
there is nothing left after paying the other items mentioned above,
the stockholders receive nothing, so that there is a certain risk
connected with an investment in railroad stock that does not apply
to railway or Government bonds. For a number of years the Burlington
Company has paid 8 per cent dividends to its stockholders. It has
earned more than that, as the annual reports show, and the Directors
might legally and properly have paid larger dividends, but they did
not, and all the money earned in excess of 8 per cent on the stock
has been spent for betterments, new equipment, etc. This policy,
pursued through a long period of years, as it has been, explains how
it is that the Burlington is in such good physical condition as it
is today, and with such a low capitalization. With this explanation,
you will understand, I am sure, that with an increase per year in
wages alone of $3,000,000.00, together with other increases due to
legislation, such as $325,000.00 per year because of the nine-hour
law for operators, and a smaller income because of rates reduced
(freight and passenger) in many states, the surplus, if any, after
paying dividends would be much less than formerly, and if any new
work was undertaken it would be necessary to keep its cost within
such surplus as might be available, or else borrow the money with
which to pay for such work. I hope I have now made clear why it was
that we became worried about the Budget in January, 1907, and why for
the last two years we have been trying, so to speak, to get our house
in order. It will perhaps be said that we could have borrowed money
for new extensions, betterments, etc., and that is actually what we
were compelled to do, in order to complete the Budget plans above
referred to; but what prudent man would want to borrow beyond his
forced necessities, at a time when the future seemed so uncertain,
and when the interest on the money so borrowed would add that much
more to his existing burdens? The same sound principles should and
do underlie railroad operations that you should and do apply to
your own personal affairs. The items are larger in the case of the
railroad--that is all.

I will now repeat the question--What will bring about a resumption
of business on railroads? And if I have succeeded in making clear
what I sought to explain, I think you can answer the question just as
well as 1 can, but I will give you my views, and you will now be in
position to judge whether they seem sound or otherwise.

In my opinion, railroad business, which really means all business,
will recover its former proportions when the influences and forces
at work during the last two or three years shall have ceased doing
the things that have contributed so largely towards bringing about
the depression which we all deplore. Perhaps that is not quite
clear. I do not mean that laws already made must necessarily be
unmade, that wages raised must be reduced, but we must have a rest.
We must be given time and opportunity to work out the new problems
that have been forced upon us during the last two years. We must be
given a chance to find out what it is going to cost to meet the new
requirements, and also how much our revenues are going to be reduced
by reduction of rates. Perhaps it will be found that by new methods
growing out of the exigencies of the case we will still be able to
earn a surplus sufficient to justify the resumption of extraordinary
expenditures as formerly. If not, then, either rates must be
advanced, or wages be reduced, or improvements must wait or be
carried on with borrowed money and railroads will be slow to increase
their interest-bearing debt under such circumstances.

As I have said, two years ago during the legislative period, 800
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.

A sixth contradiction is the wide-spread desire to regulate
capitalization. Now it may be that there have been abuses; but if
one asks any of these critics what is the grievance to be remedied,
great silence usually falls upon them, for they are unable to
show any more relation between rate-making and either physical
valuation or capitalization than there is between the price of a
pair of suspenders and the physical valuation or capitalization of
a department store. Railroads are continually importuned to make
rates that will "move the business," as in the case of the Western
road just cited, and those parts of the United States which have the
highest railroad capitalization have the lowest average freight rate.
If you will look at the _American Review of Reviews_ for the month of
June, 1908, you will find a very interesting article by Interstate
Commerce Commissioner Lane on "Railroad Capitalization and Federal
Regulation." His program is a very simple one, and while pointing
out that there should be some way of insuring that the proceeds of
all railroad securities shall be actually invested in "acquisition
of property, construction, completion, extension, or improvement
of facilities, the improvement or maintenance of service and the
discharge or lawful refunding of obligations," he says:

    "Fundamentally, there is at present no inter-dependence of
    capitalization and rate--the latter is not in law, nor in
    railroad policy, the child of the former--though railroad men
    have sometimes expediently urged the claim, and courts have
    sometimes too kindly given it their nod of sanction."

Also,

    "The most potent kind of regulation is that which casts the
    burden upon the individual to do the regulating himself and
    makes him responsible to the law for dereliction; and the plan
    for the regulation of capitalization here presented is founded
    upon that theory--to require the directors of the railroad
    companies to make public announcement of their security issues,
    to publish the objects for which such issues are made, and be
    responsible for the use of the proceeds in the precise and
    limited manner announced. This is far too modest a program to
    please those who delight in elaborate methods of procedure
    involving much filing of forms and petitions and many hearings,
    appraisements, viseings, and solemn givings of consent; and
    without question it is not nearly as thoroughgoing a plan as
    others which have been devised. But the simpler the plan is,
    the better, if it may effect its purpose."

He further says that his program

    "does not guarantee the prospective purchaser of the stock that
    the stock certificate which bears a printed par value upon
    its face does in fact represent property of the full value so
    designated; _but this is not a duty which the Government for
    any reason is bound to assume_, and I know of no motive arising
    out of national policy which compels the assumption of such
    responsibility--certainly not at present."

If our complex government shall control all future issues of railroad
capitalization, we may rely upon it that most of the new railroad
construction in this country, instead of being independent, will be
fathered by existing railroad systems, because their established
credit, whatever it may be, will be required.


RECONCILIATION.

Is it not evident that these contradictions never can be reconciled
by untrained men? I believe that for the American railroad the time
has gone by when illiterate men will be put in charge of millions of
dollars' worth of machinery and other property. We are in a new era.
Railroading is rapidly coming to be a profession. We are necessarily
in all things doing more and more specializing. Why not insist that
the regulation also shall be in accordance with ethical principles
and not determined by political expediency?

The great over-shadowing problem of reconciling private capital
and the users of railroads, and the contradictions which I have
mentioned, are the inheritance of this generation of railroad men;
and I have no doubt that this generation, like all previous ones,
will be equal to the task put upon it. Out of the painful processes
of the last four years, we have emerged with some gains. In the
first place, the country now realizes that the one million, five
hundred thousand employes and officers of American railroads are
not surpassed in integrity by any other similar number of business
men. During the four years hardly a voice has been lifted to say
this, and so I am glad to have this opportunity to raise my own in
their commendation. In the second place, it is easier for shippers
and railroad traffic men to be honest than it ever was before.
The stoppage of rebates is a distinct gain, morally as well as
financially. In the third place, it has been demonstrated, I think,
that our Government _ought_ always to be bigger than any corporation,
or any man, or any set of men, and this is a good thing for us never
to forget.

Already publicity has brought about a friendlier feeling between the
people and the railroads, and along certain paths I have no doubt we
shall find our way out of our difficulties, for the American people
are _not_ unfair when they understand a situation.

Upon one occasion I was making a trip over a division of road
where there was no competition and where we therefore enjoyed one
hundred per cent of the business. There was an unexpected stop for
something and a brakeman went to the rear to protect the train.
Presently a wagon-load of girls came in sight. The brakeman took
out his handkerchief and initiated a flirtation. Then discovering
that I had seen the performance and evidently desiring to square
himself, he said without hesitation, "If we make friends of these
people they ride on our road." One could hardly convey better than
that brakeman did to me, an idea which we should never abandon,
namely, that one of the best assets a road can have is friends, and
I suggest that probably our first duty is to keep in good humor and
be considerate one for another. That involves and includes good
service to the public, and nothing will help more to keep the public
in good humor. The people of this country already have the lowest
rates and the highest wages in the world. They are the best people
in the world and are entitled to the best service in everything. I
believe they should insist upon having the best railroads, and when
they so insist, and realize that our population has thus far doubled
every thirty years and will soon be one hundred million, and not
very long after that one hundred and twenty-five million, and that
our transportation necessities double faster than our population
does, they will set about finding out what is necessary to obtain
adequate railroads, and then we shall probably hear less about rates
and more about efficiency and safety. When the people do this they
will soon discover that it is no more disgraceful to make money in
building railroads than in selling land or in merchandising or in
manufacturing or in mining. They will also discover that although
the courts have said railroad investors are entitled to a reasonable
return upon a fair value, no court--not even that great tribunal,
the Supreme Court of the United States--can finally say what is a
reasonable return. This question would still be unsettled because we
have not yet gotten away from our dependence upon private capital.
What is a reasonable return must be answered by the investor as well
as by the commissions or the courts, because it always takes two to
make a bargain, and money, like its human owners, will go where it
has the best prospective reward and the greatest liberty. The people
will find that what we need in this country is not more bureaucratic
government by untrained officials with brief tenures of political
office, or more power to commissions, but more responsibility upon
boards of directors. If statutes are necessary to insure this, well
and good; but if regulation is general in character and national
in scope, is directed against oppression and discrimination, and
designed to promote safety and efficiency and faithful accounting,
the people will get better results from intelligent and honest
directors than they will from the best governmental management which
can be devised; and so long as the railroads are owned by private
investors, those investors will doubtless insist upon their directors
having more and more to do.

I am aware that there is a socialistic trend all over the world.
There is more and more disposition to prescribe medicine for other
people to take, but no amount of legislation will change the
fundamental laws of the universe. The fact is,--notwithstanding our
Declaration of Independence,--men are not created equal. It is a
fine thing for all of us that they are not. There is a diversity of
gifts; money-making is one of them, but a man may have the talent
for making money and be totally unable to build a bridge or paint
a portrait or lead an orchestra or an army, and if fortunes are
acquired under the laws which we ourselves have made, why should we
be envious? Unless a rich man hoards money like a miser, it is--if
not alarmed--continuously at work for all of us, through the banks
or otherwise, in spite of anything he can do, and the cheaper it
can be had, the greater the economy to society as a whole. It is
impossible to reduce everybody to a dead level, and how monotonous
it would be if we could! We don't satisfy everybody even in our form
of government, which we are prone to think is the best in the world.
For example, at the last election six and a half million people
did not get what they voted for. Part of them got what they really
wanted, but on the face of the returns, six and a half million were
disappointed, and yet the country goes happily on, apparently to
greater prosperity than ever.

But how much happier and how much more prosperous we might be if
there were not so much untrained meddling--if there were not so many
brakes upon the wheels of our progress! A brake, we all admit, is
a good thing in its place, but it has no _propulsive_ power, and
the efforts of the time to combine in one man or in any one body
of men the four functions of prosecuting attorney, judge, jury and
executioner, must sooner or later give way. First, because it is
un-American, and where such a condition exists, as Alexander Hamilton
pointed out to the people of New York, "There is no liberty." Second,
because it will not work practically.

Reconciliation of private capital and the users of railroads might,
of course, be brought about by government ownership, because if
there were a deficit the people could pay it in their taxes. Even
then railroad rates could not be made mathematically consistent,
for government is never mathematically consistent. For example, if
I mail a letter to San Francisco or London, I pay two cents, and if
you mail a letter to Evanston you pay two cents. But nobody seems to
want government ownership, although many people contend that that
would be much fairer and more honest than governmental control of
railroads without financial responsibility. Perhaps a middle ground
may sometime be worked out by a profit-sharing arrangement, as in
Chicago between the city and the street railway companies. That would
have its advantages. Among the advantages would be cheaper money for
railroads, if the government would guarantee a minimum return on
agreed valuations. But of course this would be much more complex than
to work out an arrangement with corporations like street railways,
which do a single kind of business at one rate, instead of a business
affecting every commodity of human consumption and stretching through
forty-six states and two territories. However, I think there is
food for thought for all of us in what has been accomplished here
in Chicago, and the professional intellect present tonight may well
think it over.

Finally,--while a man has as good a right to increase his fortune by
investing in railroads as in any other manner, no matter what it may
be, I believe we shall find a solution for some of the puzzles that
beset us,--not through the gospel of tyranny on the one hand, nor
the gospel of equality on the other hand, but through a gospel of
stewardship. Let us all feel that although the acquisitive faculty
is undoubtedly planted in the human breast for some wise purpose,
we are not here primarily for personal aggrandizement. We are
here for service, and the greater our talents or our wealth or our
opportunities the greater our responsibility. We are trustees--for
the users of our railroads, for our employees, and for investors;
and let us welcome all the additional responsibility which may be
put upon us as directors or salaried officials. I am sure this
sentiment will commend itself to all of you, because there is no body
of men in the world which has a higher code of ethics and which has
demonstrated personal fidelity in a higher degree than the Engineers
of America.


FOOTNOTE:

[D] In the United States in 1908 the average contents of loaded
freight cars was 19.6 tons and the average of a freight train
was 351.80. On some of the mineral roads the averages were much
greater.--S. T.




TRANSPORTATION CHARGE AND PRICES

BY LOGAN G. MCPHERSON,

Lecturer on Transportation, Johns Hopkins University. Author of "The
Working of the Railroads."


    CHAPTER VI.

    Reprinted by permission from "Railway Freight Rates in Relation
    to the Industry and Commerce of the United States," by Logan G.
    McPherson. Copyright 1909 by Henry Holt and Company, New York.


Vastly the greater proportion of the commodities moved by the
railroads are in the processes of commerce; that is, the conveyance
from the place of consignment to place of receipt in the majority
of cases is sequent to a transfer of ownership. The seller cannot
continue in business unless he obtain a market for his material,
or his merchandise, and the purchaser can not continue in business
unless he secure the material, or the merchandise, which he needs.
The margin within which the added charge for transportation may be
adjusted is therefore limited in one direction by the amount which
the seller of a commodity will accept and the purchaser will pay and
continue in business. If the seller or the purchaser cannot make a
profit at least approximately as great as from other operations in
which it might be feasible for him to engage he will, other things
equal, change his business, and the railroad will no longer have
the traffic that flowed from his operations. A railroad, therefore,
must adjust its transportation charges that production may continue.
This includes the adjustment of rates that products may be sent to
markets, that the products of the region tributary to one railroad
may reach markets in competition with similar products of other
regions, and in competition with other products that will answer the
same purpose.

The wider the markets that the producers can reach, the greater is
the encouragement to production. The more numerous and varied the
sources of supply of which the purchaser has choice, the more likely
that his requirements will be met to his satisfaction. This is the
case whether the sale or purchase be of food, whether it be of raw
material to feed the processes of mill or factory, whether it be
of wares for wholesale distribution, or whether the purchase be of
merchandise by the retail dealer, or the final consumer.

It has long been claimed by the railroads of the United States that
their rates of freight are lower than those of any other country,
and that the nation's progress in industry and commerce has in
large measure been due to the cheapness and the efficiency of its
transportation service. By way of proof has been instanced the
proportion that the transportation charge bears to the selling price
of the staple commodities. It is said that the rate charged for the
transportation of food products does not affect their selling price
in any market of the United States--that price being fixed by the
processes of supply and demand which the amount of the freight rate
does not influence. In the spring of 1907 inquiry was made upon this
point among the produce dealers of the city of New York, who gave the
information contained in the following paragraphs.

The price paid by the housekeeper per dozen for eggs during the
season of shipment seldom exceeds by more than five cents the price
received by the Western farmer who takes them to the country store.
That is, the railroads bring eggs a thousand miles to New York for a
cent or a cent and a half a dozen, and two thousand miles or so for
about two cents and a half a dozen, the dealers taking the remainder
of the five cents as payment for handling. The net difference between
the price paid per pound for butter at the creamery, whether in New
York City or in the Mississippi Valley, and that paid by the New York
retail dealer averages about one and one-half cents for commission
and one cent for freight.

In December, January and February turkeys are taken from the Texas
ranches to marketing centers, the transportation charge on ten
birds weighing one hundred and twenty pounds being about 25 cents.
After these ten birds have been dressed and packed they weigh about
one hundred and two pounds, and the freight rate from Texas to New
York is $1.50 for 100 pounds. That is, a Texas turkey that retails
in the New York market for 20 cents a pound will have paid one and
three-fourths cents per pound to the railroads that took it from
the ranch to the concentration point and thence to the market. The
farmer in Texas received about nine cents per pound, leaving a trifle
over nine cents to be divided between the packing house, the produce
merchant and the retail dealer. Chickens and other dressed poultry
that come from Chicago pay a freight rate of about three-fourths of a
cent a pound, the railroad company supplying a refrigerator car, and
keeping them iced while in transit.

The rail rate from Chicago to New York on grain and grain products
for domestic consumption has been about 17½ cents per 100 pounds;
that is, a bushel of oats or corn or wheat, that may bring in New
York anywhere from 40 cents to $1, has been brought from the Western
farm for from eight to fifteen cents. Hay that has yielded the farmer
$18 or $19 a ton and sells in New York at about $24 has paid the
railroads somewhere from $3 to $5 per ton, according to whether it
came from the meadows of the Ohio or the Mississippi Valleys.

A bullock that weighs 1,200 pounds will, at Chicago, bring on an
average $5.50 per 100 pounds, which includes an average of five cents
per 100 pounds for freight from the grazing grounds. Its total value
at the stock yards, therefore, is $66. When it has passed through
the packing house its weight will have been reduced to 700 pounds.
From Chicago to New York it will pay 45 cents per 100 pounds freight
or, in other words, the 700-pound carcass, which, if retailed at an
average of 15 cents a pound would bring $105, has paid the railroads
between $3.50 and $4 from the far West to the metropolis.

On potatoes the freight rate per barrel containing about two and a
half bushels is $1.05 from Florida, 65 cents from South Carolina, 45
cents from North Carolina, 30 cents from Virginia, and from this 12
cents per bushel the rate scales down to five or six cents per bushel
from nearby regions. The freight rate on tomatoes from Florida is
25 cents per package of six baskets, from Texas 15 cents for twelve
quarts, from Mississippi 76 cents per 100 pounds, and from the nearby
farms eight cents per bushel of twenty-eight quarts. The freight
rate on cantaloups to New York ranges from less than a cent for a
melon from the Carolinas to about two and a half cents for that from
California. Oranges from Florida to New York pay the railroads from
four to nine cents a dozen, and those from California six to twelve
cents a dozen, as they may be large or small. A three-pound can of
tomatoes from Maryland pays the railroad about one-half cent per can.

The freight rates to New York on foodstuffs have been selected as
typical of the transportation charges applying on such commodities
in the main channels of traffic from the West to the East; and, in
so far as fruits and vegetables are concerned, from the South to
the East. The transportation charge per consumer's unit on these
foodstuffs is a trifle less to Philadelphia and adjacent Delaware and
New Jersey; another fraction lower to the great Pittsburg district,
and still lower to the cities of the West and South that are nearer
the places of production. As prices of food products fluctuate within
a fairly wide range and freight rates also fluctuate, though within
but a very narrow range, the rates and prices specified in the
foregoing, as well as in the succeeding paragraphs of this chapter,
cannot be considered as of specific application at any given time in
the future. They were exact at the time they were collated and will
very closely approximate accuracy at any period.

As New York may be considered representative of the places to which
edible products of the West and South are consigned, so also may St.
Louis be considered a typical center of reception of the manufactured
products of the East. The information given in the immediately
following paragraphs was obtained from merchants and manufacturers of
that city.

The transportation charge on the material entering into a pair of
shoes made in a St. Louis factory averages one and one-quarter cents.
The transportation charge required to place that pair of shoes in
the hands of a consumer in any part of the United States averages
between two and three cents. The material entering into an ordinary
bedstead, such as retails in St. Louis for $8, will have paid the
railroad about 40 cents. From ten pounds of nails made in Pittsburg
and retailed in St. Louis the railroad will have obtained a trifle
over two cents, and from ten pounds of wire two and one-half cents.
An axe made in the Pittsburg district that retails in St. Louis for
$1 will have paid the railroads one and one-fourth cents. At Kansas
City that same axe will have paid freight of a fraction over four
cents and at Denver, where the retail price will have advanced to
$1.30, it will have paid 14 cents freight. A padlock retailing in
St. Louis at 50 cents will have paid the railroads a little more
than one-half cent; at Kansas City it will have paid one cent, and
at Denver, where the retail price advances to 75 cents, it will have
paid two cents to the railroads. An eighteen-gallon galvanized iron
tub that retails in St. Louis at 80 cents will have paid the railroad
from place of manufacture two and three-tenths cents; to Kansas City
the freight rate will have been six and one-fourth cents, and to
Denver 15 cents, but here the retail price of that tub is $1. A stove
that weighs two hundred pounds and retails in St. Louis for $18 will,
in carload lots, pay 44 cents to Kansas City or Omaha, and retail
there for $22; $1.48 to Denver, and retail there for $25; $2.50 to
Seattle, and retail there for $30. When a housewife of St. Louis buys
a dozen clothespins she has paid the railroad five ten thousandths of
a cent. If she buys a washboard at 50 cents she has paid the railroad
forty-two one-hundredths of a cent. In Denver she would pay for
that washboard 60 cents, of which the railroad would have received
two cents. The higher rates and prices that have been specified as
applying in Kansas City and Denver may also be taken as applicable to
cities in the interior South and Southwest, such as Oklahoma, Fort
Worth and San Antonio.

In response to inquiries made concerning certain staple articles of
daily and general use in various of the smaller cities and towns
extending from Massachusetts to Georgia and Illinois, and from
Michigan to Mississippi, it has been ascertained that throughout this
region the transportation charge on such articles ranges as follows:
On a man's suit of clothes, from two to eight cents; on calicos and
ginghams, from one-fiftieth of a cent to one-fifth of a cent a yard;
the freight charge paid on the entire apparel of a fully dressed man
or woman in this section would range perhaps from six or seven to 16
or 18 cents. The rate on an ordinary dining room suite consisting of
table, sideboard, six chairs and a china closet would average from
75 cents to $5, on a parlor suite of sofa and four chairs from 50
cents to $4, on a bedstead and its equipment from 75 cents to $1.50,
in each case from the factory to the home. The lumber used in the
ordinary eight-room house will have paid the railroads from $35 to
$150, and the brick from $6 or $8 to $50 or $60, as the kiln may be
near or remote. A fifty-pound sack of flour from the mill, even at
Minneapolis, in but a few cases has paid a freight rate of over eight
or nine cents to the consumer. Products of the beef or the hog are
carried from the western packing houses throughout this territory at
rates that vary from a fifth of a cent to not exceeding a cent per
pound.

It has not been difficult to secure such information as applies in
the main to the transportation charge borne by a manufactured article
from the place of making to the final market, or on foodstuff from
the place of growth to the place of sale to the consumer. Data as to
the amount of transportation charge carried by the various kinds of
raw material entering into a manufactured product has not in many
cases been so easy of ascertainment. A principal reason has been
that the manufacturers in numbers of instances do not know what it
is themselves. Many kinds of material are bought at a price which
includes delivery at the factory, the freight rate not coming under
the cognizance of the purchaser. The different materials used in
a product may have come from such diverse sources, and paid such
varying rates of freight, that the ascertainment of the total freight
charge in any given unit of manufacture would be too difficult
to be worth while. In numerous other cases the freight charge is
confessedly so small an item that no attempt is made to apportion it
as an item of expenditure per unit of product, the total simply being
grouped in the aggregate of expense.

The statement that the transportation charge borne by the material
entering into an ordinary pair of men's shoes averages one and a
quarter cents is the result of a definite calculation made by one
of the largest shoe manufacturers of the country. A leading woolen
manufacturer estimates that the price of wool at Boston will average
perhaps 30 cents a pound "in the grease," including a transportation
charge that will average one cent a pound. The loss in cleaning and
scouring is about forty-five per cent., and the price of a pound of
scoured wool will average about 63 cents at the mill. Of this about
two cents is chargeable to transportation. One hundred pounds of
wool will make about seventy pounds of straight woolen cloth, on
which the transportation charge has therefore been a fraction less
than three cents a pound. On cloth that is mixed with cotton the
transportation charge is less. The rates on woolen goods from any of
the New England mills are so low that a yard of cloth which will sell
from $1.50 upwards in any of the western markets will not have paid
the railroads more than five cents from the sheep's back in Colorado
to Massachusetts and back again to the Mississippi River.

The following information as to the extent of the transportation
charge borne by divers materials of various industries has been
obtained in each instance from an authority in that industry.

The transportation charge on raw cotton to the mills in Massachusetts
will average from one-half to two-thirds of a cent a pound, not
exceeding one cent per pound even from plantations so remote as
those of Texas. Cotton loses from fifteen to twenty per cent. in
the cleaning, one hundred pounds of cotton making from eighty to
eighty-five pounds of cotton goods. As ordinary calico will run about
six yards to the pound and sell for about five cents, the cotton that
has paid a freight rate of from 50 cents to $1 is woven into $24
worth of calico.

The transportation charge on a pair of rubber overshoes, including
the rubber from South America, the cotton stock, and the shipment to
the western markets, averages about two and one-half per cent. of the
cost of those markets. That is, a pair of rubber overshoes retailing
for 75 cents will have paid for transportation, all told, less than
one and nine-tenths cents.

In no one of these examples, which, perhaps, are typical of the
entire clothing industries in so far as the use of leather, wool and
cotton are concerned, is the transportation charge an appreciable
factor in the price either of the material to the manufacturer or of
the finished article to the consumer.

A barrel of flour made in Minneapolis and transported to Boston is
sold at the time of this writing by the milling company to a dealer
of that city, or any other place in New England, for $6. Of that $6
accrues to the transportation agencies, for carrying the wheat of
which that flour was made from the Western farm to the Minneapolis
mill, and for carrying the flour from the mill to Boston, an amount
that averages 85 cents. The proportion of the transportation charge
to price at different markets varies with the freight rate. At
New York the milling company would sell that barrel for $5.95,
which would include a total transportation charge of 80 cents; at
Philadelphia the selling price would be $5.90, the transportation
charge 75 cents; at Buffalo or Pittsburg the selling price $5.80, and
the total transportation charge 65 cents; at Atlanta the price $6.20,
the transportation charge $1.05; at New Orleans the price $6.10, the
transportation charge 95 cents.

Typical rates on leaf tobacco, averaging in value $13 per 100 pounds
from plantation to warehouse in Virginia and the Carolinas, are
from 15 cents to 21 cents per 100 pounds; on the smoking tobacco
into which this leaf is converted, and which sells at $48 per 100
pounds, from Richmond, Virginia, to New York City 30 cents, to
Chicago 59 cents, to Kansas City $1.16. Rates from the plantation
to the warehouse on the leaf tobacco of the Kentucky and Tennessee
region, which also brings an average of $13 per 100 pounds, are from
5 cents for short to 20 cents for longer distances. The plug tobacco
into which this leaf is converted is sold at $28 per 100 pounds,
being distributed on such rates as these: St. Louis to Louisville,
25½ cents; to New York City, 58½ cents; to Kansas City, 35 cents; to
Seattle, $2.20. Manufactured tobacco in all cases is sold at a price
which includes delivery from the factory to the place of consignment,
wherever it may be, in the United Stales.

The freight rate on cane sugar from the "central" in the Louisiana
district to the final refinery ranges from 5 to 10 cents per 100
pounds, the refinery paying from $3.50 to $4.50 for the sugar.
Sugar that is sold by the refining company at 4½ to 5½ cents a
pound retails at 6 cents, the dealer making little or no profit.
As a town of five to ten thousand people at the average per capita
consumption of seventy-five pounds a year will consume a carload of
sugar in about a week, the jobbing of sugar is greatly decentralized.
Contrasting with this retail price of $6 per hundred pounds typical
distributive rates are, from New York to Chicago 25 cents, to St.
Paul 30 cents, to Kansas City 42 cents; from New Orleans to Chicago
25 cents, to Atlanta 24 cents, to Kansas City 34 cents.

The freight charge on sugar beets raised in Colorado and Utah from
the farm to the refinery is always paid by the sugar company. It
averages from 30 to 40 cents per ton, or for a distance of fifty
miles is as much as 50 cents. A ton of beets contains about three
hundred pounds of sugar, which, allowing for an average loss during
extraction, would produce two hundred and forty pounds of refined
sugar. This is sent from the factories to the principal places of
storage--Kansas City, Omaha and St. Louis. The aggregate freight
charge from the farm to St. Louis on these two hundred and forty
pounds is about $1.70, and the aggregate revenue to the refinery at
five cents a pound, $12.

While the price of bananas is subject to great fluctuation, a fair
average at New York, Philadelphia, Baltimore, Charleston, Mobile
and New Orleans, the ports of import, is $1.75 per 100 pounds. The
average rail charge for carload lots from port to market is from 30
to 50 cents per 100 pounds. About one-third of the bananas consumed
in this country are received at the North Atlantic ports, whence
they are distributed throughout the Eastern and Middle States. The
remaining two-thirds, which supply the South and West, are received
at the Southern ports. Immediately upon receipt at New Orleans, for
example, shipments are made to the North in train loads that they
may be taken out of the warm climate before they spoil, and cars
are re-consigned en route at the instance of the company which has
very thoroughly organized the banana business, an allied company
having about sixty agencies with men who devote their entire time to
extending the sale of the fruit.

For hides that pay a freight rate from the packing houses at Chicago
to New York of 30 cents per 100 pounds, the butcher receives,
according to quality, from $6 or $7 to $11 or $12 per 100 pounds. The
butchers remote from market have the freight rate deducted from the
price paid them for hides, but it is a trifle, seldom exceeding five
cents per 100 pounds. The hide loses from twenty-five to thirty-five
per cent. in the process of tanning; the price of leather is fixed
by measure and not by weight. The rate on tanned leather, however,
between Chicago and Boston is 39 cents per 100 pounds.

The railroads make low rates on fertilizer to encourage its use by
the farmers, it being, of course, to the interest of a railroad to
encourage the production of larger crops that its traffic may be
augmented. Fertilizer of different grades brings from $18 and $20 to
$55 and $60 a ton. Typical rail rates from the places of manufacture
are from Jersey City to Trenton, New Jersey, $1.10 per ton, and from
Boston to Portland $1.20 per ton--both rates applying in carload
lots. In the South, where fertilizer is extensively utilized,
representative rates are from Atlanta to Thomasville $2.50, from
Charleston to Columbia $2.00 per ton.

When allowance is made for the elimination of water from pulp and the
shrinkage in its manufacture into paper, the average freight rate
borne by the material entering into paper at the northern New England
mill is about 13½ cents per 100 pounds. The manufacturers consider
17 cents per 100 pounds to be the average freight rate on the paper
from the mill to places north of the Ohio and east of the Mississippi
Rivers. The aggregate freight charge borne on the average by the 100
pounds of paper which sells at the factory for $2.50 is therefore 30
cents.

As with all things else, the rates on the ores of the far western
region have been adjusted under the necessity of the transportation
agencies to so serve the mines that their products may be marketed.
The rate upon the ore from the mine to the smelter, upon the
metal from the smelter to the refinery, and upon the refined lead
or refined copper from Chicago to the seaboard market, are all
determined by this prime factor. The freight charges, for example,
from the Coeur d'Alene district in northern Idaho on the ores from
which the extraneous material has been roughly separated, to the
Puget Sound refineries, reach a maximum of $6 per ton for a distance
of four or five hundred miles, and the rate from Puget Sound to New
York is $14.50, the average transportation charge, therefore, being
about $20 per ton. The value of a ton of copper at 12 cents a pound
is $240, and a ton of lead at four cents a pound is $80. Copper
passes through manifold and expensive processes and its extensive
consumption has followed the development of electricity. Lead does
not require so many or so expensive workings, and it has long been
a great staple of general use. The mine farther from a smelter
naturally has to pay a higher rate of freight than a mine nearer to
it, receiving, therefore, a lesser net price for its product, _but
the railroads are obliged to so adjust rates that practically every
mine can reach a market_.

The rate on refined petroleum between New York and Chicago is 27½
cents per 100 pounds, the average rate paid north of the Ohio and
east of the Mississippi Rivers being from eight to ten cents per 100
pounds. From Toledo to Atlanta the rate is 48 cents, from Whiting
46½ cents, from New Orleans 35 cents. The rate from Chicago to the
Missouri River is 22 cents, to St. Louis 10 cents; while the rate
from the Kansas field to St. Louis is 17 cents. One hundred pounds
of refined oil contain approximately sixteen gallons which, at an
average price of 12½ cents a gallon at the refinery, would aggregate
$2. The price per gallon to the consumer is increased one cent with
each increment of seven cents in the freight charge.

The principal biscuit company receives from $8 to $16 per 100 pounds
for its crackers and cakes, averaging $10 per 100 pounds for its
leading brand. From its New York plant to Boston the freight rates
are 19 cents per 100 pounds, to Atlanta 62 cents. The rate from
Chicago to Montgomery is 69 cents, to Houston 81 cents, to Denver 97
cents. From either New York or Chicago to the Pacific Coast the rate
is $1.60. These rates apply to carload lots, all goods being sold
delivered, the company absorbing the freight. The retail price is the
same all over the United States as it is with shoes, cigars, soap,
proprietary medicines and dozens of other familiar articles.

On cotton, the great staple product of the South, the freight rate
structure has been in process of development even a longer time
than that affecting the movement of grain from the West. From
the plantation into Memphis, the largest inland cotton center of
the United States, a typical rate is 30 cents per 100 pounds for
one hundred and fifty miles. From Memphis to Boston the rate is
57½ cents, and from Memphis to the Gulf 30 cents per 100 pounds.
From Augusta, Ga., a central market of the Eastern cotton growing
district, the rate to Charleston and Savannah is 21 cents, to
Brunswick 23 cents and to Norfolk 26 cents per 100 pounds. A bale of
cotton contains five hundred pounds and is therefore worth, at 11
cents a pound, $55. The aggregate transportation charge on this bale
from the plantation, one hundred and fifty miles from Memphis, to
Boston, is $4.27.

Mainly because of the rapid shifting of the sources of supply,
there has not yet been developed a stable structure of rates for
the movement of lumber in all parts of the United States. By way of
illustration, however, it may be said that a fair average rate on
lumber into Memphis from the forests of Arkansas is six cents per
100 pounds, or $2.40 per 1,000 feet. Lumber going from Memphis to
New Orleans for export will pay $4.80, or a total transportation
charge from the forest of $7.20 per 1,000 feet. A fair average rate
to the markets in Ohio and Indiana is $8 per 1,000 feet, a total
transportation charge from the forest of $10.40. This is on the kind
of lumber that in 1905 and 1906 sold at about $40. The rate on yellow
pine from New Orleans to Chicago is 24 cents per 100 pounds.

There is an equalization of rates on the iron ore from the upper
lakes in that the rates of the boat lines from the ore mines are the
same to each of the Lake Erie ports. From thence to the furnaces
they are adjusted under the policy of the railroads to make the
transportation charge on the raw material required to make a ton
of pig iron approximate the same amount at each of the competing
furnaces of southern Ohio, Pittsburg, Wheeling, in the Mahoning and
Shenango Valleys, and even as far as the Schuylkill Valley. How
closely this equalization is effected is shown by the fact that
the transportation charge on the ore, coke and limestone required
to produce one ton of pig-iron is as follows in these respective
districts: At the furnaces on the Monongahela River in the Pittsburg
district, $5.82; at the furnaces of the Mahoning and Shenango
Valleys, $5.57; at the furnaces of the Wheeling district, $5.78.
These charges compare favorably with those at the furnaces on the
Lake Shore in the Chicago district, which aggregate $5.63 per ton of
pig-iron, but are higher than at the furnaces on the Lake Shore in
the Cleveland district, where they aggregate but $4.72. The rates on
coal, which gives return loads to the cars that take the ore south
front the Lake Erie ports, are maintained at established differences
between the coal fields of Ohio, Pittsburg and West Virginia. The
rates in effect in the spring of 1908 were $1 per ton from southern
Ohio, 90 cents from southeastern Ohio, $1 per ton from the Pittsburg
field and $1.15 a ton from West Virginia.

The claim of the railroads that the rates on foodstuffs are not high
enough to enter as a factor in fixing the selling price is fully
substantiated by the statements of the dealers in such products. That
is, the conditions are, with negligible exceptions, such that if
the price obtainable in the markets be sufficient to encourage the
growing of livestock, grains, dairy products, fruits or vegetables,
the rate of freight, from whatever locality to whatever market, is
sufficiently low to allow the producer to enter that market. His
profits are, however, as a matter of course, diminished by the amount
of freight which he pays, and, as a rule, the farther the place of
production from the markets the greater is the freight charge. The
differences in the net return to the producer are almost invariably
reflected in the value of the land, which is lower as the distance
from the markets is greater. Largely because of the defective system
of mercantile distribution the grower of foodstuffs obtains a smaller
proportion of the price paid by the consumer than accrues to the
grower of any other agricultural product. Where, as in this country,
the opportunity for the extension of cultivation is practically
unlimited, a good market one season leads the farmers of any district
to increase their production up to the point of minimum profit and
the railroads are then besought for lower rates; when unfavorable
weather or other conditions reduce their output they are also
disgruntled. It therefore rarely happens that the grower, especially
of the quickly perishable foodstuffs, is entirely satisfied with the
freight rates.

A controversy, that it is scarcely an exaggeration to designate
as typical, occurred several years ago between the growers of
watermelons in a Southwestern State and the railroads conveying the
melons to the primary markets. In comparatively a few years that
region had become so productive that the shipments of watermelons
over one road alone ranged from 1,400 to 1,800 cars during a
watermelon season, deliveries being made all over Ohio and Indiana
through dealers from those States who came down and bought the melons
at the farms. The contention for lower rates had waxed so warm that
a reduction in the watermelon rate became the issue upon which a
legislative campaign was fought. The candidate pledged to secure a
reduction in the rate was elected, and introduced a bill, which was
enacted by the legislature, making the rate to the nearest primary
market 7½ cents per 100 pounds. The railroad companies put this
rate in effect and used it as a basis for the lowering of rates to
the territory beyond. During the year of this rate reduction the
traffic department of the railroad company referred to sent word to
the farmers that the company had handled 1,500 cars of melons that
season, the prompt shipment of which had been highly satisfactory
to the growers. It furthermore said that the movement of these
melons from that territory was a one-way traffic entirely, it being
necessary to send special cars empty for the crop. These were
necessarily stock cars that there might be ample ventilation, but
they had to be supplied with extra slats in order that the melons
might not fall out. It was necessary for them to be switched in
requisite number on side tracks especially built adjoining the farms
where the fruit was grown; that switching engines be kept at work,
putting cars in and taking cars out all night and all day. The cars
of melons, moreover, had to be hauled on special trains at a high
rate of speed to get them to the markets before they spoiled. This
reduced the tonnage per train fifteen or twenty per cent below the
maximum that could be hauled at the normal freight train speed. A car
with the average allowable load of 1,100 watermelons would contain
but about twelve tons, although its capacity would be eighteen or
twenty tons; the weight of the car exceeded the weight of the load.
The switching and other special movements necessitated the employment
of night telegraph operators and other extra help at the melon fields.

All of these conditions led the assistant to the general manager of
the company to make an analysis of the expenditure as compared with
the earnings. Waybills were abstracted and the receipts listed. A
tabulation was made of the revenue tonnage, the gross tonnage, the
tare weight, and the expenses incurred in behalf of the traffic. He
found that the handling of the 1,500 cars of watermelons involved a
loss to the company of $12,000 if the expenses of operation alone
were considered.

The results of this investigation were brought to the attention of
the traffic department and the next spring it sent a circular to the
farmers in the truck region urging that the watermelon acreage be
reduced, as the rates on that business were not remunerative, and
stating that the railroad would not undertake to handle it except in
the regular cars that were brought into the territory in the ordinary
course of traffic; that there would be no special trains, nor special
service of any character. The melon growers at once notified the
State Railroad Commission, which, in turn, requested the railroad
company and the melon growers to attend a meeting to discuss the
whole subject. When the meeting convened the chairman called upon the
railroads to say why they had caused so much trouble. The railroad
representative, who was the aforesaid assistant to the general
manager, stated that as he had been invited to attend the meeting it
might be proper for whomsoever instigated it to open the discussion.
Several shippers made statements of their complaints, all admitting,
however, that the melon business had become very profitable,--one
grower saying that $300 to $500 per car was being made out of a
crop. The railroad representative then made a reply, showing the
loss to the company from handling the business for the previous
year, and stated that unless cost for the handling and something by
way of profit could be obtained, the company would prefer to move
other crops. He showed that it had been necessary to park 350 to 400
especially prepared stock cars in the melon territory; that it had
taken a month or six weeks to gather these cars, which had to be
hauled empty to the melon fields. He then pointed out that the rate
per melon was less than a cent and a quarter, whereas it had cost
the farmer four or five cents per melon to bring it by wagon the one
or two or three miles to the railroad track. The chairman objected
to some of the analyses, especially to the contrast of four or five
cents per melon for the wagon haul from the farm with the cent or
a cent and a half per melon for the railroad haul of two hundred
miles. When the railroad man had finished, farmers from all over the
room began to ask questions directly of him. They wanted to know how
much they should pay to afford the railroad some slight profit. They
were told 12 or 12½, cents. The chairman said: "The rate cannot be
changed. It has been fixed by law at 7½ cents and that is the rate.
I am here to protect the people of these counties." The railroad man
suggested that his company might be willing in addition to affix the
necessary slats to the stock cars and perform the switching for $5 to
$6 per car. The farmers were willing to accept this, but the chairman
insisted that it was contrary to law, and finally said in his wrath,
"If you men here are going to deal with the railroad company you can
do it without me. This meeting is adjourned."

With one exception the farmers remained in the hall and expressed a
willingness to pay a rate of 12 cents per 100 pounds.

Returning to the main discussion, we have found that the rates on
raw materials are so adjusted as to permit the manufacture of any
staple article at any logical place of manufacture. On the raw
material of wearing apparel the freight rate is entirely unimportant.
On the lumber that enters into building material, on the ore, coke,
and limestone used in the manufacture of iron and steel the freight
rate is sufficient to become an appreciable factor in the cost of
manufacture. On brick, coal and cement the selling price is the
higher by the amount of the freight charge, which for distances
sometimes not considerable exceeds the value of the commodity at
the place of production. The freight charge, even on those heavier
commodities, however, is far less in proportion to the wage of the
day laborer as well as to the incomes and salaries received in the
United States than in any other country. This is obviously a better
test of comparison than that based upon rates of freight as expressed
in money. To say that a specific rate is twenty cents in the United
States, a shilling in Great Britain, a franc in France, or a mark in
Germany, conveys an inadequate idea. When it is ascertained that the
average wage of the day laborer in the United States is higher in
comparison with the average rate of transportation than in any other
country, the comparison is significant. In this country a continually
increasing amount of railroad transportation can be purchased with
the wage of the day laborer. With the sum of money representing the
value of a given unit of any of the staple commodities of commerce,
also can a continually increasing amount of railroad transportation
be purchased.

That which makes possible the low freight rate of the American
railroads is the magnitude of the scale upon which the transportation
is conducted. The large cars, with a capacity of from thirty to fifty
tons, and the powerful locomotives that draw a score or more of these
loaded cars in one train, permit an almost infinitesimal freight
charge per pound or per yard that, however, yields by the carload or
by the trainload no inconsiderable revenue. For example, the average
weight of the carload of food products is about 30,000 pounds. If the
freight on such a carload be $300 the rate per pound would be only
one cent, and there is scarcely a commodity upon which a freight rate
of one cent per pound makes any difference in the retail price. As
a matter of fact a carload of food products does not bring to the
railroad so much revenue as $300 unless it has been moved from a far
region; for instance, from the Dakotas or Texas to New York. Specific
complaint in regard to the freight rates of the United States for
many years has not, except in a small minority of cases, been based
on the ground that they have prevented foodstuffs from finding a
market, raw material from reaching places of manufacture, or finished
products from distribution. While the difference of a cent or two in
the rate of freight may not in the least interfere with the conduct
of industry or commerce in the aggregate, such a slight difference,
may perhaps determine whether a manufacturer obtain his raw material
from this or that source of supply, whether a wholesale dealer
obtain his stock from the manufacturer in one, or the manufacturer
in another city, whether a retail dealer make his purchases from the
wholesale dealer in this city or in that city. That is, for example,
the prices of the products at the sources of supply being equal, a
difference in the rate of freight may determine whether Cleveland,
Ohio, obtain potatoes from Michigan or from upper New York; whether a
factory in Louisville obtain coal from the fields of southern Indiana
or central Kentucky. A carpenter in Des Moines may perhaps pay a
dollar for twenty pounds of nails without knowing or caring what
the freight rate may have been, or where they may have come from. A
difference, however, of a few cents a hundred pounds in the rate of
freight may have led the hardware dealer to have purchased the nails
in Chicago or St. Louis or even directly from Pittsburg.

As the purchase of raw material tends toward the prosperity of the
region where it is produced, as the operation of a factory tends to
the increase of population, to appreciation in the value of real
estate and the augmentation of business at the place of its location,
so also does the growth of a wholesale business or of a retail
business aid in the development of its surroundings. Producers,
manufacturers, wholesalers and retailers naturally all desire to
extend their sales, to reach further markets in competition with
their rivals, and are supported in this desire by the communities
to whose welfare they contribute. Any difference in freight rates
that gives a producer of raw material, a manufacturer, a wholesale
distributer, or a retail merchant an advantage over a competitor of
another locality is therefore promptly made the subject of complaint.

The pressure brought upon the railroads by such competing producers,
manufacturers and dealers has been a very important factor in the
development of certain arrangements of freight rates, which we shall
term the Regional Rate Structures, each of which has grown out of the
various characteristics of a traffic region and has become adapted to
those characteristics.

Other arrangements of freight rates which have grown out of the needs
entailed by the production and marketing of certain of the principal
articles entering into commerce we shall designate as the Commodity
Rate Structures.

(End of Chapter VI.)




THE FREIGHT RATE PRIMER

    Adapted from the Illustrated Pamphlet, So Entitled.

    Issued by the New York Central and Hudson River Railroad Company.


THE A. B. C. OF THE MATTER.

"There has been much wild talk as to the extent of the
over-capitalization of our railroads. The census reports on the
commercial value of the railroads of the country, together with the
reports made to the Interstate Commerce Commission by the railroads
on their cost of construction, tend to show that, as a whole, the
railroad property of the country is worth as much as the securities
representing it, and that, in the consensus of opinion of investors,
the total value of stock and bonds is greater than their total
face value, notwithstanding the 'water' that has been injected
in particular places. The huge value of terminals, the immense
expenditures in recent years in double-tracking and improving grades,
roadbeds and structures, have brought the total investments to a
point where the opinion that the real value is greater than the face
value is probably true."

  (From President Roosevelt's Decoration-Day address at Indianapolis,
  May 30, 1907.)


THE X. Y. Z. OF THE SITUATION.

"An army of more than 1,500,000 men is employed directly in the
operation and maintenance of the railroads in the United States,
and millions of other men are furnished employment indirectly in
the mines, the forests and the factories, supplying the railroads
with approximately one and one-quarter billions of dollars' worth of
material and equipment annually consumed.

"These are wonderfully interesting and impressive facts; but the
fact of greater interest and worthy of the most careful thought of
every citizen of this country is that this vast army of men engaged
in producing the commodity of transportation at an average cost more
than _40 per cent lower_ than is shown by any other country is paid
an average wage more than _50 per cent higher_ than is paid in any
other country where railroads exist."

  (W. C. Brown, before the Michigan Manufacturers' Association, June
  22, 1908.)


LESSON I.

FREIGHT RATES AND THE CLOTHES WE WEAR.

Whom have we here?

Eleven different types of American citizens, standing in a row,
clad in the varied uniforms or togs of their several occupations or
leisure from hod-carrier to the dude in dress suit and opera hat.

These men all live in the Mississippi Valley.

Their clothes were made in New England.

They paid the railroads _nine cents_ apiece for transporting their
clothes, including shoes and hats, from the point of manufacture to
the Mississippi Valley.

The combined freight charges on _all_ the clothes worn by the eleven
men in the group, including shoes and hats, was _less than one
dollar_.

If freight rates were advanced 10 per cent the increased price to
these men on their entire wearing apparel would be _less than one
cent each_.

If they have to pay more than that per cent it will not be because
freight rates are advanced.


LESSON II.

FREIGHT RATES AND AGRICULTURAL IMPLEMENTS.

Consider the McCormick harvester. It mows, gathers, binds and stacks
the bearded grain, while its proud possessor cracks his whip above
the backs of his three-horse team. It has banished the nightmare of
farm mortgages from the great prairies of the West.

This particular harvester we are considering is cutting grain one
hundred miles west of the Mississippi River. It was built in Chicago
and sold for $130.

The farmer paid $1.76 to have it brought to him from Chicago, three
hundred miles away.

If freight rates were advanced 10 per cent the cost of the harvester
would be increased _seventeen and one-half cents_.


LESSON III.

FREIGHT RATES AND COOKING UTENSILS.

Next to the harvester the modern kitchen cooking range has added more
joys and years to the farmer's life than anything in the cornucopia
of modern civilization.

Here is a standard range. It is a thing of beauty as well as a means
for cooking everything your mother used to cook and much more.

The freight on a steel range, weighing from 400 to 500 pounds, from
Detroit to points in the Mississippi Valley, approximates from $2 to
$2.50 per stove on stoves which retail at from $55 to $60 each.

An increase of 10 per cent would add from twenty to _twenty-five
cents_ to the cost of the stove, which, divided by the life of
the stove, taking the low average of ten years, would add one and
one-half to _two cents_ per year to the cost.

On heating stoves the increase would be about _one-third less_.


LESSON IV.

FREIGHT RATES AND REFRIGERATORS.

What are the cold facts about refrigerators?

What cold storage is to the whole people, the modern refrigerator is
to the individual family.

It preserves all things sweet and clean and wholesome.

Now the freight on a refrigerator, such as is used by the ordinary
family, from Belding, Mich., where they are manufactured in large
quantities, to New York is approximately seventy-five cents.

An increase of 10 per cent would add _seven and one-half cents_ to
the cost of the refrigerator, delivered in New York City.


LESSON V.

FREIGHT RATES AND HOUSEHOLD FURNITURE.

Ever since Grand Rapids became the furniture hub of the Union there
has been no excuse for any American family being without its antique
or modern dining room set.

Look at this suite consisting of a solid table, six chairs, sideboard
and china closet, etc. It could be bought F. O. B. at Grand Rapids
for from $55 to $75, according to the wood and finish.

It weighs approximately 750 pounds and the freight from the factory
to Chicago would be $1.60.

An increase of 10 per cent would add _sixteen cents_ to the cost of
all this furniture.


LESSON VI.

FREIGHT RATES AND A BUSINESS SUIT.

Behold this business suit which no one would be ashamed to wear.

It might cost anywhere from $10 up to $35, according to the
reputation of the tailor or the rent and advertising rates he pays.

The freight rate on such a suit of clothes, including hat and
shoes, for a distance of 300 miles from any of our large jobbing or
distributing centers is approximately _three and one-half cents_.

A 10 per cent increase would add a little more than _one-third of one
cent_ to the cost of this suit, and it would add no more if it cost
$50 or $100.


LESSON VII.

FREIGHT RATES AND "KING COTTON."

"Befo' de wah" cotton was king. Of our exports it still leads all our
domestic products, having no second in sight.

If the entire cotton crop of the United States was compressed into
one bale its value would be about $750,000,000.

Of this bale in 1908 the railways got a little "jag" worth according
to the Interstate Commerce Commission $12,394,000, or less than 2 per
cent.

An advance of 10 per cent in rates on cotton could not add more than
one-fiftieth of a cent per pound to the price of cotton.


LESSON VIII.

FREIGHT RATES AND A SACK OF FLOUR.

Minneapolis, as all good little school children know, is the seat of
the flour industry of the United States.

If they do not learn this at school it is impressed upon their
receptive minds by every illuminated billboard and painted rock that
meets their gaze from Eastport to California.

There are half a dozen brands of flour ground at Minneapolis and
every one is better than all others.

The rate on this incomparable product in carloads from Minneapolis to
New York is 25 cents per hundred pounds.

That is 12½ cents per fifty-pound sack.

This flour is sold to the consumer in New York at approximately $1.85
per fifty-pound sack (or it was when this was written).

An increase of 10 per cent in freight rates would add but one and
one-quarter cents to the price of a fifty-pound sack, or a little
less than two one-hundredths of one cent per pound.

The freight rate on a fifty-pound sack of flour from Minneapolis to
Chicago is five cents per sack. An increase of 10 per cent in rates
would add only five mills per sack between these points, or _one
one-hundredth of one cent per pound_.


LESSON IX.

FREIGHT RATES AND DRESSED BEEF.

The reason cattle are butchered and carried to the consumer as
dressed beef rather than driven to market on foot or hauled as live
stock, is that the freight charge is less and the beef arrives in
better condition.

Little children in New York and Boston appreciate this, if the wise
grown-ups of the West sometimes seem to doubt it.

The rate on dressed beef from Chicago to New York is forty-five cents
per hundred pounds. The average price of this beef to the consumer
in New York is (or was) approximately twenty-five cents per pound.
A 10 per cent increase in freight rates would add _less than five
one-hundredths of one cent per pound_.

If freight rates were advanced 10 per cent, the increased cost in
New York City of a two-rib roast of the best quality, weighing eight
pounds, retailing for $1.92, would be _less than one-half cent_.

Surely this is not an excessive price to pay for _National prosperity
and industrial peace_.


LESSON X.

FREIGHT ON EGGS, BUTTER AND POULTRY.

Eggs were cheaper when Columbus experimented with them than they are
now, but it cost more to carry a dozen eggs or a firkin of butter ten
miles in 1492 than it would to carry them 100 miles now.

The rate on butter and eggs from points in Eastern Iowa to New
York--a distance of approximately 1,200 miles--is eighty-four cents
per hundred pounds. On dressed poultry from the same points to New
York the rate is ninety-six and one-half cents.

The eggs are sold to the consumer by the dozen and the other
commodities by the pound; _and the consumer pays every farthing of
freight that has accrued from the time the egg is laid, which he buys
in the "original package," or as dressed poultry, or from the time
the cow is milked, from which the butter is made_.

An increase of 10 per cent would add eight one-hundredths of one cent
per pound to the price the consumer pays for butter and eggs, and it
would add nine and one-half one-hundredths of one per cent per pound
to the cost of dressed poultry, for which he pays from twenty to
thirty cents per pound.


LESSON XI.

FREIGHT RATES AND LEATHER BELTING.

Some little children and many of their mothers do not know that
a great deal of the power that makes the wheels go round in this
industrial beehive is transmitted by belting.

The shops of the Lake Shore & Michigan Southern Railway at Elkhart,
Indiana, are equipped with 13,288 running feet, or _practically
two and one-half miles_, of leather belting. This belting cost the
railroad company $6,235, or an average of 46.9 cents per running
foot. The belting was shipped from Boston to Elkhart, a distance of
937 miles. The total freight charges amounted to $18.37, or fourteen
one-hundredths of one cent per running foot. An increase of 10 per
cent would add $1.83 to this cost, or _fourteen one-thousandths of
one cent per running foot_.

This belting, moreover, cost the railroad company $1,082 more than
it would have cost at the prices prevailing in 1899, representing an
increase of 21 per cent. During this same period there was no change
whatever in the freight rate.


LESSON XII.

THE RAILWAYS AND NATIONAL DEVELOPMENT.

Now listen to the sober words of the one man who has perhaps given
more official attention to the subject than any other citizen of the
republic:

"Without regard to the personnel of railroad officials, without
regard primarily to the interest of stockholders, but in the interest
of public welfare and national prosperity, we must permit railway
earnings to be adequate for railroad improvement at advantage and
profit.

"To my mind it is a most impressive fact, so great as to elude the
grasp of imagination, that the railway traffic of the country fully
doubled in the first seven years of this twentieth century. This
enormous addition to the volume of transportable goods overtaxed,
as you know, the existing facilities, and the resulting condition
perhaps accounts for much of the hostility which has been manifested
in various quarters. For the man who has raised something by hard
labor or made something with painstaking skill, which he could sell
at a handsome profit in an eager market, and finds that he cannot get
it carried to destination, and so sees his anticipated gains turned
into a positive loss, is naturally exasperated and unthinkingly
'blames it' on the railroads, and is ready to hit them with anything
he can lay his hands to; and as the state legislature seemed to be
the most convenient weapon he wielded it for all it was worth.

"I dwell upon this a moment further, because it seems plain to me
that the prosperity of the country is measured and will be measured
by the ability of its railroads and waterways to transport its
increasing commerce. With a country of such vast extent and limitless
resources, with all the means of production developed to a wonderful
state of efficiency, the continued advancement of this great people
depends primarily upon such an increase of transportation facilities
as will provide prompt and safe movement everywhere from producer
to consumer; and that we shall not secure unless the men who are
relied upon to manage these great highways of commerce have fitting
opportunity, and the capital which is required for their needful
expansion is permitted to realize fairly liberal returns."

    (Hon. Martin A. Knapp, Chairman Interstate Commerce Commission,
    in "Annals of the American Academy of Political and Social
    Science.")


LESSON XIII.

LOOK UPON THIS PICTURE.

What is this I see?

Smokeless chimneys! Closed factories. Spiders' webs across the doors
of opportunity. Grass growing rankly in the streets of industrial
towns. Dejection on the face of nature and of man.

What does it mean?

The railways have ceased to earn enough to meet expenses and provide
for the progressive maintenance of their equipment and plant.

Why, are not their receipts greater than ever?

True, but their expenses have increased more rapidly than their
earnings and their net revenues have only been maintained by
postponing purchases that must be made some time or the railways will
be incapable of performing their public service with safety, dispatch
and economy.

In 1908 and 1909 the railways scrimped maintenance $300,000,000 and
this will have to be made good some time, some how, before they are
on as sound an operating basis as they were before the panic of 1907.

What must be done to avert the consequences described above?

A readjustment of freight rates, involving a reasonable increase
applied to such articles and commodities as can stand it, without any
appreciable hardship either to manufacturer, merchant or consumer,
means the difference between grinding economy and a fair degree of
prosperity.


THE REVERSE OF THE PICTURE.

Would a 10 per cent increase in freight rates mean such a difference?

It most certainly would.

It would mean the difference between closed shops and suspended
improvements and the resumption of improvements with the ability
to resume the large purchases of material and equipment, giving
full employment to labor and furnishing improved transportation
facilities, which, within a very short time the commerce of the
country is going to demand more insistently than ever. To hundreds
of thousands of workingmen it means the difference between steady,
well-paid employment and walking the streets looking in vain for work.


LESSON XIV.

NARROW MARGIN BETWEEN EARNINGS AND EXPENSE.

"I have looked up the statement of about 80 per cent of the principal
railroads of the country and find that during the last half of the
year 1907, after the tremendous increase in expenses had become
effective, while the gross earnings of the railroads increased
$57,413,078 over the same period of the preceding year, their
expenses increased $80,235,823, showing a net loss for the period,
despite the tremendous business handled, of $22,822,745.

"The converging lines of cost and compensation in railroad operation,
which for years have been steadily approaching each other, are now
separated by so narrow a margin that in order to pay fixed charges,
taxes and operating expenses, with even a very moderate return to
shareholders, there must be either _a moderate increase in freight
rates_ or a very _substantial reduction in the wages of railroad
employes_."

    (W. C. Brown, before the Mich. Mfrs. Assn., 6-22-08.)


LESSON XV.

WHICH SHALL IT BE?

"Is it not better, Mr. President, that you and I, and tens of
thousands of people who buy and use automobiles, should pay a dollar
or two more freight on our machines than that the family of the
engineer, the conductor, the brakeman, the switchman or the humble
section hand shall be deprived of the actual necessities and comforts
of life, which we know they must give up if the monthly pay check is
reduced?

"No question of greater importance confronts the people of the
country today, for upon its righteous solution hangs the momentous
issue of an early return of prosperity or a continuance of the
depression of the past six months, emphasized and darkened by
a struggle with organized labor such as this country has never
experienced."

    (W. C. Brown, before the Mich. Mfrs. Assn., 6-22-08.)


LESSON XVI.

MORAL.

"_Our prosperity came with the prosperity of the railroads; it
declined when adversity struck the railroads. We do not believe we
can have the full measure of prosperity again until the railroads are
prosperous._"

    (National Prosperity Association of St. Louis.)




PROGRESSIVE SAFETY IN RAILWAY OPERATION

By A. H. SMITH,

Vice-President of the N. Y. C. & H. R. R. Co.

    An Address Delivered Before the National Association of Railroad
    Commissioners, at their Annual Convention, held in Washington,
    D. C., November 16, 1909.


In examining into the state of an art of such far-reaching importance
and such diversified nature as that of transportation by rail, it
seems necessary to acquaint ourselves with its beginnings and growth;
to determine the elements upon which its development relies and the
necessity which has invoked the various steps of improvement in
the plant devoted to transportation and the art of employing and
controlling it in the performance of a public service.

The lay observer will scarcely appreciate, in the absence of the
actual analysis, that there exists so many branches of this subject,
each branch of which, by itself, may be considered the object of a
separate professional science and a distinct human industry.


EARLY RAILROAD HISTORY.

Railways had their origin in tramways laid over 200 years ago in the
mineral districts of England, which conveyed coal to the sea. Animal
motive power was used. By the discovery, in 1814, of the adhesion
of a smooth wheel to a smooth rail, it became possible to consider
the employment of the tractive power of a rolling locomotive, and
for some time subsequent to this, to the trial trip of the "Rocket,"
in 1829, which may be described as the first successful steam
locomotive, the experiments were along these lines.

While industrial railroads similar in character to the English
existed in this country, the Baltimore & Ohio was the pioneer
American railroad built for public use. On July 4, 1828, the first
rail was laid by Charles Carroll, the only surviving signer of the
Declaration of Independence, and thirteen miles were opened for
traffic in 1830. In the same year the West Point Foundry began
building locomotives, producing the "De Witt Clinton," in 1831. It
weighed three and one-half tons, and was built for the Mohawk &
Hudson Railroad, the pioneer company of the present New York Central
Lines, which had been chartered in 1826, four years before actual
construction was begun.

The line was opened from Albany to Schenectady in 1831; to Utica in
1836, and to Buffalo in 1842. Connections to New York and Boston were
built in rapid succession.

About this time, in Pennsylvania, the Columbia Railroad was built
from Philadelphia to Columbia, on the Susquehanna River, forming the
pioneer division of the present Pennsylvania System.

Several companies were chartered about the same time in Massachusetts.

Following the panic of 1837 there was little industrial development
and a lull in railroad construction, but with 1850 begins the era
of rapid extension and the welding of short connecting lines under
single ownerships. The consolidation was vigorously objected to at
first. Originally there were eleven companies owning and operating
the line between Albany and Buffalo. Between Buffalo and Cleveland,
changes of passengers and freight were made at Dunkirk and Erie.
The latter change was made necessary by the difference in gauge; to
the east six feet and to the west four feet ten inches. Plans for
the consolidation of some of these lines made in 1853 entailed for
through operation the change of the gauge east to conform to that
west of Erie, to obviate transfer. This proposition so aroused the
inhabitants of Erie that they resorted to violence. In December,
1853, they tore down the railroad bridge, no trains going through
until February, 1854. This same bridge was rebuilt in 1855, but again
torn down and burned by a mob. Finally a compromise ended what is
known as the Erie War and the gauge was changed, from which time
dates the beginning of definite through operation.

In 1851 the Erie Railroad joined New York with Lake Erie. The
Baltimore & Ohio reached the Ohio River. Two years later the Atlantic
seaboard and Chicago were connected by rail, which the following
year reached the Mississippi River. These extensions to the Western
Frontier opened the traffic between the Ohio and Mississippi rivers.

In the early days the public desire for rail transportation
facilities led to numerous enterprises securing public financial
support, but owing to the disaster that was experienced in some of
these enterprises the Ohio law prohibited any town, county or State
from rendering such assistance. When the Louisville & Nashville
Railroad was built, Cincinnati found it imperative to have railroad
communication to the South, but the prohibition of the aforesaid
law prevented public assistance, and the scheme was devised of
building and owning a line. This line went south through Kentucky to
Chattanooga, was built and operated, and eventually leased to the
Cincinnati, New Orleans & Texas Pacific.

The railroads played an important part in the conduct of the Civil
War, many of them being practically devoted to the transportation of
Government troops and supplies. Great damage was done to the many
lines in the South owing to the military operations. By the close of
the war there had been no pronounced advance in protection by the
appliances which are now commonly employed in the control of train
operation. This was largely due to the light equipment, slow speeds
and sparse traffic.

The first Pacific railroad was begun, with Government aid, in the
'60s. With the opening up of the West and the return to industrial
pursuits of the people after the close of the war dates a remarkable
era in railroad extension. In the decade from 1880 to 1890, 70,000
miles were built in the central and western districts, opening vast
unoccupied agricultural, grazing and mineral sections to immigration
and development. The panic of 1893 exerted considerable influence on
railroad construction during the following decade.

The period since 1900 has been more one of reconstruction and
improving existing lines; the growth of industries and population
tributary to existing lines necessitating this course.

The vastness of the railroad industry may be imagined when one
considers that from fifteen to twenty per cent of the capital of the
United States is invested in railroads. As an exhibit of the growth
and importance let me quote the following statistics of railroad
growth by decades since the first operation:

  1830                                23 miles
  1840                             2,814  "
  1850                             9,021  "
  1860                            30,635  "
  1870                            52,914  "
  1880                            93,296  "
  1890                           163,597  "
  1900                           193,346  "
  1909                     about 250,000  "

Such is the exhibit of progress in the extent of railroads,
broadly viewed. With the growth in extent the elements of safety
have multiplied and have become very numerous; in fact, an almost
indefinite subdivision of railroad property and operation in
respect of safety might be conceived. We will consider, however, the
beginnings and the growth of a few of the more important and striking
items and their relationship to the state of the art, as portraying
in a more graphic manner the adjustment, if you may call it such,
of safety to progress, or, as the subject has been assigned to me,
"Progressive Safety."


AIR BRAKES.

As the density of traffic, and the speed, together with the weight of
equipment, developed, following upon the greater transportation to
be undertaken, the question of brakes was an important factor. More
efficient brakes were needed; the essential characteristics being
that they should be continuous throughout the length of the train,
simultaneously applied and released, with a single point of control.

In 1869 George Westinghouse, Jr., brought forth what is known as the
straight air brake, consisting of a pump, main reservoir, three-way
valve, brake cylinder and train line. Application was made by
admitting air from the main reservoir into the train line. The brakes
were released by reducing the train-line pressure into the atmosphere
through the three-way valve. The brakes were useless if there was a
leak, a burst in the air line or a parted train.

With these shortcomings in mind, the automatic air brake was produced
in 1873, in which the method was reversed. With the addition of an
auxiliary reservoir under each passenger car and a triple valve,
application of brakes was secured by reducing the train-line
pressure, while admitting air from the main reservoir raised the
pressure and released the brakes. On the application of the automatic
air brake to freight cars it was found the reduction of pressure was
not quick enough to set the rear brakes promptly, and in consequence
accidents occurred from the bunching of the cars.

The consideration of the brake question by the Master Car Builders'
Association in 1885, and public tests under their auspices in 1886,
at which time the manufacturers were represented, did not succeed in
stopping freight trains without violent and disastrous shocks. So
discouraging did these tests seem for the time being, that a report
was made, suggesting that the successful application of such brakes
on long trains could only be accomplished by electricity. However,
the following January witnessed the introduction of the Westinghouse
Quick-Action air brake, which corrected the previous trouble and
made practicable the application of air brakes to long freight
trains. Continuing from this time there has been marked improvement
and development in all features of the apparatus, without, however,
modifying the essential elements of which it is constituted.

With the solution of a means of train control came a further growth
in their size and weight; sooner or later this had to emphasize
the necessity for efficient coupling devices. Not only were there
accidents due to the primitive link and pin couplers, but the various
standards in existence both complicated the operations of coupling
and uncoupling of cars and involved the question of interchange and
safety.


AUTOMATIC COUPLERS.

Owing to the large number of accidents, Mr. F. D. Adams, of the
Boston & Albany Railroad, recommended to the Master Car Builders'
Association, at its third convention, in 1869, that a uniform height
should be established for couplers; their failure to meet when cars
came together being considered the cause of numerous accidents. In
1871 that convention adopted 33 inches as the standard height for
standard-gauge cars. At the convention of 1873 Mr. M. N. Forney
urged that a committee investigate the cause of accidents and make
recommendation. This committee in the following year gave as the
principal cause the same as reported by Mr. Adams eight years before.
They pronounced the tests of automatic couplers to date a failure.
Another committee at this same convention gave the first recognition
to automatic couplers by reporting that a great advantage would
be derived from a uniform drawbar, such as would be accepted as a
standard and which would be a self-coupler. During several years
following various models were examined, but nothing was found to meet
the demands. In 1877 Mr. John Kirby, of the Lake Shore, reported that
his company intended to equip 100 cars with self-couplers, and at the
same meeting Mr. Garey, of the New York Central, told of having been
waited upon by a committee of yardmasters, asking for dead blocks or
some such safety device. This turned the attention of the Association
from the coupler to the dead block. In the year following they
invited the Yardmasters' Association to act in concert with their
committee in reporting upon means of safety for protection of yard
and train men in the performance of their duties.

This was the situation when on March 19, 1880, the Massachusetts
Legislature instructed the Railroad Commission to investigate and
report with recommendation as to means of prevention of accidents in
the coupling of cars. They reported that they preferred to be guided
by the action of the railroad companies, and any device made standard
by them would, in their opinion, be the best recommendation for such
device.

In 1882 the Connecticut Railroad Commissioners recommended to the
Legislature that automatic couplers be required on all new cars.

In 1883 the Massachusetts Commissioners expressed the hope that the
Master Car Builders' Association would at its convention agree upon
some type of coupler for freight cars.

In 1884 the Association selected Mr. M. N. Forney to conduct tests
of automatic couplers and report. Attention was called at that time
to less than a dozen varieties that were worthy of consideration.
With this action of the Association as a guide, the Massachusetts
Commissioners undertook to solve the problem, and announced that they
would not prescribe any coupler that had not been tested in actual
traffic, but notified the railroad companies in the State that all
new cars, and cars requiring new couplers, should be provided with
one of five kinds specified. It happened that the kinds specified
would not couple with each other.

In 1885 public tests were held at Buffalo by Mr. Forney. Forty-two
couplers were tested, twelve of which were recommended for further
tests. In the following year the trials made of power brakes on
freight trains made it very evident that the link and pin type of
coupling would not suffice, and it was eliminated from further
consideration.

In 1887 the Executive Committee reported in favor of the Janney type
of coupler and all other forms that would automatically couple with
it under all conditions of service. This report was adopted in 1888
by a vote of 474 for and 194 against. The Executive Committee then
undertook to establish contour lines, drawings and templates as
standard, but found that the Janney patents covered the contour of
vertical plane couplers. This was remedied in 1888, when the Janney
Coupler Company waived all claims for patents on contour lines of
coupling surfaces of car couplers used on railroads members of the
Master Car Builders' Association, which enabled the Association to
formally adopt in all respects this type of coupler as standard.
At the convention of 1889 such action was taken, on motion of Mr.
Voorhees, General Superintendent of the New York Central Railroad,
and since that time this type of coupler has been the standard, and
called the "Master Car Builders' Coupler."

In 1893 Congress enacted a law requiring all railroads engaged
in interstate commerce to provide on all cars and locomotives a
continuous power brake capable of being controlled by the engineman
in the locomotive cab, and also automatic couplers which would
operate by impact. January 1, 1898, was the date set by which these
changes must be made--subsequently extended two years. We now have
uniformity in height and contour to insure perfect contact between
all classes of equipment, and a positively locked knuckle. The design
and attachments to car body are prescribed of a strength in excess
of the power of locomotives, and in modern friction draft gear the
strength reaches 250,000 pounds.


SIGNALING.

The need of indicating the conditions of the road to trains came
with the increasing traffic and speed. As these conditions developed
in England before they did here, the first steps were taken in
that country. In 1834 the Liverpool & Manchester introduced the
first system of fixed signals, consisting of an upright post with
a rotating disk at its top, showing red for danger and the absence
of indication by day and a white light by night for clear. On the
opening of the Great Western Railway this method was improved.
Experiments by Messrs. Chappe, the inventors of optical telegraphy,
showed that under certain conditions of illumination the color of
any body would disappear. This demonstrated that the form, and not
the color, of the day signal could be relied on. It was also found
that a long, narrow surface could be seen further as projected
against the horizon or landscape than the same area in a square or
circle. Making use of these results, Sir Charles Gregory, in 1841,
designed and erected at New Cross the first semaphore signal. There
was no communication between stations; each signalman displaying his
signal at danger after the passage of a train until a certain time
had elapsed, when it was cleared. The only information conveyed to
the engineman was that the preceding train had passed the station at
least the required time before him.

The failure or inability to act with sufficient promptness at the
display of the danger position, and the consequent collisions, led to
the installation of additional signals to give advance information
to the engineman of the position of the signal he was to obey. Thus
we have clearly portrayed the inception of the present block and
caution signals.

Mr. C. V. Walker, of the Southwestern Company, introduced the
"Bell Code," which was the first audible method of communication
between signal stations. The same year Mr. Tyer supplemented this
with electric visual signals, the object being to give the operator
indication of the signal having been received and given, and at all
times to show the exact position of the signal itself. This suggested
the space interval between trains, in place of the time interval,
making signal indications definite. In 1858 the positive block system
was established in England, based on the space interval system.

Making use of telegraph communication, Mr. Ashbel Welch, Chief
Engineer of the United New Jersey Canal and Railroad Company, devised
and installed during 1863 and 1864 the first block system of signals
in this country, on the double-track line between Philadelphia and
New Brunswick. Signal stations were suitably spaced, and at each
station a signal was provided, visible as far as possible each
way. The signal itself was a white board by day and a white light
by night, indicating "clear," shown through a glass aperture two
feet in diameter in front of the block signal box. For the "danger"
indication a red screen fell to cover the white board or light. On a
train's passing a station the signalman released the screen, which
fell by gravity, and did not raise it until advised by telegraph that
the preceding train had passed the next station, thereby maintaining
a space interval. Thus was evolved the telegraph block system, still
generally used, with modifications of apparatus and signals, on lines
of light traffic. Elaborations of this system were later installed
following more closely the English practice, perhaps reaching
the most complete development upon the New Haven and New York
Central lines, where it is still in use. Notwithstanding numerous
improvements in apparatus, the same practice of fixing a positive
space interval by means of communication between block stations still
holds. The addition of track circuits for locking and indicating
purposes and interlocking between stations, more fully effected by
the introduction of the "Coleman block instrument," in 1896, has thus
evolved the controlled manual block system as now used.


AUTOMATIC SIGNALS.

In 1867 Thomas S. Hall patented an electric signal and alarm bell,
used in connection with a switch or drawbridge. Its shortcoming lay
in the fact that a break in the circuit or failure of the latter gave
no danger indication. To correct this a closed circuit was necessary,
although more expensive. In 1870 Mr. Wm. Robinson devised the plan
of having the circuit closed at the point of danger, if conditions
were favorable, and opened a short distance in advance of the signal.
The wheels of the approaching train depressed a lever, which closed
the circuit and cleared the signal, unless interrupted at the point
of danger. Subsequent modifications were made, whereby the circuit
once completed remained so through the agency of an electromagnet,
and reopened when the train passed out of that portion of the track
governed by the signal.

In 1871 Mr. Hall put in operation the first automatic electric
block system, on the New York & Harlem Railroad, between the Grand
Central Station and Mott Haven Junction. It was normal "safety."
The wheels of a passing train striking a lever completed a circuit,
which put the signal to danger, after the train, and held it so until
the succeeding signal went to danger, when a separate circuit was
completed, which released the former signal, allowing it to return to
clear.

The disadvantage in having the wheels of a train strike a lever
to complete the circuit led Mr. F. L. Pope to experiment. After a
successful attempt in transmitting an electric circuit through an
ordinary track with fishplate joints, he made a signal test at East
Cambridge, Mass. A section of track was insulated from the rest, with
a wire circuit, including a battery and electromagnet for operating
the signal, fastened at either end to the opposite rails. The metal
wheels and axles completed the circuit, throwing the signal to danger
against following trains. A detent served to keep the circuit closed
until the next signal was reached, when a separate circuit released
the detent, permitting the signal to clear.

In 1879 this system was put in service, and, with some alterations,
still remains in some localities.

Following the original manual semaphore and the controlled manual
system of operation came the pneumatic and electric systems, for
localities which required a great number of signal movements.
With the development of motors and batteries capable of economic
operation, automatic signals of the semaphore type have been
successfully and widely installed.

In the semaphore system numerous failures have occurred, due to
the formation of ice and sleet upon the blades. This has led to
the introduction of the so-called "upper quadrant" operation; that
is, the motion of the signal being from horizontal to an upwardly
inclined position and back.

On account of the widespread prevalence of electric lighting and
the building up of the territory adjacent to railroads, changes in
the color indication of night signals have been adopted, generally
in such localities using green instead of white for the safety
indication.


INTERLOCKING.

Developing with the manual operation of signals, and as a safeguard
against mistakes of the signalmen, interlocking grew up as a means
for preventing conflicting signals being given at the same time.
As with signals, so with interlocking, England led at first. After
a trip to that country in 1869, Mr. Ashbel Welch recommended the
advantage derived from the English method of operating switches and
signals in large yards and terminals, where the entire control fell
to one man so located as to be in touch with the whole situation
and equipped with a machine that would not permit of setting up
conflicting routes. The plea resulted in the order of a twenty-lever
Saxby & Farmer interlocking machine, which was installed in 1874 on
the New Jersey Division of his line. Railroads were prompt to see
its advantage, and in a short time machines performing the functions
were made and installed in this country, not only for the protection
of railroad intersections, but for the control of large terminal
layouts. In 1876 the first power-operated interlocking system was
perfected, which was the pneumatic type. In 1900 an all-electric
interlocking system, advantageous where distant functions were to
be embraced within the operation of the plant, and applicable to
localities where electric traction was in use, was devised.

The more recent development of power-operated interlocking systems,
with complete electric indication of the conditions on all tracks,
has made it possible for larger systems to be consolidated under
the control of a central plant, and thus under the direction of a
central authority; these machines, being of a completely interlocked
character, insure greater safety by the central control, as well as
greater facility of operation.


TRAIN DISPATCHING.

In this country the first radical departure from the time interval
and flagging method of operation came in 1851. The New York & Erie
Railroad had established a single line of telegraph between Piermont,
on the Hudson River, and Dunkirk, on Lake Erie, for company business.
The Superintendent of Telegraph, Mr. Luther C. Tillottson, and the
Division Superintendent were together in the Elmira depot on an
occasion and learned that the westbound express from New York was
four hours late. At Corning an eastbound stock train and a westbound
freight at Elmira waited for the express. With this information,
Mr. Tillottson suggested that the freight train at Elmira could be
sent to Corning and the stock train at that point ordered to Elmira,
with perfect safety, before the arrival of the express. The move
was successful and encouraged similar operation, which shortly led
to the adoption, with some modifications, of this train-dispatching
method on the Susquehanna Division of the Erie. Its adoption over
the entire line followed, in spite of the great opposition which Mr.
Charles Minot, the General Superintendent, met when planning for its
introduction. Some of the conductors and enginemen went so far as
to resign rather than run on telegraphic orders against the time of
another train.

This system spread rapidly to other lines and, in company with other
features of railroad operation, has been progressively developed and
improved. One of the important elements of safety in the dispatching
practice has been the tendency to the same words in the same sequence
to convey the same instructions, insuring a uniform understanding of
the instructions instead of permitting a discretionary phraseology
in originating or a misunderstanding in construing the order
transmitted. The rules for train dispatching now prescribe the use
of standard forms of expression for orders governing the movement of
trains.

Within the past few years experiments have been made with a system of
train dispatching by telephone, now in successful operation upon some
important lines, and growing in extent. Advantage lies in the ability
to use trained railroad employes who cannot work under the telegraph
system, not being telegraph operators. The telephone-dispatching
system not only insures a rapid distribution of information, but by
its greater capacity enables a more complete knowledge of the state
of the line to be had in the controlling office, as well as in all
the offices tributary to the dispatching system.


DEVELOPMENT OF THE LOCOMOTIVE.

While it is not our intention to take up your time with the recital,
even in condensed form, of the development of all the items which go
to make up the parts of a railroad, we cannot forego the opportunity
to speak briefly about the locomotive, the motive power, giving
action and effect to transportation.

As early as 1680 Sir Isaac Newton predicted steam-propelled
carriages, and even made suggestions bearing on their design. Through
the eighteenth century various types of steam vehicles appeared, more
as curiosities than anything else, some of them forerunners of the
locomotive and others of the automobile. It was not until 1803 that
anything really deserving the name "locomotive" was built. Richard
Trevithick, a Cornish miner, constructed the locomotive bearing
his name, curiously enough as the result of a wager. On trial this
machine did convey ten tons of iron for nine miles on a cast-iron
tramway by steam power, winning the wager. The desire of Christopher
Blackett, a mine owner, to use steam motive power in place of animals
led to the practical demonstration of adhesion. On this principle,
Blackett's Superintendent, William Hedley, built his "Puffing Billy,"
a complicated affair of levers, beams and gears. On the completion of
the Liverpool & Manchester Railroad, the directors, being undecided
as to the motive power, offered a prize of five hundred pounds for
a locomotive that would fulfill certain conditions. The test came
off at Rainhill, in October, 1829, on a level piece of track about
one and one-half miles long, between four competitors. Stephenson's
"Rocket" won and gave the world the mechanical combination
essentially represented in locomotive practice since that time.
American locomotive practice followed the Stephenson model. Among the
early builders were Phineas Davis, Ross Winans and Matthias Baldwin.
The four-wheel engines of the English type proved injurious to the
light rail and sharp curves on our early roads, and to overcome this
Mr. John B. Jervis, Chief Engineer of the Mohawk & Hudson Railroad,
introduced the four-wheel "Bogie" truck. For some twenty years this
design remained, until in the '50s the demand for more tractive power
brought about the addition of another pair of coupled drivers, thus
evolving the well-known "American" type. Additional drivers were
added with the demand for increased tractive power, leading in turn
to the development of the "Mogul" and "Consolidated" types.

In the decade between 1880 and 1890 more drivers, such as in the
ten-wheel type, began to be used in high-speed service, and the
adaptation of wide fire-boxes to the American type necessitated the
addition of a trailer truck to support the rear end of the locomotive
frame, and brought about the "Atlantic" type, in 1895.

The "Pacific" type, or the most modern high-speed passenger
locomotive, is a development of this. In 1888 Anatole Mallett
designed the articulated locomotive. In 1904 the first one of this
type was placed in operation on an American railroad, and since that
time has gained favor where maximum tractive power on heavy grades is
required.

There is perhaps no more striking illustration of the progress of the
art than can be obtained from an examination of the illustrations of
the various types of locomotives built and operated since 1829. It
all bespeaks a tremendous growth, based on a tremendous necessity.
We can point to the strengthening of all parts commensurate with
the work to be done; to the perfection of detail in materials;
manufacture, maintenance and inspection; and possibly observe
with pride that the motive power of the railroads of the present
contributes an almost negligible part of the difficulties of modern
railroad operation, due to features of design or control.


CAR CONSTRUCTION.

One of the early problems in transportation was to secure the
carrying capacity of cars as well as safety. We have pointed out how
it was necessary to add a guiding truck to the English locomotive,
designed to adapt the same locomotive safely to American conditions.
Both the excessive wheel loads on four-wheel freight cars and the
greater liability to accident or derailment led at an early time to
the use of four-wheel trucks under cars. Between 1831 and 1834 Mr.
Ross Winans, of Baltimore, made improvements on cars on the Baltimore
& Ohio Railroad. He applied the swivel four-wheel truck, the outside
bearing for axles, and the application of the draft gear to the car
body and not to the trucks. The increase in lengths of passenger
cars, with corresponding increases in weight, led, about 1880, to
the quite general employment of a six-wheel truck instead of a
four-wheel truck, and even eight-wheel trucks were used for a time,
but rejected on account of the excessive length of wheel base and
other complications.

In 1879 the Allen wheel, consisting of built-up construction with
forged-steel tire, was introduced and rapidly became applied to cars
in the most exacting service. Originally the tires were imported from
the Krupp Works, in Germany, but later were manufactured here.

Great interest attaches itself at the present time to the manufacture
of solid-steel forged wheels, on account of the reduction in parts.

In the latter '80s experiments were made in the development of steel
framing for car construction, and built-up steel underframes were
introduced shortly after; at first on cars for mineral traffic, where
excessive weights and capacities were required. The success of this
type of construction has led to its adaptation at the present time
to all classes of equipment, and not only steel underframes, but
complete steel construction in certain classes of service where the
conditions require.

With the increase in through passenger service we note the appearance
of the vestibule, protecting the communication between cars.
Originally this vestibule was narrow, about the width of the car
door, and was introduced about 1882, although experimented with as
far back as 1845. The equipment of the "Exposition Flyer," operated
from New York to Chicago during the World's Fair, was the first, we
believe, to appear with full-width vestibules, these being originally
designed as offering less atmospheric resistance to high-speed
trains, but having subsequently been found a more economical,
attractive and safer form of construction.

The question of steel cars and composite steel and wooden cars is
having very careful investigation and experiment at the present time.
While considerably used, the results of the use of these cars must be
awaited. After the factor of safety has been determined the question
of tare weight per passenger carried will naturally arise. In this
country our weights are now far in excess of all foreign railroad
practice. This enters into the resistance and cost to produce the
service.


CAR HEATING.

The original method of heating passenger cars by direct radiation
from coal or wood stoves was a source of discomfort to the passengers
as well as a menace in case of disaster. This brought about in the
late '80s the introduction of the "Baker Hot-Water Heater," which was
a great improvement for the comfort of passengers, but still left
a fire in the car. In many instances of collisions and derailments
during this period, especially in winter, the cars were set on fire
and the wreckage consumed from the fire scattered from the stoves or
heaters. Experimentally, steam from the locomotives was used, but the
difficulties in securing satisfactory couplings between the cars, the
drain on the boiler, and the fact that the locomotive was sometimes
detached from the train, were obstacles. One of the Western roads
even attached a separate car for the sole purpose of supplying heat
and light. The growth in the capacity of locomotive boilers, and the
perfection of the couplings between cars, have led to the present
practice of car heating, which entirely eliminates the presence of
any fire or source of danger from that source.


CAR LIGHTING.

Car lighting has passed through the same stages as house lighting,
possibly more gradually, on account of the greater difficulties.
The old low-roofed passenger cars were illuminated by candles about
two inches in diameter, placed in racks along the sides of the car.
With the advent of mineral oil, just before the Civil War, the
candles gave place to oil lamps. Great difficulty was experienced
in maintaining a steady flame, until the principle of the student
lamp was adopted. The flame was shielded from the outside air by
a chimney, and the central draft to the burner provided the air
necessary, at the right point, to insure combustion. For more than
fifteen years this method prevailed, and while the presence of oil
lamps in wrecks contributed fuel to the flames, the proof that they
were in any way the principal cause was lacking. Still, to eliminate
this contributory feature, attempts were made to use ordinary
coal gas, compressed in tanks on each car. This, however, proved
unsatisfactory. In 1870 a system of compressed gas made from crude
petroleum had been invented by Julius Pintsch, of Berlin, and by 1887
had been put into a number of cars on European railroads. The light
was too dim to satisfy American conditions. It was only a question of
time, however, for its proper and adequate development to our needs,
when its use became general, on the perfection of the lamp and burner.

For the last fifteen years electric lighting of various types
has been in use on cars in an experimental way. While possessing
advantages, perhaps, in safety, owing to low voltages and small
quantity of current, its general use has not yet been entirely
practicable, owing to the complications involved, either in
generating and satisfactorily controlling the current upon the cars,
or in supplying it at terminals through storage batteries.

So far we have been considering largely features either of equipment
or train control. Perhaps more important than these is the permanent
way. Compared with engines, cars, signals and dispatching, the
variety of problems presented in the construction and maintenance
are many. We perhaps owe to the ancient beginnings and highly
scientific development of the profession of civil engineering and
its branches the fact that these problems of construction and
maintenance are so well met and the source of so little anxiety in
connection with railroad transportation at the present time. American
engineering ingenuity and courage have devised structures to meet
every requirement of railroad development. In bridge construction for
centuries the simple beam or the arch were the only spans employed.
The natural barriers to construction of railroads required something
more than either. Between 1830 and 1850 many wooden trusses were
built in the Eastern and Middle States after the design of Burr
and Palmer. S. H. Long's introduction of counter-braces in truss
construction in 1830 was a long step in advance, and after ten years
the celebrated Howe truss was brought out by the inventor. Four years
later came the Pratt truss. In 1859 several riveted lattice trusses
were built for the New York Central, varying from 40 to 90 feet in
length, by Howard Carroll. The Lehigh Valley built a Whipple-Murphy
pin-connected bridge of 165-foot span.

This progress in truss construction enabled the railroads to bridge
streams and secure continuous roadway.

As an interesting historical note in connection with railroad
bridges, we find that the first railroad bridge was built across
the Mississippi River at Rock Island in 1856. It had hardly been
completed, at great expense, before St. Louis steamboat interests
demanded its removal as a nuisance and an obstruction to navigation.
The United States District Court so adjudged it, and ordered its
removal within six months. The presiding judge in his opinion stated
that "if one railroad is able to transfer freight and passengers
without delay and expense of changing at the river, financial
necessity will compel competing roads to provide themselves with
the same facilities," which led him to foresee great interference
to river traffic and great mischief in the establishment of such a
precedent.

The case was appealed, and Abraham Lincoln was the counsel for the
bridge company before the United States Supreme Court. He argued that
both the river and the railroad were great highways for the people,
and while at the immediate time the water traffic was possibly
greater, he predicted that the time might come when the railroads
might equal or exceed the traffic on the river, and he consequently
felt that each interest was entitled to equal consideration. His
broad grasp of the subject secured for his company a reversal of the
decision of the lower court, and the bridge remained.

With the advent of steel the possibilities of bridge construction may
be said to have become almost unlimited, and their design exceedingly
simplified and standardized.


EVOLUTION OF THE RAIL.

Equally important is the evolution of the rail and its fastenings.
The type of metal rails of which the bottom served as the running
surface for flat wheels guided by a flange on the rail gave place to
"edge" rails on which flanged wheels used the upper surface of the
rail before the day of the steam locomotive.

Of the edge type, the first were cast iron, fish-bellied, in sections
about three feet in length. They were supported by stone blocks or
in cast-iron chairs which were in turn made secure to the stone.
Later the same type was made of wrought iron by John Birkinshaw, in
England, who rolled it up to 15 or 18 feet in length.

From 1820 to 1850 the flat strap rail, spiked to longitudinal
timbers, in turn supported by cross-ties, was largely used in this
country, as it was the only shape that could be rolled here. In 1834
Mr. Strickland designed the Bridge, or "U"-shaped section, which was
used on some of our earlier roads and was the first style of edge
rail rolled in this country, in 1844.

The present "T" section was invented in 1830 by Colonel Stevens,
Chief Engineer of the Camden & Amboy Railway, and until 1845,
when it was first rolled in this country, had to be imported from
England. The poor quality of the iron at this time required such
a broad support, in the design of the rail, for the head, that no
satisfactory plate fastening could be secured. Iron shoes, into which
the rail ends fitted, were the means of connection.

The greatest improvement dates from 1855, when the first steel rails
were rolled in England. Ten years later they were experimentally
rolled here. In 1867, through the introduction of the Bessemer
process, which made possible their manufacture at a greatly reduced
cost, began a revolution in track construction.

While the decade from 1880 to 1890 witnessed the greatest rate of
railroad building in this country, it also witnessed the substantial
substitution of steel rails on our lines. The earlier rails weighed
from 50 to 70 pounds per yard. The increasing weight of equipment
brought out a heavier section, and fifteen years ago there was
a large percentage of mileage on which weights of 90 pounds and
over--and even 100 pounds--per yard had been introduced. Under
special conditions rails weighing as high as 140 pounds per yard are
used.

With the increasing weights of rails, and the development of steel
manufacture, greater attention has been paid to details of analysis,
process of manufacture, shape and laying, and it may be briefly
stated that all these matters are uniformly prescribed at the present
time.

Our rail fastenings, ties and ballast have kept pace with the
development of the rail and equipment. An orthodox part of the rules
governing the maintenance of railway property places in the hands of
the maintenance force standard plans and specifications, not only for
the elements, such as rail and ties, but for the complete make-up of
the finished track structure and roadbed, and these plans are the
result of current experience and study of the several railroads, and
of the various associations of engineers, maintenance officers and
manufacturers, and it is safe to say that these plans, specifications
and standard practices represent the best known state of the art.


GRADE-CROSSING ELIMINATION.

In the early days both the railroads and public ways used the natural
surface of the ground, as a matter of economy. The public question
then was how they were to get the railroads, and _not_ how they were
to restrict them in the manner of their construction. The districts
traversed were sparsely settled and trains were few and slow in
their movement; the highways were little used; all of which made for
freedom from accident where the two crossed.

The conditions in England were vastly different. There the country
was thickly settled and an assured traffic was evident from the
inception of the enterprise, which would warrant expenditures on
original construction that could not be entertained by the promoters
of our first companies. So it was not through any blindness that made
grade crossings grow up in this country, but it was purely the result
of economic conditions which precluded their elimination.

With the increase in population and the development of the country
came the need of increased transportation facilities. More frequent,
faster and heavier trains were moving up the railroads and a greater
number of people came to use the highways. The inevitable result
followed, and at length the great number of accidents occurring at
the grade crossings attracted public attention.

The Legislature of Massachusetts took the first action in 1869,
when it provided for the appointment of a Railroad Commission, to
investigate and report upon "Safer and Better Methods of Construction
and Operation." They very promptly took up the Grade-Crossing
question.

At this time in

  Massachusetts   there was 1 mile of track to  5.47 square miles
  New York        there was 1 mile of track to 14.12 square miles
  United States   there was 1 mile of track to 46.72 square miles
  Great Britain   there was 1 mile of track to  8.60 square miles

This showed that the railroad network in Massachusetts was more
extensive in proportion to the area of the State than existed in
Great Britain. In their report the Commission suggested the avoidance
of future crossings of railroads and highways at grade, and the
propriety of the railroads changing some existing crossings which
presented no great difficulty or expense.

In 1873 a law was passed providing for the separation of grade
when a town and railroad effected an agreement. The cost was to be
apportioned by a Commission appointed by the Superior Court. This law
did accomplish something, but hardly abolished existing crossings as
fast as new ones were built. Under it the Fitchburg Railroad did away
with twenty-five between 1875 and 1890, bearing varying portions of
the expense.

In 1885 an Act provided that the County Commissioners could order the
abolition of a grade crossing on a petition of twenty legal voters
if the cost would not exceed $3,000. Again, in 1888 the Legislature
asked the Governor to appoint another Commission to investigate
and report upon a scheme for gradual abolition and the method of
apportioning the expense. In February, 1889, this Commission,
composed of Kimball, Weber and Locke, submitted systematic plans,
with estimates, etc., in which they fixed forty years as not an
unreasonable length of time for the completion of the work. The next
step came in 1890 with the passage of the Grade Crossing Law, which
provided that the directors of a railroad or the authorities of a
town or city could petition the Supreme Court for a Commission on
the Abolition of a Grade Crossing. This Commission was to determine
the manner of the separation and by whom the work was to be done, and
how the expense was to be divided as between the railroad, city and
State. Before the report was presented to the Court for approval it
was incumbent upon the Commissioners to ascertain that the aggregate
proportion of the State's liability in this connection would not
exceed $500,000 per year for ten years. While on the one hand the
Legislature authorized this expenditure of $5,000,000 to abolish the
crossings of highways with railroads at grade, they granted charters
indefinitely to electric lines to cross steam roads at grade.

The New York State Board of Railroad Commissioners was created
in 1882 and its membership appointed by the Governor. Among the
functions which they immediately assumed was the question of public
safety in connection with crossings at grade of railroads and
highways. The consideration which this received and the complaints
of unsafe conditions, as well as the complications and adjudications
involved, led to the passing of the Grade Crossing Law, which went
into effect July 1, 1897.

Not only by the New York State law, but by the Massachusetts law,
the method of elimination, as well as the apportionment of expense,
is specific. The initiative is open to both the railroad and to the
community, and the rapid progress of eliminations in these two States
may be taken as an endorsement of the wisdom of such legislation,
paving the way, as it does, for more progress on the question of
eliminations than it is believed would ordinarily take place where no
specific rule existed for the undertaking.

While the exact conditions throughout the country are not definitely
known, it is believed that progress is being made quite generally
in this direction. The influence of grade-crossing elimination upon
the safety of operation is of such importance as to deserve serious
consideration, as I will further suggest. Perhaps the elimination
of grade crossings, thereby separating the public from the railroad
except as authorized in connection with their patronage of it, is one
of the most important factors as safety.


HUMAN ELEMENT IN OPERATION.

Notwithstanding the great improvements in roadbed, track, bridges,
signals, equipment and other respects, all securing increased service
and safety in railroad operation, the human element is a vital
factor. With a view of raising the standard of individual service,
a system of physical and educational examinations has been adopted.
In the early days of railroads the individual service was possibly
less definitely classified and qualified than must prevail under
the exactions of modern conditions. In keeping with the progress
in mechanical and safety devices and the necessity of a better
system, we have today a preliminary examination, both physical and
as to fitness. Employes must pass examinations as to vision, color
sense and hearing, and their knowledge of the fundamental rules and
regulations, as well as the fundamental knowledge of road, appliances
and equipment. These examinations are repeated from time to time as
the class of service and further advancement of the employes may
require. Many of the large railroads have established schools, with
capable instructors, where employes may receive instruction upon the
performance of their duties, as well as affording them an opportunity
to fit themselves for promotion.

Beginning with the General Time Convention some thirty years ago, the
need to standardize railroad practices and systematically qualify
employes began to be realized.

The Convention, largely through the efforts of Mr. W. F. Allen, saw
that, as time is the term in which railroad schedules are expressed,
it was a fundamental necessity that there should be standard time,
and that the timepieces of employes which should govern their
observance of instructions and schedules must conform to the
standard. This led to the present system of standard time; to the
system whereby employes must compare watches with standard clocks;
must have watches inspected regularly and record taken of same; must
compare watches and register before trips.

The General Time Convention led to the formation of the American
Railway Association, consisting of the executive and operating
officers of the railroads of the United States and Canada. The
Association considers problems of railroad operation, construction
and equipment, and recommends practices for their solution. Their
investigations, conclusions and recommended practices embrace train
operation, dispatching, block-signal operation, air-brake operation,
physical and educational qualifications of employes, regulations
for the transportation of dangerous articles, clearances, rail
manufacture, safety appliances, inspection, car construction, track
gauge, train heating and lighting, methods of loading, etc. Marked
progress has been made in co-ordinating the work of the various
organizations of railroad officers with the work of the Association,
to secure the benefit of the broadest and most careful consideration
of the subjects.

Assurance, therefore, exists that the experience and knowledge of
railway management and officers will be brought from time to time
into the text and fact of standard practices, promoting convenience
by close interline relationships and uniformity of regulation, and
causing a uniform, systematic and careful regard for safety.


BY WAY OF RECAPITULATION.

So, to recapitulate:

From a few miles of crude tramways the world has in a century built
500,000 miles of steam operated and 100,000 miles of electrically
operated roads; instead of spragging the wheels we rely on the
automatic high-speed brake; the coupling of cars has become an
imitation of the action of human hands instead of risking their
destruction; each train finds the condition of road ahead and
protects itself by the agency of electric circuits and semaphores,
the sequence of whose operation discloses on behalf of safety any
obstruction of the route; four-wheel barrows are replaced by steel
cars, larger than the miner's cabin, and carrying more than his
month's output; instead of traveling on a tramway stage coach,
the passenger finds available for his comfort a modern hotel on
wheels, with every luxury known to-day--electrically lighted, steam
heated, weather-proof; the old strap iron, which became detached and
penetrated the car floor, frequently impinging passengers to the
roof, is replaced by the bar of steel weighing 100 pounds to the
yard, whose manufacture, installation and maintenance is prescribed
with every degree of refinement known to the chemist and engineer;
we have learned to treat sub-grade, drainage and ballast as an
architectural science, and our bridges, from the single-log span,
now make continuous roadbed for high-speed operation, even over the
continental rivers.

Some one has said that the builders' art consisted in making the
structure proclaim the purpose for which designed, and to my mind
there is nothing which quite so dramatically fulfils this as the
modern steam locomotive. How many of you have seen a huge Pacific
locomotive, drawing a train of 600 tons at a speed of 70 miles an
hour, yet under control of one man, just the same as Stephenson's
"Rocket," which could have been lifted off its track and set on the
ground by four strong men, and which was a world-wonder when for a
short distance it attained a speed of twenty miles an hour? We know
that our engineman with a Pacific locomotive and the high-speed train
can stop his train with the air brake in a definite distance.

These comparisons, briefly as might be, between, we will say, the
beginnings of the nineteenth and of the twentieth centuries, show
how the commercial growth and increase of trade have produced a
demand for transportation to be performed, and with the performance
an economic revolution. We have, in a general way, though with far
less than the thoroughness of which the subject is worthy, outlined
what might be called the "state of the art," of railroad plant and
operation, in a relative sense.

Progress of a pronounced character has occurred. That this progress
has been accomplished by increased safety is demonstrated by common
knowledge and confirmed by the records, both of the railroads and
the public authorities. As an illustration, take the statistics of
the Interstate Commerce Commission. The increased safety of railroad
operation is indicated in part by the following figures:

    For the decade following the beginning of the records, namely,
    1888 to 1897, the fatalities were 1 in 45,300,000; for the next
    decade, bringing it down to the present time, the fatalities
    were 1 in 54,900,000; the gain in ratio being, for the nation
    at large, fully 20 per cent.

    Looking at the conditions in the State of New York, where the
    density of travel is considerably in excess of that of the
    country as a whole, we find a report of the State Engineer in
    the year 1862 showing ratio of fatalities of 1 in 28,200,000;
    the average for six years, 1902 to 1907, inclusive, shows 1 in
    200,000,000; an increase in relative safety of 800 per cent.

We may assume that never before in the history of railroad
transportation was there presented a bigger problem than to-day.
The weights are greater; the distances are greater; the speed is
greater; the population is more dense; prices and wages are higher,
and the public service more exacting. A gathering of the official
representatives of the nation and of every State, possibly with
a desire for uniform and concerted action, even though it may be
unofficial, points with emphasis to the attitude from which the
public contemplates the employment of the railways in their behalf.
It is, I believe, an accepted fact of our political constitution
at the present time that the public, through its authorized
representatives and through lawful channels, has a right to be
reasonably assured in this respect. I believe that the co-operation
manifested, as well as the inquiries by the various railway boards,
has in a great sense aided in reaching our present standard of
excellence, to which we can point with pride in comparison with any
other national railway system of the globe. We are becoming more
familiar--the railroad management and employes--with the standpoint
of the public, and the public is becoming more familiar with the
problems of the railroads. The mutual aim is: First, safety and
service; and, second, economy. The public concern for the safety and
service is for its own protection, and the railroad management must
give both with economy.

So far we have been dealing largely with the progressive safety
of railroad operation as furthered by the action of the railways,
either initiatively or responsively, as the case might be. We have
described the improvement in roadway, equipment and appliances;
the standardizing of regulations for operation; the selection of
employees and their government.

With the better understanding of the problem of the railroad by the
public through and in connection with the special boards represented
here today, it might not be amiss to express the hope that such
needs as cannot be met without the active support of public opinion
and perhaps legislation will be clearly brought out. One of the
thoughts that occurs to me was suggested by a recent exhibit, from
the records, of the loss of life, damage to railroad property, as
well as injury to persons and property conveyed, due to the presence
of unauthorized persons upon railroad property, whether wilfully
or carelessly trespassing. As an illustration of its seriousness:
during last year over 5,000 trespassers lost their lives on railroads
besides a large number injured. Numerous mishaps have been traced
to acts of trespassers, which may be the secret of many unexplained
casualties. The railroads are a highway for the migration of tramps
and unemployed persons, who commit petty depredations, jeopardize
the safety of trains and the lives of employees and passengers. It
seems of no avail that thousands of the worst class are arrested by
railroad police forces and convictions secured, as the sentences in
the majority of cases serve rather to aggravate, than to mitigate,
the evil. One line arrested over 9,000 trespassers during the past
year, and secured convictions in 75 per cent of the cases; but in
half of them sentence was suspended, which usually meant that the
offender used the railroad to escape from the scene. I do not wish
to be understood to asperse the administration of justice, nor to
insist that offences of a serious character are always committed by
railroad trespassers, but the hazard involved is one that should not
be permitted to exist, the railroad property destroyed or damaged
bearing no relation to the risk of persons and property transported,
and to the enormous loss of life involved.

I feel that the attention of those accustomed to broadly viewing
problems of public concern should be brought to bear upon these
facts, with the hope that measures may be taken to insure greater
safety in this respect, as well as to save the waste of life and
property now resulting from or incident to the practice. I might
venture to suggest that the loss of life is far greater than entailed
through decades by boiler explosions or rear-end collisions, the
seriousness of which I do not wish to deprecate; and the situation
might warrant special record of the facts being obtained in behalf of
the public through the regular channels.

Wherein lies the increased safety of the future may perhaps be the
query in many minds. It is universally sought.

It would be mere conjecture on my part, and, with your indulgence,
I am not inclined to prophesy. As I see it, the great problem is to
make our progress sure, taking no doubtful measures, adopting no
specious devices which may appeal to us at first blush until we have
satisfied ourselves that no greater risk is involved by the change.

The multiplication of rules enjoining obedience, together with
devices for additional protection, may yield a false sense of
security if fundamental obedience to existing rules and efficiency
of existing appliances is one bit impaired by the addition. We must
not embrace paper reforms, even though clamor and pressure be great.
An "ounce of prevention is better than a pound of cure," we grant,
but reverse the proverb, and the pound of prevention may over-whelm
us. The public official would seem to be in a judicial position,
mindful of public justice and safety, basing his judgment and acts
upon facts alone. Improvement in general safety and character of
railroad operation must be the product not only of an enlightened
public opinion and the conservative wisdom of public representatives,
but progressive and careful management, coupled with a sense of
discipline and responsibility and industry of railroad employees, who
must jointly share the obligations of the problem.

Speaking of the compliance we have cheerfully made to the suggestions
of the public representatives--the Commissions--in regard to
improvements of service, facilities and conditions of operation,
etc., we believe in the long run that these things mean a better
standard and greater security for railroad property, as well as the
enormous benefit that accrues to the public by reason of proper and
efficient railway service, and we have only thoughts of admiration
for the attitudes of the Commissions as we have found them. They have
a large problem. We are glad to avail ourselves of their wisdom, and
believe it to be the means whereby the responsibility of the carriers
to the public is secured, and through whom the responsibility of the
public to the railroads must be voiced.

Gentlemen, I thank you for your kind attention, and the favor, which
I acknowledge, of being permitted to address you as best I may upon
a subject to which we are all devoted. In the absence of a distinct
literature on the subject that your worthy President assigned to me,
my efforts are perhaps a bit crudely devised, having no pattern.
In another generation we may perhaps evolve a distinct species of
railroad statesman and an encyclopedia from which we will be able to
point back to the beginnings and the efforts at mutual advice, and to
the growth and knowledge that have ensued, just as we have seen the
day of small things in railroads to be the beginning of a constant
growth to the wonders of today. I am sure that the American people
can congratulate themselves upon an institution of the character
of your Convention and of your several honorable bodies, and trust
that this meeting will be such that you will feel that you have made
definite progress in your concurrent aims.




RAILWAY MAIL PAY

BY

JULIUS KRUTTSCHNITT,

DIRECTOR OF MAINTENANCE AND OPERATION OF THE UNION PACIFIC SYSTEM
AND SOUTHERN PACIFIC COMPANY.


The question of compensation to the railroads of the United States
for carrying the mails has been under review before Congress
at different times during the past ten years. The subject was
exhaustively investigated by a Joint Commission of the Senate
and House of Representatives in 1898 and 1899, which reached the
following conclusion after full consideration and taking of a mass of
testimony on all sides of the question:

    "Upon a careful consideration of all the evidence and the
    statements and arguments submitted, and in view of all the
    services rendered by the railroads, we are of the opinion
    that the prices now paid to the railroad companies for the
    transportation of the mails are not excessive, and recommend
    that no reduction thereof be made at this time."

(See Report 2284, House of Representatives, 56th Congress, 2d
Session.)

This Commission also concluded as to the pay for railway postoffice
cars:

    "Taking in view all these facts as disclosed by the testimony
    filed herewith, we are of the opinion that the prices paid as
    compensation for the postal car service are not excessive, and
    recommend that no reduction be made therein so long as the
    methods, conditions and requirements of the postal service
    continue the same as at present."

Since the above recommendations were made, the operating costs
on railroads, and, consequently, the cost of handling the mail,
as hereafter shown, have been largely increased, through higher
prices for both material and labor, so that if the railways were
not over-paid ten years ago, the present rates, being lower than
those paid at that time, would be too low and should really be
increased to give the railroads a reasonable return. Far from doing
this, legislation enacted in the past few years has had the effect
of cutting down the mail pay of the railroads, whilst the special
requirements as to service and equipment have been made more severe
and exacting.

Recent acts of Congress or orders of the Postoffice Department,
which have the force of law, that have caused reduction of railroad
revenues, are the following:

1. Act of Congress of March 2, 1907, reduced pay on all routes moving
in excess of 5,000 pounds per day. This reduced the pay for handling
mails $1,740,494.63, or 3½ per cent. of the total earnings. The same
act reduced the rental rates for railway postal cars $935,974.09 per
annum, or 16 per cent. The total reduction in pay to the railroads
under this act was $2,676,468.72, or 6 per cent. of the total
compensation for both classes of service.

2. Act of Congress of June 26, 1906, effective July 1, 1906, withdrew
from the mails empty mail bags and certain supplies, to be thereafter
shipped as freight or express. It may be conservatively estimated
that the annual loss in mail revenue to the railroads by withdrawing
these shipments from the mails is at least $1,000,000, with
practically no reduction in space furnished because of this change.

3. Order of Postmaster-General of June 7, 1907, changing with each
mail weighing thereafter the method of computing average weights on
which pay is based from that always previously used and theretofore
regarded as the proper interpretation of the law. The effect of this
on the mail weighings of 1907 and 1908 was to reduce railway mail pay
in two sections of the country, $2,222,108.92, or 9½ per cent., or at
the rate of $4,500,000 per annum for all roads of the country.

4. Orders of Postmaster-General reducing railway postal car pay
by allowing "shorter-car" pay on certain lines than heretofore
authorized and changing certain full lines to half lines; that is,
reducing pay for return movement, thus causing an annual loss to the
railroads of $345,287.06. (Second Assistant Postmaster-General's
Annual Report 1908, page 13.)

The effect of all of these reductions on the mail revenue of the
railroads aggregate $8,500,000 per annum, or 17 per cent. of the
total pay received by them in the year ending June 30, 1908, for
handling the mail and furnishing railway postal cars.

These reductions were made without justification and for the purpose
of reducing railroad revenues--and, incidentally, the expenses
of the Postoffice Department, at a time when the net earnings of
the carriers seemed large to the public mind, although under these
favorable conditions the returns to the shareholders approximated
but 4 per cent., whilst farmers were receiving 10 per cent.,
manufacturers 15 per cent. and National banks 18 to 20 per cent.

It is true that there has been a large increase in the gross revenue
of the railroads in the last ten years, but this has accrued from
traffic other than carriage of the mails and has been accompanied
by great increase in operating expenses. In fact, were it not for
the economies of the carriers, effected by the use of more powerful
locomotives and larger freight cars, the increase in operating
expenses would, without doubt, have fully neutralized the growth in
revenue. In the months preceding the panic of October, 1907, the
railroads were quite generally showing decreases in net earnings in
face of the largest gross earnings in their history. It was costing
them much more than a dollar to handle every dollar increase in gross
earnings.

Since the hasty enactment of ill-considered legislation reducing
mail pay, the revenues of the roads have been seriously affected by
a change in business conditions which has reduced traffic without
reducing prices of materials and labor. At the same time, legislation
has increased labor costs by reducing hours of service.

In 1898 rates for transporting the mails were too low to cover the
cost of service, they are much too low now, and the losses on the
mail service as a whole--there are some routes that pay--are borne by
freight traffic entirely.


RECEIPTS FROM MAIL AND OTHER RAILROAD TRAFFIC.

The latest statistics of operations of all railroads of the United
States are for the year ending June 30, 1907, issued by the
Interstate Commerce Commission, July 9, 1908. From them we compile
the following exhibit comparing results of 1907 with 1898--when a
Commission of Congress, after complete investigation of the subject,
recommended that mail rates be not reduced.

                                                             Pct. Pct.
    Year ending June 30th--         1907.         1898.      Inc. Dec.

  Earnings from passengers   $  564,606,343     $266,970,490  111  --
  Earnings from express      $   57,332,931     $ 25,908,075  121  --
  Earnings from mails        $   50,378,964     $ 34,608,352   46  --
  Earnings from freight      $1,823,651,998     $876,727,719  108  --
  Operating expenses         $1,748,515,814     $817,973,276  114  --
  Passenger train mileage       541,439,176(a)   341,526,769   58  --
  Freight train mileage         662,106,857(a)   503,766,258   31  --

  (a) Including mixed trains.

  Earnings per passenger train mile (cents):
                                                                Pct. Pct.
                                              1907.      1898   Inc. Dec.

  From passengers                             105.7       79.4    31  --
  From express                                 10.7        7.7    38  --
  From mails                                    9.4       10.3        10
                                              -----       ----    --  --
    Total                                     125.8       97.4    29  --
  Number passengers carried per train          51         39      31  --
  Tons of mail carried per train                 .86        .80    7  --
    Earnings per freight train mile (cents):
  Earned from freight                         274.0      173.1    58  --
  Tons of freight carried per train           357.35     226.45   58  --
  Operating expenses per total train mile
  (cents)                                     147.0       95.6    54  --
    Net earnings per train mile (cents):
  Passenger trains                             21.2 (Loss) 1.8
  Freight                                     127.0       77.5    64  --
  Passenger earnings per passenger mile
  (cents)                                       2.014      1.973   2  --
  Mail earnings per mail ton mile (cents)      10.66      12.57   --  15
  Freight earnings per freight ton mile         0.759      0.753   1  --
  (cents)

    Note.--Bear in mind these figures do not, of course, show
    effect of cut of $8,500,000 in mail pay effective July 1,
    1907, or losses in net revenue through depression in business
    conditions commencing in latter part of 1907. As an index of
    the latter, the Commercial and Financial Chronicle of September
    5, 1908, showed that 141 roads, aggregating 168,839 miles or 70
    per cent. of all roads in the country, had suffered a loss of
    $63,484,902, or 24.97 per cent., in net earnings in the first
    half of the calendar year 1908, as compared with same period of
    previous year.

The foregoing statement clearly shows the difference between the
revenue obtained from passenger trains as compared with freight
trains. The control of the former is largely out of the hands of
railroad operating officers, as to meet competitive and traffic
conditions, heavier and more luxurious passenger cars must constantly
be furnished, which, of course, means largely increased expense
with very little increase in the paying train load. In fact, as
to the mails, notwithstanding an increase in tonnage carried on
the average train, the mail earnings per passenger train mile were
actually less in 1907 than in 1898, due largely to the automatic
reduction of railway mail pay per ton mile. Considering the freight
train mile, the composition of which is almost entirely within the
control of the railroads, which institute methods for reducing cost
of transportation, it will be observed that by such methods the
railroads have been enabled to place 58 per cent. more tonnage in a
train, bring them 58 per cent. more earnings, which can be applied as
an offset to the increase of 54 per cent. in the cost of running a
train one mile.

This increase in operating expenses per train mile last referred to
has been brought about largely because of the increased cost of labor
and materials, which, as is well known, has been general throughout
the country.

Comparing results of operation of all railroads of the United States
for the year ending June 30, 1907, with 1898, when this question
was last up, it is shown by reports of the Interstate Commerce
Commission that gross revenue from operations, as well as income
from investments, increased $1,380,000,000. This is a very large
sum, but let us see what becomes of it. Increased wages paid to
employes consumed $577,000,000, or 42 per cent., purchase of material
included in operating expenses, $354,000,000, or 26 per cent. of the
increased income, and these material purchases represented largely
labor involved in their production. Increases in betterments and
miscellaneous deductions consumed $77,000,000, or 6 per cent. of the
increased income. Larger payments for interest on funded debt and
current liabilities consumed $96,000,000, or 7 per cent., and larger
taxes 2.5 per cent., leaving $240,000,000, or 16.5 per cent. of the
increased income for the owners of the properties, the stockholders.
In 1898 dividends were less than 2 per cent. of the capital stock,
and in 1907, even with the large increase noted, they were only 4 per
cent. Contrast this with the manufacturers' returns of 15 per cent.,
the farmers' of 10 per cent., and the National banks' of 18 to 20 per
cent. on their capitalization.

Reduction in railway mail pay was not justified in 1898; it was far
less justified in 1907. On the contrary, there has been a large fall
in mail pay per ton mile, and conditions under which mails are
transported are becoming more and more onerous. The cost of building
a railway postoffice car to the present plans and specifications of
the Postoffice Department is at least 50 per cent. more than it was
in 1898, although pay received for handling these cars, that weigh
from 25 to 30 per cent. more than formerly, has been arbitrarily cut
over 16 per cent. by the Act of Congress of 1907, and has since been
further cut through readjustment of routes. For the year ending June
30, 1908, the railroads received gross $48,155,379, including railway
postoffice pay, for carrying 80 per cent. greater tonnage of mails
than in 1898, a sum $12,747,629 less than it would have been but for
the reduction of rate from 12.59 cents in 1898 to 9.94 cents in 1908.
In face of this, as we have shown, arbitrary cuts of $8,500,000 more
have been made, a grand total of over $21,000,000 less paid now than
ten years ago.

About eighteen months ago the conclusion was reached that heavier
and stronger cars were demanded by changed conditions resulting in
heavier trains, greater speed and increased frequency and consequent
risk of accident to clerks and mail in collisions and wrecks. After
careful investigation and expert testimony the specifications were
revised so that full 60-foot cars would weigh about 100,000 pounds
instead of 80,000 pounds, and be greatly strengthened by the free use
of steel plates and oak timbers. To meet the views of car builders,
east and west, two plans and specifications, slightly differing,
were adopted as standard, and railroads were given the option of
conforming to one or the other. The best known anti-telescoping
features were adopted in both plans, producing in the judgment of
responsible car builders a car of exceptional resisting and carrying
power. When new lines of cars are authorized by the Department,
or new cars are ordered to take the place of old cars in service,
companies operating the routes are furnished copies of these
specifications and the superintendent of division is instructed to
see that cars are built in conformity therewith. Inspections are made
while the car is in the shop, and when it is completed a full report
is made and forwarded to the Department. A decision is then reached
as to whether the car is satisfactory and can be accepted.

(Annual Report Postmaster-General for 1905.)

This increase in weight of a postal car might not be thought of much
moment, but it means to the railroads the movement of 1,000,000
additional gross ton miles per car per year, costing them $10,000
per annum in operating expenses, whilst, as shown, they receive 16
per cent. less railway postoffice pay now than formerly.

United States Postal Laws and Regulations, Section 1164, provide
that the average weight of the mails used in fixing rates shall be
established by the actual weighing of the mails for a period of not
less than thirty days and "_not less frequently_ than one in every
four years." The construction placed upon this by the Department has
been the one which reduced to the minimum the pay which the railroads
receive for services rendered. If mail traffic were stationary,
weighing every four years would not matter much, but the increase of
mail matter throughout the United States has been very great, and,
because of the policy of the Department, to weigh the mails not more
frequently than every four years, heavy losses have resulted through
the railroads having to haul tonnage for three successive years
following each weighing for which they receive no pay.

As a result of this policy of quadrennial weighings, the roads in
Interstate Commerce Groups 7, 8, 9 and 10 (including the territory
west of the Missouri river and the Mississippi below St. Louis)
between 1878 and 1905 suffered a loss of $19,200,000, or 12 per cent.
of the aggregate railway mail pay, compared with what they should
have received if the mails had been weighed annually. In other words,
this loss is equivalent to a reduction in the rate received per ton
mile in these groups of states of 12 per cent. The loss to roads in
the western part of the United States is most striking, due as it is
to the rapid growth of that section. The same reduction, though to a
slightly less degree, obtains in other parts of the United States.


COMPARATIVE RETURNS TO THE RAILROADS FROM CONDUCTING MAIL. PASSENGER
AND FREIGHT SERVICE IN THE UNITED STATES.

In order to make a fair comparison of operating results from
different classes of traffic, it is necessary to consider them under
substantially similar conditions. The best measure of railroad
service is work done, or weight multiplied by distance carried; in
other words, the ton mileage. A comparison of services differing so
widely as the mail, passenger and freight on the basis of ton mileage
of such business is, however, unfair, because in the two former an
excessive proportion of dead weight must be transported for each ton
of paying load, whilst with freight traffic the proportion of dead
weight is small. The hauling power of a locomotive is measured not
by revenue ton miles, but by ton miles of gross weight, it making
little difference to the locomotive as to what this gross ton mileage
is composed of, the gross tonnage and the speed at which it must be
moved being the factors that consume the energy of the locomotive.

A computation has been made of ton mileage on each individual mail
route by multiplying weight carried by length of route; to the sum
of these we add the dead weight of cars. The report of the Second
Assistant Postmaster-General for year ending June 30, 1908, page
32, gives the number of cars engaged in mail service, which we have
multiplied by the average mileage made by the average car, based
on experience of the Union Pacific and Southern Pacific Systems,
to ascertain total car mileage for the United States. Multiplying
this by the dead weight of a car gives the ton mileage of dead
weight, which, added to the ton mileage of mails, gives the gross
ton mileage, measure of work and cost imposed on the railroads
in return for the pay they receive for handling the mails. These
computations are shown in the following statements, the results being
conservative, as for want of accurate data it has been necessary to
omit some work which the railroads do, which, if ascertainable, would
increase the cost. For example, we have made no charge for the dead
weight of that portion of baggage cars devoted to the handling of
pouch mail, such pouch service, according to the Postmaster-General's
report, covering annually on railroads and express trains
122,027,597 miles; nor for the dead weight of storage mail cars
provided by the railroads. Neither has any account been taken of
the value of transportation given mail clerks, which, based on the
Postmaster-General's report of 1908, amounted to 629,778,443 miles,
which at 2 cents a mile would be $12,500,000; nor for the value
of transportation or postal commissions of Postoffice Department
officials; nor does it take into account special service rendered by
the railroads, such as delivering mail at stations, value of space
furnished by the railroads and required of them by the Postoffice
Department at important junction and terminal points for mail
distribution and accommodation of government transfer clerks.

The statistics of passenger service in the following statements are
based on the 1907 Annual Report of Statistics of Railways published
by the Interstate Commerce Commission (1908 figures, which would
show higher operating cost, not available), with the exception that
the average mileage per car per annum run by passenger cars is based
on the experience of the Union Pacific and Southern Pacific Systems.

Statistics of freight service are likewise based on the 1907 Report
of Statistics of Railways, freight car mileage being actually
reported by the Interstate Commerce Commission, dead weight per car
being computed from all freight cars handled on Union Pacific and
Southern Pacific Systems.


MAIL SERVICE.

  Year Ending June 30, 1908.

  Paid to the railroads for railway postoffice cars             $ 4,567,366
  Paid to the railroads for mail transportation                  43,588,013
                                                                -----------
  Total                                                         $48,155,379

  Ton mileage of mails handled by railroads                     484,683,135
  Pay per revenue ton mile, including railway
  postal pay car                                                      9.94c
  Pay per revenue ton mile, excluding railway
  postal car pay                                                      8.99c

                                             R.P.O.   Apartment.     Total.
  Number of cars (Postoffice Department
    Report)                                  1,342       3,568        4,910
  Average length (special mail weighing
    1907), feet of mail apartment               59          27          --
  Equivalent full R.P.O. cars                1,342       1,633        2,975
  Miles run per car per annum (experience
    of U. P. System and Southern
    Pacific Company)                       100,000      60,000        --
  Total equivalent R.P.O. car miles    134,200,000  97,980,000  232,180,000

  Miles traveled by R.P.O. clerks
    (miles reported as traveled by crews
    multiplied by average number of men
    per crews)                                           --     629,778,443

    Gross ton mileage--
  Equivalent railway postal clerks, 232,180,000 miles, at
    45 tons per car                                          10,448,100,000
  Ton miles of clerks at 160 pounds per man                      50,382,275
  Revenue ton miles of mail, including pouch mail               484,683,135
                                                             --------------
  Total gross ton miles(a)                                   10,983,165,410

  Average weight of mail per equivalent full R.P.O. car (tons)(a)      2.09
  Average weight of clerks per equivalent full R.P.O. car (tons)        .22
  Average weight of car per equivalent full R.P.O. car (tons)         45.00
  Rate of mail and R.P.O. car pay per gross ton mile (cents)          0.438
  Ratio of paying to dead load(a)                                 1 to 21.7

  (a) No portion of mileage or weight of storage cars or cars handling
      pouch mail has been considered.


PASSENGER SERVICE OTHER THAN MAILS.

                                               Miles run     Total car
                                      Number    per car      miles run
                                     of cars.  per annum.    per annum.
                                        (a)        (b)
  Baggage and express, excluding 2,975
    equivalent postal cars             7,404     60,000     444,240,000
  Sleepers, diners and parlor cars     2,000    100,000     200,000,000
  Coaches, etc.                       31,594     40,000   1,263,760,000
                                      ------              -------------
      Total                           40,998              1,908,000,000

  Passenger train miles, including mixed trains             541,439,176
    Cars per train mile--
                             Mail   0.43
                             Others 3.52
                                    ----
                             Total  3.95

    Gross ton mileage--
  Baggage and express cars, 444,240,000x30 tons          13,327,000,000
  Sleepers, diners and parlor cars, 200,000,000x50 tons  10,000,000,000
  Coaches, etc., 1,263,000,000x40 tons                   50,550,400,000
                                                         --------------
      Total ton miles dead weight                        73,877,400,000
                                                         --------------
  Ton miles of passengers, 27,718,030 (a) passenger
    miles at 150 pounds per passenger                     2,078,891,552
  Ton miles of baggage and express, 444,240,000 car miles
    estimated at only 3 tons average load in a car        1,332,700,000
                                                          -------------
  Total ton miles revenue load                            3,411,591,552
  Total gross ton miles                                  77,288,991,552
  Total revenue received from passengers and express       $621,939,274
  Total revenue received per gross ton mile (cents)               0.805
  Total revenue received per revenue ton mile (cents)            18.23
  Ratio of paying weight to dead load                       1 to 21.7


FREIGHT SERVICE.

  Total miles run by freight cars (a)                    17,122,259,754
  Total ton miles dead weight, each car estimated
    at 15 tons (b)                                      256,833,896,310
  Total ton miles revenue freight (a)                   236,601,390,413
                                                        ---------------
      Total gross ton miles                             510,557,546,477

  Ratio of paying to dead load                                 1 to 1.1
  Total revenue received for transporting freight        $1,823,651,998
  Total revenue received per gross ton mile (cents)               0.369
  Total revenue received per revenue ton mile (cents), (a)        0.759
  Tons per car revenue freight (loaded and empty)                13.8
  Revenue per car mile (cents)                                   10.5

  (a) Statistics of Railways of United States, 1907.

  (b) Experience of Union Pacific and Southern Pacific Systems.


RELATIVE COST OF SERVICE.

To determine the relative costs to the railroads of performing mail,
passenger and freight service, we must allocate the expenses to
freight and passenger service as a whole, afterwards apportioning
the latter to mails and other service. Railroad operating expenses
apply jointly to both passenger and freight trains, so that, with few
exceptions, it is impossible to determine exactly from any published
statistics the cost of passenger train service as distinguished
from freight. There are some items of train mile expense directly
connected with movement which are less for passenger than for freight
trains, whilst, on the other hand, many other expenses are greater
for passenger than for freight, such as danger from casualties,
necessity of expensive terminals, delays to other traffic through
preference given to passenger trains, additional main tracks, and,
particularly, higher standards of maintenance of roadbed required for
high speed passenger train movement.

On account of the impossibility of separating the expenses, we assume
that the above factors about balance each other and that the average
cost of running _all_ trains can be taken as either passenger or
freight train mile cost, respectively, without serious error.

We allocate a proportion of the passenger train cost to the mails on
the basis of the gross ton miles handled in each class of passenger
traffic.

The relative revenues and expenses are shown on opposite page, mail
revenues being as shown by 1908 Report of Postoffice Department, and
other statistics as given in the 1907 Statistics of Railways of the
United States, published by the Interstate Commerce Commission, or
are computed therefrom.


ALL RAILROADS IN UNITED STATES.

  Summary of Mail, Passenger and Freight Service.

                                       Other        Total
                           Mails.   Passenger.   Passenger.       Freight.

  Gross revenue       $ 48,155,379  621,939,274  670,094,653  1,823,651,998
  Operating expenses  $ 96,322,357  677,614,637  773,936,994    974,577,820
  Taxes and interest on
    bonds             $ 23,503,973  165,582,552  189,086,525    235,468,467
  Total expenses      $119,826,330  843,197,189  963,023,519  1,210,046,281
  Surplus                     --           --           --      613,605,711
  Deficit             $ 71,670,951  221,257,915  292,928,866           --
    Ton mileage (thousands)--
  Revenue weight           484,683    3,411,592    3,896,275    236,601,390
  Dead weight           10,498,482   73,877,400   84,375,882    256,833,896
    Total gross         10,983,165   77,288,992   88,272,157    493,435,286
  Tons dead weight per
  ton revenue                 21.7         21.7         21.7            1.1
    Per gross ton mile (cents)--
  Gross earnings             0.438        0.805        0.759          0.369
  Operating expenses         0.877        0.877        0.877          0.197
  Earnings over operating
    expenses                   --           --           --           0.172
  Operating expenses over
    earnings                 0.439        0.072        0.118            --
  Taxes and interest on
    bonds                    0.214        0.214        0.214          0.048
  Surplus                      --           --           --           0.124
  Deficit                    0.653        0.286        0.332            --
  Per cent of operating
    expenses to earnings       200          109          115             53
  Gross expenses to earnings   249          135          144             67

      Figures exclude dividends, betterments and additions, etc.

The above shows that whilst passenger service as a whole is
unremunerative, the mail earnings are hardly what they should be to
pay a fair share of the railroad operating expenses only, regardless
of taxes and interest.

Or, put in another way, our computations have shown that in each
passenger train run the railroads haul an average of 43/100 of a
mail car, and the contents of this car yielded average earnings of
9.4 cents for each mile run. The computation just made shows that
each freight car run, loaded or empty, yields a revenue to the
carrier of 10.5 cents per mile. Incredible as this may seem, it is
understandable when we reflect that the railroads transport 1.1 tons
of dead weight for each ton of freight for which they are paid; with
mail they transport 21.7 tons, or twenty times as much. The freight
rate is .759c per ton mile, the mail rate 9.94c, or only thirteen
times as much.

Arguing in still another way: Average number of cars in each
passenger train handled in United States is 3.95, of which mail cars
amount to 0.43, or 11 per cent. Eleven per cent. of the average
earnings of a passenger train is 13.8 cents, but mail contributed
only 9.4 cents. That is, it should pay 47 per cent. more than it does
to be made to contribute a fair share to the insufficient earnings
of a passenger train. Mails are fairly responsible on basis of space
used for 11 per cent. of the cost of running a passenger train, or
16.17 cents, and as dead weight per foot of space is greater with
mails, their proportion of train mile cost is even larger. They pay
little more than one-half this cost.

By building larger capacity cars and larger engines, the cost of
handling freight traffic, entirely in the control of the carrier, has
been reduced to follow rate reductions and increased expenses.

On the other hand, because methods of conducting passenger traffic
are largely--and mail traffic entirely--beyond their control the cost
of handling mail and passengers has been steadily increasing, and, as
revenue has not increased, the net revenue or margin of profit has
been cut to a point where it is unremunerative.

The argument advanced by advocates of reduced mail pay, that
increasing density permitted economies and that lower rates would
yield more net, is not applicable when the carriers' hands are tied
and measures of economy so successfully applied to handling freight
are prohibited. The following will illustrate this:

On routes where pouch service is used mail is handled with express
and baggage without much increase of cost over other passenger
traffic. A somewhat greater mail traffic obliges the railroads to
furnish apartment cars, at increased expense and dead weight for the
postoffice feature, but still permitting the railroads to carry other
traffic in the same car. A still further increase in weight means the
establishment of full R. P. O. lines for which the railroads receive
extra, but inadequate, compensation, these cars being used for no
other class of traffic and adding largely to the weight and cost of
train service. Even after the route has been made an R. P. O. route,
the railroads are not permitted to economize by carrying more mail
in the car, and as traffic density grows the roads must under the
requirements of the Department add more cars, almost in proportion
to the business, as the loads carried in R. P. O. cars, as shown
by recent special weighing, average only 2¾ tons, and many of them
return empty--for which empty haul the railroads often receive no
pay. When the mail business has assumed very large proportions and
the R. P. O. cars have multiplied in ratio therewith, special trains
are then added to carry the bulk of the mail, being run at very high
speed and adding to the railroad expense account in a far higher
degree per unit of business than any other class of traffic.

In contrast to the above, baggage and express are very generally
hauled in the same and a much lighter and less costly car than the
mail car, and increase in tonnage is accommodated by hauling greater
loads per car. In the case of freight, increased density means larger
car and train loads and greatly reduced costs of operating per ton
mile.

Despite these differences in conditions, the automatic scale has
secured to the Government a larger reduction in mail rates per
ton mile in the last ten years than the percentage of fall in
freight rates, despite higher labor and material costs of railroad
operating. As a result, the mail business--which, according to
evidence introduced before the Congressional Committee of 1899, was
unprofitable at that time, has been made more unprofitable at the
present time by the heavy rate reductions of 1906-7.

As the greatest reduction made deals with mail routes on which
traffic is heaviest, a consideration should be given to the following
conditions of handling mail on such routes:


HEAVY TRAFFIC MAIL ROUTES.

On very many of the heavy traffic routes where the principal
reduction in pay occurred a large part of the mail is now handled
in special mail trains run at excessively high rates of speed. Such
trains introduce the following conditions:

1. A very much greater liability to accident. A large proportion of
the deplorable accidents that have occurred on the American railroads
in recent years have occurred to excessively high speed trains,
accidents to such trains being almost invariably destructive to
life and property. An examination of serious accidents on the Union
Pacific System and Southern Pacific Company for the calendar year
1906 shows that 36 per cent. of the property damage from all causes,
including negligence, as traceable to trains not under control and
excessive speed, whilst 30 per cent. additional damage was due to
causes that might prevent inferior trains getting out of their way,
such as keeping main line on time of superior trains, failure to
observe signals or orders, etc.

2. Mail trains run at excessive high speed are much more expensive to
operate than other trains, for the following reasons:

    (_a_) Fuel consumption per traffic unit is very much greater at
    high speed because of diminished tractive power of locomotives.

    (_b_) A relative greater hauling capacity of locomotives must
    be consumed in moving trains at higher speeds.

    (_c_) Excessive speed requires higher standards of track
    maintenance, double-tracking, block signals, heavy rail, better
    ballasted roadbed, etc., etc.

    (_d_) High speed means increased wear and tear on equipment and
    track.

    (_e_) High speed trains are expensive, delaying and adding to
    the cost of other traffic.

3. Speed of trains carrying mails has been constantly increased, a
study made of the speed per hour made on fastest trains on which
R. P. O. cars are handled on seventeen of the principal mail routes
giving the following results:

Average of fastest train on seventeen mail routes:

                                Speed
  Year.                   (Miles per Hour.)    Relative.

  1905                           42.21            136
  1899                           39.23            126
  1890                           34.35            110
  1885                           31.34            100
  Average increase per year       0.55

With the above increase in speed, rates paid the railroads have
automatically decreased whilst expenses have largely increased to
provide for the above greater speed and because of increase in
prices of labor and materials of all kinds in the past five or six
years. This increase in speed has been made coincident with growth
of freight traffic, which is the railroads' profitable business,
_the non-profitable high speed trains delaying the profitable ones,
increasing their cost and incurring liability to accident_.

4. Earnings of mail trains supposedly high are not higher than other
passenger trains, which, as a whole, earn very much less per mile
run than freight, relative figures being as shown by last report of
the Interstate Commerce Commission--as 100 is to 218, whilst the
cost of running passenger trains is as much, if not more. This is
particularly the case with high speed passenger trains, which is
the most unprofitable business in which railroads are engaged. (On
Union Pacific System last year earnings per passenger train mile were
$1.71, per freight train mile $4.31.)

5. Passenger engines in hauling fast passenger trains on principal
main lines at the present time have assumed, on account of increased
weight of equipment and excessive speed required, enormous
proportions. We now have in such service on our lines engines
weighing exclusive of tender 222,000 pounds, this power being 60 per
cent. heavier and twice as costly as locomotives used in the same
class of service ten years ago, burning double the amount of fuel.
Engineers running these locomotives receive higher pay because of the
greater size of these engines--to say nothing of recent increases
made in their schedules. Such heavy power moving at fast speed
is extremely destructive to the roadbed, requiring a much higher
standard of maintenance than formerly, maintenance of way cost in
the past few years having gone up 50 per cent. Engine failures are
largely confined to fast passenger trains, and, in general, expenses
are increased all along the line because of their introduction.

6. As illustrating the additions to expenses because of increased
track maintenance on account of fast passenger and mail trains, we
have made a study of statistics, using the Interstate Commerce report
of 1906 as a basis, of seven roads having a large proportion of fast
passenger service and seven roads having a moderate speed passenger
service, but with a large proportion of freight service. On the
roads first named the average cost of maintenance of way per mile
was $2,951, and on roads in the latter class $1,565. The operating
expenses per train mile in the former class were $1.47, and in the
latter $1.33. The roads in the former class, on account of large
number of excessively high-speed trains, were obliged to double-track
their lines, which directly increased maintenance expenses.


PAY FOR RAILWAY POSTAL CARS.

The large reduction made by Act of March 2, 1907, in pay for railway
postal cars was made in face of large increase in the cost of
constructing such cars, due to higher prices of labor and material
and greater cost of meeting the more exacting specifications of the
Postoffice Department. Changing to steel construction, increases in
weight, and generally heavier operating expenses, have created an
extremely large increase in cost of moving these cars. The standard
railway postal car of only a few years ago, 60 feet long, weighed
80,000 pounds and cost about $5,500. The standard railway postoffice
cars, 60 feet long, of wooden construction, used on the railroads
with which I am connected, weigh over 100,000 pounds each, or
one-fourth more weight, and costs 40 per cent. more, whilst our new
standard postal cars of steel construction weigh 108,000 pounds and
cost over $9,000, or 60 per cent. more than the car of a few years
ago.

An argument sometimes made in favor of a lowering of R. P. O. car
pay is that for apartment cars used in runs where mail density does
not require a full car, no additional compensation is allowed. But
we feel that a fair consideration of the circumstances under which
mail is handled as compared with other traffic will justify the
conclusion that this is not an argument in favor of reducing R. P.
O. pay, but rather for allowing the railroad additional compensation
for the apartment cars as well. Both services require the furnishing
of special features in the way of traveling postoffices not required
except for the convenience of the Postoffice Department to enable it
to do work while mail is in transit, such as ordinarily performed in
office buildings. The full postal car is more expensive to the roads,
as it always means additional car service, whilst in some cases of
apartment cars the space not occupied by the traveling postoffice is
adequate to take care of baggage and express, though very frequently
this service also means additional car movement that would not be
necessary but for the postoffice feature.

The saving to the railroads from reduction in car mileage that would
be possible if it were not obliged to furnish traveling postoffices,
but could use the space occupied by racks and other postoffice
features by loading additional mail in cars, would be many times the
revenue allowed by the railway postal cars.

To illustrate: The car mileage of postal cars (changing apartment
cars to full cars on basis of length) is 232,180,000 per annum;
the ton mileage of mail 484,683,135, or 2.09 tons per car. From
figures obtained from the Postoffice Department, average car weights
shown on page 59, table "EE," special mail weighing of 1907, it is
ascertained that storage mail cars, which, of course, contain no
postoffice features, carry an average of 7.04 tons of mail. At this
rate the whole mail business could be carried by the movement of
68,844,000 car miles, or 163,336,000 less than actually employed, due
to the postoffice features. The total railway postal car pay is only
$4,567,366, or only 2.8 cents per additional car mile, whilst the
operating expenses chargeable to running these 163,336,000 car miles,
of 70 per cent. of the total movement, amount to $67,000,000.

But for the postoffice feature, the combined weight of an entire
route could many times be handled in a single car such as is used
for express instead of several heavy and expensive postoffice cars,
whilst often extra cars for storage mail must be added, for which no
extra pay is allowed, the cost of running these storage cars also not
being included in the computation of cost of service, as no accurate
statistics of their number or car mileage are available.

In addition to the furnishing of storage cars, although many
R. P. O. routes are paid for on a basis of 40 foot cars, it is not
economical for the railroads to construct such cars which are not
interchangeable with other equipment and which would have to be
thrown aside if through growth of traffic larger cars are afterwards
required. As a result, full 60-foot R. P. O. cars have for years been
furnished on many 40 and 50-foot routes, the railroad getting no
credit for this, whilst on many other routes R. P. O. cars have been
run in advance of the fixing of R. P. O. pay for them.

On a number of routes postal car pay has been allowed for running
full cars in one direction only, classing such routes as half-lines.
This obliges the railroads to move the car in the opposite direction
without pay, the small additional compensation of less than 4 cents
per mile run received in one direction being entirely inadequate to
compensate the road for the empty haul--to say nothing of allowing
anything for moving it in direction for which pay is received. To
illustrate: The Union Pacific Railroad in one case between Council
Bluffs, Iowa, and Ogden, Utah, 1,003 miles, receives no pay for
handling east-bound a 60-foot mail car, which is paid for west-bound
only, six mail cars being required on this line. The R. P. O. pay per
car mile, including movement in both directions, is only 2.24 cents,
or about what would be received for transporting a single passenger,
although a standard passenger coach has a capacity for 70 passengers.

In connection with the railway postoffice, an item not often
considered is the value of transportation furnished clerks in the
railway mail and compartment cars. Figuring this at 2 cents per
mile, which is about the lowest passenger fare, the total value of
this transportation for clerks in railway postoffice cars would be
$8,600,000 per annum, or $4,000,000 more than the railroads receive
for the handling of these cars, and the value of transportation in
the case of apartment cars would be $4,000,000 per annum additional.
In addition to this, a large amount of free transportation is
required annually by the Postoffice Department for inspectors and
other officers of the Department.

The Postoffice Department issues annually about six hundred traveling
commissions to postoffice inspectors and other postal officials,
and requires railroad companies to honor such commissions for free
transportation on all trains on all lines on which mails are carried.
In some cases these commissions are issued to Government officials
whose official duties are in no way connected with the transportation
of mails on railroads. The railroads have no control whatever over
the issuance of these commissions and can not even secure from the
Postoffice Department a list of them, the Department holding that
the list is confidential. These commissions are frequently used
for personal travel in violation of the rulings of the Interstate
Commerce Commission. In brief, the Postoffice Department in effect
arbitrarily issued about six hundred annual passes over every mail
carrying railroad in the United States, which is equivalent to about
200,000 annual passes.


POSTAL DEFICIT.

In investigating the subject of railway mail pay, we have been
struck very forcibly with changes which have taken place in the
revenues and expenditures of the Postoffice Department since 1899,
when this subject was last reviewed. Although postal operations
still show a deficit, it is a fact that its revenues have increased
in a remarkable degree, and the deficit is certainly not due to the
amounts paid to the railroads for hauling mail, as these payments are
relatively far less now than formerly. Revenues of the Postoffice
Department have grown from $102,000,000 in 1900 to over $191,000,000
in 1908, or 87 per cent., this increase in revenue in eight years
being as great as the entire increase in the previous thirty-five
years.

But in this same period of eight years there was an increase
of $100,600,000, or 93 per cent., in Postoffice Department
expenditures, of which only $10,900,000, or 11 per cent., was paid
to the railroads, $33,935,000, or 34 per cent., going to Rural Free
Delivery, $25,000,000, or 25 per cent., to postmasters and their
clerks, and the balance to other items.

The following statement shows for the year 1895 and for the years
1899 to 1908, inclusive, postal revenue and postal expenditures
divided between amounts paid the railroads, cost of rural delivery
and other expenditures:


    REVENUE.                               EXPENDITURES.

                          Paid        Rural
  Year.                Railroads.    Delivery.     Other.        Total.

  1895  $ 70,983,000  $31,189,000(a)  $   --    $57,637,000  $ 88,826,000(a)
  1899    95,021,000   35,775,000      150,000   65,607,000   101,632,000
  1900   102,355,000   37,315,000      420,000   70,005,000   107,740,000
  1901   111,631,000   38,161,000    1,778,000   75,616,000   115,555,000
  1902   121,848,000   39,519,000    3,998,000   81,269,000   124,786,000
  1903   134,224,000   41,377,000    8,102,000   89,305,000   138,784,000
  1904   143,583,000   43,971,000   12,682,000   95,709,000   152,362,000
  1905   152,827,000   45,482,000   20,824,000  101,093,000   167,399,000
  1906   167,933,000   46,953,000   24,774,000  106,543,000   178,270,000
  1907   183,585,000   49,831,000   26,643,000  113,754,000   190,238,000
  1908   191,479,000   48,155,000   34,355,000  125,842,000   208,352,000

  (a) Includes $1,646,741 accrued in favor of Pacific Railroads in 1895,
      but not charged to postal expenditures.

  The railroads are themselves large contributors to the revenues of the
  Postoffice Department. It is ascertained that nine roads, covering
  27,500 miles, pay annually $261,000 for postage stamps, or at the rate
  of $2,000,000 for the entire railroad mileage of the country.

The next statement shows clearly that the ratio of expenses to
receipts of the Postoffice Department would in 1908 have been but 91
per cent. and no deficit but for the expenditures made for Rural Free
Delivery, the amount paid the railroads being now only 25 per cent.
of the total revenue as compared with 41 per cent. in 1895.


RATIO OF EXPENSES OF POSTOFFICE DEPARTMENT TO POSTAL REVENUES
1895-1908.

          Percentage       Percentage         Percentage
         of Postal Rev.      Paid to            Paid to
  Year.   Paid to R'ys.   Rural Free Del.    Other Expenses.   Total.

  1895        41                0                  75            116
  1899        38                0                  69            107
  1900        36                0                  69            105
  1901        34                1                  69            104
  1902        32                3                  67            102
  1903        31                6                  66            103
  1904        31                9                  66            106
  1905        30               14                  66            110
  1906        28               15                  63            106
  1907        27               15                  62            104
  1908        25               18                  66            109

In order to avoid a deficit, attention has been concentrated on this
25 per cent. of the postal expenditure, which we contend is at least
not an unfair compensation to the railroads for services rendered.
Though the proportion of the total revenue going to the railroads has
fallen one-third in ten years, the deficit still remains, and is it
reasonable to suppose that any reduction in railway mail pay would
not be speedily absorbed in other directions? On the contrary, ought
not efforts be concentrated to bring within reasonable figures the
other expenses of the Department, which now absorb 84 per cent. of
its revenue as compared with only 69 per cent. in 1900--despite an
actual growth in postal revenue in the same time of $89,000,000, or
87 per cent.?

It will be noted from these figures that a reduction of 10 per cent.
in the ratio of railway mail pay to total revenue can be entirely
wiped out by an increase of only 3 per cent. in other postal
expenses, whilst a retrenchment of 10 per cent. in the latter would
have put the Department almost on a paying basis, notwithstanding
the heavy cost of Rural Free Delivery. From 1895 to 1908 actual
totals show that the railroads' pay has increased 54 per cent. for
handling 114 per cent. more mail tonnage, whilst in the same period
other expenses of the Postoffice Department have grown 178 per cent.,
revenues increasing 149 per cent.

Increased mail business means a direct increase in postal revenue,
as postage remains the same regardless of tonnage, but carrying
this increased business on the part of the railroads means less
proportionate revenue to them according to volume of tonnage, so that
the proportion of the postal revenue they now receive is very much
less than formerly. Labor, material, and the price of everything sold
in commerce have advanced materially, as we all know, in the past
seven or eight years; railway mail pay being practically the only
thing that has decreased in the face of conditions that should have
raised it.

As a large increase in mail tonnage means to the Postoffice
Department about an equal increase in revenue with a decreased
payment per ton to the railroads through lower rates, the avoidance
of a deficit would seem not a difficult matter if other postal
expenses were kept at least within sufficient control, so they would
not increase faster than the increase in volume of mail handled.

The Postoffice Department enjoys this peculiar advantage of receiving
with the growth of the country an increase in revenue directly in
proportion to the increase in business handled. In disbursing this
revenue, it must pay less to the railroads in proportion to the
density of business, thus retaining to apply on other expenses a
larger net revenue year by year. It is reasonable to suppose that
the cost of many branches of the Department should not increase in
the same ratio as tonnage of mail (for example, that expenses of
individual postoffices and administrative and general expenses should
not grow in this proportion). Yet, regardless of these favorable
influences, expenditures in other directions have absorbed the
great net revenues after paying the railroads, and it is in these
directions that the cause of the postal deficit must be looked for.

The growth of these expenditures, which since 1900 has been much
faster than the rise in mail tonnage, is shown in the following
comparison of 1908 with 1898:

                                  1908.        1898.      Increase.  Pct.
  Ton mileage of mails handled
    by railroads              484,683,135  272,714,017   211,969,118   78
  Postal revenues            $191,478,663  $89,012,619  $102,466,044  115
  Less paid to railroads       48,155,379   34,379,227    13,776,152   40
  Net applicable to other
    expenditures              143,323,284   54,633,392    88,689,892  162
  Other expenditures          160,196,507   63,654,297    96,542,210  152
      Deficit                  16,873,223    9,020,905     7,852,318   87
    Per ton of mail handled by railroads (cents)--
  Postal revenues                                    39.5    32.6    +6.9
  Paid to railroads                                   9.9    12.6    -2.7
                                                     ----    ----    ----
  Net applicable to other items                      29.6    20.0    +9.6
  Other expenditures                                 33.1    23.3    +9.4
                                                     ----    ----    ----
      Deficit                                         3.5     3.3    +0.2

    Note.--The increase in gross postal revenue per unit of mail
    handled by railroads is no doubt due to increase in city mail
    not handled by railroads.

Chicago, Ill., March 1, 1909.




THE DIMINISHED PURCHASING POWER OF RAILWAY EARNINGS

BY C. C. MCCAIN.

Chairman of the Trunk Line Association, New York, 1909; Formerly
Auditor Interstate Commerce Commission.


INTRODUCTION.

The ten years or more which have elapsed since the resumption
of industrial activity that began some time in 1897 have been
characterized by changes in rates of wages for substantially all
kinds of labor, and in the prices of most commodities which amount
to a profound and material alteration in the value of money. Wages
of railway labor, prices of railway materials and supplies and
prices of commodities carried by railways and of those produced by
the purchasers of railway transportation have rapidly increased.
This is equivalent to a decrease in the value of the money in which
railway charges are paid _for the appreciation of commodities is the
depreciation of money_. Commodities cannot have generally augmented
value without money having diminished value. Railway rates have not
been adjusted to this diminished value of money. The involuntary and
unsolicited reduction in railway rates has gone so far as seriously
to threaten the stability of railway wages and that of the whole
railway industry. Some adjustment through compensatory advances
in money rates (_i. e._, nominal rates) is, therefore, absolutely
necessary. The extent of the changes which have taken place, their
relation to the problem of railway rates and the adjustments which
they have made necessary are set forth in the following pages.


TYPICAL UNCHANGED RATES.

A fifteen-ton car-load of fourth class freight carried all-rail
between Chicago and New York at any time during the year 1897 would
have brought the railways transporting it $105.00 in gross receipts.

There has been no change in the class-rates between Chicago and New
York since 1897 and the same quantity of freight, classified in the
same way, produces the same gross receipts now that it did in 1897.[E]

The rates between Chicago and New York, as is very well known, are
the basis of all rates in the region north of the James, Potomac
and Ohio Rivers, and east of the Mississippi River and of a large
proportion of the rates applicable to traffic originating or destined
to any point in that region. Without a change in rates between
Chicago and New York there could have been, during the continuance of
the system of rate adjustment that has been in force since long prior
to the year 1897, no general change in the rates based upon those in
force between those cities.


WAGES OF RAILWAY EMPLOYEES.

More than forty per cent. of the gross receipts of the railways of
the United States are expended in the payment of employees, the sums
annually paid out for that purpose since 1897 being as follows:

                Amount paid to
  Year.           employees.

  1897          $465,601,581
  1898           495,055,618
  1899           522,967,896
  1900           577,264,841
  1901           610,713,701
  1902           676,028,592
  1903        (a)776,321,415
  1904           817,598,810
  1905           839,944,680
  1906        (a)927,801,653
  1907         1,072,386,427
             ---------------
  Total       $7,781,685,214

  (a) Includes $19,000,000 estimated for Chicago, Milwaukee & St. Paul
      in 1903 and $27,000,000 for the Southern Pacific in 1906.

It is a matter of common knowledge and of frequent comment that
a given sum of money will now buy very much less in labor or
commodities than it would in 1897. The change has been gradual but
substantially continuous and the aggregate result has been enormous.
The consequence of this change has worked great hardship to those
whose incomes have not been adjusted to the changed purchasing power
of money but fortunately the rates of wages of nearly all workmen and
the prices of practically all products of labor expended upon farms
or in factories or otherwise have been raised sufficiently to more or
less completely offset it. The principal sufferers are those salaried
employees whose salaries have not been readjusted and those whose
incomes are received under contracts covering long periods of time or
are derived from the marketing of commodities or services at prices
more or less effectively controlled by custom or statute. Many of the
owners of railway bonds are in the second class and all interstate
railways are, as to the disposal of their services, in the third
class.

As already noted, the gross revenue derivable by the railways from
the transportation of a carload consisting of fifteen tons of fourth
class freight between Chicago and New York is the same now that it
was in 1897--_i. e._, $105.00. But $105.00 is worth much less to any
railway now than it was in 1897 for money is worth at any time what
it will buy at that time. The reports of the Interstate Commerce
Commission show the following increases in rates of average daily
wages paid to railway employees:

                                               Wages per day.
  Class of Employees.                     -------------------------
                                                          Increase,
                                          1897.   1907.   per cent.

  Station agents                          $1.73   $2.05     18.50
  Other stationmen                         1.62    1.78      9.88
  Enginemen                                3.65    4.30     17.81
  Firemen                                  2.05    2.54     23.90
  Conductors                               3.07    3.69     20.20
  Other trainmen                           1.90    2.54     33.68
  Machinists                               2.23    2.87     28.70
  Carpenters                               2.01    2.40     19.40
  Other shopmen                            1.71    2.06     20.47
  Section foreman                          1.70    1.90     11.76
  Other trackmen                           1.16    1.46     25.86
  Switchmen, flagmen and watchmen          1.72    1.87      8.72
  Telegraph operators and despatchers      1.90    2.26     18.95
  Employees, account floating equipment    1.86    2.27     22.04
  All other employees and laborers         1.64    1.92     17.07

The foregoing affords a means of ascertaining the real value of
$105.00 of railway gross receipts in 1897 and 1907 and the decrease
from the earlier to the later year. The following table shows the
number of days labor of each of the different classes of railway
labor which $105.00 would buy in each of the years indicated:

                                            Number of days labor
                                           purchasable for $105.00.
  Class of Employees.                      ------------------------
                                                          Decrease,
                                           1897.   1907.  per cent.

  Station agents                           60.7    51.2     15.65
  Other station men                        64.8    59.0      8.95
  Enginemen                                28.8    24.4     15.28
  Firemen                                  51.2    41.3     19.34
  Conductors                               34.2    28.5     16.67
  Other trainmen                           55.3    41.3     25.32
  Machinists                               47.1    36.6     22.29
  Carpenters                               52.2    43.8     16.09
  Other shopmen                            61.4    51.0     16.94
  Section                                  61.8    55.3     10.52
  Other trackmen                           90.5    71.9     20.55
  Switchmen, flagmen and watchmen          61.0    56.1      8.03
  Telegraph operators and despatchers      55.3    46.5     15.91
  Employees, account floating equipment    56.5    46.3     18.05
  All other employees and laborers         64.0    54.7     14.53
                                           ----    ----     -----
  Average                                   --      --      16.27

The foregoing shows that on the average the gross railway receipts
derived from the service assumed as the basis of the calculation
would purchase 16.27 per cent. less of the necessary services
of railway employees, in 1907 than in 1897 and what is true of
the receipts from this service is true of every dollar received
by a railway--that is, no railway dollar will pay for more than
eighty-four per cent., on the average, as much railway labor as it
would in 1897.

The change in railway rates necessary fully to offset this decrease
in the value of the money in which rates are paid would amount to an
apparent advance of 19.43 per cent, of the money rates now in force.


COST OF FUEL FOR LOCOMOTIVES.

Next to labor the principal single item of expense incurred in the
operation of the railways of the United States is for the fuel
used in their locomotives. The expenditures for this purpose now
constitute about eleven per cent. of the cost of operation and since
1897 have been as follows:

                Cost of fuel
  Year.       for locomotives.

  1897            $65,044,670
  1898             72,469,777
  1899             77,187,344
  1900             90,593,965
  1901            104,926,568
  1902            120,074,192
  1903            146,509,031
  1904            158,948,886
  1905            156,429,245
  1906            170,499,133
  1907            200,261,975
               --------------
    Total      $1,362,944,786

Thus, from 1897 to 1907, the cost of fuel for locomotives, in
spite of the economies in its use partially suggested by the
contemporaneous increase in the train-load of freight from 204.62
to 357.35 tons, or 74.64 per cent., increased 207.88 per cent.,
while passenger traffic increased but 126.15 per cent. and freight
traffic by 148.69 per cent. Thus while there was one dollar spent for
locomotive fuel in 1897 for each $17.25 of gross railway receipts
the ratio had declined by 1907 to one dollar for locomotive fuel for
each $12.93 of gross receipts--a difference which must plainly be
productive of profound changes in the proportion of gross receipts
remaining after the payment of necessary operating expenses. The
average prices of coal, per ton of 2,000 pounds, at the mines, in the
several states, in the years 1897 and 1907, as given by the United
States Geological Survey, were as follows:

                          Price per ton.
                   -----------------------------
                                       Increase,
    State.          1897.     1907.    per cent.

  Alabama           $0.88     $1.29      46.59
  Arkansas           1.06      1.68      56.49
  California      (a)2.55   (a)3.81      49.41
  Colorado           1.17      1.40      19.66
  Georgia         (b)1.03   (b)1.38      33.98
  Idaho           (c)3.33   (c)4.10      23.12
  Illinois            .72      1.07      48.61
  Indiana             .84      1.08      28.57
  Iowa               1.13      1.62      43.36
  Kansas             1.18      1.52      28.81
  Kentucky            .79      1.06      34.18
  Maryland            .76      1.20      57.89
  Michigan           1.46      1.80      23.29
  Missouri           1.08      1.64      51.85
  Montana            1.76      1.94      10.23
  New Mexico         1.38      1.46       5.80
  North Dakota       1.08      1.61      49.07
  Ohio                .78      1.10      41.03
  Oklahoma           1.34      2.04      52.24
  Oregon             3.09      2.34   Decrease
  Pennsylvania--
    Bituminous        .69      1.04      50.72
    Anthracite       1.51      1.91      26.49
  Tennessee           .81      1.25      54.32
  Texas              1.52      1.69      11.18
  Utah               1.19      1.52      27.73
  Virginia            .67      1.02      52.24
  Washington         1.94      2.09       7.73
  West Virginia       .63       .99      57.14
  Wyoming            1.21      1.56      28.93

  (a) Includes Alaska.

  (b) Includes North Carolina.

  (c) Includes Nebraska.

It will be noted that the cost of coal increased in every state of
considerable production. In California much of the locomotive fuel
used consists of petroleum, and the same fuel is used to some extent
in Oregon and New Mexico.

The number of tons of coal purchasable at the mines in the several
states with $105.00, the gross revenue from the typical shipment
which has been used for illustrative purposes, in 1897 and in 1907,
would have been as follows:


                     Tons of coal purchasable
                           for $105.00.
                     ------------------------
                                    Decrease,
    State.           1897.  1907.   per cent.

  Alabama             119     81      31.93
  Arkansas             99     62      37.37
  California           41     28      31.71
  Colorado             90     75      16.67
  Georgia             102     76      25.49
  Idaho                32     26      18.75
  Illinois            146     98      32.88
  Indiana             125     97      22.40
  Iowa                 93     65      30.11
  Kansas               89     69      22.47
  Kentucky            133     99      25.56
  Maryland            138     88      36.23
  Michigan             72     58      19.44
  Missouri             97     64      34.02
  Montana              60     54      10.00
  New Mexico           76     72       5.26
  North Dakota         97     65      32.99
  Ohio                135     95      29.63
  Oklahoma             78     51      34.62
  Oregon               34     45    Increase
  Pennsylvania--
    Bituminous        152    101      33.55
    Anthracite         70     55      21.43
  Tennessee           130     84      35.38
  Texas                69     62      10.14
  Utah                 88     69      21.59
  Virginia            157    103      34.39
  Washington           54     50       7.41
  West Virginia       167    106      36.53
  Wyoming              87     67      22.99

In this connection it should be noted that the United States
Department of Labor reports an increase, between 1897 and 1907, in
the price of anthracite of 29.23 per cent., and in bituminous coal
from the Georges Creek region of 85.54 per cent.


COST OF RAILWAY SUPPLIES.

Bulletin No. 75, of the United States Bureau of Labor, shows average
prices for the following articles used by railways, or, as raw
materials, for the manufacture of railway supplies:


                                                       Price.
                                           -------------------------------
                 Articles.                                       Increase,
                                            Unit.  1897.  1907.  per cent.

  Axes, M. C. O. Yankee                     Each    .39     .68     74.36
  Coke, Connellsville, furnace               Ton   1.62    2.83     74.69
  Bar iron, best refined, from mill        Pound    .011    .0175   59.09
  Barbed wire, galvanized                   Cwt.   1.80    2.63     46.11
  Copper wire, bare                        Pound    .1375   .2402   74.69
  Doorknobs, steel, bronze, plated          Pair    .166    .450   171.08
  Files, 8-inch                            Dozen    .81    1.00     23.46
  Hammers, Magdole, No. 1½                  Each    .38     .47     23.68
  Lead pipe                                 Cwt.   4.32    6.71     55.32
  Locks, common, mortise                    Each    .0833   .20    140.10
  Nails, cut, 8-penny, fence and common     Cwt.   1.33    2.16     62.41
  Nails, wire, 8-penny, fence and common    Cwt.   1.49    2.12     42.28
  Pig iron, Bessemer                         Ton  10.13   22.84    125.47
  Pig iron, foundry No. 1                    Ton  12.10   23.90     97.52
  Pig iron, foundry No. 2                    Ton  10.10   23.87    136.34
  Pig iron, gray, forge, southern, coke      Ton   8.80   20.99    138.52
  Steel billets                              Ton  15.08   29.25     93.97
  Steel rails                                Ton  18.75   28.00     49.33
  Steel sheets, black, No. 27              Pound   0.019   0.025    31.58
  Tin, pig                                 Pound    .1358   .3875  185.35
  Tin, plates, domestic, Bessemer, coke     Cwt.   3.18    4.09     28.62
  Zinc, sheet                               Cwt.   4.94    7.49     51.62
  Brick, common domestic                       M   4.94    6.16     24.70
  Cement, Rosendale                         Bbl.    .75     .95     26.67
  Doors, pine                               Each    .81    1.88    132.10
  Lumber, hemlock                         M feet  11.00   22.25    102.27
  Lime, common                              Bbl.    .72     .95     31.94
  Linseed oil, raw                          Gal.    .33     .43     30.30
  Lumber, maple, hard                     M feet  26.50   32.25     21.70
  Lumber, oak, white, plain               M feet  36.25   55.21     52.30
  Lumber, oak, white, quartered           M feet  53.83   80.00     48.62
  Lumber, pine, yellow                    M feet  16.44   30.50     85.52
  Lumber, poplar                          M feet  30.67   58.08     89.37
  Shingles, cypress                            M   2.35    4.23     80.00
  Lumber, spruce                          M feet  14.00   24.00     71.43
  Window glass, American, single,
    firsts, 6 by 8 to 10 by 15 inch   50 sq. ft.   2.20    2.81     27.73
  Window glass, American, single,
    thirds, 6 by 8 to 10 by 15 inch   50 sq. ft.   1.96    2.24     14.29

The bulletin indicates that putty, Portland cement and Ames shovels
are about the only exceptions to the general rule of greatly
increased prices of railway supplies. It is plain that as to all of
the important supplies and materials included in the foregoing list
the $105.00 of gross receipts from the typical shipment heretofore
used as an example would show the same, or a greater, loss in
purchasing power which has characterized the comparisons previously
shown.

Evidence from official sources thus shows that in purchasing the same
quantities either of labor or of supplies the railways have now to
expend much larger sums than they did ten years ago. The official
statistics already quoted are fully supported and their pertinence
to the problem in hand is fully proven by the accounting records of
the purchasing departments of the several railways. The Trunk Line
Association has obtained detailed information concerning purchases in
1897 and 1907, by important railways represented in its organization,
and this information has been carefully and accurately tabulated.
A table showing the largely increased cost of articles which this
tabulation reveals has been made Appendix B and will be found at
pages 194 to 198 of this pamphlet. An examination of this appendix
and, particularly of the classes of labor and of the articles shown
to have greatly increased in cost, discloses the unquestionable fact
that the increased cost pervades the whole aggregate of operating
expenses and that there is no considerable exception to the rule that
every item of operating expenditure is now very much greater than it
was in 1897.


OTHER COSTS OF SUPPLYING RAILWAY SERVICES.

The cost of railway transportation which must be borne out of the
receipts for railway services includes operating expenses, interest
on capital and taxes. Before discussing the increase in the rate of
interest demanded it is worth while to note that the exactions made
by the taxing power upon the railways have also notably increased.

The sums annually paid as taxes on railway property since 1897
follow:

                                 Taxes paid.
            Miles operated   ----------------------
            and included                   Average
            in reports          Amount.   per mile
            of taxes paid.                operated.

  1897       183,284.25      $43,137,844    $235.36
  1898       184,648.26       43,828,224     237.36
  1899       187,534.68       46,337,632     247.09
  1900       192,556.03       48,332,273     251.00
  1901       195,561.92       50,944,372     260.50
  1902       200,154.56       54,465,437     272.12
  1903       205,313.54       57,849,569     281.76
  1904       212,243.20       61,696,354     290.69
  1905       216,973.61       63,474,679     292.55
  1906       222,340.30       74,785,615     336.36
  1907       227,454.83       80,312,375     353.09
             ----------     ------------     ------
                *  *        $625,164,374      *  *

Thus in the years from 1897 to 1907 railway taxation per mile of line
has increased from $235.36 to $353.09, or no less than 50.02 per cent.


COST OF REGULATION.

Closely akin to taxation of railway property are the additional
expenses which have to be met out of railway revenues on account
of public regulation. The increased and, in many cases, minute
regulation imposed by the Hepburn law of 1906 and the rules and
requirements established thereunder by the Interstate Commerce
Commission and by various State enactments have caused the railways
many new and augmented expenditures. Among the many purposes for
which these expenditures have become necessary are those enumerated
below:

1. Preparation, publication, filing, posting, etc., of rate schedules.

2. Compilation and tabulation of statistics, preparation and filing
of annual reports of operation and finance.

3. Litigation under regulatory statutes including cases before
National and State commissions and including legal and incidental
expenses thereof.

4. Appliances and special equipment required by safety appliance laws.

5. Additional employees and additional wages paid on account of laws
regulating the hours of labor.

Besides these and other positive additions to the expenses of
operation there have been considerable reductions in revenue brought
about by the various regulative statutes. Thus there have been
reductions in revenue caused by the following:

1. Orders, or suggestions having practically the force of orders,
requiring changes in the classification of freight.

2. Orders, or suggestions having practically the force of orders,
requiring reductions in rates.

3. Statutory reduction in the rates of compensation for carrying the
mail.

4. Reduction of compensation for carrying the mail made by executive
order.

A painstaking effort to secure accurate statistics concerning recent
increases in these expenditures and losses has been made and data for
that purpose have been supplied by many of the railways operating
east of the Mississippi river. These data are necessarily incomplete
and fragmentary, the accounts of many of the companies not being kept
in such form as fully to disclose the items desired. In few cases
were the data which could be obtained for any line complete--some
companies were able to report particular items while other companies
could not give these, but could supply others. Generally speaking,
it should be realized that the tabulation of these reports makes
a showing which is incomplete mainly in the form of omissions. A
conservative computation discloses that the costs due to increases
in expenses or reductions in revenue imposed by statutes or by
Commissions acting under Federal and State regulatory laws costs
the railways of the United States approximately $200,000,000 in two
years. That this is not an exaggerated estimate will be appreciated
by reference to the principal general items of expenditures as
enumerated on the preceding pages. Until these items shall have been
assigned a proper classification in the accounts of the railroads
the accurate results may not be ascertained, but it will at once
occur to those in any measure informed that there has been an
enormous increase of work and expense placed upon the carriers to
conform to the innumerable requirements of State and Federal laws
and the rulings of the Commissions thereunder, and that this burden
has extended to all departments of the carriers. Litigation and
miscellaneous expenses appear as a large part of these new costs,
and in addition the carriers' revenues have been greatly depleted
either directly by the laws, orders of Commissions or suggestions
having practically the force of orders, resulting in reductions of
freight and passenger charges.


COST OF OBTAINING NEW CAPITAL.

In the matter of interest on the capital employed the railways
have apparently enjoyed an advantage which would seem to offset
the natural tendency of interest rates to rise in response to the
stimulus of augmented cost, in dollars and cents, of the commodities
entering into the budget of expenditures of the average recipient
of interest--that is to say, the advantage growing out of the fact
that a large proportion of railway capital is secured under long-time
contracts and that many of the contracts now in force unquestionably
run back to a time before the extensive depreciation of the American
dollar began. This advantage is a real one, but its extent is easily
exaggerated. For the purpose of throwing light upon the effect upon
the cost of railway transportation of the rise in interest rates
which has characterized recent years an analytical study of railway
indebtedness (including guaranteed dividends) amounting, in the
aggregate, to $9,499,099,065 has been made. This sum represents
indebtedness now outstanding and includes some duplication owing to
the fact that certain of the securities represented in the aggregate
are themselves based upon other securities deposited as collateral
or held in the treasuries of the corporations making the secondary
issues; duplication which could not be eliminated without adding
vastly to the difficulty of the inquiry with no corresponding gain
in the accuracy of the result. These data are also subject to the
qualification necessarily due to the fact that all of the issues
included were not sold at par. In some cases a small premium was
doubtless obtained and in other cases a slight discount was required,
but, nevertheless, it is believed that the data fairly indicate the
general change in interest rates on capital loaned to railways. Of
the total outstanding indebtedness of $9,499,099,065 the portion
incurred during the years 1897 to 1908, inclusive, amounts to
$5,466,340,252, or 57.55 per cent. The following table shows the
amounts incurred at the different rates during each of the years
named:

  Rate of Interest and Amount Incurred During Year and Outstanding.

  Year.  6½ per cent.   6 per cent.   5 per cent.   4½ per cent.

  1897         --       $11,039,000   $42,126,000     $7,700,000
  1898         --           487,000     7,486,700        207,000
  1899         --        13,094,000    29,197,000     15,896,000
  1900         --         1,133,000    15,926,351      7,979,000
  1901         --         1,777,775    38,840,000     37,845,378
  1902         --             --       44,949,508     19,949,600
  1903         --         1,552,000    53,592,030     22,092,500
  1904         --           256,000    61,191,561     30,241,729
  1905         --         1,810,000    66,346,000     73,996,100
  1906       $350,000     1,180,579   141,786,511     40,922,181
  1907         --        30,325,000   289,458,892    177,805,962
  1908(a)      --       114,504,970    47,546,385      2,850,000
             --------  ------------  ------------   ------------
    Total    $350,000  $177,159,324  $838,446,938   $437,485,450


  Rate of Interest and Amount Incurred During Year and Outstanding.

  Year.       4 per cent.  3¾ per cent.    3½ per cent.   3 per cent.

  1897       $205,882,500   $      --      $221,663,000     4,998,275
  1898        187,898,000          --       194,724,325        --
  1899        277,784,400          --       126,734,000    43,231,272
  1900         83,735,500          --        62,577,000    43,689,000
  1901        382,131,250       330,000      51,635,000        --
  1902        348,038,050          --        58,641,500        --
  1903        317,948,000          --        22,308,000     9,866,435
  1904        193,499,500          --        39,890,000        --
  1905        364,507,404          --       112,645,155    16,000,000
  1906        251,037,681    48,262,548      31,098,670        --
  1907        210,399,075          --           423,000        --
  1908(a)     101,380,000          --              --          --
            -------------   -----------   -------------  ------------
    Total  $2,924,181,360   $48,592,548    $922,339,650  $117,784,982

  (a) January to July, only.

Even a cursory examination of the foregoing statement shows that the
average rate of interest demanded by those who supply railway capital
has greatly increased. In 1897 and 1898 the largest aggregate of
new indebtedness was incurred at the rate of three and one-half per
cent. per annum; in 1899, 1900, 1902, 1903, 1904, 1905 and 1906 the
preponderating portion was at four per cent.; in 1907 the largest
aggregate was at five per cent., while in the months of 1908 for
which data are available the greater portion was obtained at six
per cent. Loans at three and three and one-half per cent., which
supplied a considerable aggregate during all of the years to and
including 1906 and particularly in the earlier years of the period,
had substantially disappeared before 1907 and no funds were procured
at less than four per cent. during the portion of 1908 which is
included. The increased volume of loans at five and six per cent. is
equally marked. The following table makes this analysis clearer by
showing the total borrowings of each year and the percentage at each
rate:


  ========================================================================
                     Rate of Interest and Proportion of Total Indebtedness
                               Incurred During Year and Outstanding.
  Year.   Borrowed.  -----------------------------------------------------
                        6½     6      5     4½      4    3¾     3½     3
                        per   per    per    per    per   per    per   per
                       cent. cent.  cent.  cent.  cent. cent.  cent. cent.
  ------------------------------------------------------------------------
  1897   $493,408,775   --   2.24   8.54   1.56  41.73   --   44.92   1.01
  1898    390,803,025   --    .12   1.92    .05  48.08   --   49.83    --
  1899    505,936,672   --   2.59   5.77   3.14  54.91   --   25.05   8.54
  1900    215,039,851   --    .53   7.40   3.71  38.94   --   29.10  20.32
  1901    512,559,403   --    .35   7.58   7.38  74.55  0.07  10.07    --
  1902    471,578,658   --     --   9.53   4.23  73.80   --   12.44    --
  1903    427,358,965   --    .36  12.54   5.17  74.40   --    5.22   2.31
  1904    325,078,790   --    .08  18.82   9.30  59.53   --   12.27    --
  1905    635,304,659   --    .28  10.44  11.65  57.38   --   17.73   2.52
  1906    514,638,170  0.07   .23  27.55   7.95  48.78  9.38   6.04    --
  1907    708,351,929   --   4.28  40.86  25.10  29.70   --     .06    --
  (a)1908 266,281,355   --  43.00  17.86   1.07  38.07   --     --     --
  ------------------------------------------------------------------------
  Total 5,466,340,252  0.01  3.25  15.34   8.00  53.49  0.89  16.87   2.15
  ------------------------------------------------------------------------

  (a) January to July, only.

The foregoing table shows that while, in 1897, the railways borrowed
87.66 per cent. and in 1898, 97.91 per cent. of the new capital
obtained in the form of loans at four per cent. or better, they were
compelled, in 1907, to promise more than four per cent. on 70.24 per
cent. and in the first six months of 1908 to promise six per cent. on
43.00 of their borrowings. The significance of these figures is made
still more apparent by the following table, which shows opposite the
aggregate borrowings of each year, the interest charges thereon and
the average rate upon the portion of the capital which it represents:

  Year.                          Aggregate
                                 interest      Av. rate
                Borrowed.        charges.      interest.

  1897        $ 493,408,775    $ 19,258,593       3.90
  1898          390,803,025      14,744,141       3.77
  1899          505,936,672      19,804,814       3.91
  1900          215,039,851       8,073,638       3.75
  1901          512,559,403      20,856,559       4.07
  1902          471,578,658      19,119,182       4.05
  1903          427,358,965      17,561,577       4.11
  1904          325,078,790      13,571,945       4.17
  1905          635,304,659      25,758,601       4.05
  1906          514,638,170      21,964,215       4.27
  1907          708,351,929      32,722,081       4.62
  1908(a)       266,281,355      13,431,067       5.04
             --------------    ------------       ----
    Total    $5,466,340,252    $226,886,413       4.15

  (a) January to July, only.

The foregoing shows an increase, in the average interest rate
demanded upon new loans to railway corporations, from 3.90 per cent.
in 1897 to 4.62 in 1907 and 5.04 in 1908. The increase in the rate
from 1897 to 1907 was equal to 18.46 per cent. and from 1897 to 1908
it was 29.23 per cent. In other words, one dollar would pay interest
on as much of the new capital secured by loans in 1897 as $1.29
would of the loans of 1908. The gross revenue of $105.00 obtained in
both years from the typical shipment of fourth class freight between
Chicago and New York, at the unchanged rate applicable to such a
shipment in both years, would pay interest on $2,692.31 secured in
the earlier year and on only $2,083.33 secured in the later year.
The loss in power to purchase loaned capital therefore amounts to
22.62 per cent. In order fully to appreciate the importance of this
rise in the cost of capital it is necessary to realize that very
great sums of new capital are annually required for the necessary
augmentation and improvement of railway facilities. This is made
evident by the total yearly borrowings as shown in the foregoing
tables, but it should be borne in mind that further sums, certainly
not less extensive in the aggregate, have been raised through issues
of stock, which promise no certain rate of interest, although
these sums could not have been obtained unless the subscribers had
considered it probable that they would, in the long run, receive
returns in dividends at least equal to the "going rate" of interest.
It is interesting to note that the aggregate of new capital secured
by loans in each year has very largely exceeded the total interest
payments to all capital obtained by borrowing. This is shown by
the following table, the data in which, except those as to the sums
obtained by loans, are from the reports of the Interstate Commerce
Commission:

                                                Per ct. int.
                New capital      Interest on    paym'ts new
  Year.(a)       borrowed.       funded debt.    borrow'gs.

  1898        $ 390,803,025     $ 237,578,706        60.79
  1899          215,039,851       241,657,535        47.76
  1900          215,039,851       242,998,285       113.00
  1901          512,559,403       252,594,808        49.28
  1902          471,578,658       260,295,847        55.20
  1903          427,358,965       268,830,564        62.90
  1904          325,078,790       282,118,438        86.78
  1905          635,304,659       294,803,884        46.40
  1906          514,638,170       305,337,754        59.33
  1907          708,351,929       323,733,751        45.70
             --------------    --------------        -----
    Total    $4,706,650,122    $2,709,949,572        57.58

  (a) Accurate data for payments to capital in 1897 are not available.


FROM THE VIEWPOINT OF THE PURCHASER OF THE SERVICES.

So far the extent and significance of the changes in the value,
or purchasing power, of money have been considered from the point
of view of those who produce and sell railway transportation. But
equally striking changes will appear and similar conclusions are
inevitable when recent history is reviewed in the aspect which
it presents to those whose earnings are devoted, in part, to the
purchase of the services which the railways supply. For the important
consideration to the wage-earner who wishes to travel by rail or
who buys commodities that have been so carried, or to the producer
whose products must go to market over railway routes, is not, how
much money must be paid for the railway services, but, rather, how
much labor must be expended, or what quantity of his goods must be
produced, in order to obtain that sum of money. If the earnings of
a particular wage-earner have increased from fifty to seventy-two
cents per hour, a railway service is cheaper, to him, if it costs
twelve cents than it was at ten cents when his earnings were on the
fifty-cent basis, for he now procures with the fruit of ten minutes'
toil what formerly cost the result of twelve minutes' labor. In
Bulletin No. 77, just issued by the United States Bureau of Labor,
the official statistician presents data showing the relative wages
per hour of many different classes of wage-earners, not including
railway employees, in 1897 and 1907. While these data show that
wages have almost uniformly advanced (there are ten somewhat
questionable exceptions among the 342 classes) the data supplied by
the Interstate Commerce Commission show that during the same period
average railway freight rates have declined from 7.98 mills to 7.59
mills per ton per mile, or 4.89 per cent. A table presenting and
based upon these official statistics and showing the relative wages
per hour of the various classes of labor, in 1897 and 1907, the
percentage increase in wages rates per hour and the increased command
over railway freight services which these wage-earners have obtained
through the combined effect of higher wages and lower ton-mile rates
is given in Appendix C[F]. In studying the data presented in this
appendix it should be borne in mind that the wages are relative
and not absolute. They mean, for example, that the average male
blacksmith in the agricultural implement industry was paid, in 1907,
$1.25 for the same quality and period of labor for which he was paid
a little less than ninety-six cents, in 1897. This increase amounted
to 30.58 per cent. of the wages rate of 1897, and, combined with a
decreased cost of railway freight service of 4.89 per cent., which
made 95.11 cents go as far in purchasing the latter in 1907 as one
dollar would go in 1897, gave him 37.29 per cent. greater command
over railway freight services.

In an earlier bulletin, No. 75, published during the current year,
the Bureau of Labor continued its "index numbers," which show,
in similar manner, the average relative wholesale prices of the
commodities entering into the ordinary budget of family expenditures.
For the purpose of presenting the changes in these prices on a
uniform basis the Bureau represents the averages for the ten years
from 1890 to 1899, inclusive, as one hundred per cent. and reduces
the averages for each year to percentages of the averages for the
basic period. The following table presents these figures for the year
1897 to 1907, inclusive:

                           Relative Wholesale Prices.

                                     Cloths     Fuel        Metals
                  Farm                 and       and         and
  Year.         Products.   Food.   Clothing.  Lighting.  Implements.

  1890-1899      100.00    100.00    100.00     100.00      100.00
  1897            85.2      87.7      91.1       86.4        86.6
  1898            96.1      94.4      93.4       95.4        86.4
  1899           100.0      98.3      96.7      105.0       114.7
  1900           109.5     104.2     106.8      120.9       120.5
  1901           116.9     105.9     101.0      119.5       111.9
  1902           130.5     111.3     102.0      134.3       117.2
  1903           118.8     107.1     106.6      149.3       117.6
  1904           126.2     107.2     109.8      132.6       109.6
  1905           124.2     108.7     112.0      128.8       122.5
  1906           123.6     112.6     120.0      131.9       135.2
  1907           137.1     117.8     126.7      135.0       143.4

             Lumber and                House
              Building   Drugs and   Furnishing  Miscell-   All Com-
  Year        Materials. Chemicals.    Goods.    aneous.   modities.

  1890-1899      100.00    100.00      100.00     100.00     100.00
  1897            94.4      94.4        89.8       92.1       89.7
  1898            95.8     106.6        92.0       92.4       93.4
  1899           105.8     111.3        95.1       97.7      101.7
  1900           115.7     115.7       106.1      109.8      110.5
  1901           116.7     115.2       110.9      107.4      108.5
  1902           118.8     114.2       112.2      114.1      112.9
  1903           121.4     112.6       113.0      113.6      113.6
  1904           122.7     110.0       111.7      111.7      113.0
  1905           127.7     109.1       109.1      112.8      115.9
  1906           140.1     101.2       111.0      121.1      122.5
  1907           146.9     109.6       118.5      127.1      129.5

From the data in the foregoing table, which show advances averaging
nearly forty-five per cent., the following table, indicating the
present purchasing power over railway freight service of each class
of articles, in a manner similar to that adopted to measure the
increased power of labor to buy railway freight transportation, has
been derived:

                                                            Increased
                                    Relative prices.      power to pur-
                                 ----------------------   chase railway
        Commodities.                           Increase  freight services
                                1897.   1907.  per cent.     per cent.

  Farm products                  85.2    137.1    60.92         69.19
  Food                           87.7    117.8    34.32         41.22
  Cloths and clothing            91.1    126.7    39.08         46.23
  Fuel and lighting              96.4    135.0    40.04         47.24
  Metals and implements          86.6    143.4    65.59         74.10
  Lumber and building materials  90.4    146.9    62.50         70.85
  Drugs and chemicals            94.4    109.6    16.10         22.07
  House furnishing goods         89.8    118.5    31.96         38.74
  Miscellaneous                  92.1    127.1    38.00         45.00
  All commodities                89.7    129.5    44.37         51.79


AGRICULTURAL PRODUCTS AND FREIGHT RATES.

The statistician to the United States Department of Agriculture
obtains annually a very large number of reports from farmers as to
prices obtained for their products and these are carefully tabulated.
The results show the average prices, at the farms, of the principal
agricultural products. The following table shows the increased prices
obtained for such products, and the increased power which these
producers enjoy, per unit of their products, to purchase railway
freight services:

                                                               Increased
                                                                power to
                                                                purchase
                                            Price.               railway
                                    -------------------------    freight
  Product.     Value of                              Increase    service
             crop of 1907.    Unit.   1897.   1907.  per cent.  per cent.

  Corn      $1,336,901,000   Bushel  $0.263  $0.516     96.20     106.28
  Wheat        554,437,000     "       .808    .874      8.17      13.73
  Oats         334,568,000     "       .212    .443    108.96     119.70
  Barley       102,290,000     "       .377    .666     76.66      85.74
  Rye           23,068,000     "       .447    .731     63.53      71.94
  Buckwheat      9,975,000     "       .421    .698     65.80      74.32
  Potatoes     184,184,000     "       .547    .618     12.98      18.79
  Hay          773,507,000     Ton    6.62   11.68      76.44      85.51
  Cotton       613,630,436    Pound    .066    .104     57.58      65.68
            --------------
    Total   $3,932,560,436

Detailed tables presenting the data from which the foregoing averages
for the whole country have been derived and showing prices and
purchasing power over freight service are given in Appendix D[G].
These tables disclose the uniformity, throughout the United States,
of the advance in agricultural prices and of the augmented command of
agricultural producers over railway freight service.


FARM ANIMALS AND FREIGHT RATES.

The Department of Agriculture of the United States also collects
data concerning the value of farm animals and annually publishes the
average values reported for the first day of each successive year.
All classes of farm animals have increased in value since 1897 and
each represents a great command over railway freight services, for
the sum representing the average value of each animal will now buy
much more freight transportation than it would in 1897. This is shown
by the following table:

                                                                Increased
                                                                 power to
                                                                 purchase
                                   Average price, each.           railway
                              --------------------------------    freight
                  January 1,  January 1, January 1,  Increase,   service,
                     1908.        1897.      1908.   per cent.  per cent.

  Horses        $1,867,530,000   $31.51    $ 93.41      196.45     211.69
  Mules            416,939,000    41.66     107.76      158.67     171.97
  Milch cows       650,057,000    23.16      30.67       32.43      39.24
  Cattle, except
    milch cows     845,938,000    16.65      16.89        1.44       6.65
  Sheep            211,736,000     1.82       3.88      113.19     124.15
  Swine            339,030,000     4.10       6.05       47.56      55.14
                --------------    -----     ------      ------     ------
    Total       $4,331,230,000      --         --          --         --

In considering the foregoing the fact that the prices relate solely
to animals on farms should be borne in mind. They are doubtless
somewhat lower than for animals elsewhere located, but prices of the
latter have probably moved in the same direction and in about the
same extent.[H]


RAILWAY RATES IN 1897 AND AT PRESENT MEASURED IN MONEY.

Throughout the foregoing discussion reference has frequently been
made to what has been assumed to be a typical shipment, that is,
a fifteen-ton carload of fourth class freight transported between
Chicago and New York. The typical service rendered in moving this
shipment would have brought the railways gross receipts of $105.00,
in 1897 or in any of the intermediate years, and would bring the
same amount now. The period in question, however, has witnessed
many thousands of changes in railway rates on particular commodities
and between particular points, and, confining the discussion for
the present to the mere expression of rates in terms of money, it
is necessary to inquire whether the general level of all rates has
been raised or lowered and how far the change, if any is discovered,
has gone in either direction. Now, it is manifestly impossible to
correlate all rates in a single tabulation, and, giving to each its
proper weight in the determination of a final average, thus establish
definitely and with complete precision the relation between the money
rates of 1897 and those at the present time. The number of different
articles shipped and the great number of different points at which
each article may enter into the aggregate of traffic movement or
to which it may be destined, as well as the elusive character of
the factors which would indicate the relative weight properly to be
allowed to each separate rate, wholly preclude the adoption of such a
method. Fortunately, however, American railway accountants long ago
adopted a measure of traffic movement, which was later officially
sanctioned by its adoption for the same purpose by the Interstate
Commerce Commission, and which, when compared with the gross receipts
from freight service, results in an average that throws great light
upon the movement or absence of movement in the general level of the
rates charged. When the weight of any shipment, expressed in tons, is
multiplied by the distance which it is carried, expressed in miles,
the resulting product gives a measure of the service performed, in
units which are designated as "ton-miles." When the ton-miles (or
ton-mileage) of all shipments are aggregated the total represents
the sum of all services. The result of dividing the revenue from a
particular shipment by its ton-mileage is the average rate per ton
per mile for that shipment and if the sum representing the aggregate
gross receipts from all railway freight services is divided by the
aggregate ton-mileage of those services the quotient obtained is the
average ton-mile rate for all services. During the period from 1897
to 1907 these data have been compiled annually by the Interstate
Commerce Commission under the direction of Professor Henry C. Adams,
its statistician. The average rates thus established are given both
for the United States as a whole and for each of ten districts or
groups. The following table shows these averages as they are given in
the successive annual statistical reports of the Commission:


  TABLE LEGEND

  REGION:
  A == Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and
         Connecticut.

  B == New Jersey, Delaware, Maryland, New York, east of Buffalo,
         Pennsylvania, east of Pittsburgh, West Virginia, North of
         Parkersburg.

  C == New York, west of Buffalo, Pennsylvania, west of Pittsburgh,
         Michigan, lower Peninsula, Ohio, Indiana.

  D == West Virginia, south of Parkersburg, Virginia, North Carolina
         and South Carolina.

  E == Kentucky, Tennessee, Georgia, Florida, Alabama, Mississippi,
         Louisiana, east of Mississippi River.

  F == Illinois, Wisconsin, Minnesota, Iowa, Missouri, north of St.
         Louis and Kansas City, South and North Dakota, east of
         Missouri river, Michigan, upper Peninsula.

  G == Nebraska, Wyoming, Montana, North and South Dakota, east of
         Missouri River, Colorado, north of Denver.

  H == Arkansas, Indian Territory, Oklahoma Territory, Kansas, Colorado,
         south of Denver, Texas, Panhandle, New Mexico, north of
         Santa Fe.

  I == Texas, except Panhandle, Louisiana, west of Mississippi River,
         New Mexico, north of Santa Fe.

  J == Washington, Oregon, Idaho, California, Arizona, Nevada, Utah,
         New Mexico, western portion.

  ==============================================================
                Year and average rate in mills per ton per mile.
                 -----------------------------------------------
  Group.  Region.  1897    1898    1899    1900    1901    1902
  --------------------------------------------------------------
  I.         A    12.02   11.76   11.23   11.52   11.51   11.72
  II.        B     6.75    6.17    5.82    6.13    6.46    6.64
  III.       C     6.05    5.78    5.29    5.46    5.68    5.76
  IV.        D     6.48    5.92    5.94    5.95    6.41    6.50
  V.         E     8.64    8.35    8.07    8.08    8.02    8.16
  VI.        F     8.55    8.26    8.21    8.06    7.89    7.87
  VII.       G    11.48   11.57   11.01   10.64   10.43    9.94
  VIII.      H    10.79    9.61    9.68    9.64    9.71    9.78
  IX.        I    10.40   10.42   10.65    9.38   10.18    9.84
  X.         J    12.75   11.46   11.36   10.67   10.55   10.37
  --------------------------------------------------------------
  United States    7.98    7.53    7.24    7.29    7.50    7.57
  --------------------------------------------------------------

  {table continued}
  ===============================================================
                 Year and average rate in mills per ton per mile.
                 ------------------------------------------------
  Group.  Region.  1903    1904    1905    1906    1907   1908(a)
  ---------------------------------------------------------------
  I.         A    11.67   11.96   11.79   11.72   11.45   11.10
  II.        B     6.67    6.86    6.65    6.50    6.55    6.43
  III.       C     6.07    6.20    6.07    5.94    5.98    5.94
  IV.        D     7.14    7.16    6.91    6.90    7.03    6.96
  V.         E     8.27    8.51    8.39    8.13    8.27    8.25
  VI.        F     7.74    7.79    7.66    7.45    7.43    7.35
  VII.       G     9.80    9.64    9.00    8.94    9.33    9.42
  VIII.      H     9.62    9.98    9.88    9.47    9.66    9.53
  IX.        I     9.74   10.00   10.96   10.09   10.51   10.02
  X.         J    10.05   10.36   10.98   11.03   11.63   12.04
  ---------------------------------------------------------------
  United States    7.63    7.80    7.66    7.48    7.59     7.5
  ---------------------------------------------------------------

  (a) Average for 1908 added from 21st annual Report of Prof. Adams.
          S. T.

The foregoing shows that the average rates per ton per mile,
expressed in money, were lower in every group but one, as well as
in the whole country, in 1907 than they were in 1897. The average
for the whole country was lower in 1907 than in any other year
shown except the years 1898 to 1902, inclusive, and for three of
those years the difference was less than one-tenth of one mill. The
decrease in the general average from 1897 to 1907 was 4.89 per cent.
and the increase from 1899, the year of the lowest average, was 4.83
per cent.

So far as the quality of the ton-mile unit is affected by changes in
the geographical distribution of traffic the tendency between 1897
and 1907 was toward a higher quality, for traffic movement grew more
rapidly in the regions where rates are normally higher than it did
in the regions of lower rates. In the following statement the groups
used by the Interstate Commerce Commission are arranged with the
group in which ton-mileage increased most rapidly from 1897 to 1907
at the top, the group that increased next most rapidly in the second
line, and so on to the group that increased least rapidly at the
bottom:

                                                     Average rate per ton
        Tons of freight carried one mile.  Increase,   per mile in mills.
  Group.       1897.            1907.      per cent.   In 1897.  In 1907.

  X       3,133,623,734   11,252,450,440      259.09      12.75     11.63
  VII     2,633,860,958    9,300,234,849      253.10      11.48      9.33
  VIII    6,333,591,463   17,406,430,971      174.83      10.79      9.66
  III    17,587,334,609   47,994,909,002      172.89       6.05      5.98
  V       6,802,119,489   17,397,321,360      155.76       8.64      8.27
  VI     17,393,471,480   44,318,734,155      154.80       8.55      7.43
  IX      3,165,108,561    7,546,655,555      138.43      10.40     10.51
  IV      4,936,635,046   11,418,243,141      131.30       6.48      7.03
  II     29,579,613,559   63,455,243,659      114.52       6.75      6.55
  I       3,573,663,326    6,511,166,971       82.20      12.02     11.45
         --------------  ---------------      ------      -----     -----
  U. S.  95,139,022,225  236,601,390,103      148.69       7.98      7.59

It will be noted from the foregoing that the group in which the
average rates were highest in both 1897 and 1907 shows the most rapid
increase in traffic movement and that, with few exceptions, the
regions of higher rates show more rapid augmentation of ton-mileage.
This is exactly what might have been anticipated, for the highest
average rates are usually to be found in the regions most scantily
populated and, as these regions are filling up and are therefore
those most rapidly growing in population and industry, they
naturally show the greatest relative increases in freight tonnage.
The only notable exception is furnished by New England, a region
of high development, but where traffic movement is largely of a
character which imposes higher average rates. In the following table
the traffic increase is given for the regions that had ton-mile rate
averages above and below the average for the whole country, in 1897:

                                        Ton mileage.        Increase.
                                 In 1897.         In 1907.  per cent.
  Ton mile rates above
       the average          43,035,439,011  113,732,994,301   164.28
  Ton mile rates below
       the average          52,103,583,214  122,868,395,802   135.82
                            --------------  ---------------   ------
    Total                   95,139,022,255  236,601,390,103   148.69

The region with rates above the average in 1897 had 45.23 per cent.
of the total ton-mileage in that year, and 48.07 per cent. in the
year 1907. Of the total increase in traffic movement 49.98 per
cent. was in this region. The precise effect that these changes in
the geographical distribution of ton-mileage would have had upon
the average ton-mile rate for the whole country is shown by the
computation set forth in the following table:

                                                           Product of
                                                         ton-mileage of
                    Ton mileage    Ton-mile rates of   1907 and ton-mile
  Group               of 1907.       1897 in mills.      rates of 1897.

  I                6,511,166,971         12.02          $ 78,264,226.99
  II              63,455,243,659          6.75           428,322,894.70
  III             47,994,909,002          6.05           290,369,199.46
  IV              11,418,243,141          6.48            73,990,215.55
  V               17,397,321,360          8.64           150,312,856.55
  VI              44,318,734,155          8.55           378,925,177.03
  VII              9,300,234,849         11.48           106,766,696.07
  VIII            17,406,430,971         10.79           187,815,390.18
  IX               7,546,655,555         10.40            78,485,217.77
  X               11,252,450,440         12.75           143,468,743.11
                 ---------------         -----        -----------------
  United States  236,601,390,103           --         $1,916,720,617.41

By dividing the aggregate of the products in the last column of the
foregoing by the total ton-mileage shown in the second column, an
average is obtained which represents the ton-mile rate that would
have resulted in 1907 had the traffic of each group in that year
moved in precisely the same volume in which it actually moved and
had the average rates in each group been exactly the same as they
were in 1897. This shows that, under the conditions assumed, the
average ton-mile rate for the whole country would have been 8.10
mills or 0.12 mill higher than in 1897. This advance of 1.50 per
cent. would have been wholly due to the more rapid growth of traffic
in the regions of normally higher rates. The chief significance of so
small a change in so long a period is, really, to indicate that the
ton-mile unit, so far from being of rapidly changing character, is
actually, at least as far as it might be assumed to be affected by
changes in the location of traffic movement, a fairly stable unit and
thus an excellent measure of the rise or fall in rates. Whether the
same conclusion is to be derived from a study of the changes in the
proportion of the total movement made up of commodities of different
grades and naturally taking different rates is now to be made the
subject of inquiry.

Publication of the classified statistics of tonnage necessary for
such an inquiry was begun by the Interstate Commerce Commission with
the report for the year 1899. Consequently it is not practicable to
extend the inquiry to a period prior to that year. The following
statement shows the number of tons of freight of each of the
classes of commodities named which were received by the railways
for transportation in 1899, 1903 and 1907 and the proportion of the
tonnage in each class to the total number of tons carried:


                                            Tons.
  Class of commodity.             1899.          1903.          1907.
  Products of agriculture     50,073,963     61,056,212     77,030,071
  Products of animals         13,774,964     16,802,893     20,473,486
  Products of mines          227,453,154    329,335,621    476,899,638
  Products of forest          48,122,447     74,559,980    101,617,724
  Manufactures                54,415,205     91,980,903    137,621,443
  Merchandise                 19,844,735     29,949,022     34,718,487
  Miscellaneous               23,197,155     35,116,027     44,824,123
                             -----------    -----------    -----------
    Total                    441,881,623    638,800,658    893,184,972


    {table continued}
                                   Percentage of
                                   total tonnage.
  Class of commodity.         1899.    1903.    1907.
  Products of agriculture     11.33     9.56     8.62
  Products of animals          3.12     2.63     2.29
  Products of mines           51.47    51.56    53.59
  Products of forest          10.89    11.67    11.38
  Manufactures                13.45    14.39    15.41
  Merchandise                  4.49     4.69     3.89
  Miscellaneous                5.25     5.50     5.02
                             ------   ------   ------
    Total                    100.00   100.00   100.00

It should be observed that the foregoing statement represents tons
received for shipment regardless of the distance carried and, in
consequence, does not throw the light upon traffic movement that
would be available if it were possible to know the ton-mileage of
each class of commodities. Nevertheless, the data undoubtedly convey
some information as to the character of the ton-mile unit during the
different years and the nature of the changes in its quality which
are in progress. This will be made more evident by the following
table showing comparisons for the years 1899 and 1907:

                                            Tons.
                                                         Increase.
    Class of commodity.       1899.        1907.     Amount.   Per cent.

  Products of agriculture  50,073,963   77,030,071   26,956,108    53.83
  Products of animals      13,774,964   20,473,846    6,698,522    48.63
  Products of mines       227,453,154  476,899,638  249,446,484   109.67
  Products of forest       48,122,447  101,617,724   53,495,277   111.16
  Manufactures             59,415,205  137,621,443   78,206,238   131.63
  Merchandise              19,844,735   34,718,487   14,873,752    74.95
  Miscellaneous            23,197,155   44,824,123   21,626,968    93.23
                          -----------  -----------  -----------   ------
    Total                 441,881,623  893,184,972  451,303,349   102.13

Obviously the effect of the increases shown in the foregoing upon the
quality of the average ton-mile must be in proportion as they have
exceeded or fallen short of the average increase shown at the foot of
the last column. There is no question that, in general, products of
agriculture, animals, forests and mines are low-grade commodities,
or that, on the other hand, the commodities classed as manufactures,
merchandise and miscellaneous are high-grade articles. An increase
in excess of the general average increase in the first four classes
named would tend to lower the quality of the average ton-mile while
the opposite effect, that is, a raising of the quality, would result
if the last three classes should increase more rapidly than the
increase in all tonnage. Adopting this classification, the following
shows the respective increases in high-grade and low-grade tonnage:

                                             Tons.
                                                          Increase.
  Class of commodity.         1899.        1907.      Amount.  Per cent.

  High-grade              102,457,095  217,164,053  114,706,958   111.96
  Low-grade               339,424,528  676,020,919  336,596,391    99.17
                          -----------  -----------  -----------   ------
    Total                 441,881,623  893,184,972  451,303,349   102.13

The considerably greater increase in the tonnage of high-grade
articles indicated by the foregoing is scarcely within the possible
margin of error in the classification, but, in any event, what the
figures certainly prove is the absence of any actually far-reaching
change in the typical or average unit of traffic. That this
conclusion extends to traffic movement is clearly probable.


PRICES AND ACTUAL RATES.

Comparisons between actual prices of commodities shipped by rail
and typical freight charges on the same articles, for 1897 and
1907, demonstrate the fact that while prices have almost uniformly
advanced the greater number of rates have remained stationary while
among those which have changed the reductions are as numerous as the
advances and exceed the latter in extent and importance.

[Mr. McCain here presents a table compiled from reports of the Bureau
of Labor of the actual prices of commodities and the rates between
principal points of shipment, occupying pp. 50-58 of his pamphlet.]

Examination of prices collected and reported by the Bureau of Labor,
giving the prices in 1899 and 1907 of 229 articles, shows that among
these 204 prices or 89.08 per cent. of the total were increased. The
rates on forty-nine of these articles were advanced an average of
13.14 per cent. and the rates on forty-eight of them were reduced
an average of 16.44 per cent. Other conclusions are shown in the
following summary table:

                                                   Aggregate    Average
                                       Per cent.  percentage    changes,
        Item.                Number.   of total.  of changes.  per cent.

  Prices--
    Advanced                    204       89.08       11,340      55.59
    Reduced                      13        5.68          330      25.38
    Unchanged                    12        5.24          --         --
      Total                     229      100.00          --         --

  Rates advanced--
    Prices advanced              44       19.22          606      13.77
    Prices reduced                3        1.31           30      10.00
    Prices unchanged              2         .87            8       4.00
      Total                      49       21.40          644      13.14

  Rates reduced--
    Prices advanced              42       18.34          708      16.86
    Prices reduced                3        1.31           33      11.00
    Prices unchanged              3        1.31           48      16.00
      Total                      48       20.96          789      16.44

  Rates unchanged--
    Prices advanced             118       51.52          --         --
    Prices reduced                7        3.06          --         --
    Prices unchanged              7        3.06          --         --
      Total                     132       57.64          --         --

The foregoing shows that while prices were advanced for 204 out of
229 articles, or 89.08 per cent. of the entire number included in the
table, the freight rates on the same articles, as expressed in money,
were advanced in but forty-nine instances, or 21.40 per cent. of the
total, money rates were reduced in forty-eight instances, or 20.96
per cent. of the total, and remained stationary in 118 instances, or
57.64 per cent. of the total. Of the rates advanced forty-four were
in cases in which the prices had also advanced, and of the rates
reduced forty-two applied to articles which had advanced in price.
Even as to the commodities which had advanced in price, the average
advance being over fifty-five per cent., money rates were advanced in
but forty-four instances out of 204 and the average advance was but
13.77 per cent. and there were forty-two reductions in money rates,
such reductions averaging 16.86 per cent.


SIGNIFICANCE OF THE DEPRECIATION OF MONEY.

It has now been fully demonstrated (first) that the railways have
to pay much more, probably not less on the average than twenty-five
per cent. more, for everything they require in the conduct of their
business, including labor, than they did ten years ago, (second) that
those who make use of railway services receive much more, probably
not less on the average than twenty-five per cent. more, for their
labor or for the commodities which they produce than they did ten
years ago, (third) that average rates per ton per mile for railway
freight transportation, expressed in money, that is to say, in
dollars and decimal fractions of dollars, are now somewhat lower than
they were in 1897 or formerly, and (fourth) that the ton-mile unit
is a highly stable one as to quality and that in consequence of this
stability the ton-mile rates accurately answer the question whether
rates, expressed in money, have remained stationary, have advanced
or have declined. The latter conclusion has been supplemented and
re-enforced by data from the classifications and rate schedules
which tend strongly to prove the same fact. Therefore, it has been
made plainly apparent that there has been a decline in money rates
since 1897. But railways require money only to remunerate the
highly skilled labor they employ, to purchase necessary materials
and supplies, to pay taxes and to compensate the capital they
use. Consequently money is worth to the railway corporation, as
to the wage-earner, only what it will buy for the satisfaction of
wants. A dollar which will pay for less labor or buy less fuel for
locomotives is worth less to the railway just as a dollar that will
buy less bread or clothing is worth less to the man who works for
wages or receives it as interest on his savings. It has long been
realized that any effort to study the question of wages, throughout
an extended period, which fails to take into consideration the
purchasing power of the money received is worse than valueless,
because it is deceptive and misleading. It has been generally
recognized also that any effort to consider the condition of
particular classes of producers by comparisons of the prices obtained
for their products at different periods, as that of farmers by the
prices of corn and wheat, is similarly dangerous unless these prices
are turned into quantities of the commodities which such producers
must purchase.

[In elucidating this obvious point Mr. McCain cites such authorities
as Adam Smith, John Stuart Mill, President Hadley of Yale, Professor
Frank W. Taussig of Harvard, and then continues.]

A rapid decrease in the purchasing power of the money they receive
has brought about, within a single decade, a reduction in railway
freight rates that cannot be less than twenty-five per cent. This
reduction began almost imperceptibly at a time when American
railway rates were already lower than ever before in the history
of railways and lower than anywhere else in the world. It has
proceeded, concurrently with the fall in the real value (that is in
the purchasing power) of the American dollar, but in such subtle
form that only when its consequences threaten the stability of the
American railway system, the wages of railway employes and the
prosperity of the great rail-manufacturing, car-building and other
allied industries is its real significance and extent perceived
even by those most immediately interested. That such a threat now
hangs over the railway industry of America and every employe and
industry dependent upon it is too plain for argument. The situation
is acute and nothing but a prompt adjustment of the rates obtained
for the services rendered to offset, partially, at least, the loss
in the value of the money received will prevent disaster. That such
an adjustment, if effected now, will, at best, be tardy and belated
is evident from the facts herein presented, which show that prices
in every other industry and the wages of all artisans were long ago
adjusted to this fundamental condition.


APPENDIX B

Statement showing prices of railway supplies purchased in 1897 and
1907 as disclosed by the records of various Eastern railways. It
should be noted that the quality of the supplies, made the basis of
this statement, may have changed somewhat between 1897 and 1907, but
in few instances would the allowance for this source of variation
materially affect the results.

                                            Prices.
                                                             Increase.
    Class.                             1897.        1907.    Per cent.

  Locomotives--
    Mogul                           $10,181.00   $14,111.00      38.6
    10-Wheel passenger               11,026.00    15,734.00      42.7
    Atlantic                         not built    16,236.00       --
    Pacific                          not built    19,580.00       --
    Prairie                          not built    16,468.00       --
    8-Wheel passenger                10,243.00    13,581.00      32.5
    6-Wheel switcher                  9,392.00    12,098.00      28.8

  Cars (1899-1907)--
    Hopper                              475.00     1,185.00       --
    Box                                 783.00     1,110.00       --
                                        490.00       844.00       --
                                        519.00       897.00       --

  Note.--The prices of cars shown above are typical prices paid
  by different roads in the respective years and employed in the
  same service. As the cars purchased in 1907 are of more modern
  construction, better quality and larger capacity than those
  purchased in 1899, no accurate comparison can be made or percentage
  of increased cost shown.

  (1902-1907)--

  100,000 lbs. Capacity Box Car
    with Steel Underframe and
    wood superstructure              $1,043.49    $1,148.88      10.09
  100,000 lbs. Capacity Composite
    Gondola Car with Steel Under-
    frame and wood superstructure     1,021.62     1,148.45      12.42
  100,000 lbs. Capacity Composite
    Flat Car with Steel Underframe
    and wood floor                      953.23     1,010.60       6.02
  100,000 lbs. Capacity, all steel
    Hopper Cars                       1,002.22     1,076.05       7.47

  Angle Bars                 Cwt.         1.02         1.55      52.0
  Axles--
    Locomotive               Cwt.         2.75         2.95       7.2
                             Cwt.         2.72         2.85       4.7
    Tender                   Cwt.         1.40         2.35      67.8
    Car                      Cwt.         1.60         1.95      21.9
                             Cwt.         1.45         2.20      51.7
                             Cwt.         1.68         2.25      34.0
  Bar Iron                   Cwt.         1.19         1.78      49.5
                             Cwt.         1.10         1.80      63.6
                             Cwt.         1.05         1.50      42.8
  Brick--
    Common                     M          4.50         6.00      33.3
    Paving                     M          8.00        11.00      37.5
  Castings--
    Brass                     Lb.         0.11         0.25     127.3
    Brass                     Lb.         0.12         0.25¾    114.6
    Steel                    Cwt.         3.50         6.00      71.4
    M. Iron                  Cwt.         2.50         4.25      70.0
                             Cwt.         2.70         3.60      33.3
                             Cwt.         2.35         2.85      21.2
    Gray                     Cwt.         1.15         2.00      74.0
                             Cwt.         1.20         1.65      37.5
  Coal                       Ton          1.46         1.76      20.5
                             Ton          1.32         1.82      38.0
                             Ton          1.17         1.52      29.8
                             Ton          1.83         2.07      13.1
    Run of Mine              Ton           .65         1.05      61.5
         ¾                   Ton           .75         1.15      53.3
  Couplers--
    Freight                  Set         14.00        15.00       7.1
    Passenger                Set         20.50        27.00      31.7
    Tender                   Set         18.00        18.50       2.8
  Fencing                  M. Ft.        12.00        25.00     108.3
                           M. Ft.        10.00        18.15      81.5
  Flues                       Ft.         0.13         0.15½     19.2
                              Ft.         0.14         0.15       7.1
  Forgings--
    Axles                     Lb.         0.02         0.03      50.0
    Crank Pins                Lb.         0.05         0.10     100.0
    Piston Rods               Lb.         0.06         0.10      66.6
    Main Rods                 Lb.         0.08         0.10      25.0
    Side Rods                 Lb.         0.08         0.10      25.0
  Lead--
    White                    Cwt.         4.95         6.25      26.3
  Lumber--
    Large Bridge Timbers   M. Ft.        13.12        25.62      95.3
                           M. Ft.        23.00        38.00      65.2
                           M. Ft.        20.00        33.00      65.0
                           M. Ft.        17.00        28.00      64.7
                           M. Ft.        22.50        38.00      68.9
                           M. Ft.        15.00        27.00      80.0
  Car Sidings              M. Ft.        17.00        35.00     105.9
                           M. Ft.        18.00        33.00      83.3
    Stringers              M. Ft.        18.00        28.00      55.5
                           M. Ft.        16.00        34.00     112.5
                           M. Ft.        18.00        26.00      44.4
                           M. Ft.        17.00        28.00      64.7
    Car Flooring           M. Ft.        17.00        24.00      41.2
                           M. Ft.        20.00        33.00      65.0
                           M. Ft.        11.00        25.00     127.2
                           M. Ft.        14.00        19.71      40.8
    Piles (Soft)              Ft.         0.08         0.14      75.0
                              Ft.         0.08         0.11      37.5
          (Hard)              Ft.         0.12         0.17      41.7
    Heavy Planks           M. Ft.        14.00        22.00      57.1
                           M. Ft.        14.00        30.00     114.3
                           M. Ft.        16.00        27.00      68.8
    Cross Ties (Hardwood)    Each         0.47         0.80      70.2
                             Each         0.60         0.85      41.7
                             Each         0.55         0.75      36.4
                             Each         0.37         0.70      89.2
                             Each         0.45         0.60      33.3
                             Each         0.45         0.55      22.2
                             Each         0.48         0.90      87.5
                             Each         0.38         0.80     110.5
                             Each         0.38         0.67      76.4
    Softwood                 Each         0.22         0.60     172.7
                             Each         0.20         0.28      40.0
                             Each         0.23         0.48     108.7
                             Each         0.48         0.58      20.8
  Nails                      Cwt.         1.60         2.20      37.5
                             Cwt.         1.33         2.16      62.4
                             Cwt.         1.10         2.15     104.5
    Wire                     Cwt.         1.27         1.85      45.7
                             Cwt.         1.48         2.11      42.6
  Oil--
    Kerosene                 Gal.         0.06         0.09½     58.3
    Signal                   Gal.         0.28         0.36      28.6
                             Gal.         0.20         0.36      80.0
    300 degree               Gal.         0.09         0.10      11.1
  Paint--
                             Gal.         0.77         1.03      33.8
                             Gal.         0.50         0.65      30.0
                             Cwt.         4.75         6.62      39.4
                             Cwt.         5.50         6.50      18.2
  Pipe--
    Cast Iron                Ton         16.00        34.00     112.5
                             Ton         16.75        29.15      74.0
                             Ton         13.50        21.00      55.6
                             Ton         16.00        32.00     100.0
    Copper                    Lb.         0.31         0.34       9.7
                              Lb.         0.30         0.33      10.0
                              Lb.         0.30         0.35      16.7
  Rails--
    Steel              Gross Ton         19.00        28.00      47.4
                       Gross Ton         18.00        28.00      55.6
                       Gross Ton         18.05        26.60      47.4
  Rubber Hose--
    1  Inch                   Ft.         0.34         0.41      20.6
    1¼ inch                   Ft.         0.40         0.46      15.0
  Springs--
    Loco.                    Cwt.         4.05         4.10       1.2
  Switches--
    Comp. 80                             31.90        40.77      27.8
    Frogs 80                             18.75        27.50      46.7
  Switch Lamps               Doz.        45.00        65.00      44.4
  Tile                       Rod          0.40         0.60      50.0
  Track Bolts                Cwt.         1.70         2.45      44.1
                             Cwt.         1.65         2.60      57.6
                             Cwt.         2.20         2.75      25.0
                             Cwt.         1.65         2.45      48.5
                             Cwt.         1.75         2.76      57.7
  Track Spikes               Cwt.         1.85         2.52      36.2
                             Cwt.         1.35         1.70      25.9
                             Cwt.         1.50         2.60      73.3
                             Cwt.         1.65         2.25      36.4
                             Cwt.         1.50         1.90      26.7
                             Cwt.         1.45         1.90      31.0
                             Cwt.         1.75         2.00      14.3
  Track Tools--
    Axes                     Doz.         8.00         9.00      12.5
    Drills                   Each         0.35         0.46      31.4
    Ratchets                 Doz.         5.13         6.65      29.6
    Shovels                  Doz.         5.00         5.65      13.0
    Lamp Bars                Each         0.52         0.65      25.0
  Waste--
    Colored                   Lb.         0.047        0.055     17.0
    White                     Lb.         0.06         0.08      33.3
  Wheels--
    Car                      Each         5.60         7.80      39.29
                             Each         6.00         8.35      39.17
                             Each         7.50         9.30      24.0
                             Each         4.78         8.46      76.9
                             Each         4.50         9.00     100.0
                             Each         6.75         8.00      18.5
                             Each         6.50         9.00      38.5
                             Each         6.00         9.05      50.8
    33-in Steel              Each        50.00        56.00      12.0
                             Each        42.50        44.50       4.7
    36-in. Steel             Each        42.50        50.50      18.8
                             Each        54.00        60.00      11.1
  Wire--
    Barbed                   Cwt.         1.70         2.50      47.0
    Iron                     Cwt.         1.50         2.20      46.7
    Copper                    Lb.          .13          .26     100.0
                              Lb.          .13          .18      38.5


FOOTNOTES:

[E] A partial list of the articles in each class in 1807 which are
still in the same class, as shown by Official Classifications Nos. 16
and 32, is given in Appendix A to Mr. McCain's pamphlet. There were
approximately 3,000 various articles bearing the same classification
or rating in 1908 as in 1898.

[F] Appendix C occupies pages 89 to 95 of Mr. McCain's pamphlet.

[G] Appendix D occupies pages 96 to 101 of McCain's pamphlet.

[H] Details from which the table was derived are given in Appendix E
to Mr. McCain's pamphlet, pp. 102-106.




THE RAILROADS AND PUBLIC APPROVAL

BY EDWARD P. RIPLEY,

President Atchison, Topeka and Santa Fe Railway Company.

    Address delivered at the annual dinner of the Railway Business
    Association, New York, November 10, 1909.


Circumstances over which I had no control caused me to be born with a
distinct inability to think consecutively, or talk coherently, in a
standing position and before an audience.

Seated on the small of my back with my feet on the desk I sometimes
think I am thinking, but when I get before an audience I am like
the little steamer plying on the Sangamon River that had a 10-foot
boiler and a 12-foot whistle--when she whistled she stopped. But
my weakness, or rather one of my weaknesses, is susceptibility to
flattery, and when one of your officers represented in honeyed
phrase the importance of your organization and of this meeting, and
laid particular stress upon the importance of my saying something,
I weakly yielded. I know the result will be disappointment, but the
responsibility is only partly mine, and you know we railroad men get
so little flattery that when properly administered the result is
intoxicating.

Also, let me state in extenuation of the crime I am about to commit
that the subject was not my own selection, but was chosen for me.
My natural disposition in discussing railroads and the public is
to growl, while, if I understand your officers' wishes, I am here
expected to "purr."

But while a better man might have been selected to say it, there is
much to be said as to the railroads and public opinion.

In this country the people rule--and in the long run that system,
that method or that personality that does not meet the approbation of
the public can not succeed. True, the public is often fooled; true,
it "gets on the wrong feet," as often perhaps as on the right; true,
it has to be guided, controlled, and at times abruptly stopped by
those authorities which it has selected for that purpose; yet the
fact remains that the government of the people, that Congress, the
legislatures and even the courts are keenly alive to public sentiment
and anxious not to stray far from the line of public opinion.

Our forefathers recognized the danger that the majority would not
necessarily be right, but might often be wrong, and sought to provide
safeguards for the rights of the minority. But these safeguards are
obviously growing less efficient; obviously growing weaker; obviously
more sensitive to the public clamor which for the moment stands for
public opinion, and when all safeguards have been exhausted it is to
public opinion that we must look at last.

There are two things about which the public is most critical--one
is the management of the newspaper, the other the management of the
railroad. In his heart the average citizen believes that he could
operate either his daily newspaper or the railroad passing through
his town much better than it is being operated; he would perhaps
hesitate to announce this opinion, but his attitude is coldly
critical, and it is to be remembered that the railroad is all out
of doors--all out in the weather, everything about it exposed to
the limelight and visible to anybody's naked eye. There is no human
activity the operation of which is attended with so much publicity.
All our earnings and expenses are published; all our charges and all
our methods the subject of regulation, intelligent or otherwise.

Many years ago Mr. W. K. Vanderbilt, journeying to Chicago, was met
on the outskirts of the city by an enterprising reporter for a daily
paper, who boarded the train and forced himself into the presence
of Mr. Vanderbilt and his party, and demanded news on behalf of
"the public." Probably Mr. Vanderbilt, resenting the intrusion,
said something uncomplimentary to the reporter and possibly to the
"public" he claimed to represent, and the next issue of that paper
quoted him in scare headlines as using the phrase, "The public be
damned." Mr. Vanderbilt subsequently denied having said it, but
whether he did or not and whatever may have been his provocation,
the phrase has for nearly forty years been used as indicative of the
railway man's attitude toward his patrons.

Many years ago also the late George B. Blanchard, being on the
witness stand at Albany, was asked what was the correct basis for
making freight rates, and replied, "What the traffic will bear"--a
most excellent answer, but a most unfortunate one--for it has passed
into history as meaning "all the traffic will bear," which is a very
different thing.

Such things as these, distorted as they have been, conspired to
inflame public opinion, but that is not all.

It is the custom and privilege of men past middle age to be
reminiscent and I ask your indulgence for a very brief history of
the events that have led us to our present status. My railroad
experience began about forty years ago and the railroad business was
then much like any other business--it had its price list as did the
merchant; but, like the merchant, it had its discounts for large
shippers and for special conditions, and the discounts were irregular
and various. The larger shippers demanded concessions as a right,
and the principle was generally admitted. Naturally the result was
favoritism, not because the railroads desired especially to favor one
as against another, but because in the nature of things secret rates
could not well be given to everybody.

Nobody regarded these secret rates as criminal or objectionable. But
as time passed and these discriminations became more frequent and
greater there arose a demand from the less favored portion of the
shipping community for legislation forbidding the discrimination and
providing for like opportunity for all. This was strenuously opposed
by the favored shippers and by those railroad men who believed the
railroad to be purely a private institution and not amenable to law
as to its charges. It was common enough to hear it seriously argued
that the larger shipper was entitled to the lower rate--this view
was held by many shippers and, I believe, by most railroad managers.
They argued that the business was like any other business--that each
interest must look out for itself, and that competition between the
roads would prevent rates from ever being too high.

For myself I may say that I realized from an early period that
discrimination as to rates was unjust and at no time objected to laws
forbidding it.

The interstate commerce law was passed in 1887. It was crude in its
provisions and was the result of compromises between radicals and
conservatives; it sought both to foster competition and to abolish
it, and in that respect remains still contradictory and impossible.

Upon the passage of the law, that which had been looked upon as
perfectly proper and as the working of natural competitive forces
became illegal and criminal. The railroads generally accepted
the law and made an honest effort to observe it--the mercantile
community did not--indeed, they openly defied it, soliciting rebates
unblushingly and threatening with the loss of their tonnage those
roads who would not succumb. The Interstate Commission, new to its
duties, contented itself with comparatively unimportant decisions and
practically did nothing to help those railroads who desired honestly
to carry out the provisions of the law; and, as a result, within a
year of the passage of the law it was quite generally disregarded.
A few railroad men were fined, a few shippers convicted--and almost
immediately pardoned--and the law fell into disrepute, a condition
disgraceful alike to the government, the shippers and the railroads
and especially distasteful to the latter, but exactly what was to be
expected.

The result was the passage of the so-called Elkins bill, and later
the Hepburn bill, which, while amateurish and in many ways vicious,
have effectually stopped the rebate system--a result for which we may
all be thankful.

In all the controversies that have led up to this almost complete
control of railroad earnings and railroad policies by governmental
agencies, the railroads have, as a rule, acted in active opposition.
They have not been unanimous--some of us were willing to accept it
long before it became a fact, but the majority could see nothing in
it but disaster--it is too early to say which was right--perhaps
an earlier acceptance of control would have made the control more
lenient; perhaps its earlier acceptance would, on the other hand,
have bound the chains more tightly. But the fact remains that while
the basic principle of absolute equality as to rates has been
accepted by the railroads gladly and in all good faith, and they
have also accepted the principle of government regulation, the scars
of the conflict remain and a large section of the public still
suspects and misjudges us. It is true, of course, that in the rapid
development of our business and in the exigencies of a most exacting
profession there have been abuses and lapses, but I am here to
maintain that the standards of fair dealing and commercial honesty in
our business have been as high as in any other, and I appeal to you
who sit around this table to say if it be not so.

But whatever sins may be laid at our door, however much we may have
once believed that ours was a private business to be controlled
exclusively by its owners, however much we have resented or still
resent the interference of the public as manifested in the various
governing bodies, it is, after all, the public that is master and
we must all recognize it. It is, however, still our privilege to
exercise our right as citizens and members of the body politic to
use our efforts to guide it. Acknowledging as we must that the public
is all-powerful, the question is, How may we satisfy our masters and
thus mitigate our woes and preserve our properties?

First. We must realize, as I think we all do (after a series of very
hard knocks), that the railroads are not strictly private property,
but subject to regulation by the public through its regularly
constituted authorities--that the Government may reduce our earnings
and increase our expenses has been sufficiently proved.

Second. To meet this situation we must endeavor to get in touch with
public opinion. Perhaps you will smile when I say that for years I
have read every article on railroad matters in each of the papers
published along our ten thousand miles of road--not an easy task for
a busy man--but while I have waded through much chaff I am sure it
has resulted in some reforms.

Third. The avoidance of action seriously counter to public opinion,
except for compelling reasons.

Fourth. The disposition to explain these reasons through officers and
employes of all grades. Generally, the loudest criticisms come from
those who are not anxious to know the truth.

Fifth. Efforts to improve service in many cases without hope of
reward and for the deliberate purpose of winning public approval,
such as better stations, improved heating and lighting devices,
better equipment, better terminal facilities, separation of grades,
etc.--all with due regard to the rights of those whose money we are
spending.

As we do all these things, meet us half way. Encourage the habit
of not rushing into abuse. Try to consider the facts and the
difficulties--this is for the public interest as well as ours. Oppose
unnecessary and restrictive legislation and give us a chance.

Most of our railroads are mere imitations of what a railroad should
be, and what it must be to keep abreast of the country--yet even the
poorest serves a useful purpose and can not be spared. An eminent
authority has said that five thousand millions of dollars would be
required to supply the transportation needs of the next decade, and
I do not believe it is an over-estimate. Can private capital be
found to that amount unless "public sentiment" is willing to assure
it of return? A portion of the public is clamoring for facilities
involving great additions to expenses; another portion for limitation
of earnings; will the investor consent to accept the risks while
strictly limited as to his return? Since the public may do as it will
with us and since we are necessary to the public, we may properly
call attention to the fact that railway investments already pay less
than any other line, and to ask what is to be done--really, it is
quite as much the public's affair as ours.

Is it certain that the mixture of private ownership and public
regulation which is now prevalent will succeed? Is it not contrary to
all rules of political economy and to all the teachings of history?
Starting as a purely private industry it has been appropriated in
part and other parts are apparently to follow. Granting whatever
may be claimed for the advantages of regulation by government, do
not equity and ordinary commercial decency require that such close
restriction and supervision should be accompanied by some guaranty of
return?

I have endeavored to sketch briefly what should be the attitude of
the railway man _as_ a railway man toward the public. I am sure I
voice the sentiment of all managing railroad officers when I say
that our great desire is to please the public and to give it the
best possible service for the least possible compensation consistent
with reason. Discriminations have long since passed away and nobody
is better pleased than the railroad man that it is so. There is no
desire to escape either responsibility or regulation. We desire to
accord only justice and we ask in return only justice. May I now,
as a citizen, appeal to the railway employe, to the members of this
Association, and to all other good citizens, to resist to the utmost
of their powers the encroachment of government on private rights?

Mr. Elbert Hubbard, of East Aurora, N. Y., recently remarked that
"when God sent a current of common sense through the universe most of
the reformers wore rubber boots and stood on glass." Our troubles are
with this class--well-meaning men who have zeal without knowledge and
enthusiasm without sanity; these we may not reach, but the great mass
of the solid and substantial citizenship may perhaps be induced to
stop and consider whither we are drifting and whether this greatest
of all the country's industries is being fairly treated.




RAILROADS AND THE PUBLIC

BY HON. JOHN C. SPOONER.

    From the address delivered at the annual dinner of the Railway
    Business Association, New York, November 10, 1909.


The topic which has been assigned to me is brief, but very large:
"Railroads and the Public." It suggests nothing of humor, but
everything of gravity and involves considerations which affect the
prosperity of our whole people. The railroads, often berated in
legislatures and in congresses as leechlike and piratical, are, after
all, vital to the happiness of our people and to the progress of
our industries and commerce. The people are apt to forget that they
have been the greatest factors--I say the _greatest_ factors--in the
development of our resources and the enlargement of our commerce,
both in times of war and in times of peace. If one would stop
to think of what would have happened if, during the war for the
preservation of the Union, we had been without railroads, ready
and willing to serve the government upon its demand and at prices
fixed by it, how long would the war have continued? And what might
not have been its result? They carried troops from the North to the
places of rendezvous in the fields; they enabled the government
to transfer quickly from the East to the West, or the West to the
East, as emergency demanded, troops essential to successful military
operations. They carried munitions of war, they carried the mail
to our soldiers, they carried food and raiment to those who were
fighting under our flag.

And in time of peace, what would this country have been without the
railroads? The railroad has been the advance courier of progress, of
settlement, of production, of commerce. It is absolutely, and has
been, indispensable to the government, to the commerce and to the
happiness and comfort of our people. Its mission is not performed or
fulfilled. Considered solely with reference to construction, there
are new fields to be penetrated by them. Today men of courage and men
of means are building railways with characteristic American energy
in far off Alaska, to bring the gold mines and the coal mines and
the timber and the unknown resources of that distant territory into
the markets of the United States. If there is one instrumentality
which above another has been a factor, appreciable by all thoughtful
men, in making this country what it is, it is the railroad. And the
railroad has kept abreast with the demands of commerce. Every device
which ingenuity or invention has presented has been promptly adopted
by the railway companies of the country. They have kept abreast of
invention and improvement, until today the railway system of the
United States is the most luxurious, the safest, the best managed
railway system under the bending sky.

The first thing that would occur to one from this toast, the
railroads being first mentioned, is what do the railroad companies
owe to the public? That is easily defined. They owe it to the public
to furnish safe roadbeds and equipment; they owe it to the public
to furnish prompt service; they owe it to the public to treat all
men, with obvious limitations, passengers and shippers under the
same circumstances, equally and without unjust discrimination, and
they owe to the public the duty of, as far as it is possible, so
maintaining their roads and their equipment as to be able to meet
in a fair way all the demands of commerce and traffic at reasonable
rates. That excludes the rebate which never had any justification in
logic or in fair play. I think those who hated it most were those who
felt obliged to adopt it. When one railway company gave rebates it
is quite manifest that the competitor was obliged to, or go out of
business. And I believe that railway companies of the United States
were glad, and their officers were glad, when it was made a penal
offense for railway companies to give rebates. I think a railway
company owes to the public to be careful in the selection of its
employes; they should be capable, of course, and they should not
only be capable, but they should be courteous and polite. To sum it
up, you would say that what the railway in the enlarged sense--which
includes details--owes to the public is just and fair treatment.

What does the public owe to the railway companies? Precisely, as
I view it, the same thing, just and fair treatment. Only that and
nothing more. Everybody knows that the railway companies of the
United States--I won't put it that way--that the railway system
of the United States never could have been created without the
utilization of corporate entities. Partnerships never could have
concentrated the capital necessary to that end. Only corporations
could have achieved it. That was true in the past and it always
will be true. Now, why is the railway company different from other
corporations, most other corporations? One trouble with the general
public is that they don't seem to understand--and they are not
perhaps to be chided for it--their relation to the railway company.
They think, and they are told, they have been told it in Congress,
and they have been told it where one would least have expected it,
that railway corporations are public corporations, and they have
been taught to believe that their power over public corporations was
supreme, which is not far from the truth; but the railway corporation
is not a public corporation. The Supreme Court has many times decided
that a railway company is a private corporation, that its property
is private property, under the protection and safeguards of the
Constitution of the United States against the public as well as
against individuals who attack it. Then, wherein lies the difference
between a private corporation engaged in manufacture and a railway
corporation? Right here: A railway corporation can not construct its
railway without being clothed with a power which is not given to the
usual private corporation, a power which inheres in the sovereignty
of the state, the ultimate power of the people delegated to the
railway corporations and very few others, and that is the power to
take your land without your will at a price fixed not by you but by a
jury. Why? Because it is for the public use, and private interest and
private sentiment can not be permitted to obstruct the interest of
the state, and therefore the property of a railway company while it
is private property is, as the Supreme Court of the United States has
said, affected with the public interest.

A railway company serves the public, that is what it is organized
to do. Those who apply for the corporate franchises do not apply
for an altruistic purpose. They wish it because they think they can
make profit out of it, and that is legitimate, but the state grants
it for the public use. And so it comes about that the state has the
power to regulate it. Mark what I say, to regulate it, to prevent it
from exacting extortionate rates from the people; to prevent it from
putting upon the people abuses in its management, but that does not
mean that the state may take its property. That does not mean that
the state may take its management out of the hands of its owners.
It means simply that the state may protect the public from any
abdication by it or violation by it of its duty as a common carrier,
and this principle is too often forgotten.

In these days regulation has apparently achieved a wider field for
operation, and is deemed to be broad enough to regulate not only the
property and the management of the property, but the management of
everybody connected with it. That won't do. Why, I see it is stated
in the report of your Business Association that commissions which
have been organized by the states and the Commission organized under
the act of Congress, have come to stay. Of course they have come--we
know that, and we know another thing, that whenever a governmental
commission comes, it stays. The commissions in the states, most
of the states--God knows I wish I could say all the states, but
I can not truthfully--have subserved a useful purpose. The state
lays down the rule and the commission administers the law. There
is one thing about a commission in the regulation under the law of
railway carriers which places it in respect of proprietary, fairness
and fitness for that function, far above Congress or any other
legislative body, and that is this: That they have time to listen,
to investigate, to get at the truth, which a legislative body does
not have time to do in the very nature of things. I do not know, but
I think nothing added more to the reputation of Governor Charles E.
Hughes, of New York, than the fact that he refused to sign a bill,
but vetoed it, reducing the rates which railway companies might
charge, upon the ground that there had been no investigation which
enabled fair judgment as to what was fair treatment to the railway
corporations.

I was in public life a good many years and I am a firm believer in
the sober second thought of the American people, for it represents
the average judgment of every class of our people; but they get
wrong, they get wrong about men, and they get wrong about policies
and measures. They are subject, en masse, as men are individually,
to moments of passion and excitement, and they know it. As Mr.
Webster said, and as the Supreme Court of the United States has said,
the fundamental object of a constitution adopted by the people is
that they may protect themselves against themselves in moments of
excitement and passion. And the American people will always give heed
to the popular translation of the phrase, "Due process of law," that
is, hear before you strike.

Now the Commission, the Interstate Commerce Commission, was intended
by the Congress which created it to be an absolutely independent
body. It was to report to the Congress, it was not to be subject to
the command of either House of Congress, or of the Executive of
the United States. It was intended to be a quasi-judicial body. I
know all of its members, and I do not depreciate to the slightest
extent the services which it has rendered. The only criticism I
would have of it, and that does not arise from its membership, but
it is inherent in the system, is that it is never satisfied with the
powers it has got. It is as insatiable as death for power. It has
been proposed that they shall have the power to regulate the issue
of stocks and bonds by railway corporations created by the states,
that is, if the state which creates the railway company authorizes
it, desiring it to utilize its privileges for the construction of
a new railroad, to issue stock, or issue bonds, that it shall not
be permitted to do that thing until the act of the legislature and
the approval of the governor shall have been supplemented by the
approval of the Interstate Commerce Commission. Now I am getting
along in years, and I am a little old-fashioned, and I have not yet
been able to satisfy myself that where one government creates a stock
corporation, another government shall regulate the amount of its
capital stock and its bonded indebtedness.

I have seen it proposed lately that the Commission should have
the power to fix a rate, and that that rate should be final until
a final judgment setting it aside was reached. What becomes of
the constitution under such a law as that? A railway company, as
I have said, owns its property. It renders a compulsory service
to the public over its own property, with its own equipment, with
its own employes, and at its own risk, and is entitled to a fair
compensation, based upon the fair value of the property which it
devotes to the public convenience, and the Supreme Court has held
that that property can not be taken--because the use of property
is the property--can not be taken for the public use without just
compensation, and if the state, the legislature, or the Congress may
authorize a commission to fix a rate as reasonable and fair, beyond
which the railway company may not charge for services it renders, and
require it to observe that rate until the final adjudication as to
whether the rate is reasonable or not, and after the lapse of months
it is decided that it was unreasonable, how can the railway company
recover the great sum in unreasonable rates which it had lost? It
is a taking of a private property for a public use without just
compensation, and I deny the constitutional power of Congress to do
that thing. I admit the power, and the exercise of it to the fullest
extent to so far regulate railway corporations as to secure to the
public a faithful discharge of all their duties to the public at
reasonable rates, and under fair regulations; beyond that I believe
that the owners of the property ought to be permitted to manage the
property.

The business of railway management has become one of the learned
professions. It calls for some of the brightest intellects in the
country. It calls for the exercise of powers which, if devoted to
the law or to finance or to any other business, would place those
who exercise it among those at the head. It is one of infinite
complication, and it is not to be supposed that railway commissions
can manage railway properties as well as the men who have been
trained from boyhood to that business. I have never questioned that
the Interstate Commerce Commission, the Commission in Wisconsin, and
other commissions, earnestly set out to do the just and fair thing,
but the trouble with this whole question is, and has been through
many a year, that it gets too often into politics. I do not believe
myself that questions of business ever ought to find their way into
the political platform of the party, any more than I believe that the
relations of the employer to the employe, whatever the business may
be, ought to become the football of party politics.

This Association was born out of a happy inspiration. I think these
troublesome problems are approaching solution. The railway companies
must obey the law. The people ought to see to it that the law which
the railway corporations are obliged to obey is a just law, and that
is to be ascertained only on painstaking inquiry, and not through
the speeches of enthusiastic orators or on the floors of Congress.
It has got to be at times that where there was no other issue upon
which a political contest could be fought out, the easy, obvious and
last resort was "let us go for the railroads," or, as a Governor of
Minnesota once expressed it, "Let's shake the railroads over hell."
The truth is that the interest of the railroads is the interest of
the people. The railroad company is dependent upon the people for its
life and its sustenance, and the people are no less dependent upon
the railway company, and between the two there should be even-handed
justice. They should be dealt with calmly, and legislation should
only follow deliberation and investigation, and a law once enacted
should be impersonally enforced, not enforced against some and left
to fall into innocuous desuetude as to others.




RAILROAD PROBLEMS OF TODAY

BY J. B. THAYER,

Vice-President Pennsylvania Railroad Company.

    Address delivered before the Traffic Club of New York, Saturday
    Evening, February 16, 1909.


Problems--both many and varied--have always confronted the railway
manager. Particular problems come to the front from time to time that
tax all of our resources. They differ with different periods of our
history. Today one of the most serious depends more for its solution
upon our lawmaking bodies, both State and national, than upon the
railroad men, and for the present, at least, we must feel like the
old Arkansas darky, who said he was "in the hands of an all-wise and
unscrupulous Providence."

In the early days of railroads the chief problem was that of
construction and equipment; later, when more railroads had been built
than there was traffic to feed, there came the traffic problem, and
all the abuses which followed in its train. These, in turn, led
to the legislative problem accompanied by the Interstate Commerce
Law of 1887, and through the '90s all sorts of problems--including
bankruptcy for many. Now, within the past few years has come the
great problem of enlargement--the construction period again, but in
a different shape. Not experimental, for we had learned how to build
and how to equip; not the building so much into new country, but to
take care of the traffic which was overflowing our rails.

Events of the past year have proved the absolute necessity for
almost all the large railroads in this country to enlarge their
trackage, their terminals, and their equipment; and yet, here again,
when in considering where to obtain the necessary funds for such
purposes,--which must, of course, come from the public,--the railroad
managers find themselves confronted with great difficulties. This,
of course, is largely due to the tremendous demands for capital,
in the development that is going on in all parts of the world, but
it is increased, at the moment, by the natural timidity of capital
to invest its funds in railroad securities, in view of the violent
attacks that are being made against corporations through Congress and
the State legislatures.


POPULAR HOSTILITY TO THE RAILROADS.

This brings us, then, to our greatest and most perplexing
problem--that of how to restore a state of reciprocal understanding
and fairness between the carriers and the public. Many railroad
officials believe that so deep-seated is the apparent hostility
of the people that the management of the railways will be taken
practically out of the hands of their owners, and that great
disasters are to follow. I do not share this view, principally for
the reason that whatever may have been the faults in the past, the
methods and practices of railroad management are now based upon a
decent regard for their public responsibilities. Sooner or later the
people will recognize this--as I believe they are already beginning
to do. But by no means can we minimize the actual situation of today.
It is, indeed, a time of great anxiety to all those entrusted with
railroad management, and who have the interests of their country at
heart as well.

With the old rebates and secret discriminations things of the
past, with all kinds of business in a most prosperous condition,
we all know that within the past three years, suddenly, out of an
almost cloudless sky, there has burst forth upon the railroads of
this country a torrent of the most bitter and violent attacks--by
political orators upon the stump; in magazines and newspapers; in
Congress and State legislatures. It is fair to say, I think, that
this onslaught had its origin in the agitation of 1904 for changes
in the Interstate Commerce law. It was based upon a misunderstanding
of existing railroad conditions and the position of the railroad in
regard to the points at issue, which I shall presently explain.

Following the agitation surrounding the passage of the rate bill has
come a swarm of bills in Congress and State legislatures, which, if
they become laws, and are enforced, will prove disastrous to the
railroads, and, equally so, to the public at large. The question is,
What is to be done to prevent it? The old method of influence has
been abandoned, and, I hope, forever. Has it left us unequipped to
meet the issue? To answer this question let us get a perspective.


RAILROADS NOT BLAMELESS.

We must not imagine, to begin with, that we are entirely blameless.
We are in some respects only realizing the wages of past sins. We
have done many of "those things which we ought not to have done,"
and we have left undone many of "those things we ought to have done."
Most of the evils date back many years and many of them might have
been prevented had the government done its duty and enforced the
law. Yet even in most recent years we can find some mistakes with
which to concern ourselves. It is not strange that many men who have
suffered loss through delays in their traffic, or in their personal
transportation, or who saw themselves deprived of profitable business
because they could not secure cars, should have become exasperated
and, not having time to properly analyze the difficulty, thought that
the railroads were lacking in foresight and management.

But let us go back a few years. It is a great mistake to hold the
railroads responsible for such practices as rebating in those days,
when it would have been impossible to throw a stone in a commercial
community without hitting somebody who was taking rebates and
wanting more. Many men are today running for office on anti-railroad
platforms who if you were to say "Rebates" would duck their heads
very much as David Harum said his Newport friends would do if he
called out "Low bridge!" That rebates were wrong nobody questions,
but to pillory a man today for accepting rebates at that time is a
farce.

Many persons believe that the so-called discriminations, resulting
in the secret arrangements, were largely influenced by the desire
upon the part of railroad officials to favor one man against another,
but no thoughtful man who has at all studied the problem believes
this. Rebates and other forms of discrimination,--whatever may have
been the result in specific instances,--had their origin mainly in
the competition between carriers for the traffic. Incidentally, in
transacting railroad business through secret arrangements, as became
the custom in that period, there were many cases of discrimination in
favor of the strong and against the weak.

There was a strong feeling upon the part of many men, both in and
out of railway service, that the larger shipper, under the ordinary
rules of business, was entitled to a lower rate, and they could
not conceive the real principle which should govern the making of
railroad rates,--which, however, has come clearly to be realized
since that time. The railroad systems, generally, were not more
anxious to pay rebates than they were to pay higher prices for their
supplies, and simply pursued the course of their competitors because,
otherwise, they saw nothing but loss and probable bankruptcy staring
them in the face. The railroads were forbidden by law to meet and
make formal agreements for the maintenance of rates, and by another
law were required to compete. We all thought that the old plan _was_
competition.

Had the Government, through its Interstate Commerce Commission,
vigorously undertaken to enforce the law--passing if necessary,
long before it did, the Elkins Act--I think we should have seen a
correction of these abuses long before the reform came; but, as a
matter of fact, neither the Government authorities nor many of those
managing the railroads had yet reached a clear conception of the
significance of the abuses which existed and of the proper legal
method of uprooting those evils.


GETTING AWAY FROM OLD ABUSES.

Upon the resumption of business activity, in 1898 and 1899, and,
later, following the passage of the Elkins Act, the opportunity was
presented,--and in general accepted by the railroads,--to get away
from the old methods. While since then there have been some cases of
violation of the law, in the matter of secret arrangements, yet I
think that, at least within the last four or five years, it is safe
to say that they have been of small importance, and perhaps, in many
of the cases--while a technical violation of the law--were actually
not discriminations. I say this advisedly, so far as the eastern
situation is concerned, because I know that the Pennsylvania Railroad
Company has not paid a rebate for years, and it is fair to believe
that as that company held its traffic,--in fact, largely increased
it,--without the necessity for such arrangements, its competitors
must have to a large extent pursued the same policy.

But not alone in reference to freight rates was there more or
less complicity in evil between the people and the railroads, but
let me ask you to consider, for a moment, the question of free
transportation, or passes,--whether political or business. It is
only within the last year or two that the public conscience has been
awakened on this subject. It is true, the railroads have been abused
for several years by those who did not enjoy such favors, but is the
railroad more responsible for the conditions that existed than the
Government of the people, either in the National Congress or in the
State legislatures, and how could it be expected that the legislators
in one State could feel that they were doing very wrong in accepting
passes, when the legislators of another State enjoyed them by law of
the State? How could members of Congress be criticised for accepting
such privileges, or the railroads for extending them, when the
Presidents of the United States and member of their cabinets, and
other important officers of the Government not only accepted them,
but practically exacted them, and, further, expected that private
cars and private trains should be furnished without charge? Upon
one occasion within the past two years I called upon the Interstate
Commerce Commission to ask its assistance in eliminating the pass
abuse, and was very frankly told that it could make no move, nor
take any interest in the subject, in view of the fact that important
public officials including Senators and the members of Congress
felt that it was not improper for them to accept them. Out of this
situation grew a large part of the pass abuse, because, following the
national government and the legislatures, the large men of business
felt that they could properly accept similar privileges.

Therefore, I repeat, that while there were great abuses--especially
during the period referred to--embittering a large portion of
people, yet the railroads were no more responsible than the people
themselves; and yet, without doubt it was during this period that the
foundation was laid for the feeling of the present day.


RAILWAYS WELCOME JUST REGULATION.

But, as I stated, we were forced to bear the brunt of our past
sins--and more--in the campaign for increasing the powers of the
Interstate Commerce Commission. Do not misunderstand me. Many
thoughtful railroad men believed always, in the value, both to
the railroads and the public, of an interstate law, and, further,
considered it wise to strengthen the power of the Commission.
The distinction, however, between what railroad men did and did
not believe in, is very clear. We felt and we feel now that the
government is perfectly justified in regulating railroad practices
to the extent of preventing discriminations. Indeed, the government
should act as a sort of policeman to see to it that the weak and the
helpless are protected. If reasonably administered, the railroads
need the law. But the government should not have the right to
interfere with the proper play of the natural commercial forces of
the nation. The great distinction between police and commercial
powers should never be lost sight of.

The danger does not lie in the provisions of the new national
law. There is no substantial difference between its provisions
and those of the old law, except in respect to the powers of the
Commission. There was no necessity for the new law, so far as the
prevention of the old abuse of secret rates and discrimination was
concerned. The operation of this law does not involve any material
change in traffic operations of the railroads; the only danger is
as to how the Commission may exercise their power in influencing
reductions in rates, but even in that respect the railroads have
the right of appeal to the courts. It is from various other bills
being presented in Congress in which the immediate danger lies,
showing possible interference by the national government with the
operation of railroads, with respect to the hours of labor of its
employes, systems of signals, and other methods of operation, which
should properly be left to the railroads themselves. This threatened
interference of the federal government is having a powerful and
dangerous influence upon the legislatures of the various states, who
apparently are--in a slang term--"Seeing Congress and going them
five or six better"--in the bills for reduction of state rates, both
passenger and freight; for increase in taxation, and all sorts of
measures which tend to reduce the earnings and increase the expenses,
and hamper and delay the actual development necessary.

It was unfortunate that in the agitation and discussion following
the President's recommendations, until the present law was finally
adopted, there was a total misunderstanding upon the part of the
public at large as to this attitude of the railroads. It was most
unfortunate in that campaign that the principal point of contest
upon the part of the railroads was lost sight of--and that is--the
objection upon their part not to reasonable amendments to the law,
and not--if the people wanted it--to some increase of power to the
Commission, but to the attempt to make a commission of five or seven
men--in many respects a political body--the final arbiters as to the
rates and fares of the railroads.


DIFFICULTIES UNDER THE PRESENT LAW.

Yet even with the new law on the statute books, our traffic problems
are still with us. We are forbidden by law to make formal agreements
as to rates, yet it is universally recognized that in order to secure
an equitable adjustment of rates, it is absolutely necessary that the
traffic managers of the railroads shall confer frequently. It is well
known that such conferences are held and must be held to prevent
discriminations, yet no definite agreements can be made.

The present law stipulates that there shall be no discrimination by
railroads against persons or communities. Right here, however, the
railroads are face to face with a problem all their own, which is
a very serious one, and that is: How shall a particular railroad
prevent discrimination against a community on its own line by
some other railroad seeking to specially favor a community on its
line? Is it not absolutely essential that there should be both
an understanding and a virtual agreement on the part of the two
railroads concerned for the purpose of protecting both communities?

Cases of dispute between railroads as to proper rate adjustments
have, indeed, been referred to Interstate Commerce Commissioners
as arbitrators and their findings have been observed. This shows
how absolutely vital to all business is the necessity for that
co-operation which can only be secured by agreement and conference
between all interested parties. The President of the United States
recognized the necessity for this fact in his last annual message
and recommended that some legislation be passed which would permit
agreements between railroads as to rates.

We are thus in the presence of this ridiculous situation; that on the
one hand we are being threatened with prosecution by the Government
for violation of the Sherman Act in respect to methods which on the
other hand the President of the United States and the Interstate
Commerce Commissioners agree must be followed in order to properly
discharge our responsibility to the public--in other words, we are
"between the devil and the deep sea," or we are damned if we do, or
we are damned if we don't.

So much for the moment, for our national problem. As to State
regulation: while not believing--now that we have a national
law--that it is necessary or desirable for the public to establish
state commissions and special railroad laws, at the same time, if
the people desire such commissions, we have no right to look upon
such a demand as "anarchistic," but we feel that the working of such
commissions will be unsatisfactory to the business interests.


CONFIDENCE AND JUSTICE NEEDED.

These are but a few of our problems and difficulties. While I do
not wish to minimize the dangers of the present situation, while I
recognize that it is now to some extent, by adding to the timidity of
investors, retarding our ability to secure funds necessary to make
extensions and buy equipment required for the ever-increasing traffic
of the country, and if continued will make it impossible, yet I am
firmly of the opinion that the good sense of the people will prevail
and the unjust attacks cease. Confidence of investors both here and
abroad is needed to furnish funds, and, if this is seriously shaken,
the prosperity of the railroads, which are the keystone of the arch
of business, will be destroyed.

To avoid these dangers a regime of confidence and fairness on the
part of the public toward the railroads must be restored, and to
accomplish this we must place our case, as it were, before the
legislators and the people and make clear our difficulties and the
complications which beset us. Few, after all, understand the railroad
problem, and we have not made it plain to the people, either because
it was the fashion not to do so, or because we could not realize that
things simple to us were not understood by the public. We must not
stop at one statement, but discourse upon and elucidate every subject
which the public misunderstands.

Let us be frank and take the public into our confidence as fully
as is consistent with the proper conduct of our business. Let
us approach the subject with the feeling that the railroads are
not absolutely perfect, that we have to some extent brought this
condition of affairs upon ourselves, and that we should govern
ourselves in the future accordingly. Let us undertake to go frankly
before the people and present the actual facts in connection with our
affairs.


THE PENNSYLVANIA AS AN ILLUSTRATION.

Let me illustrate: The Pennsylvania Legislature is in session.
Numerous bills have been presented, of a most radical nature. It
is our purpose to appear before every committee that will hear us,
and tell our side of the story. I doubt very much if the average
legislator--and certainly not the average citizen--understands
whom he is injuring in unjust acts towards the railroads. Take our
company, for example. It is not a small group of rich capitalists;
it is not Mr. McCrea and myself and a few others; the Pennsylvania
Railroad is owned by more than 50,000 people, 30 per cent of whom
live in Pennsylvania. Forty-seven per cent of our shareholders are
women; and in many cases the dividend is their only source of
income. Then there are thousands of bondholders; beyond them are
nearly 100,000 employes in the State of Pennsylvania dependent upon
the prosperity of the Pennsylvania Railroad for their livelihood.

Therefore, by the usual computation, it is safe to say that
approximately half a million people--men, women and children--are
actually dependent upon the welfare of this company in the State of
Pennsylvania alone.

Upon the Pennsylvania Railroad's prosperity depends the prosperity of
the other lines in its system, and including the employes of these
lines, there are 200,000 men, who, with their families, constitute an
army of a million or more. Behind them, again, are the thousands of
men, with their families, who produce the coal and other materials
which the railroads use. Anything that cripples the railroads injures
every one of these people.

When we make these and other facts plain, I cannot but feel that
no injustice will be done. In the meantime, let us keep our minds
well balanced, and not allow ourselves to believe that chaos is
coming; let us meet the issue fairly and squarely and frankly. While,
therefore, necessary for the present, at least, to suspend many
improvements, let us keep our courage, trusting to the ultimate good
sense of the lawmakers and the people for that sympathy and support
to which we feel that we are entitled.




THE RELATION OF RAILROADS TO THE STATE.

BY W. M. ACWORTH, M. A.

    Delivered before the British Association at Dublin, Ireland,
    September 2, 1908.


I propose to treat the subject in two aspects; first, the history in
outline of the relations between railroads and the state in different
countries, and, second, the question of the factors which are of
primary importance in any consideration of the matter.

Ever since the year 1830, when the dramatic success of the Liverpool
& Manchester Railway first revealed to a generation less accustomed
than our own to revolutionary advances in material efficiency the
startling improvements in transport that railroads were about to
effect, theorists have discussed the question whether state or
private ownership of railroads be in the abstract the more desirable.
But it is safe to say that in no country has the practical question,
"Shall the state own or not own the railroads?" been decided on
abstract considerations. The dominant considerations have always been
the historical, political and economic position of the particular
country at the time when the question came up in concrete shape for
decision.


BELGIUM.

The Belgian railroads have belonged to the state from the outset,
because they were constructed just after Belgium separated from
Holland, and (the available private capital being in Holland and
not in Belgium) King Leopold and his Ministers felt that, if the
railroads were in private hands, that would mean in Dutch hands,
and the newly acquired independence of Belgium would be thereby
jeopardized. Within the last few years this history has repeated
itself, and the fact that the bulk of the Swiss railroad capital was
held in France and Germany was one main reason, if not _the_ main
reason, which induced the Swiss people to nationalize their railroads.


GERMANY.

In Germany 70 years ago the smaller states were regarded as the
personal property of their respective Sovereigns, almost as
definitely as Sutherlandshire is the property of the Duke of
Sutherland. And it was therefore as natural that the Dukes of
Oldenburg or Mecklenburg should make railroads for the development of
their estates as that the Duke of Sutherland should build a railroad
in Sutherland.


AUSTRALASIA.

Take, again, Australasia. In that region the whole of the railroads,
with negligible exceptions, now belong to the different state
governments, and the public sentiment that railroads ought to be
public property is today so strong that it is impossible to imagine
any serious development of private lines. But at the outset the
traditional English preference for private enterprise was just
as strong there as it was at home, and it was only the fact that
the whole of the available private capital was absorbed in the
development of the gold fields and that, therefore, if railroads were
to be built at all, public credit must be pledged and English capital
must be obtained, that caused the state to go into the railroad
business.


ITALY.

Take, once more, the case of Italy. In the days when Italy was only a
geographical expression, the various Italian states experimented with
railroad management of all sorts and kinds. When, after 1870, Italy
was unified, it was necessary to adopt a national railroad policy,
and the Italian government instituted an inquiry whose exhaustiveness
has not since been approached. The force of circumstances has indeed
already compelled the government to acquire the ownership of the
railroads, but the Commission reported that it was not desirable
that the government should work them. The railroads were accordingly
leased for a period of 60 years, running from 1884, to three
operating companies, and it was provided that the leases might be
broken at the end of the 20th or the 40th year. From the very outset
a condition of things developed which had not been contemplated when
the leases were granted, and for which the leases made no provision.
Constant disputes took place between the government and their
lessees. Capital for extensions and improvements was urgently needed;
neither party was bound to find it; and agreement for finding it on
terms mutually acceptable was impossible of attainment. In the end
the government has been forced to cut the knot, to break the lease at
the end of the first 20 years' period, and for the last two years the
Italian government has operated its own railroads. But it is safe to
say that an _a priori_ preference for state management over private
management played but scant part in the ultimate decision.


GENERAL INCREASE OF STATE CONTROL.

It is impossible to review, even in the merest outline, the railroad
history of all the countries in the world, but the instances already
given will serve to illustrate my proposition that the position in
each country depends not on abstract considerations, but on the
practical facts of the local situation. Yet one cannot look round
the world and fail to recognize that the connection between the
railroads and the state is everywhere becoming more intimate year by
year. Whatever have been the causes, the fact remains that Italy and
Switzerland have converted their railroads from private to public. In
Germany the few remaining private lines are becoming still fewer. In
Belgium the process is practically completed. In Austria it is moving
steadily in the same direction; four-fifths of the total mileage is
now operated by the state. In Russia the story would have been the
same, had it not been for the war with Japan. Even in France, whose
railroads have a very definite local and national history of their
own, an act for the purchase of the Western Railway by the state was
passed last year by the Chamber of Deputies, and has now, after much
contention, been passed by the Senate within the last few weeks. But
it is not without interest to note that, though a majority both of
deputies and of senators supported the bill, the representatives of
the district served by the company were by a large majority opposed
to it, while the commercial community of the whole of France, as
represented by the Chambers of Commerce, were almost unanimously
hostile.[I] So far as can be seen at present, the purchase of the
Western Railway by the state is not likely to be made a precedent
for the general nationalization of the French railroads. Still, the
broad fact remains that a series of railroad maps of the continent
of Europe, constructed at intervals of ten years, would undoubtedly
show an ever-increasing proportion of state lines, and that the last
of the series would exhibit the private lines as very far below the
state lines both in extent and in volume of traffic.

A word ought to be said of Holland, not only because Holland is a
country with free institutions like our own, but because the railroad
position of Holland is unique. The railroads of that country were
built partly by the state and partly by private enterprise, but the
working has always been wholly in private hands. Some ten years
ago, however, the Dutch government bought up the private lines and
rearranged the whole system. The main lines of the country are now
leased to two operating companies, so organized that each company
has access to every important town, and railroad competition is now
practically ubiquitous throughout Holland. So far there are no signs
that the Dutch people are otherwise than satisfied with their system.
Now compare this with France. The French government, though it has
hitherto, except on the comparatively unimportant state railroads in
the southwest of the country, stood aloof from the actual operation,
has always kept entire control of railroad construction and of the
allocation of new lines between the several companies. And the French
government has proceeded on a principle diametrically opposed to
the Dutch principle. In France railroad competition has, as far as
possible, been definitely excluded, and the various systems have
been made to meet, not, as in Holland, at the great towns, but at
the points where the competitive traffic was, as near as might
be, a negligible quantity. Now that questions of competition and
combination are to the fore in England, and seem likely to give
very practical occupation to Parliament in the session of 1909, the
precedents on both sides are perhaps not without interest.


AMERICA.

When we turn from the continent of Europe to the continent of America
the position of affairs is startlingly dissimilar. The railroads of
America far surpass in length those of the continent of Europe, while
in capital expenditure they are equal. State ownership and operation
of railroads on the continent of America is as much the exception
as it is the rule in Europe. In Canada there is one comparatively
important state railroad, the Intercolonial, about 1,500 miles in
length. Though its earnings are quite considerable--about £20 per
mile per week--it barely pays working expenses. I may add that in
all the voluminous literature of the subject I have never seen this
line cited as an example of the benefits of state management. There
is another small line, in Prince Edward Island, which is worked at a
loss; and a third, the Temiskaming & Northern Ontario Railway, owned
not by the Dominion but by the Provincial government, which is too
new to afford any ground for conclusions.

The Federal government of the United States has never owned a
railroad, though some of the individual states did own, and in
some cases also work, railroads in very early days. They all burnt
their fingers badly. But the story is so old a one that it would be
unreasonable to found any argument on it today.

In Mexico, of which I shall have more to say directly, the state
owns no railroads. As for Central America, Costa Rica and Honduras
have some petty lines, which are worked at a loss. Guatemala had a
railroad till 1904, when it was transferred to a private company.
Nicaragua has also leased its lines. Colombia owns and works at a
profit, all of which is said to be devoted to betterment, 24 miles of
line.

In South America, Peru and Argentina own, as far as I am aware, no
railroads. The Chilian government owns about 1,600 miles out of the
3,000 miles in the country. Needless to say private capital has
secured the most profitable lines. The government railroad receipts
hardly cover the working expenses. The Brazilian government formerly
owned a considerable proportion of its railroad network of nearly
11,000 miles. Financial straits forced it some years ago to dispose
of a large part to private companies, to the apparent advantage at
once of the taxpayer, the shareholder and the railroad customer.
About 1,800 miles of line are still operated by the government, the
receipts of which, roughly speaking, do a little more than balance
working expenses. But it may be broadly said that the present
Brazilian policy is adverse to state ownership and in favor of the
development of the railroad system by private enterprise.


THE UNITED STATES SITUATION.

The question of public ownership and operation was, however, raised
very definitely in the United States only two years ago, when
Mr. Bryan made a speech stating that his European experience had
convinced him that it was desirable to nationalize the railroads of
the United States. For many weeks after, Mr. Bryan's pronouncement
was discussed in every newspaper and on every platform, from Maine
to California. Practically, Mr. Bryan found no followers, and today,
though he is the accepted candidate of the Democratic party for the
Presidency, the subject has been tacitly shelved. To some extent
this may have been due to the ludicrous impossibility, if I may
say so with all respect for a possible President, of Mr. Bryan's
proposals. In order, presumably, not to offend his own Democratic
party, the traditional upholders of the rights of the several states,
he seriously suggested that the Federal government should work the
trunk lines, and the respective state governments the branches. Even
if anybody knew in every case what is a trunk line and what is a
branch, the result would be to create an organism about as useful for
practical purposes as would be a human body in which the spinal cord
was severed from the brain. Mr. Bryan's proposal was never discussed
in detail: public sentiment throughout the Union was unexpectedly
unanimous against it, and it is safe to say that the nationalization
of the railroads of the United States is not in sight at present.

But though nationalization is nowhere in America a practical issue,
everywhere in America the relations between the railroads and the
state have become much closer within the last few years. Canada
a few years ago consolidated its railroad laws and established a
Railway Commission, to which was given very wide powers of control
both over railroad construction and operation and over rates and
fares for goods and passengers. Argentina has also moved in the
same direction. In the United States, not only has there been the
passage by the Federal Congress at Washington of the law amending the
original Act to Regulate Commerce and giving much increased powers
to the Interstate Commerce Commission, besides various other Acts
dealing with subsidiary points, such as hours of railroad employes,
but scores, if not hundreds, of Acts have been passed by the various
state legislatures. With these it is quite impossible to deal in
detail; many of them impose new pecuniary burdens upon the railroad
companies, as, for instance, the obligation to carry passengers at
the maximum rate of a penny per mile. All of them, speaking broadly,
impose new obligations and new restrictions upon the railroad
companies. Not a few have already been declared unconstitutional, and
therefore invalid, by the law courts. And when the mills of American
legal procedure shall at length have finished their exceedingly
slow grinding, it is safe to prophesy that a good many more will
have ceased to operate. But for all that, the net result of state
and Federal legislation in the sessions of 1906 and 1907 will
unquestionably be that even after the reaction and repeal, which,
thanks to the Wall street panic of last year, is now in progress,
the railroads of the United States will in the future be subject to
much more rigid and detailed control by public authority than there
has been in the past. The reign of railroad despotism, more or less
benevolent, is definitely at an end; the reign of law has begun. It
is only to be regretted that the quantity of the law errs as much on
the side of excess as its quality on the side of deficiency.


THE MEXICAN SITUATION.

Apart from its interest as a quite startling example of how not
to do it, the recent railroad legislation of the United States is
only valuable as an indication of the tendency, universal in all
countries, however governed, for the state to take a closer control
over its railroads. Much more interesting as containing a definite
political ideal, worked out in detail in a statesmanlike manner, is
the recent railroad legislation of Mexico. One may be thought to be
verging on paradox in suggesting that England, with seven centuries
of parliamentary history, can learn something from the Republic of
Mexico. But for all that I would say, with all seriousness, that I
believe the relation between the state and the national railroads is
one of the most difficult and important questions of modern politics,
and that the one valuable and original contribution to the solution
of that question which has been made in the present generation is due
to the President of the Mexican Republic and his Finance Minister,
Señor Limantour.

Broadly, the Mexican situation is this: The Mexican railroads were in
the hands of foreign capitalists, English mainly so far as the older
lines were concerned, American in respect to the newer railroads,
more especially those which constituted continuations southwards
of the great American railroad systems. The foreign companies,
whether English or American, naturally regarded Mexico as a field
for earning dividends for their shareholders. The American companies
further, equally naturally, tended to regard Mexico as an annexe and
_dépendance_ of the United States. If they thought at all of the
interest of Mexico in developing as an independent self-contained
state, they were bound to regard it with hostility rather than with
favor, and such a point of view could hardly commend itself to the
statesmen at the head of the Mexican government. Yet Mexico is a
poor and undeveloped country, quite unable to dispense with foreign
capital; and, further, it was at least questionable whether Mexican
political virtue was sufficiently firm-rooted to withstand the
manifold temptations inherent in the direct management of railroads
under a parliamentary _régime_. Under these circumstances the
Mexicans have adopted the following scheme: For a comparatively
small expenditure in actual cash, coupled with a not very serious
obligation to guarantee the interest on necessary bond issues,
the Mexican government have acquired such a holding of deferred
ordinary stock in the National Railroad Company of Mexico as gives
them, not, indeed, any immediate dividend on their investment, but
a present control in all essentials of the policy of the company,
and also prospects of considerable profit when the country shall
have further developed. The organization of the company as a private
commercial undertaking subsists as before. A board of directors,
elected in the ordinary manner by the votes of shareholders, remains
as a barrier against political or local pressure in the direction
of uncommercial concessions, whether of new lines or of extended
facilities or reduced rates on the old lines; but--and here is the
fundamental difference between the new system and the old--whereas
under the old system the final appeal was to a body of shareholders
with no interest beyond their own dividend, the majority shareholder
is now the Government of Mexico, with every inducement to regard the
interests, both present and prospective, of the country as a whole.


IRREFRAGABLE THEORY OF PUBLIC OWNERSHIP.

Public ownership of railroads is in theory irrefragable. Railroads
are a public service; it is right that they should be operated by
public servants in the public interest. Unfortunately, especially in
democratically organized communities, the facts have not infrequently
refused to fit the theories, and the public servants have allowed,
or been constrained to allow, the railroads to be run, not in the
permanent interest of the community as a whole, but in the temporary
interest of that portion of the community which at the moment could
exert the most strenuous pressure. The Mexican system, if it succeeds
in establishing itself permanently--for as yet it is only on its
trial--may perhaps have avoided both Scylla and Charybdis. Faced with
a powerful but local and temporary demand, the government may be able
to reply that this is a matter to be dealt with on commercial lines
by the board of directors. If, on the other hand, permanent national
interests are involved, the government can exercise its reserve
power as a shareholder, can vote the directors out of office, and
so prevent the continuance of a policy which would in its judgment
be prejudicial to those interests, however much it might be to the
advantage of the railroad as a mere commercial concern.


STATE CONTROL OR OWNERSHIP.

The history whose outline I have now very briefly sketched shows, I
think, that whereas there is everywhere a tendency towards further
state control, the tendency towards absolute state-ownership and
state-operation is far from being equally universal. I shall have
a word to say presently as to the reasons why America shows no
signs of intention to follow the example of continental Europe.
Meanwhile it is well to notice that American experience proves also
the extreme difficulty of finding satisfactory methods of control.
Sir Henry Tyler said some five-and-thirty years ago in England, in
words that have often been quoted since, "If the state can't control
the railroads, the railroads will control the state"; and President
Roosevelt has again and again in the last few years insisted on the
same point. "The American people," he said in effect, "must work
out a satisfactory method of controlling these great organizations.
If left uncontrolled, there will be such abuses and such consequent
popular indignation that state-ownership will become inevitable, and
state-ownership is alien to American ideas, and might cause very
serious political dangers."

Perhaps some of my hearers may remember Macaulay's graphic
description of the passion that was aroused by Charles James
Fox's proposed India Bill; it was described as a Bill for giving
in perpetuity to the Whigs, whether in or out of office, the
whole patronage of the Indian government. The objection felt by
American statesmen to handing over their railroads to the National
government--for I think it may be taken for granted that if they were
nationalized it would have to be wholly under Federal management,
and that the separate states could take no part in the matter--is in
principle the same. There are something like a million and a half
men employed on the railroads of the United States, say roughly 7
or 8 per cent. of the voters. Americans feel that rival political
parties might bid against each other for the support of so vast and
homogeneous a body of voters; that the amount of patronage placed at
the disposal of the executive government for the time being would
be enormous; and that the general interests of the nation might
be sacrificed by politicians anxious to placate--to use their own
term--particular local and sectional interests. How far this fear,
which is undoubtedly very prevalent in the states, is justified
by the history of state railroads in other countries is a question
exceedingly difficult to answer. Dealing with state railroads in the
lump, it is easy to point to some against which the charge would
be conspicuously untrue. To take the most important state railroad
organization in the world, the Prussian system, no one, I think, can
fairly deny that it has been operated--in intention at least, if not
always in result--for the greatest good of the greatest number. But
then Prussia is Prussia, with a government in effect autocratic, with
a civil service with strong _esprit de corps_ and permeated with old
traditions, leading them to regard themselves as the servants of
the king rather than as candidates for popular favor. An American
statesman, Charles Francis Adams, wrote as follows more than 30 years
ago: "In applying results drawn from the experience of one country
to problems which present themselves in another, the difference of
social and political habit and education should ever be borne in
mind. Because in the countries of continental Europe the state can
and does hold close relations, amounting even to ownership, with
the railroads, it does not follow that the same course could be
successfully pursued in England or in America. The former nations are
by political habit administrative, the latter are parliamentary. In
other words, France and Germany are essentially executive in their
governmental systems, while England and America are legislative.
Now the executive may design, construct or operate a railroad; the
legislative never can. A country therefore with a weak or unstable
executive, or a crude and imperfect civil service, should accept with
caution results achieved under a government of bureaus. Nevertheless,
though conclusions cannot be adopted in the gross, there may be in
them much good food for reflection."


CONTROL BY DEMOCRACY, OR OWNERSHIP BY AUTOCRACY.

I am inclined to think that the effect of the evidence is that the
further a government departs from autocracy and develops in the
direction of democracy, the less successful it is likely to be in
the direct management of railroads. Belgium is far from being a pure
democracy; but compared with Prussia it is democratic, and compared
with Prussia its railroad management is certainly inferior. Popular
opinion in Belgium seems at present to be exceedingly hostile to the
railroad administration; official documents assert that, while the
service to the public is bad, the staff are scandalously underpaid,
and yet that the railroads are actually not paying their way. There
was, it is true, till recently an accumulated surplus of profits
carried in the railroad accounts, but the official figures have been
recently revised, and the surplus is shown to be non-existent.

The Swiss experiment is too new to justify any very positive
conclusions being drawn from it; but this much is clear: the state
has had to pay for the acquisition of the private lines sums very
much larger than were put forward in the original estimate; the
surplus profits that were counted on have not been obtained in
practice; the economies that were expected to result from unification
have not been realized; the expenditure for salaries and wages
has increased very largely; and so far from there being a profit
to the Federal government, the official statement of the railroad
administration is that, unless the utmost care is exercised in the
future, the railroad receipts will not cover the railroad expenditure.

The Italian experiment is still newer. It would not be fair to say
that it proves anything against state management; but I do not think
that the most fervid _Etatist_ would claim that, either on the ground
of efficiency or on the ground of economy, it has so far furnished
any argument in favor of that policy.

If we wish to study the state management of railroads by pure
democracies of Anglo-Saxon type, we must go to our own Colonies.
My own impressions, formed after considerable study of the subject
and having had the advantage of talking with not a few of the men
who have made the history, I hesitate to give. It is easy to find
partisan statements on both sides; for example, in a recent article
in the _Nineteenth Century_, entitled "The Pure Politics Campaign
in Canada," I find the following quotation from the _Montreal
Gazette_--a paper of high standing--dated May 27, 1907: "Every job
alleged against the Russian autocracy has been paralleled in kind
in Canada. First, there is the awful example of the Intercolonial
Railway, probably as to construction the most costly single-track
system in North America, serving a good traffic-bearing country, with
little or no competition during much of the year, and in connection
with much of its length no competition at all, but so mishandled that
one of its managers, giving up his job in disgust, said it was run
like a comic opera. Some years it does not earn enough to pay the
cost of operation and maintenance (I may interpolate that its gross
earnings per mile are equal to those of an average United States
railroad), and every year it needs a grant of one, two, three or four
million dollars out of the Treasury to keep it in condition to do at
a loss the business that comes to it. When land is to be bought for
the road, somebody who knows what is intended obtains possession of
it, and turns it over to the government at 40, 50 and 100 per cent
advance. This is established by the records of Parliament and of the
courts of the land."


AFRICAN CAPE GOVERNMENT RAILROADS.

Probably no one outside the somewhat heated air of Canadian politics
is likely to believe this damning accusation quite implicitly; but
even if there were not a word of truth in it--and that the management
of the Intercolonial Railway is, for whatever cause, bad, appears, I
think, clearly from the public figures--it is bad enough that such
charges should be publicly made and apparently believed. Let me quote
now from a document of a very different type referring to a colony
very far distant from Canada: "A memorandum relative to Railroad
Organization, prepared at the request of the Railroad Commissioners
of the Cape Government Railways, by Sir Thomas R. Price, formerly
general manager of those railroads, and now general manager of the
Central South Africa (_i. e._, Transvaal and Orange River) Railways,
dated Johannesburg, February 22, 1907."

    "The drawbacks in the management of the railroads in the Cape
    that call for removal arise from the extent to which, and the
    manner in which, the authority of Parliament is exercised. They
    are twofold in their character, viz.:

    "(1) The practice of public authorities, influential
    persons, and others bent on securing concessions or other
    advantages which the general manager has either refused in
    the conscientious exercise of his functions, or is not likely
    to grant, making representation to the Commissioner (as the
    ministerial head of the Government), supplemented by such
    pressure, political influence, or other means as are considered
    perfectly legitimate in their way, and are best calculated to
    attain the end applicants have in view.

    "(Many members of Parliament act similarly in the interests
    of the districts, constituents, or railroad employes in whom
    they happen to be interested. It is by no means unknown for the
    requests in both classes of cases to coincide somewhat with a
    critical division in Parliament--present or in prospect--or
    otherwise something has occurred which is regarded as
    irritating to the public or embarrassing to the Government, and
    the desire to minimize the effect by some conciliatory act is
    not unnatural.)

    "(2) The extent to which the fictitious, and often transitory,
    importance which a community or district manages to acquire
    obscures (under the guise of the Colony's welfare) the
    consideration of the railroad and general interest in the
    Colony as a whole."

    (During the earlier period of my railroad service in the Cape
    Colony few things impressed me more, coming as I had from a
    railroad conducted on strictly business lines, than the extent
    to which the conduct of railroad affairs was influenced by
    certain conditions. Nor was this impression lessened afterwards
    when, in the course of a conversation on the matter, Sir
    Charles Elliott mentioned to me that he had more than once told
    a late railway commissioner, "The Government is powerful, but
    [mentioning the town and authority] is more powerful still.")

    "I do not regard it as open to doubt that the Colony as a whole
    has suffered severely in consequence, the inland portions of
    the Colony particularly so; and that the need for a remedy is
    pressing if the railroads are to be conducted as a business
    concern for the benefit of the Colony.

    "The necessity for the railroads and their administration being
    removed from such an atmosphere, and treated as a most valuable
    means of benefiting the Colony as a whole, while not neglecting
    the interests of a district (but not subordinating the welfare
    of the whole Colony thereto), is pressing. That there should be
    an authority to refer to in case of real necessity, where the
    decision or action of the general manager is not regarded as
    being in the public interests, is also clear. But it is equally
    manifest that the Commissioner or the Government of the day,
    with political or party consideration always in view, is not
    the proper court of reference.

    "There can be little doubt that in the Cape Colony political
    considerations have influenced the adoption of new lines
    and their construction--many, if not most of them of an
    unprofitable character--without sufficient inquiry or
    information, often with scanty particulars, and possibly
    contrary to the advice of the officer afterwards entrusted with
    the construction and working of the line.

    "A material change is imperatively necessary in this respect,
    if only to insure the solvency of the Colony."


VICTORIAN (AUSTRALIA) RAILROADS.

It is sometimes conceded that improper exercise of political
influence may be a real danger where railroads are managed under
a parliamentary _régime_ by a Minister directly responsible to
Parliament; but that difficulty, it is said, can be got over by
the appointment of an independent Commission entirely outside the
political arena. History does not altogether justify the contention.
The last report of the Victorian State Railways gives a list of seven
branches, with an aggregate length of 46 miles, constructed under the
Commissioner _régime_ at a cost of £387,000, which are now closed
for traffic and abandoned because the gross receipts failed even to
cover the out-of-pocket working expenses. It is not alleged, nor is
it a fact, that those lines were constructed in consequence of any
error of judgment on the part of the Commissioners. But in truth it
is inherently impossible to use a Commission to protect a community
against itself. In theory a Commission might be a despot perfectly
benevolent and perfectly intelligent; in that case, however, it
can hardly be said that the nation manages its own railroads. But
of course any such idea is practically impossible, because despots,
however benevolent and intelligent, cannot be made to fit into the
framework of an Anglo-Saxon constitution. In practical life the
Railway Commission must be responsible to someone, and that someone
can only be a member of the political government of the day.


COMPETITION HAS CEASED TO REGULATE.

I have indicated what in America, where the subject is much more
carefully considered than here, is regarded as a great obstacle to a
state-railroad system; but I have pointed out also that it is quite
possible that statesmen fully alive to the dangers may yet find
themselves constrained to risk them unless some satisfactory method
of controlling private railroad enterprise can be found. I do not
think it can be considered that this has been done in England at the
present time. In the main we have relied on the force of competition
to secure for us reasonable service at not unreasonable rates; and
as I still cherish a long-formed belief that English railroads are
on the whole among the best, if not actually the best, in the world,
I am far from saying that competition has not done its work well.
But competition is an instrument that is at this moment breaking in
our hands. Within quite a few years the South Eastern Railway was
united with the Chatham; the Great Southern has obtained a monopoly
over a large part of Ireland; in Scotland the Caledonian and the
North British, the Highland and the Great North have in very great
measure ceased to compete. If the present proposals for the working
union of the Great Eastern, the Great Northern and the Great Central
go through, competition in the East of England will be absolutely
non-existent from the Channel to the Tweed. And one can hardly
suppose that matters will stop there. In fact, since this address
was in type a comprehensive scheme of arrangement for a long term of
years between the London & North Western and the Midland has been
announced. We must, I think, assume that competition, which has done
good work for the public in its day, is practically ceasing to have
any real operation in regulating English railroads.


HOW SHALL GOVERNMENT REGULATE?

For regulation, therefore, we must fall back on government; but
how shall a government exercise its functions? Regulation may be
legislative, judicial, executive, or, as usually happens in practice,
a combination of all three. But we may notice that, as Mr. Adams
points out, in Anglo-Saxon countries it is the Legislature and the
Judicature that are predominant; whereas in a country like France,
which though a democracy is bureaucratically organized, it is
executive regulation that is most important. Now, the capacity of the
Legislature to regulate is strictly limited; it can lay down general
rules; it can, so to speak, provide a framework, but it cannot decide
_ad hoc_ how to fit into that framework the innumerable questions
that come up for practical decision day by day.

The capacity of the law courts to regulate is even more strictly
limited. For not only is it confined within the precise limits of
the jurisdiction expressly conferred upon it by the Legislature, but
further, by the necessity of the case, a court of law can only decide
the particular case brought before it; a hundred other cases, equally
important in principle, and perhaps more important in practice, may
never be brought before it at all. Even if the court had decided
all the principles, it has no machinery to secure their application
to any other case than the one particular case on which judgment
was given. There was a case decided 30 years ago by our Railroad
Commission, the principle of which, had it been generally applied
throughout the country, would have revolutionized the whole carrying
business of Great Britain. It has not been so applied, to the great
advantage, in my judgment, of English trade. Further, the great bulk
of the cases which make up the practical work of a railroad: "What is
a reasonable rate, having regard to all the circumstances, present
and prospective, of the case? Would it be reasonable to run a new
train or to take off an old one? Would it be reasonable to open a
new station, to extend the area of free cartage, and the like?"--all
these are questions of discretion, of commercial instinct. They
can only be answered with a "Probably on the whole," not with a
categorical "Yes" or "No," and they are absolutely unsuitable for
determination by the positive methods of the law court with its
precisely defined issues, its sworn evidence, and its rigorous
exclusion of what, while the lawyer describes it as irrelevant, is
often precisely the class of consideration which would determine one
way or other the decision of the practical man of business.

It seems to me, therefore, that both in England and in America we
must expect to see in the near future a considerable development of
executive government control over railroads.

This is not the place to discuss in detail the form that control
should take, but one or two general observations seem worth making.
The leading example of executive control is France; in that country
the system is worked out with all the French neatness and all the
French logic. But it is impossible to imagine the French principle
being transplanted here. For one thing, the whole French railroad
finance rests upon the guarantee of the government. The French
government pays, or at least is liable to pay, the piper, and has,
therefore, the right to call the tune. The English government has
not paid and does not propose to pay, and its claim to call the
tune is therefore much less. Morally the French government has a
right--so far at least as the railroad shareholders are concerned--to
call on a French company to carry workmen at a loss; morally, in my
judgment at least, the English government has no such right. But
there is a further objection to the French system; the officers of
the French companies have on their own responsibility to form their
own decisions, and then the officers of the French government have,
also on their own responsibility, to decide whether the decision
of the company's officer shall be allowed to take effect or not.
The company's officer has the most knowledge and the most interest
in deciding rightly, but the government official has the supreme
power. The system has worked--largely, I think, because the principal
officers of the companies have been trained as government servants in
one or other of the great Engineering Corps, des Mines or des Ponts
et Chaussées. But it is vicious in principle, and in any case would
not bear transplanting.

What we need is a system under which the responsibility rests, as at
present, with a single man (let us call him the general manager), and
he does what he on the whole decides to be best, subject however to
this: that if he does what no reasonable man could do, or refuses to
do what any reasonable man would do, there shall be a power behind to
restrain, or, as the case may be, to compel him. And that power may,
I think, safely be simply the Minister--let us call him the President
of the Board of Trade. For, be it observed, the question for him is
not the exceedingly difficult and complicated question, "What is best
to be done?" but the quite simple question, "Is the decision come to
which I am asked to reverse so obviously wrong that no reasonable man
could honestly make it?"

And even this comparatively simple question the President would not
be expected to decide unaided. He will need competent advisory
bodies. Railroad history shows two such bodies that have been
eminently successful--the Prussian State Railway Councils and the
Massachusetts Railroad Commission. Wholly unlike in most respects,
they are yet alike in this: their proceedings are public, their
conclusions are published, and those conclusions have no mandatory
force whatever. And it is to these causes that, in my judgment, their
success, which is undeniable, is mainly due. Let me describe both
bodies a little more at length.

There are in Prussia a number (about ten I think) of District Railway
Councils, and there is also one National Council; they consist
of a certain number of representative traders, manufacturers,
agriculturists, and the like, together with a certain number of
government nominees; and the railroad officials concerned take part
in their proceedings, but without votes. The Councils meet three or
four times a year, their agenda paper is prepared and circulated
in advance, and all proposed changes of general interest, whether
in rates or in service, are brought before them, from the railroad
side or the public side, as the case may be. The decision of the
Council is then available for information of the Minister and his
subordinates, but as has been said, it binds nobody.

The Massachusetts Railroad Commission is a body of three persons,
usually one lawyer, one engineer and one man of business, appointed
for a term of years by the Governor of the state. Originally the
powers of this Commission were confined to the expression of opinion.
If a trade, or a locality, or indeed a single individual, thought
he was being treated badly by a Massachusetts railroad, he could
complain to the Commission; his complaint was heard in public; the
answer of the railroad company was made there and then; and thereupon
the Commissioners expressed their reasoned opinion. The system has
existed now for more than 30 years, and it is safe to say that,
with negligible exceptions, if the Commission expresses the opinion
that the railroad is in the right, the applicant accepts it; if the
Commission says that the applicant has a real grievance, the railroad
promptly redresses it on the lines which the Commission's opinion has
indicated. The success of the Commission in gaining the confidence
of both sides has been so great that of late years its powers have
been extended, and it has been given, for example, authority to
control the issue of new capital and the construction of new lines.
But on the question with which we are specially concerned here, the
conduct of existing railroad companies as public servants, it can
still do nothing but express an opinion; and it may be added that the
Commission itself has more than once objected to any extension of
that power.

Mr. Adams, from whom I have already quoted, was the first Chairman
of the Commission. He has described their position as resting "on
the one great social feature which distinguishes modern civilization
from any other of which we have a record, the eventual supremacy of
an enlightened public opinion." That public opinion is supreme in
this country, few would be found to deny; that public opinion in
railroad matters is enlightened, few would care to assert. But given
the enlightened public opinion, one can hardly doubt that it will
secure not merely eventual but immediate supremacy. In truth, as
Bagehot once pointed out, a great company is of necessity timorous
in confronting public opinion. It is so large that it must have many
enemies, and its business is so extended that it offers innumerable
marks to shoot at. It is much more likely to make, for the sake of
peace, concessions that ought not to be made than it is to resist a
demand that reasonable men with no personal interest in the matter
publicly declare to be such as ought rightly to be conceded.

To sum up in a sentence the lesson which I think the history we
have been considering conveys, it is this: Closer connection than
has hitherto existed between the state and its railroads has got to
come, both in this country and in the United States. Hitherto in
Anglo-Saxon democracies neither state ownership nor state control has
been over-successful. The best success has been obtained by relying
for control, not on the constable, but on the eventual supremacy of
an enlightened public opinion. Nearly 20 years ago, in the pages of
the _Economic Journal_, I appealed to English economists to give us a
serious study of what the Americans call the transportation problem
in its broad economic and political aspects. Since then half-a-dozen
partisan works have appeared on the subject, not one of them in my
judgment worth the paper on which it is printed; but not a single
serious work by a trained economist. And yet such a work is today
needed more than ever. Let me once more appeal to some of our younger
men to come forward, stop the gap, and enlighten public opinion.


FOOTNOTE:

[I] Further, it is common knowledge that the Senate only passed
the bill (and that by a majority of no more than three) because
M. Clemenceau insisted that he would resign if it was not passed,
and, though they disliked nationalization much, they disliked M.
Clemenceau's resignation more.




RAILWAY NATIONALIZATION

BY SIR GEORGE S. GIBB.

    A paper read at a meeting of the Royal Economic Society, on
    10th November, 1908.


Railway nationalization has for many years occupied the minds of
economic and political students and the practical activities of
statesmen in many countries and in English colonies. It has been
regarded here as a remote possibility which might some day or other
come to the front for practical discussion. But quite recently it
would have been thought to be as incredible that any responsible
politicians should be considering proposals for purchasing our
railways for the State as that any substantial number of persons
could be found who would advocate an abandonment of the fundamental
principle that there should be no taxation of imports into England
except for revenue purposes. In these days, however, public opinion
moves suddenly and rapidly. The despised fallacy of yesterday rises
as the creed of to-day. There are already many indications that,
before long, there will be a numerous and influential, though perhaps
a somewhat heterogeneous party, who will urge that immediate steps
should be taken to nationalize our railways.

The test, and the only test, to be applied to proposals for railway
nationalization is whether railways owned by the State and worked
directly by Government officials would be better and more efficient
than railways owned and worked by private corporations, and whether,
after taking account of all the effects of the change, upon each
class, each district, each interest, the net result would increase
the wealth and well-being of the community, and be a permanent
benefit to the public.

We may, I think, start from the assumption that railway proprietors
as such have no interest in opposing nationalization. The value of
their property, whether measured in terms of capital value or in
terms of future income, estimated on a fair basis, would, it is
assumed, be fully provided for in the gigantic financial operation
which railway purchase would involve. There is no legal flaw in
the title of railway proprietors. They enjoy the fundamental
rights attached by our law to absolute property, subject only to
the performance of obligations definitely prescribed by Acts of
Parliament. I think, therefore, that we may discuss this subject of
railway nationalization without apprehension that the change, if it
were adopted by the deliberate judgment of the community, would be
accompanied by anything in the nature of confiscation of existing
rights.

This might not be the intention or the wish of all who think that our
railways should be nationalized. Probably some extreme Socialists
would like to transfer railways to the State without giving what,
in our judgment, would be adequate compensation to existing owners.
Their aim is the substitution of a new social polity for that which
exists, in which antiquated ideas of private property would have no
place. But that is only a phase of their creed which condemns it to
sterility. It is not the small band of Socialist zealots, but the
majority of the nation that we have to consider in estimating the
risk of anything being done in the nature of confiscation.

Those who join the party for nationalizing will, no doubt, find
themselves in strange company. There can be little doubt that the
movement up to the present has been mainly Socialistic. A trader,
who advocates nationalization because he hopes that he might be
able to transfer to somebody else, perhaps he does not very much
care whom, some part of the burden of the charges which he has
to pay for railway carriage, will find that his next neighbor at
a meeting of the party is a man who has joined for quite other
reasons, with the object, indeed, of ultimately seizing for the
State some part of his neighbor, the trader's, property, which
the latter was reckoning to increase at the expense of, amongst
others, his neighbor the Socialist, through the plan of railway
nationalization. But the homogeneity of the party need not concern
us, nor the question whether each and every member of it would be
actuated by a single-minded desire for the public good. The forces
making for honesty and equity in the treatment of existing interests
would, I think, so overwhelmingly outweigh the influences tending
in a contrary direction that we need not complicate the question by
importing into it a discussion as to whether adequate compensation
should or would be paid to existing owners in the event of the State
deciding to acquire their property. Fair and adequate compensation
for existing interests may be taken for granted.

But although compensation can be paid for property, it cannot be
paid to the general community who would suffer in the event of the
administration and operation of railways under State management being
less efficient than under private management. If a mistake be made,
all would suffer, and their sufferings would not, and could not, be
mitigated by compensation in any form.

It may be useful at the outset to consider what has led to the
question of railway nationalization in this country being discussed.

The origin and the causes of those movements in public opinion which
bring about great constitutional and social changes are frequently
most difficult to trace, especially by contemporary observers. For
a full understanding of such movements, it is necessary to wait for
the historian's point of view, and to survey a wider field than is
possible whilst the events are occurring, when much of the material
for final judgment as to the causes in operation is concealed in an
undisclosed future.

That there is a movement in progress tending to the nationalization
of railways in England is apparent to every thoughtful observer of
the times. But whence does this movement come, and what are its
principal causes? We are able to identify some of them, less able to
weigh the relative importance of each, still less able to foretell
the ultimate share which each will have on the future course of
development, which will depend on the direction taken by other
movements in public opinion which, at the moment, may seem to be
entirely independent of all connection with the particular movement
we are considering.

I will refer to a few of the causes which seem to me to be most
prominently at work, but I will not attempt to state them in the
order of their importance. I will merely enumerate those which are
plainly discernible as existing in some shape or other.

The first I will name, though it may not be the most influential, is
the existence of a certain amount of dissatisfaction with the present
state of railway administration. I suppose that if railway services
were as good as possible, charges as cheap as possible, profits as
high as possible, and the management as perfect as it is possible
for railway management to be, and these conditions were generally
admitted to exist, the natural instinct to leave well alone would
prevent any proposal for nationalization from obtaining a hearing.

It must be conceded that there is a certain feeling of
dissatisfaction, superficial and indefinite though it be, to
which advocates of nationalization, whose schemes originate in
considerations which have no relation either to the excellence or
to the imperfections of railway arrangements, are able to appeal
in the pursuit of their aims. It is not that many people really
think that our railways do not, as a whole, serve the public well,
whatever individuals may say in moments of haste. Hut complaints are
sufficiently numerous to have a real importance as an influence on
public opinion. And, unfortunately, their influence is to a large
extent independent of their justice. The existence of criticism,
which, after all, is only another name for difference of opinion, is
inevitable, and probably would be inevitable under the most perfect
system of railway management which the world has seen or ever can
see. State railways would not be immaculate. The nature of railway
business lays it open, to an exceptional extent, to the unpopularity
which unavoidably gathers round every institution on which there
is universal dependence. Providence itself does not wholly escape
unpopularity. No other industry is comparable with the railway
industry in the close dependence upon it of the vast majority of
the people. The necessity for transport services penetrates more
frequently and more deeply into the lives and habits of the people
than any of the other prime necessities of civilization. The need for
transport is a tyranny. All tyrants are unpopular. And the tyranny
of a need is apt to beget, by an illogical transposition of ideas, a
dislike of those who are responsible for supplying the need. People
are conscious of grievances, or, let us say, unsupplied wants. They
cannot measure the range of possibility which limits the supply of
those wants or remedies for those grievances. They constantly wish
for the impossible, but have not sufficient knowledge to distinguish
between the possible and the impossible. Defects which cannot be
remedied are generally condemned with more emphasis than those which
are due to mismanagement. It is irrelevant to consider whether the
dissatisfaction to which I have referred is justified or not. Whether
well or ill founded, it must be set down as one of the causes of the
movement for nationalization.

The second cause I would mention is a belief, growing from a
suspicion into a conviction under the stimulus of repeated failures
in control experiments, that it is impossible for any Government, by
any legislative or executive action in any form, to exercise useful
and effective control over railways. People turn in despair from
ideas of regulation and control to ideas of ownership.

The third cause is the prevalence of that feeling which, for want
of a better name, I will call district jealousy. The competition of
privately-owned railways undoubtedly does create inequalities. It
would be mere affectation to pretend that the railway accommodation
and facilities afforded to all places and all districts are equal
in merit and value. The less favored districts see other districts
enjoying superior facilities. They do not allow for differences in
conditions which, in some cases, explain and justify the differences
of service. I say in some cases, because it would be impossible to
deny that in other cases the comparative inferiority of railway
facilities cannot be explained away by inevitable determining
conditions. Hence district jealousy arises and a desire for
uniformity, such uniformity as it is hoped a State system of railways
would give.

The fourth cause I would name is the example of other countries.
This is affecting men's judgments with great force. We are slow to
be moved by foreign example. But there is an increasing tendency
to submit to international influences, and foreign example in this
matter does, on the whole, point to national railways becoming the
generally accepted system.

The fifth cause is the one which, I think, has more to do with the
initiation of the discussion of nationalization schemes than any
other cause. This is the general tendency of the time to Socialistic
experiments. If there were no Socialists, and no Socialism in the
thought of the age, there would, we may safely conclude, be no talk
of nationalization of railways. It is the Socialistic propaganda, and
the influence which that propaganda has had on many minds, which more
than anything else has brought the question of the nationalization of
railways within the range of practical discussion.

The sixth cause is the anxious search for more revenue for the
State. National expenditure has grown to such enormous and alarming
dimensions that the provision of revenue to meet it has become a
serious and urgent difficulty. A Chancellor of the Exchequer on
the lookout for cash has not been able to resist the attraction of
railways as a source of revenue for the State. He has noted the
various influences at work which are tending to bring the question
of railway nationalization to the front, has looked with envy at the
large revenue which Prussian railways yield to the State, and has
at least gone the length of asking himself the question, within the
hearing of reporters, whether he ought not to encourage and to take
advantage of a state of opinion which might conceivably be worked
upon so as to create a majority prepared to approve the principle of
State ownership of what might be a highly lucrative State monopoly.

The mileage of railways open for traffic in the United Kingdom at
the end of each of the last four decades up to 1907 is shown in the
following table:

               Mileage open    Increase in     Average increase
  Year.        for traffic.     ten years.        per annum.

  1877             17,077             --                --
  1887             19,578           2,501             250.1
  1897             21,433           1,855             185.5
  1907             23,108           1,675             167.5

The growth has been slow and decreases with each decade. It is
probably true that the period of construction has nearly come
to an end. Future additions to the mileage are not likely to be
either large or of substantial importance. This rather indicates
the present as a suitable time for considering a change of system.
The considerations which are applicable to what I may call the age
of construction are very different from those which become most
important in the age of operation.

It would probably be accepted as indisputable that in a country like
England, where capital is plentiful and enterprise active, the system
of leaving the construction of railways to private enterprise is the
best system.

Whatever may be thought as to the respective merits of private and
public ownership, it cannot be denied that private enterprise does
take more risk than any Government is likely to do, except under
pressure of military necessities. The hope of gain is the strongest
motive for enterprise, and this desire operates more strongly on the
private citizen than it does on the State.

The growth of railway mileage during the age of construction in any
country is promoted by the constant influence and moving force of
those incentives which act on capitalists. The spur of competition
is always in active operation. Then there are the very powerful
professional influences which are constantly at work to induce
capitalists to spend their money on works and enterprises which
afford professional work, even if they do not subsequently provide
dividends.

Theoretically; no doubt, railways promoted by private enterprise
tend to the favoring of particular localities at the expense of
other localities. Perhaps it is right that the stronger should grow
at the expense of the weaker, but, at all events, it is inevitable.
You cannot expect private competitors to think of anything but their
own interests. And if this be so, you cannot expect from a system in
which private interests predominate the same consideration of general
design, from the point of view of the interests of the whole country,
as from a system which places public in front of private interests.

It is difficult to deny that the miscellaneous and unequal activities
of private enterprise fail in the absence of some central guidance
to produce the best results so far as harmony and completeness of
design are concerned. In England railway construction has not been,
as in America, almost entirely free from any public control. We
have had the control, I think the most salutary and useful control
of Parliament, so far as it has gone, both over location and
capitalization. But it has not gone far. Although there has been a
certain amount of control, there has been practically no guidance.
The control, under the system of private bill legislation, has been
very ineffectual except as regards capitalization. It has been mainly
negative; never constructive. All that Parliament could practically
do was to prohibit the making of particular railways which aroused
opposition from some landowning or railway interests powerful enough
to oppose and wealthy enough to pay the heavy costs of opposition.
Private interests have been protected, but the general interest has,
in the main, been ignored.

But whilst conceding that it would have been a great advantage if
the vagaries of private enterprise had been more restrained by some
prudent, general guidance, I think that the chief public requirement
during the age of construction is that as much mileage as possible
should be constructed; and I submit, as a true conclusion on the
point I am discussing, that, as regards the age of construction, at
all events, England has derived incalculable benefit from the fact
that the railway system has been made by private enterprise. But the
problem of working the railway system after it has been constructed
is, I admit, essentially different from the problem of securing its
construction.

My subject is not one which admits of discussion except on very
general lines. Our views on it must necessarily be formed under the
influence of the opinions we hold as to the legitimate functions of
the State. It has been truly said that no country has ever adopted
State ownership of railways from theoretical considerations. In
each and every instance there were some practical reasons, based on
military necessities or concrete and pressing economic conditions to
meet which State ownership was accepted, not as a system desirable
in itself, but as an expedient which, in the circumstances, was
considered to be the best practical solution of difficulties which
stood in the way of the satisfactory development of railways.
But whilst agreeing with this as a true historical statement, I
doubt whether theory can be entirely excluded from a statement
of the genesis of national railway systems. In a country where
Individualist opinions prevail, as I think at the present time they
do in England, no temptations, no pressure of circumstances short of
extreme national emergency, would induce people to face the evils
which the Individualist knows must result from the intrusion of
State action into matters of trade. This is theory, although those
who are influenced by it may think that it is founded on practical
experience. On the other hand, those persons who wish to secure
trading profits for the State even at the cost of taking commercial
risks, or who, when difficulties and obstacles arise in commercial
development, resort to the powers of the State to overcome them,
either by the imposition of taxes on the general community in
the interests of a class, or by handing over to State officials
the direction of an industry, instead of relying on the skill,
self-reliance, enterprise, energy, and character of the people, are
Socialists at heart, whether they know it or not, and are actuated
by the radical theory of a creed which, perhaps, most of them would
disavow.

But, after all, the question is not whether State purchase would be
a step in the Socialist direction, but whether it would be a step
in the right direction. Why should we change? Are we suffering from
intolerable evils from which there is no other way of escape, or is
there some great national benefit to be derived from the change?

The general case for nationalization, as put forward by its
advocates, rests on very few arguments, and it is not, I think,
unfair to describe these as being mainly assumptions, the accuracy
of which it is impossible to verify. I may summarize a few of these:--

(1) Government management would be more efficient and less costly
than private management.

(2) Government management would primarily regard the interests of
the community and of the country as a whole, and the substitution of
that condition for the existing system under which the interests of
private trading concerns take first place in the thoughts and efforts
of those responsible for management would have the effect of securing
a more equal and more satisfactory development of the resources of
the country, and, as one writer expresses it with more than the usual
proportion of assumption in his statement, trade would be stimulated
under equitable, reasonable, and uniform systems of rates.

(3) The change would result in the removal of most of the serious
complaints made against the existing administration of railways.

(4) Those who refuse to look upon the matter as mainly a commercial
problem think and hope that new means would be found for the
satisfaction of the social needs of the nation if the railways were
at the disposal of the Government.

(5) Experience of the economy resulting from large combinations in
other industries is invoked in support of the proposal to get rid
of the separate administrations of private railways. It is said
that the advantage of production on the largest scale by a single
corporation in place of production by a number of smaller units is
being verified by the experience of nearly every important trade and
industry. The principle has been recognized in the history of railway
development in this country by the amalgamation of large numbers of
small railways into the great railway systems which we now see, and
it is argued that a further step should now be taken in the same
direction. But a step involving the creation of so great a monopoly
as further large amalgamations would involve can only, it is thought,
be taken by the State. In this country the largest railway system
under one management is no greater than about 2,000 miles in length,
whereas in the United States of America railway systems covering
about 15,000 miles are now under the control of a single President
and a Board of Directors. It is said, therefore, that modern methods
of administration have made it feasible to direct the 23,000 miles of
railway in the United Kingdom efficiently and successfully by means
of one comprehensive organization, and probably if there is to be one
organization there would be no difference of opinion that the single
organization to own, control, and manage the railways must be the
State.

Most of the principal objections are, I think, covered by the
following list:--

(1) State management would be less efficient than management under
private enterprise.

(2) The extension of Government patronage, by placing at the disposal
of Government such a vast number of appointments to lucrative offices.

(3) The risk of political corruption, not only in connection with the
exercise of patronage, but also in ordinary administration in the
settlement of questions relating to charges, wages, and services.

(4) The danger that interested parties would, by political pressure,
compel the State to expend public money on unremunerative lines and
unremunerative services.

(5) The contraction of the available field for private enterprise,
and hence the weakening of the foundation of all individual and
national progress.

(6) The introduction of serious dangers in connection with labor
disputes between the Government and the large body of railway
servants.

The subject has not been sufficiently long under public discussion to
make it easy to state fully the hopes of its supporters and the fears
of its opponents. Probably both are exaggerated. If one examines the
complaints made against the existing railway system, it is obvious
that many of these must exist under any system, whilst some are the
necessary accompaniments of every system into which competition
enters. But if competition is discarded in favor of monopoly it does
not need argument to show that this merely means a change from the
evils of competition to the evils of monopoly. No one would deny that
each system contains inherent and characteristic evils. The evil of
competition is waste; the evils of monopoly are stagnation and the
restriction of freedom.

Hitherto, for the regulation of railways, reliance has been placed on
two factors--competition and control. Parliamentary action and public
opinion have veered about from one to the other, and the absence of
clear principle in the policy of the Legislature has introduced evils
which a more logical and consistent adherence either to the policy of
free competition on the one hand, or to the policy of strict control
on the other, would have avoided. That some regulation is necessary
all would admit. Railways sell transportation as a commodity, but the
nature of the business makes it impossible to secure the conditions
of absolutely free competition as in the case of other industries.
Hence the necessity for control, but every plan of control that has
been tried has proved practically inoperative and ineffective mainly
because it has endeavored to leave competition in operation, and it
is the evils which necessarily arise from competition which lead to
most of the complaints against railways. The inevitable weakness of
the dual system of competition and control is that control checks
competition just where it would be useful in the public interest, and
competition nullifies control just where it could be advantageously
applied.

Under no system could we expect railways to be free from complaints.
They arise equally from the nature of the business and the nature
of the customers. But with a view to seeing whether State ownership
would remedy the complaints that exist, let us try to understand as
clearly as possible what the complaints are. The Chancellor of the
Exchequer (Mr. Lloyd-George), speaking to a deputation of traders
in 1906, when he was President of the Board of Trade, said that he
was impressed with the "great and growing discontent with the whole
system."

Now what are the causes of the present discontent? Is it great? Is
it growing? These are questions very difficult to answer. But there
are some useful data available for the answer. The way has been made
plain and easy for complainants against railways. Every encouragement
and every facility has been afforded to them. A special Court has
been created--the Railway and Canal Commission--the constitution of
which was carefully framed so as to encourage anyone with a grievance
against railways to hope that he would get a sympathetic hearing
of his case. The applications to that Court were so few that those
people who cannot bring themselves to believe that the number of
real, as distinct from imaginary, grievances against railways are
remarkably few, said that the public were deterred from bringing
complaints forward by the expense of litigation before the Railway
Commissioners. So, to render the path of the complainant still
easier, a procedure was introduced which is unique for simplicity
and cheapness. All, without distinction, who had any complaint or
grievance of any sort or kind against any railway or canal company,
were invited to come and lay the same before a Department of
Government, the Board of Trade, who practically promised to use their
influence to secure an amicable adjustment of any differences. This
procedure is so simple, so sweeping, so all-embracing, so encouraging
to complainants, and has, on the whole, been exercised by the Board
of Trade with so much tact and success, that its records should
supply the information we are seeking.

In view of these efforts to get every aggrieved or discontented
person to come forward and disclose his complaint, is it possible to
imagine that there are now any concealed complaints? It is often said
that traders will not complain, that they are afraid of rousing the
hostility of those terrible tyrants, the railways, whose power in
England, at any rate, whatever it may be in America, is ludicrously
exaggerated. It is true that a sensible trader who has a fair case
does not fly with it to the Board of Trade. He submits it to the
railway officers in the ordinary daily course of business, and almost
invariably gets the matter adjusted. But I do not believe that there
is any trader who would be deterred from submitting a complaint to
the Board of Trade by any feeling of fear. On the contrary, traders
in these days suffer from an excess of boldness. If a trader is
dissatisfied with any railway charge, he simply refuses to pay,
and only those who have experience of the daily conduct of railway
business can know how common, and unfortunately how effective, this
remedy is.

The Board of Trade make an annual report to Parliament of all
complaints made to them under their conciliation jurisdiction, and
I think the contents of these reports may fairly be relied on as
presenting a complete view of the kind of complaints that exist
against railways. A useful table is given in the tenth report of the
Board of Trade, issued in July last, showing the total number of
complaints for ten years, classified according to their nature as
follows:

                                                       No. per
                                               Total.   annum.

  1. Rates unreasonable or excessive in
     themselves or which were unreasonably
     increased                                    715     71.5

  2. Undue preference                             352     35.2

  3. Sundry complaints                            510     51
                                                -----    -----
                                                1,577    157.7

Of the total number forty-eight were complaints against canal
companies, but these are not separated in the classification.

Surely the above is a remarkable table, considering the vast
aggregate of business and the facilities offered for complaints. Only
1,529 complaints against railways, or an average of about 153 per
annum, have been found to exist.

Then look at the results of these complaints. These are given
in another table, and only 573 complaints, or an average of 57
per annum, are entered as resulting in the complainants finally
expressing themselves as dissatisfied.

Services for which the aggregate payment amounts to 120 millions
sterling per annum are rendered, and yet there are only an average
of fifty-seven cases per annum of dissatisfied complainants to the
most open, most favorable, and least costly tribunal in the world for
hearing complaints against railways.

Now let us look at the nature of the complaints made. Would State
ownership remedy any of these complaints? I set aside the 510
cases of miscellaneous complaints about delay in transit and other
minor matters, because it is obvious that complaints about such
matters would not disappear under any conceivable system of railway
management.

Practically all other complaints group themselves under two heads:

    1. Excessive rates.

    2. Undue preference.

The complaint that railway rates are excessive generally takes the
shape of a comparison of the charges on some foreign railway. Now, I
confess that it is very difficult to meet such allegations, because
of the difficulty of presenting all the conditions of which account
must be taken in order to make a fair and sound comparison, and also
owing to the absence of adequate data or materials in the published
statistics of English railways.

A general allegation that English rates are higher than those charged
in some countries cannot even be discussed, because the factors
needed for the comparison are not available. Are they in fact
higher is a question the answer to which must precede discussion
as to reasons and explanations. The facts in regard to the average
length of haul, the average rate per ton mile for different kinds
of traffic, or the average charge per passenger mile, and general
information as to the nature of commodities carried, speed of
transit, and services rendered for the rates charged must be
ascertained before any comparison is possible, and these facts are
not ascertainable for English railways.

My belief is that having regard to the capital expended on
construction of railways, English railway rates are not excessive
for the services rendered, and I greatly doubt whether, after
making proper allowances for differences in capital cost of railway
accommodation, and for other essentially different conditions, rates
in any country are lower, comparing like with like, than railway
rates in England. This is an issue of fact. It lies at the threshold
of any inquiry into the subject of railway rates, and I confess I do
not see how much progress can be made with any discussion which turns
on assertions as to the relative dearness of English railway rates
until adequate materials are available for a sound comparison.

It is true beyond question that English railways have cost more
to construct than the railways of any other country. The capital
expenditure of all railways in England is represented by the figure
of about £56,000 per mile as compared with about £21,000, which is
the corresponding figure for German railways, and about £12,000 per
mile for American railways. Railway proprietors in England are not
responsible for the high capital cost. They were forced by law,
and by custom powerful as law, to pay monstrously inflated values
for their lands. Burden upon burden has been heaped upon them by
the action of the Legislature, by the requirements of Government
departments, and by the exactions of public opinion. They have borne
heavy losses in being compelled to spend capital without regard to
their ability to secure adequate return upon it, and assuredly no
reckoning is due from them to the public in this matter. The reverse
would be more true.

The total capitalization of railways in the United Kingdom in the
year 1907, as given in the Board of Trade Returns, was 1,294 millions
sterling, of which 196 millions represents nominal additions. The
net earnings (some of which, however, arose from miscellaneous
sources independent of the operation of the railways) amounted to
£44,940,000, or 3.47 per cent on the nominal capital. Out of a total
of 1,294 millions sterling, 136 millions of loan and preferential
capital received interest or dividends in excess of 4 per cent.
This presumably arose from the insecurity of capital, involving the
payment of a high rate of interest or dividend. One hundred and
eighty-one millions of ordinary capital received dividends in excess
of 4 per cent. per annum. The capital receiving interest or dividends
in excess of 4 per cent. per annum is, therefore, 317 millions, or
24.5 per cent. of the total. It cannot be said on these figures that
the interest received by those who provided the capital for the
railways is excessive.

But would it be possible for State railways to reduce the amount
included in railway rates for interest and dividends? It cannot be
denied that our present system does involve the needless duplication
of railway accommodation--the inevitable waste of competition. There
is the constant endeavor to divert traffic, the corresponding effort
to keep it. Capital is wasted, but public facilities are increased.
The public could certainly secure by monopoly the saving of waste,
but only at the cost of losing the advantages, such as they are,
of getting more than they pay for. I suspect that on a broad and
comprehensive view these advantages are not worth to the community
the waste of capital involved in providing them. But it is rather
late in the day to adopt this view. Enormous waste has already been
incurred, and it must be remembered that this drain on the resources
of the nation is not likely to be so serious in the future as it has
been in the past, even if the system of leaving railways to private
enterprise is not abandoned.

The private ownership of railways provides for the absorption of
the wastage of capital in a manner which would be impossible under
State ownership. Eighty-eight millions of the capital expenditure
on railways goes without dividend, and 151 millions has to be
content with a return less than 2 per cent per annum. Although
this undoubtedly represents a loss to the community, the loss is
distributed. It falls on those who voluntarily spent their money in
the hope of gain, and lost it. The State cannot lose capital in this
way. All expenditure incurred by the State would be represented by
money borrowed on the public credit, and the interest would have to
be paid in full, whether the expenditure proved remunerative or the
reverse.

That there would be savings, and large savings, under State
management I would not deny, but that is because the railways would
be worked as a monopoly, and not because they would be worked by
the State. The same and still larger economies in working could be
effected under private enterprise if competition were abandoned
in favor of universal combination or monopoly. The whole question
depends on the waste of competition. Each railway company works for
its own route. The result is that unnecessary train mileage is run,
and train loads are lessened. The secret of success, the foundation
of all economy in railway working, lies in securing the largest
possible train loads. This is a simple rule, but it embodies a
universal truth. If those responsible for the handling and carriage
of railway traffic could work with a single eye to economical
results, and in all cases forward traffic by the routes which
yielded the best working results, great economies could undoubtedly
be effected. This consideration does indicate that a source of
improvements in railway results would be open to a railway system
under Government management which is not available for privately
owned railways competing with one another. And in fairness one
must admit that this source of economy obtainable only under the
conditions of monopoly must be set down as a point to the credit of
State ownership.

Many of the complaints against railway rates as excessive are really,
when analyzed, complaints of undue preference. They are based on
comparisons with other rates, and, in nearly every case, it is the
factor of competition which lies at the root of the difficulty. This
is the natural result of our mixed system of competition and control.
In principle all would admit that there should be equal treatment on
railways. But what is and what ought to be equality are questions in
regard to which there is much room for difference of opinion.

To what extent does the law really require equality? The Railway
and Canal Traffic Act, 1888, enacts in substance that a railway
company shall not make any difference in the treatment of traders
which shall amount to an undue preference. It permits the grouping
of places situated at various places from any point of destination
or departure of merchandise, provided that the distances shall not
be unreasonable, and that the rates charged and the places grouped
together shall not be so grouped as to create an undue preference.
Now, in this legislation there is no definite or tangible principle.
The Legislature has not really made up its mind how traders should
be treated. It simply says that any preference given to one trader
over another shall not be undue, but the interpretation of the word
undue is left open. The prohibition of undue preference only applies
to the actions of one company on its own railway, and, therefore,
covers but a small part of the matter. A trader desiring to have his
goods sent to some market which is prejudiced by the competition of
goods carried to the same market from some other place by some other
railway which, for some reason or other, good or bad, gives better
treatment to its customers--a prejudice far more likely to happen,
in fact, than one arising from differences in treatment on the same
railway--is not protected or assisted by any legislation.

The question may be asked whether national railways would or could
cure this somewhat indefinite position?

If railways were nationalized, would it not be necessary, and would
it be practicable to settle the principles to be applied in treating
different districts in competition with one another? At present there
are no principles if the districts are served by different railways.
If one railway serves two districts, the law provides that such
railway shall not mete out unequal treatment so as to constitute
undue preference, whatever that may mean, but if these two competing
districts are served by different railways, the law shrinks from any
interference.

Now, in practically every case the favorable treatment complained
of, due or undue, as the case may be, is forced upon the railway
company by competition in some shape or other. It may be competition
of other carriers by sea or by land, or it may be the necessity
for enabling one district to compete with another less favorably
situated. Such consideration for the commercial needs of districts
in relatively advantageous positions is permitted and encouraged
when it is afforded by different railways, though rendered difficult
when one railway serves the competing districts. What would State
railways do? If the law of undue preference now operative within
the limits of particular railway systems became, by reason of State
ownership, applicable to all railways, there would be a stupendous
disturbance of existing trading conditions. Instead of State purchase
diminishing the complaints of undue preference, it would be the
signal for the commencement of fierce conflicts between districts. It
would be necessary to face the question whether and to what extent
geographical advantage of position should be recognized in fixing
railway rates. The centers of production and consumption in England
have been fixed away back in commercial history, and from a railway
point of view these have largely to be taken as facts beyond control.
Facilities for reaching the populous centers of consumption are of
vital importance to producers and importers. Would State railways
be compelled by the pressure of interested landowners and others to
fix rates for agricultural produce and manufactured articles and for
import and export trade rigidly in proportion to distance?

It is probable that a bitter controversy would arise on the question,
and discontent with the railway arrangements which have gradually,
and with very general approval, been established in England, instead
of being lessened, would be greatly extended if we embarked on the
experiment of State ownership.

Would the management of railways by Government officials be, on the
whole, better than management by the officers of private corporations
working for profit?

That is the question which lies at the root of the subject which
we are discussing. So far as I am concerned, I have no inclination
to jibe at the management of those enterprises which are conducted
by the State and municipal bodies. I do not think that the postal
services would be better managed if they were under private control,
probably not so well. Municipal tramways show the weakness of public
management, chiefly in the tendency towards fixing charges at figures
which sacrifice the interests of ratepayers to the interests of the
working classes who possess votes, but who generally occupy houses
in respect of which they do not directly pay rates. That there would
be very grave risks in substituting State management for commercial
management of railways must, I think, be generally admitted.

But some of the principal arguments against municipal trading do
not seem to me to apply to the working of railways by the State. Of
course, the objection of those who think that no public authority
should become directly responsible for the management of any
commercial undertaking is as valid against State working of railways
as against municipal working of tramways, or municipal supply of
electricity for light and power. In both cases there is a restriction
of the field of private enterprise, and that is enough for the
out-and-out Individualist. He is convinced, on general grounds, that
all commercial undertakings should be left exclusively to private
enterprise. But those who are not prepared to settle such matters
on any general theory, and who prefer to weigh the advantages and
disadvantages in each case, see that many of the reasons against
municipal trading cannot fairly be urged against the national
ownership of railways. Municipal trading is indefensible because it
unfairly competes with private traders. Competition in commerce must
be fair competition on equal terms, otherwise it fails to secure any
of the economic advantages which do undoubtedly flow from the free
competition of private traders. A commercial undertaking must be
worked for a commercial profit. A municipality raises money on public
credit, and thus gains an advantage over every private competitor. It
also fixes scales of charges and rates of wages without reference,
or, at all events, without exclusive reference, to considerations of
profit, and thus makes it impossible for any competing trader to earn
a legitimate commercial profit. And to make it possible to do this it
uses the power of taxation, and levies rates on the competing traders
themselves, so that the municipal business can be carried on without
the commercial profit which the private trader must earn in order to
live. No one can say that this is fair competition.

Then municipal bodies are, from their composition, unsuitable for
carrying on commercial business. Their organization cannot be adapted
to commercial management. The individuals who serve on these bodies
have neither the time nor, as a collective body, the capacity for
managing the business on which they embark with efficiency and
success. The difference in results due to the difference between good
and bad management is paid for out of the rates.

These considerations do not, however, apply with equal force to the
State management of railways. The State would have a complete and
universal monopoly. There would be no private competition left,
except, of course, competition by sea or by tramway or any other mode
of conveyance which can compete with railways.

Then there would not be, it may be assumed, any body like a municipal
council who would practically interfere with the management. There
might be Advisory Councils, like the Prussian State Railway Councils,
and, of course, there would be a Minister of State responsible to
Parliament for the railway administration, and Parliament itself,
already, one may remark in passing, clogged and overburdened with
work. But it is certain that whatever the details of the organization
adopted might be, the whole of the management would practically be
left to the expert permanent officials of the railways. There is no
reason to doubt that railway officers would serve the State with as
much loyalty and with as great a measure of success as they now serve
the proprietors. Instead of being responsible to boards of directors
and shareholders, they would be responsible to a certain number of
officers of State, probably, indeed necessarily, to a large extent
recruited from their own ranks, and I do not think that the change
would result in much practical difference so far as the work of those
who really carry out the duties of management are concerned. The only
difference would be that these officers would have in view that they
were working for the State instead of for shareholders.

There can be little doubt that if railways were nationalized they
would be used as a field for many kinds of social experiments. The
combination of philanthropy with business is generally regarded
with suspicion, but the conversion of the railway manager into
a social reformer would, I think, arouse serious and legitimate
alarm. The certainty which we now possess that the action of any
railway company, whether it be wise or foolish in itself, is wholly
commercial in its motives and its aims, is a valuable safeguard. But
if railway policy were to become the medium for the promotion of
social or even economic theories under the guidance of politicians,
would not this be a most alarming peril to trading and industrial
interests? One group might insist, by political pressure, that the
standard of wages should be maintained at a higher level than could
be commercially justified. Another group, or many groups, might
devote their efforts to securing the construction of railways in
districts which could not support them with sufficient traffic, with
the result of burdening the railway system with many unremunerative
branches for which either traders, passengers, or the taxpayers
throughout the country would have to pay. The policy of others would
be to make suburban railways at enormous cost, and run cheap trains
to serve the population resident in large cities, regardless whether
such railways or trains were self-supporting or not. In this policy
they would have the ardent and influential support of the owners of
suburban land, who would rejoice in the increase of their rents,
brought about by the expenditure of public money in creating railway
facilities on uncommercial terms. These are not fanciful dangers.
They are the results which we may feel sure would inevitably follow
the nationalization of our railways, and the advantages to be gained
from State management would need to be very great to compensate for
these burdens.

Another aspect of the question which requires the gravest
consideration is that which concerns the position of the State as
an employer of labor. There are upwards of 620,000 railway officers
and servants. The State would become the direct employer of that
huge army, and would have to settle all questions relating to hours,
wages, and other conditions of service. If a railway company is
unable to settle differences with its men the ultimate resort of the
men is the withdrawal of their labor, whilst the company are free
to employ other men who are willing to accept their conditions of
employment. Any railway strike on a large scale is a dire calamity to
trade and to the public, but if one were compelled to consider the
possibility of a general strike on a national railway system, even
the deplorable results which accompany strikes on privately-owned
railways would seem comparatively insignificant. Probably a railway
department of Government would not urge the adoption of compulsory
arbitration, if they were themselves concerned, with as much
equanimity as they do in the case of strikes on private railways. It
is true that in this matter the advocates of State railways can point
to the comparative absence of labor conflicts in connection with the
services now under Government control, but municipal undertakings
have not been so successful in avoiding labor disputes, and in many
cases have secured even the degree of immunity from such conflicts
which they enjoy by the concession of terms of employment which
constitute heavy burdens on the ratepayers. It seems to me that the
danger of serious labor disputes cannot be put aside, and I confess
that I am unable to see any safe way of meeting the objection to
State ownership on the ground that the State ought to limit, as far
as possible, its liability to become directly concerned in such
disputes.

In conclusion, I would say that I have felt unable to take up a
partisan attitude on the question. For many years past both my
studies on railway subjects and my practical experience have led me
to a convinced belief in the advantages of well-regulated monopoly,
and I am unable wholly to disapprove of a scheme which would secure
for the country the advantages of a system of well-regulated monopoly
in which I believe, even although it should come in the guise of
State ownership.

Competition, in my judgment, creates more evils than it cures,
especially the half-hearted and imperfect competition which exists in
England so far as railways are concerned, which cannot be regarded as
free competition on a commercial basis.

I recognize that it is impracticable to secure unification or any
very extensive or far-reaching combinations of railways under
our system of private ownership. The public would not tolerate
uncontrolled railways under private management, and I doubt whether
any form of control which has yet been devised, or is likely to
be devised, combined with partial competition, can give entirely
satisfactory results. That there are grave dangers and risks in the
public ownership of railways I fully admit; indeed, so grave are
they, that I think he would be a very bold minister who would venture
to bring forward, under Government sanction, a proposal for the
nationalization of our railways. The existence of such a huge amount
of Government patronage would open the door to political corruption.
The existence of such an enormous body of Government servants
possessing the franchise--and I confess it seems to me impracticable
to hope that any measure could be carried subject to disfranchisement
of Government servants--would imperil the financial stability of
the railway system, and introduce new and very serious sources of
weakness and danger into the body politic.

The risk of loss from the charging of unduly low rates under pressure
from the influential body of traders seeking to enrich themselves
at the expense of the general community seems to me a risk which no
thoughtful man can ignore. No expedients for checking and restraining
political influence so that it could not reach or sway the decision
of the officers of State responsible for railway management seem to
me practicable under our democratic constitution.

If the nation owns the railways, the nation must take all the risks
of State ownership, and we could only trust that the existing
purity of our politics and the common sense, honorable character,
and long experience in self-government of the English people would
suffice to protect the commonwealth from these perils resulting in
serious harm. But whatever may be the issue of the consideration of
the question of State purchase of railways, I am prepared to believe
that English railways will continue, whether under State management
or under private management, to deserve the praise which Mr. W. M.
Acworth expressed in his recent address as President of the Economic
Section of the British Association in Dublin, by saying that in
his judgment--after, I may remind you, a fuller study of railway
conditions in all countries of the world than has been given to the
subject of many men in England--that "English railways are, on the
whole, among the best, if not actually the best, in the world."




CONCERNING ADVANCES IN RAILWAY RATES

FEBRUARY 8, 1909.--Ordered to be printed.

Mr. ELKINS, from the Committee on Interstate Commerce, submitted the
following

    ADVERSE REPORT.

    [To accompany S. 423.]


The Committee on Interstate Commerce, to which was referred
Senate bill 423 "To amend section 6 of an act entitled 'An act to
regulate commerce,' approved February fourth, eighteen hundred and
eighty-seven, and acts amendatory thereof," respectfully reports said
bill adversely, and recommends its indefinite postponement.

The amendment proposed to section 6 will be found on page 4,
commencing on line 10, and ending on page 5, on line 8, of the bill,
as follows:

    _Provided further_, That at any time prior to the expiration of
    the notice herein required to be given of a proposed increase
    of rates, fares, or charges, or of joint rates, fares, or
    charges, any shipper or any number of shippers, jointly or
    severally, may file with the commission a protest, in writing,
    against the proposed increase in whole or in part, stating
    succinctly the grounds of his or their objections to the
    proposed change. The filing of such protest shall operate to
    continue in force the then existing rate or rates, fare or
    fares, charge or charges, proposed to be changed and protested
    against as aforesaid, until the reasonableness of the rate
    or rates, fare or fares, charge or charges, proposed to be
    substituted shall have been determined by the commission. Upon
    the filing of such protest, a copy thereof shall be mailed by
    the Secretary of the commission to the carrier or carriers
    proposing the change and thereafter the commission shall
    proceed to hear and determine the matter in all respects as it
    is required to do by sections thirteen and fifteen of this act,
    in case of a complaint made because of anything done or omitted
    to be done by any common carrier, as provided in said section
    thirteen; but throughout the proceeding, the burden of proof
    shall be on the carrier proposing the change to show that the
    rate, fare or charge proposed to be substituted is just and
    reasonable.

An amendment was offered in the committee which would modify
the original proposition of the amendment, by leaving it to the
discretion of the Interstate Commerce Commission, upon the filing
of a protest against the proposed increase of rates, to determine
whether the schedule filed should go into effect at the end of
thirty days or should be suspended by order of the commission until
after final hearing, upon the question as to whether the advance was
reasonable.

This proposed amendment to the amendment of the 6th section, although
somewhat modifying its effect, did not alter the principle upon
which the original amendment rested, or remove the objections that
influenced the committee in reporting the bill adversely. The reasons
which control the action of the committee may be briefly stated as
follows:


REVIEW OF QUESTION BEFORE COMMITTEE.

1. From 1887 Congress, by the act then passed "to regulate commerce"
through all of its amendments to that act, including the act of June
29, 1906 (which was passed after the most elaborate investigation of
the entire subject and the fullest debate), has adhered to a fixed
policy in its legislation upon this subject. It has declared its
constitutional right to regulate the transportation of persons and
property in interstate and foreign commerce, while, at the same time,
it has recognized the right of the owners of the instrumentalities
of commerce to control and manage their properties subject to the
supervision and limitation imposed by the regulating statute, that
the charges, fares and rates must be fair, just, and reasonable;
that neither discrimination as to person or place must be found in
the schedules; and that no device of any character should result in
unlawful preference between shippers.

It has in all these acts recognized the right of the responsible
managers of the transportation interests of the country to fix
the rates for transportation, as upon its revenue must rest the
efficiency of its service to the public and the value of its property
to its holders, subject only to those wise limitations which prohibit
the exercise of these property rights to the injury of the public.
Congress has appreciated the magnitude of the vast interest affected
by such legislation. With 230,000 miles of track, with millions of
rates published in accordance with the statute, with changes of rates
numbering between 600 and 700 a day, and reaching the enormous sum of
225,000 a year, it has, with the practical experience of twenty-two
years, refused to take the initiation of rates from the carrier and
impose it upon its administrative tribunal. Congress and the Supreme
Court have adopted the construction of the act to regulate commerce,
announced by Judge Jackson (Interstate Commerce Commission _v._ B. &
O. R. R. Co., 43 Fed. Rep., 37, and affirmed, 145 U. S., 263):

    Subject to the two leading prohibitions that their charges
    shall not be unjust or unreasonable, and that they shall not
    unjustly discriminate, so as to give undue preference or
    disadvantage to persons or traffic similarly circumstanced, the
    act to regulate commerce leaves common carriers as they were
    at the common law, free to make special contracts looking to
    the increase of their business, to classify their traffic, to
    adjust and apportion their rates so as to meet the necessities
    of commerce, same principles, which are regarded as sound, and
    adopted in other trades and pursuits.

This policy, we believe, has been approved by the country during that
period. Pending the elaborate investigation of this subject prior to
the passage of the act of June 29, 1906, no crystallized sentiment
was manifested, either in the press or during the hearings, that
indicated a public sentiment that this policy should be departed
from. Since this bill has been before your committee no such public
sentiment has been shown to exist by those who appeared before it.

The conferring upon the commission the power to suspend a rate
advanced, either upon the filing of a protest by a shipper or in the
discretion of the commission, taken in connection with the provision
of the statute which gives to the commission the power to fix a rate
and to designate the time, not longer than two years, that it should
remain in force, would ultimately turn over to that administrative
body the function of initiating the rates of the entire country. It
would offer a premium to every shipper to enter a protest to the
advance of rates, whether they were reasonable or unreasonable, even
if discretion was vested in the commission. The protest, prepared
by skilled attorneys, presenting a prima facie case of unreasonable
advance of the rate, with no opportunity for an investigation before
it must be acted upon, an official body, on which was imposed the
responsibility to act would be constrained to suspend the rate until
a final determination of the complaint.

The existing law permits any shipper to protest any rate that has
gone into effect, the hearing on the protest is made without formal
pleadings, and the commission is authorized then to determine
the question whether the rate put in effect by the carrier was a
reasonable rate or not, and, if not, to make the rate reasonable. So
far, in the practical operation of the act of June 29, 1906, this
provision of law has worked satisfactorily, and but comparatively
few of the decisions of the commission have been contested by
the carriers. Under existing law both parties are protected. If
the decision is that the rate is unreasonable a judgment may be
rendered in favor of the protestant for the difference between
what the commissioners determine is a reasonable rate and the rate
fixed by the carrier, with 6 per cent interest from the date of the
overcharge. If, on the other hand, this amendment should receive the
approval of Congress and the rate filed by the carrier should be
protested and then suspended by the commission (in the multiplicity
of duties imposed upon that tribunal), considerable time would elapse
before a final determination of the question could be reached. During
that period the carrier would be receiving only the old rate, and if
the commission finally decided that the advance was reasonable no
reparation in any way could be awarded.

It was alleged before the committee that this last result would
not be very injurious to the carrier, for the reason that it would
be receiving the rate which it had fixed as a fair compensation
for the service performed prior to the change. The answer to this
seems reasonable, which was, that conditions had so changed that
it required an advance of the rate to meet those new conditions.
Otherwise the advanced rate would have no justification. That traffic
officials fully appreciate the fact that, with the watchful eyes of
every shipper affected by an advanced rate and the authority of the
commission to determine and fix a just and reasonable rate (as a
general rule), rates would not be advanced by such officials without
a belief upon their part that there were sufficient reasons to
sustain them, if protested.

The attention of the committee has been called to the attitude of
the commission in its rulings upon the advance of rates, even where
the facts have shown that the rates have been lowered with a view
of developing a particular industry. In the case of the New Albany
Furniture Company against Mobile, Jackson and Kansas City Railroad
Company, etc., decided June 2, 1908, the commission held:

    "The rates were low before the increase, but having been
    established, after prolonged negotiations, especially for the
    purpose of permitting complainant to reach a particular market,
    and in preference to making a readjustment in some other
    direction or territory, and complainant having adjusted its
    business thereto, defendants may not by an arbitrary advance
    in those rates destroy complainant's business, there being no
    evidence that the rates advanced were less than the cost of
    service."

A similar decision was rendered on the 1st of June in the case of
Western Oregon Lumber Manufacturers' Association against the Southern
Pacific Company.

Knowledge of the views held by the commission by the traffic
officials and shippers will serve as the most effective check upon
the part of the carrier in advancing rates over those which have been
in existence for any considerable period of time, unless they can
support the advance by the most satisfactory reasons.


WOULD THE AMENDMENT PROPOSED BE IN CONFLICT WITH THE FIFTH AMENDMENT
TO THE CONSTITUTION?

2. An objection urged to the approval of this amendment, even though
modified as suggested in committee, was that it conflicted with the
fifth amendment in depriving the carrier of its property without due
process of law.

The existing law authorizes carriers to make reasonable rates.
Congress recognizing the right of control by the carrier has provided
reasonable regulations to safeguard the interests of the public in
the exercise of that right. It authorizes a protest after the rate
had gone into effect; it provides for a full hearing after notice by
the commission; it has further extended the time when the rate shall
be made effective to thirty days from the filing of the schedule
with the commission. These were held to be reasonable regulations,
but it is claimed that under the amendment proposed to the sixth
section, that if the rate is suspended from going into effect at the
end of the thirty days by a protest, there is no limitation in the
act fixing the time when the commission shall determine the question
of the reasonableness of the advance; that the period is therefore
indefinite, depending upon numerous considerations which might extend
the time when the rate would be effective, if it was finally held to
be reasonable, to six months or a year.

That the act of suspension either by the operation of the statute or
by the commission is without notice or hearing to the carrier; that
Congress has no greater right to authorize an administrative tribunal
to suspend indefinitely the taking effect of a reasonable rate
without notice or hearing than it has the right to provide that an
administrative tribunal may authorize a rate which would yield less
than the cost of the service.

It was decided in the case of Chicago, M. & St. P. R. R. Co. against
Minnesota, 134 U. S., 418, that the right to make a reasonable rate
was a property right. In the case of Interstate Commerce Commission
_v._ Chicago Great Western Ry., 209 U. S., 118, the Supreme Court
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."

Justice Brewer, in the above case, page 108, speaking for the court
said:

    "It must also be remembered that there is no presumption
    of wrong arising from a change of rate by a carrier. The
    presumption of honest intent and right conduct attends the
    action of carriers as well as it does the action of other
    corporations or individuals in their transactions in life.
    Undoubtedly when rates are changed the carrier making the
    change must, when properly called upon, be able to give a good
    reason therefor, but the mere fact that a rate has been raised
    carries with it no presumption that it was not rightfully done.
    Those presumptions of good faith and integrity which have been
    recognized for ages as attending human action have not been
    overthrown by any legislation in respect to common carriers."

It is claimed that the indefinite suspension of the rate until
final hearing is to deprive the carrier, if the rate advanced is
reasonable, of its right of property during the period of suspension,
without having given it any opportunity to be heard prior to the
act of suspension. Due process of law must precede, and should not
follow, the suspension. To set aside the carrier's act in fixing
the rate pending the investigation required by due process of law
is to deprive the carrier, pro tanto, of its property right to
charge a reasonable rate. The fact that the statute requires an
investigation after the suspension of the rate does not avoid the
constitutional inhibition, as that provision can only be satisfied
when the investigation precedes any disturbance of property rights.
The carrier is entitled to the investigation before it is restrained
in the _exercise_ of its property rights; the theory of the amendment
suggested is that the shipper is entitled to an investigation before
the carrier can _exercise_ its property rights.

Those contending for this objection to the amendment assumed that
the indefinite suspension without hearing of the act of the carrier
which deprived it, beyond a reasonable time, of the benefit of the
advanced rate, was in effect the same as that which was condemned by
the Supreme Court in the case of the Chicago, M. & St. P. R. R. Co.
against Minnesota. Under the statute of that State, a carrier had
the right to initiate the rate, and to put it in effect, and, under
the law, the commission was authorized to make such changes as it
deemed proper in the schedule so filed, and to direct the carrier
to modify or change the schedule in accordance with the decision of
the tribunal. In the one case the going into effect of the rate is
suspended indefinitely without notice or hearing; in the other, the
rate is changed or modified without hearing. On page 418 the court
condemns this in the following language:

    "No hearing is provided for, no summons or notice to the
    company before the commission has found what it is to find and
    declared what it is to declare, no opportunity provided for the
    company to introduce witnesses before the commission, in fact,
    nothing which has the semblance of the process of law."

On page 458 the court said:

    "If the company is deprived of the power of charging reasonable
    rates for the use of its property, and such deprivation takes
    place in the absence of an investigation by judicial machinery,
    it is deprived of the lawful use of its property, and thus, in
    substance and effect of the property itself without due process
    of law and in violation of the Constitution of the United
    States."

This view of the law as announced in 134 U. S. was affirmed by the
Supreme Court in the case of Louisville and Nashville Co. against
Kentucky, 183 U. S., 510.

It was further suggested that if this amendment was incorporated in
the sixth section, that it was so fundamental in its character, that
if the court should hold that it was an unconstitutional exercise of
power by Congress, that it might have the effect of destroying the
entire value of this remedial legislation, as it would be impossible
to separate the clause from those provisions of the law directly
controlling the subject of rates.

The committee, without expressing any opinion upon the constitutional
questions suggested, feels that it is of sufficient importance and
gravity to cause it to hesitate to incorporate such amendment into
the sixth section, especially in view of the other objections to such
legislation.


COULD THE COMMISSION, UNDER THE AMENDMENT, FIX A REASONABLE RATE, IF
IT HELD THE PROPOSED ADVANCE RATE UNREASONABLE?

3. One of the most serious objections to this measure, if the
contentions of those who oppose it are well founded, is the assertion
that the adoption of this amendment would, in reference to advanced
rates that were protested, deprive the commission of the power
conferred upon it by the fifteenth section of the act of June 29,
1906, empowering it, if on protest and hearing it found a rate to be
unreasonable, to fix a reasonable rate.

The authority to the commission proposed in the amendment "to hear
and determine the matter in all respects as it was required to do by
sections 13 and 15 of this act," can only be construed to refer to
the procedure as provided in the thirteenth and fifteenth sections
of the interstate commerce law. There is no attempt to amend the
provisions of section 15, which confers upon the commission the
right to declare a rate unreasonable, and when so declared to fix
a reasonable rate. There are no provisions found in the amendment
suggested to the sixth section conferring upon the commission the
power, when it finds a rate proposed to be advanced unreasonable,
that it may then proceed to fix a reasonable rate.

An examination of section 15 in reference to the power of the
commission to fix a rate depends upon a condition precedent that is
clearly set forth in said section. It is, that before the commission
has the authority to fix a rate it must first reach the opinion that--

    "The rates, or charges whatsoever, demanded, charged, or
    collected by any common carrier or carriers, * * * or that
    any regulation or practice whatsoever of such carrier or
    carriers affecting such rates, are unreasonable, or unjustly
    discriminatory, or are unduly preferential or prejudicial, or
    otherwise in violation of the provisions of this act."

When this conclusion has been reached as to existing rates the
section then authorizes the commission--

    "to determine and prescribe what will be the just and
    reasonable rate or rates, charge or charges, to be thereafter
    observed in such cases as the maximum to be charged; and what
    regulations or practice in respect to such transportation is
    just, fair and reasonable to be thereafter followed."

To leave no doubt of the true construction of this section, an
examination of the order required to be entered by the commission is
conclusive of the meaning and intention of Congress in the enactment
of this portion of the fifteenth section. It provides:

    "And to make an order that the carrier shall cease and desist
    from such violation to the extent to which the commission finds
    the same to exist, and shall not thereafter publish, demand, or
    collect any rate or charge for such transportation in excess of
    the maximum rate or charge so prescribed."

An analysis of this order of the commission which requires it
to provide "that the carrier shall cease and desist from such
violation, to the extent to which the commission finds the same to
exist," recognizes the fact that the rate is an existing rate, is an
effective rate, is a rate in full operation, and cannot, therefore,
be applied under the provisions of the amendment suggested to the
sixth section, as no rate has gone into effect and become operative.

The subject we are considering as affected by the proposed amendment
and the provisions of the fifteenth section, do not rest upon any
principle of the common law, but are purely statutory enactments to
carry out a policy in reference to interstate commerce deemed wise
by Congress. The construction, therefore, of the statute in this
respect cannot be aided by any principles of the common law, and the
conclusion as to its meaning must rest entirely upon the intention of
the legislature as expressed by the language of the act.

If this view of the fifteenth section is correct, the adoption of the
amendment to the sixth section would change one of the most effective
provisions of the act of June 29, 1906, and which was contended for
with such earnestness in its passage through Congress.

Under the amendment to the sixth section, if adopted, and a protest
was made to the advanced rate, or the commission under a protest was
authorized in its discretion to suspend the advanced rate, until
hearing as to its reasonableness, the only decision that could be
made under that amendment would be, that the rate proposed to be
advanced was either reasonable or unreasonable, but there would exist
no power in the commission, if they found the rate unreasonable, to
fix what in its judgment would be a reasonable rate. The committee
does not believe that it is the desire of Congress, in view of the
sentiment of the country as expressed in the press and before it,
to pass additional legislation which would invite and suggest such
confusion and legal difficulties in the construction of an act which
has not yet been put in full operation by the tribunal charged with
that duty.


COULD THE DECISION OF THE COMMISSION, CONDEMNING AN ADVANCE OF RATES,
BE REVIEWED BY THE COURTS?

4. It was suggested to the committee that the incorporation of this
amendment to the sixth section of the act of June 29, 1906, would
deprive the carrier of the right to review by a bill in equity a
decision of the commission which denied to the carrier the right
to advance a rate. This contention is based upon the ruling of the
courts, that the making of a future rate is a legislative act, and
not a question for judicial review, and that until the rate is fixed
and becomes effective it is purely one within the legislative
function, and presents no subject cognizable by the court.

Under the amendment proposed a carrier would file a schedule of
advanced rates; a shipper enters a protest to the rate taking effect;
either by operation of the statute or the exercise of discretion
by the commission, the rate is suspended until final hearing;
subsequently there is a notice of the hearing and a decision rendered
adverse to the contention of the carrier seeking an advance of the
rate. Under these circumstances there is no remedy of review of that
act of the commission provided for by existing law or under the
principles of equity.

Existing law, providing for a review of a decision of the commission,
does not by its terms enlarge the subject of equitable jurisdiction.
The provision of the statute confers upon the court the right to
take jurisdiction of a case against the commission and to review its
decision when based upon an existing rate. There is no provision of
the statute that contemplates the exercise of a jurisdiction by the
courts in a case arising under a provision of law similar to the
amendment sought to the sixth section of the act of June 29, 1906. In
the decision rendered by the commission denying the right to advance
the rate, the question of the reasonableness of the former rate or
of any existing rate is not involved in the order to be entered by
the commission. Under this proposed amendment the carrier submits a
proposition to advance the rate, which has never become effective.
The order of the commission would simply approve the proposition or
deny the advance of the rate. This, under the proposed amendment,
would be the extent of the authority and act of the commission.

In the case of McChord _v._ L. & N. R. R. Co. (183 U. S., 483),
followed by the case of L. & N. R. R. Co. _v._ Ky. (183 U. S., 503),
the court sustains the doctrine announced, and held that before
a court of equity can intervene, the administrative body must do
some act that advances beyond the legislative function. (Reagan
_v._ Farmers' Loan & Trust Co., 154 U. S., 362; Interstate Commerce
Commission _v._ Railway Co., 167 U. S., 479.)

It is contended that the decision of the commission prohibiting the
advance is a legislative act, and that under the decisions of the
courts the order simply prohibiting the taking effect of a proposed
advance could not be the subject of equitable cognizance. If this
view is not correct, it is contended that the courts by overruling
the order of the commission would in effect be putting in force
a future rate. Under existing law, however, if the rate has taken
effect its reasonableness is a matter of judicial review, and
should the commission after protest and hearing declare it to be an
unreasonable rate and set the same aside in its order, that decision
is reviewable by the courts, as it presents a judicial question. The
statute conferring upon the commission the power to determine whether
an existing rate is reasonable or unreasonable has fixed the standard
which must determine the jurisdiction of the administrative tribunal,
and the courts have a right to review the act of the commission, with
a view of ascertaining whether it has acted within the limitations of
the power conferred upon it.

In the case of the State Corporation Commission of Virginia against
Railways, decided by Mr. Justice Holmes November 30, 1908, speaking
of the power of the commission to fix a rate and the appeal from its
decision to the court of appeals of Virginia, the court said:

    "A judicial inquiry investigates, declares, and enforces
    liabilities as they stand on present or past facts and under
    laws supposed already to exist. That is its purpose and end.
    Legislation, on the other hand, looks to the future and
    changes existing conditions by making a new rule to be applied
    thereafter to all or some parts of those subject to its power.
    The establishment of a rate is the making of a rule for the
    future, and therefore is an act legislative, not judicial, in
    kind. * * *

    "Proceedings legislative in nature are not proceedings in a
    court within the meaning of the Revised Statutes, section 720,
    no matter what may be the general or dominant character of the
    body in which they may take place. * * * That question depends
    not upon the character of the body, but upon the character of
    the proceedings. (Ex parte Va., 100; U. S., 339-348.) They are
    not a suit in which a writ of error would lie under Revised
    Statutes, section 709, and act of February 18, 1875. (C. 80
    Stat., 318.) * * * Litigation can not arise until the moment
    of legislation is passed. * * * We may add that when the rate
    is fixed a bill against the commission to restrain the members
    from enforcing it will not be bad as an attempt to enjoin
    legislation or as a suit against a State, and will be the
    proper form of remedy."

The recent decision of the Supreme Court in the case of Public
Service Commission _v._ Consolidated Gas Co. of New York, in which
the opinion was delivered by Mr. Justice Peckham, in deciding what is
known as the Eighty-Cent Gas Case from the southern district of New
York, is instructive upon the question discussed in this objection.

In that case, the parties had gone to issue upon the question as to
whether the rate of 80 cents enjoined by the court from taking effect
was confiscatory. After deciding the case upon the merits in favor of
the commission, the court was unwilling, upon the supposed effect of
a rate which had never been in operation, to bar the parties of their
right when the same became effective from asking the protection of
the court against its practical results. The memorandum announcing
the position of the court upon that question is as follows:

    "As it may possibly be that a practical experience of the
    effect of the acts by actual operation under them might
    prevent the complainant from obtaining a fair and just return
    upon its property used in its business of supplying gas, the
    complainant, in that event, ought to have the opportunity
    of again presenting its case to the court. Therefore, the
    decree is reversed, with direction to dismiss the bill without
    prejudice."

This case simply illustrates the fact that the court was unwilling
to decide the question finally until the rate contested had become
effective. This was a suit involving a schedule of rates, and the
question made by the record was that these rates would result in
the confiscation of the property of the complainant in violation
of the Federal Constitution. Where that question can be properly
made, the courts have intervened upon clear proof and sustained
their jurisdiction to prevent such a violation of the constitutional
protection. In this case, although the court held that the evidence
developed the fact that this allegation of the bill was not
sustained, it was so reluctant to give effect to testimony as to what
might be the effect of the rates before they were made operative that
it preserved the rights of the parties by authorizing a new suit
after the rate should become effective. Under the act to regulate
commerce, such a constitutional question could hardly be practically
raised, and the rights of the court to intervene must depend upon
the limit placed upon the power of the commission by Congress in the
enactment of the law, in fixing the standard which should guide the
commission in its action.


BURDEN IMPOSED ON THE COMMISSION.--CONFLICT OF JURISDICTION.--HOW
RATES ARE MADE.

5. Your committee has deemed it proper that it should report to the
Senate the legal objections to the incorporation of this amendment in
the sixth section of the act of the 29th of June, 1906, but although
giving due weight to these objections, the committee has been more
strongly influenced in its adverse report upon this bill because
of the strong and forcible practical objections which have been
urged to the adoption of this amendment as a part of the interstate
commerce law.

Should this amendment become a part of the law, it would be in the
power of any shipper, whether interested or not in the result, to
file a protest against the advance of the rate which under the
proposed amendment would at once suspend its going into effect,
and under the amendment offered in committee would place it in the
power of the commission to order its suspension, if a prima facie
case was presented in the protest. The shipper in filing a protest
assumes no responsibility, either as to the effect of his action
upon the carrier or liability in any way for cost accruing during
the proceeding. Considering the thousands of articles transported
by the carriers of the country, the hundreds of thousands of rates
published for the transportation of these articles, and the thousands
of shippers interested in their movement, some idea of the number of
protests that probably would be filed on the advance of rates can
be imagined. The burden that would be thrown upon the commission in
its effort to meet this responsibility would, as Judge Cooley well
remarked, require "superhuman" efforts on its part. He said:

    "Moreover, an adjudication upon a petition for relief would in
    many cases be far from concluding the labors of the commission
    in respect to the equities involved, for questions of rates
    assume new forms, and may require to be met differently from
    day to day; and in those sections of the country in which the
    reasons or supposed reasons for exceptional rates are most
    prevalent the commission would, in effect, be required to
    act as rate makers for all the roads and compelled to adjust
    the tariffs so as to meet the exigencies of business while
    at the same time endeavoring to protect relative rights and
    equities of rival carriers and rival localities. This in any
    considerable State would be an enormous task. In a country so
    large as ours, and with so vast a mileage of roads, it would be
    superhuman. A construction of the statute which should require
    its performance would render the due administration of the law
    altogether impracticable, and that fact tends strongly to show
    that such a construction could not have been intended."

If the advance of rates was ultimately decided to be reasonable, the
carrier would have been deprived during the period of suspension of
the additional earnings to which it was entitled, and under such a
provision of law would be required to maintain, at enormous expense,
a large force of attorneys to answer and defend these protests. It
would confer upon the commission the powers now exercised by the
courts, and the jurisdictions over the same subject by both the
courts and the commission would necessarily produce conflict and
confusion.

The Supreme Court in the case of Texas Pacific R. R. Co. _v._
Abilene Cotton Oil Co. (204 U. S., 426), construing the ninth and
twenty-second sections on the right of a shipper to apply to the
courts for pecuniary redress for an alleged unreasonable rate held
that, until the protested rate was condemned by the commission, there
was no relief in the courts. This decision avoided a conflict of
jurisdiction between the courts and the commission. It would lessen
very greatly the value of the amendment of the act of June 29, 1906,
which requires thirty days' notice in a change of rate, which was
adopted, with a view of investing rate conditions with a greater
degree of stability than formerly. Under existing law, the shipper is
assured of that degree of stability, and can predicate his sales and
purchases accordingly. Under the amendment, shippers would never know
whether or not a rate is to become effective on schedule time, or at
any future time. The effect of the amendment would, therefore, be to
a considerable degree to nullify the permanency which this amendment
to the act to regulate commerce sought to impress upon the law.

We must remember in considering this question that the majority
of advances have resulted from the practice of the roads in the
reduction of rates to meet certain commercial and economic conditions
at the time, which have usually been the result of appeals from
shippers and suggestions from commercial organizations.

We desire to direct attention to the statement filed before the
Committee on Interstate and Foreign Commerce upon a similar bill to
this by the chairman of the committee of the Southwestern Traffic
Association, which is as follows:

    "A very small percentage of the changes in freight rates,
    either reductions or advances, is evolved by railroad
    officials. Practically every change in rates is the result of
    suggestion from one or more shippers, who find that by some
    modification in the existing schedules their business in a
    certain territory can be increased by enabling them to meet
    competition which they encounter from other sources of supply,
    which are in most cases served by rival railroads. Their
    representation is that by the proposed change their profit
    or business will be increased, and consequently the railroad
    serving them will share in an augmented traffic which, at the
    time of the suggestion, is being handled by the rival shipper
    and carrier.

    "Ninety or more per cent. of these suggestions are for
    reductions in rates or for changes in rules and regulations
    beneficial to shippers and classed as reductions. The railroad
    company is anxious at all times to increase its traffic and
    gives a keen ear to such pleas of the shipper. The railroad
    official to whom such requests are made carefully investigates
    the conditions recited by the shipper and, by correspondence
    with such railroad's representatives at the points of origin
    and destination, confirms, if possible, the views of the
    shipper and the effect of the proposed change on the tonnage
    and revenue of the company. The traffic official of the
    railroad thus being daily engaged in investigations of this
    kind becomes very proficient in his knowledge of the factors
    surrounding the movement of the principal articles of commerce
    and becomes, after experience, a ready judge of the merit of
    such propositions. When thus convinced, he becomes the agent of
    the shipper in securing the proposed adjustment. This may take
    the form of suggesting to a rival railroad that the advantage
    which its shippers have enjoyed is unjust and that he should be
    permitted, without any corresponding reduction on the part of
    such rival railroad, to reduce his rate that the complaining
    shipper may profitably secure an increased share of the
    competitive traffic in question. Being unable to thus persuade
    the competing railroad of the merits of such a contention he
    is forced to proceed by reducing his own rate without regard
    to the possible change which may follow on the part of other
    railroads as a consequence of his reduction.

    "It will, therefore, naturally be seen that the railroad
    official and the shipper are constantly planning to increase
    the business in which they are jointly interested, to the
    disadvantage of the rival railroad and shipper. Sometimes
    these efforts result in serious rate wars until the point in
    controversy has been adjusted and the competitive rates placed
    on a basis which is more nearly equitable to all concerned. In
    many instances these disputes result in arbitration either by
    the Interstate Commerce Commission or by individuals who may be
    agreed upon by the contending interests.

    "Bearing in mind, therefore, that practically all rate
    reductions are the result of the effort of the railroad company
    to serve the shipper, it can easily be seen what the result
    will be if no advances in rates can be made without practically
    the approval of the Interstate Commerce Commission. Where it is
    difficult to restore rates to normal figures, the carrier will
    be loath to reduce them in order that the shipper dependent
    upon such carrier may increase, for the time being, his share
    in the competitive traffic in which he is interested."


ADJUSTMENT OF RATES.--INTERRELATION OF RATES.--PRACTICAL OPERATION OF
AMENDMENT.

6. The subject of rate adjustment, even upon a single system of
transportation, is one involving great difficulty and perplexity.
When this adjustment is considered in its relation to the entire
country, to the diversified commercial conditions, as affected by
commercial competition, and as controlled by the interrelation of
rates, it stands forth as one of the most difficult of all the
problems which must be mastered that the transportation agencies
may not be injuriously crippled in the performance of their quasi
public functions, or the prosperity and development of the commercial
interests be retarded by the failure to enact proper, reasonable, and
just governmental regulations.

Rates which can be considered alone are comparatively few in number.
In the large majority of cases they are interrelated with other
rates, and frequently this interrelation exists as between areas
widely separated. The rates upon iron and steel from mills within 50
to 100 miles of New York, Philadelphia and Baltimore, whose relations
to each other are established by long custom and usage, are based
primarily upon the necessity of preserving a fair comparative charge
between the different shipping points and destinations. Rates upon
coal from central Pennsylvania to tide water have close relations
with the rates upon coal from West Virginia to tide water, competing
as such coal does, in the same markets. The rates upon lumber from
the Michigan markets must bear some relation to the rates on lumber
from Louisiana and Georgia to the same market of distribution,
although separated by hundreds of miles.

The rates upon grain from western farms to eastern points bear
a relation to the other, and upon export grain the rates to the
Atlantic seaboard bear a close relation to the rates to the Gulf.
The rates upon fruit and vegetable traffic from the various shipping
districts, as California on the West and Florida on the South,
must be considered in the making of rates. The structure of rates
between the territory east of the Mississippi and north of the Ohio
River, and the territory east of Pittsburg and Buffalo, including
New England, is closely interrelated; as an example, the rates
between Chicago and New York take a percentage of the Chicago rate
from all points west of Pittsburg and Buffalo. The principle of
the interrelation of rates has frequently been recognized in the
decisions of the Interstate Commerce Commission.

In the interest of the manufacturer there is a very important
relationship between rates upon different products entering into
the manufacture of a given article. In the great steel-producing
districts of the Shenango and Mahoning valleys and Pittsburg for many
years the rates upon raw material to the furnaces for the production
of pig iron have been adjusted upon a basis, so far as possible, of
making the freight cost of assembling the raw materials that enter
into this product the same to each furnace. In the one case the rate
upon coke may be higher and the rate upon ore or limestone lower; in
other cases the reverse. The adjustment of rates upon these different
raw materials is so made that when assembled at the different
furnaces the aggregate cost is relatively the same. This illustrates
the contention that such rates cannot be considered separately, but
must be taken as a whole.

Bearing these facts in mind it is manifest that if an advance in
rates is made and the protest of one shipper shall operate as a stay
to the advance of a particular rate in which he may be interested the
result would be to burden thousands of other shippers who have made
no objection. The protesting shipper would thus secure an advantage,
enjoying for a time, at least, a rate relatively lower than that to
which he was entitled. It might be urged that it would be open to all
other shippers to file similar protests, but under the provisions of
the bill, or of the amendments suggested in committee, the protesting
shipper might wait until the last day of the thirty-day period, thus
giving no opportunity to other shippers, who would be ignorant of
his purpose, to file their protest. It would be possible if this
amendment became a law that many individual shippers would take
advantage of their competitors by making contracts upon the basis of
a lower rate and at the last moment file the protest, suspend the
advance rate, and deliver their product under such contracts within
the period of the suspension of the advanced rates and thus profit at
the expense of their competitors.

The effect of this amendment becomes more serious where the relation
of rates is between wide areas, and these relative rate adjustments
cannot be made simultaneously. The rates upon grain for export, from
the West to the Gulf, as compared with the Atlantic seaboard, will
illustrate this statement. The protest of one shipper between two
specific points would not only result in throwing out of relation
the rates from all points in that section, but would also affect
the competitive rates from other sections. Such a result would
necessarily render the rate situation in reference to the grain rates
"confusion worse confounded."

Rates in a country like the United States, which is comparatively
young, and the development of which attracts the attention of the
world, must, necessarily, be elastic, not only in the interest of
the carrier, but of the shipping public. The principle is sound and
has received the approval of the Interstate Commerce Commission,
that rates must be fixed with regard to their relations one with
the other, and not entirely upon the cost of service. This relation
is because of the competition between shippers, between sections
of shippers, and between localities, and as (because of the rapid
development of our country in the production of new sources of
supply, in the opening up of new grain fields, flour mills, mines,
and factories, etc.) this competition is constantly changing. It is
manifest that rates must constantly fluctuate, so as to be adjusted
to the new condition; it is essential in the development of the
country, even in the older sections, that rates must be elastic,
which means constant reductions and advances.

This is in the interest of communities and the individual shipper.
There must be elasticity for other reasons, in the interest of
communities as of the railroads; in meeting changes in commercial
conditions that necessitates reductions in rates for shorter or
longer periods, as an illustration, to enable our grain and other
products of the farm to reach foreign markets, which would be
impossible in one period unless rates were lowered, whereas in other
periods higher rates could be charged without injurious results.
Understanding the conditions that surround this complex subject,
it is manifest that if a single shipper, or even the Interstate
Commerce Commission, is to have the power to prevent at any time that
elasticity which involves an advance in rates, the natural result
will be that reductions will not be made by the carrier, and the
elasticity will be lost. The fear would be ever presented to the mind
of the traffic official that the rate once reduced could not--at
least, until after exhaustive and long-drawn-out hearings before the
commission--be advanced.

The necessary fluctuation in rates to meet the changing conditions of
commerce, when examined in the light of the reports of the Interstate
Commerce Commission, is startling to one not familiar with the
rapid change of commercial conditions in this country. There were
225,982 tariff publications filed with the commission in one year,
all containing changes of rates, either reductions or increases,
and rules governing transportation. These publications--many of
them--contained a great number of different tariffs. The Pennsylvania
lines, east of Pittsburg, issued 2,200 tariffs and 3,600 supplements.
About 33-1/3 per cent of these covered advances, and 66-2/3 per
cent were reductions. As the law exists today, there was no special
inducement to the shipper to file protests against the advances.
Suppose, however, that this amendment had been a part of the act to
regulate commerce, how many protests would have been filed, and what
length of time would it have taken the commission to have disposed
of them? What uncertainty would have resulted to the commercial
interests while waiting for the adjudication of these questions?


OPPORTUNITY FOR FRAUD AND DISCRIMINATION UNDER THE AMENDMENT.

7. One of the most serious objections urged to the passage of this
amendment is the opportunity which such a law would present for the
perpetration of frauds under it, and in the case of even honest
protest to the advance of rates, where rates rest on a differential
basis, in producing thousands of instances of unfair discrimination.

An example under the first proposition may be stated briefly, as
follows: There are two men engaged in the same line of trade; they
are both called upon to bid on a contract involving a large amount
of a given commodity in which both deal. The carrier has given
notice of an advance in rate, effective thirty days from the filing
and publication of the schedule; the commodity is not to move
for some days; one of the bidders files his bid, based upon the
advanced rate, assuming that the notice of the carrier will be made
effective; the other shipper and bidder waits until two or three days
before the date the rate is to be made effective, files a protest,
confident that it will take three or four months to have the matter
adjudicated, files his bid against his competitor, based on the
current rate, and being the lowest, secures the contract. An example
under the second proposition would be in case of a rate published
from St. Louis to be followed differentially from Chicago by a number
of competing roads. A shipper on one of the lines, just prior to the
taking effect of the rate, would file his protest as to the rate east
of Chicago. The differential adjustment that has been made by all
these roads will at once be destroyed, and the shipper on the road
against which the protest was filed would have the advantage over all
of his competitors on the other lines in shipping east.

These discriminations between shippers would be the direct result of
the power placed by Congress in the hands of shippers and would have
received the sanction of legislative approval, and, therefore, be
lawful. The statute has taken it out of the power of the carrier to
meet such a condition and to prevent the discrimination. It cannot
change its rate under thirty days without a special order of the
commission, and that order, it must be assumed, cannot be granted
without a reasonable hearing. Congress since 1887 has sought by the
most stringent measures of legislation to prevent discrimination
and preserve equality among shippers. The original act was demanded
more to accomplish that purpose than for any other. The Elkins Act
was confined almost entirely to the subject, and the act of June 29,
1906, increased the penalties for the violation of these provisions.
Should this policy, which has been followed for more than twenty
years, be modified and an act passed, the tendency of which is to
tempt the cupidity of the shipper to accomplish results which it has
earnestly and vigorously fought to stamp out?


WOULD PREVENT REDUCTIONS, AS WELL AS ADVANCES, IN RATES, AND DESTROY
THEIR FLEXIBILITY.

8. On the face of this amendment, it seems only to give to the
commission the authority to prevent an increase in rates, but the
practical result of such a law would be far more reaching. Such a law
would mean a rigid freight tariff in place of the present flexible
and elastic system of rates which exists alone in this country.
Stability of freight rates is important, but not to the extent that
the carrier shall not feel warranted in promptly applying remedies
for the relief or assistance of shippers who find themselves no
longer able to compete, due to advantages which other shippers have
secured, or changes which have occurred in the conditions surrounding
the marketing of their products.

A law which tends to minimize the commercial or competitive
conditions existing at the present time will necessarily result
to the disadvantage of shippers, to the carrier, and to the
communities they serve. It is not necessary here to again refer to
the presentation of the importance of the flexibility of rates,
which is so clearly shown in the discussion of the influences which
control in making reductions, as well as advances of rates by the
chairman of the Southwestern Traffic Committee, as quoted under
section 5 of this report. The more the committee has reflected upon
the probable tendency of the principle announced by this amendment,
if incorporated into the law, the more definite has become its
conviction that it would ultimately result in destroying that
important factor in American railroad management, "the flexibility
of their tariffs--their adaptability to the changing commercial and
economic conditions."

One of the most distinguished and skilled traffic officials in the
country, Mr. Henry Fink, in considering this amendment uses the
following language:

    "Railroad officials are constantly engaged in the work of
    adjusting rates so as to meet as far as practicable the
    requirement of their patrons. In times of depression of
    business they make reduction in rates in order to enable
    shippers to send their commodities to certain markets, and
    keep industrial establishments from being closed. These
    reduced rates are often so low as to barely cover the cost of
    transportation. But they are meant to be temporary in their
    operation, and to be advanced when business conditions have
    become more favorable.

    "It must be obvious that when the restoration of such rates is
    obstructed, so that railroad officials are not permitted to
    advance rates except by permission of a government bureau after
    an investigation which must consume considerable time, railroad
    officials will naturally hesitate, and often decline, to make
    reductions in rates which involve considerable loss of revenue
    without any compensating benefits to their companies, either in
    the present or future.

    "It is easy to see the effect of this. Railroads would no
    longer be able to afford the desired assistance to shippers,
    however anxious they might be to do so. The rates would in a
    large measure lose their elasticity, and become rigid, and a
    condition similar to that existing in France would be created,
    where state controlled rates prevent railroads from building up
    the territory."

In considering this question, we must not forget that when we destroy
elasticity and flexibility in our rates, we prevent reductions of
rates, as well as the raising of rates. Its tendency is not only to
prevent the reduction in particular instances that has resulted in
great advantage to the shippers and the country in the past, but it
prevents the lowering of the general average of rates. There have
been comparatively few complaints, as to the unreasonableness of
the rates of this country per se. The vast majority of complaints,
against the reasonableness of rates, is the claim that they
are relatively unreasonable. Under the American system of rate
adjustment, with its freedom to meet commercial and economic
conditions, the general average of rates per ton per mile has
voluntarily been reduced by the carriers of the country from 1870;
not so strikingly since 1896 as previously, but substantial reduction
as follows:[J]

  1896          802
  1897          789
  1898          753
  1899          724
  1900          729
  1901          750
  1902          757
  1903          763
  1904          780
  1905          766
  1906          748
  1907          759

The leaders of railroad management and the ablest experts on railroad
economics in foreign countries have approved in the most enthusiastic
language, the wisdom which has preserved to the American railway
system its freedom of management and its flexibility of rates,
subject only to the limitations of reasonable rates, equality
among shippers, and the avoiding of all devices that might result
in discrimination among those who use these public means of
transportation.

The view of M. Emile Heurteau, president of the Orleans Railroad,
speaking of the American system of roads, said:

    "We would be only too glad to adopt the American system
    of fixing the lowest rates proper, and making up the loss
    of profit on each shipment out of the increased volume of
    business they make the railways available to, which is the
    only economically and commercially right and sensible way
    of doing. We would be glad to build up our territory as the
    American railways do, by encouraging its industries, by opening
    its markets, by enabling it to compete with other territory
    contributing to the same markets.

    "But we can not do that; the state-controlled rates prevent it,
    however strong our desire or the people's may be.

       *       *       *       *       *

    "Railroads under government supervision must set their rates
    close to the maxima then, and maintain them there, for their
    own salvation. There are many times when, if it were possible,
    we would like to lower freight charges to meet some special
    emergency, such as the necessities of a district suffering from
    a crop failure, for example.

    "That is not philanthropy, but commercial sense, to help the
    man who creates business for you, when he is hard pressed,
    and to increase the volume of traffic that is falling because
    people have not the money to pay the price they have been
    accustomed to pay easily. But if we should once lower our
    rates--possibly to the point of loss, as American railways have
    done frequently in crises--we would not be allowed to restore
    them later, when they could be fairly restored.

       *       *       *       *       *

    "The wonderful growth and development of the United States is
    the admiration of the whole world. I have no doubt it is to be
    attributed largely to the freedom you have always enjoyed in
    your commercial and industrial life.

    "Opportunity is given here for railways and communities to be
    mutually helpful, and splendid use has been made and is being
    made of it. The few cases of complaints against your railways,
    the expansion of trade through the opening of European markets
    to the producers of your Central and Western States, who
    are enabled to deliver their products abroad, the low cost
    of transportation that enables them to compete there with
    the foreign producer near at hand, whose railways are in no
    position to help him--all these things seem to me sufficient
    evidence of the success and desirability of the American
    practice in the management and regulation of railway matters.

    "Any economist, any business man, any transportation manager
    will tell you that the present American method of fixing
    freight rates is the only logical and rational one."

In the investigation of railways by the Senate committee in 1905,
Mr. W. M. Acworth, who is regarded as one of the leading experts
in England on railroad transportation and railroad economics, was
invited to appear before the committee, with the request to give a
review of the historical facts bearing on the control and management
of the railways of England. After complying with the request of
the committee, certain questions were asked him that were of great
importance at that time in the consideration of the questions then
being investigated by the committee. One of these questions involved
the effect of the provision of the new canal and traffic act of
Parliament, which for the first time embodied the provision that
"railway companies must make no increase except for good cause, if
anybody objects," and which, as construed by the courts, prevented
any increase of a rate where objection was made, until after hearing
by the board of trade.

His examination will be found in the third volume of the hearings
of that investigation, pages 1848, 1852, 1853 and 1854, and was as
follows:

    "Since it has been decided that no rate can be put up once
    it has been put down, without appeal to the law courts, the
    railway companies have practically arrived at the conclusion
    that they will not put them down because they do not know
    whether they will have an opportunity to put them up again.

    "Senator CULLOM: Do you think it works to the advantage of the
    people that the railways will not put the rates down for fear
    they will not get a chance to put them up again?

    "Mr. ACWORTH: Personally, I have no doubt it does not. It is
    fair to remember always that it may protect the weaker in
    commercial strife. It is rather hard on the weaker man to be
    crowded to the wall by a wholesale concern in any walk of life.
    But if it be true in ordinary business that, on the whole, the
    public gains by the wholesaling method, it is probably true in
    railway business also. I think that, so to speak, the heart has
    been taken out of the railway man. The railway men understand
    this business; they know how to manage it in their own way. The
    railway men think 'the responsibility has ceased to be ours; we
    must maintain the status quo,' and that is what they do.

    "The CHAIRMAN: You think that dividing responsibility impairs
    the administrative power of the officials of the roads as well
    as the service they render to the public?

    "Mr. ACWORTH: From the operating point of view, I do not think
    our railways have been sufficiently interfered with to prevent
    them developing the goodness of the service. But as to rate
    making, I have no doubt that the interference of Parliament,
    the courts, and the Executive has all tended to stereotype and
    keep rates at an unnecessarily high level.

    "The CHAIRMAN: Would you say that, on the whole, the power
    to make rates generally and primarily should be left to the
    railroads and to the free play of the forces of the business
    world?

    "Mr. ACWORTH: Speaking as an individual student, I have no
    doubt that that is the process that will arrive at the best
    results for the community, with this exception: That I fully
    think it is necessary that the community in some way should
    interfere to protect all customers from unfair treatment.

    "The CHAIRMAN: You think that the power should reside somewhere
    to correct excessive and extortionate rates by summary and
    proper proceedings?

    "Mr. ACWORTH: I am not sure that I should go so far as to say
    excessive rates regarded as excessive in themselves. I am
    myself inclined to think that excessive rates will correct
    themselves. The wise men will discover that it does not pay to
    charge excessive rates. But I think the law should interfere to
    prevent unfair rates to A as compared with the rates given to
    B. It seems to me that the State is bound to insist that the
    rates shall be public, and that practically will settle it,
    for if they are public they have got to be fair; I am inclined
    to think the law should confine itself to securing that, where
    there is a difference made as between A and B, the difference
    should be a difference for a commercial reason, and not for any
    reason of personal favoritism.

    "Senator FORAKER: And I understand you to say that the effect
    of fixing maximum rates is to lessen the tendency to reduce
    rates, which railroads had practiced before this legislation
    was enacted?

    "Mr. ACWORTH: I am not quite sure that the maxima have really
    had very much effect at all. It has been a tendency, but I do
    not think an important tendency. But the interpretation by the
    courts of the undue preference law, and the recent limitation
    that having once reduced you can not subsequently increase,
    have had that effect markedly, I believe.

    "Senator FORAKER: So that the rates for the transportation of
    freight on railroads in England have not been declining, I take
    it from your statement, in recent years, but have remained
    practically stationary?

    "Mr. ACWORTH: I do not know what the average rate is, because
    there are no statistics in England; but my own impression would
    be that it had probably not declined to an appreciable extent,
    whereas in an earlier period it certainly did decline pretty
    fast."

The effect of a similar law, passed in England, as shown by the
testimony of Mr. Acworth, confirms the views of the committee which
have been expressed in this report, that with such a provision
embodied in the present interstate commerce law, there would be few
reductions or advances in American rates. If it had the effect in
England of destroying the flexibility of the rates of the carrier and
interfered with the development of England's commerce, as well as her
railroads, how much more serious would be the result in this country,
that is in the process of rapid development, both as to its commerce
and territory? It has been credibly stated that the Board of Trade of
England is now seriously considering a recommendation for the repeal
of that provision of the statute.


AN ANALYSIS OF THE COMMUNICATION TO THE COMMISSION--MANY OF ITS
OBJECTIONS APPLY TO THE AMENDMENT OFFERED IN COMMITTEE.

9. When this bill was referred to your committee for its
consideration the chairman addressed a letter to the Interstate
Commerce Commission, inclosing the bill, and requested the opinion of
the commission as to the wisdom of incorporating the amendment into
the interstate commerce law.

The chairman replied in the following communication:

        "INTERSTATE COMMERCE COMMISSION,
        "_Washington, January 29, 1908._

    "HON. STEPHEN B. ELKINS,
      "_Chairman Committee on Interstate Commerce_,
        "_United States Senate, Washington, D. C._

    "DEAR SIR: The Interstate Commerce Commission has the honor to
    submit the following in response to your communication of 24th
    instant, transmitting a bill (S. 423) to amend section 6 of the
    act to regulate commerce, introduced by Senator Fulton December
    4, 1907, and requesting the commission to 'advise the committee
    before its next meeting, January 31, their opinion of said bill
    and what action they would suggest thereon.'

    "Whilst the views of the entire commission can not be
    definitely ascertained within the time named, because of
    absences on official business, a majority of the commissioners
    and probably all of them would not be disposed to favor the
    enactment of this measure.

    "To give to the protest of a single shipper the effect of
    preventing the advance of any rate until the reasonableness of
    that advance was affirmatively determined by the commission
    would establish a hard and fast rule of doubtful fairness
    to the railroads and questionable advantage to the public.
    Under existing conditions we are of the opinion that it would
    be unwise to adopt the arbitrary limitation which this bill
    proposes, whatever may be found desirable or necessary in this
    regard in the future.

    "It is further to be observed that the passage of such a bill
    at this time would impose a burden upon the commission which
    it ought not to be asked to undertake. If every proposed
    advance had to be investigated by the commission and officially
    sanctioned before it could take effect, the number of cases
    to be considered would presumably be so great as to render
    their prompt disposition almost impossible. In instances of
    justifiable increase the necessary delay resulting from the
    probable volume of cases would work injustice to the carriers.
    Until conditions become more stable and the substantive
    provisions of the act are more completely observed in railway
    tariffs and practices we entertain the belief that a wider
    latitude of discretion on the part of carriers than this
    measure allows should be permitted.

    "It is also suggested that the practical effect of the proposed
    amendment might be to prevent voluntary reductions of rates
    by the carriers. If no rate could be increased without the
    approval of the commission after affirmative showing by the
    carrier it might happen that many reductions now voluntarily
    accorded would not be made.

    "This subject of rate advances was discussed in our recent
    annual report to the Congress, and that portion of the report
    is transmitted herewith for the information of your committee.
    It concludes with a recommendation relating to the matter in
    question in which the entire commission concurred, and that
    recommendation is now respectfully renewed.

        "Very respectfully,
          "MARTIN A. KNAPP,
            _Chairman_."

It will be observed by an examination of this communication from the
commission that it deemed it unwise to recommend the adoption of the
amendment to the sixth section as offered in Senate bill 423, but the
letter refers to its former report as expressive of its views upon
this subject, which recommended a somewhat similar provision, but
differing in this respect. In Senate bill 423 the filing of a protest
would suspend the taking effect of the rate until after full hearing
as to the merits of the advance. The recommendation of the commission
in its former report, referred to in the communication, recommended
the adoption of a provision that would confer upon the commission,
upon the filing of a complaint, the discretion to suspend the rate
until final hearing. The amendment to the bill before your committee
offered during its consideration, and which has been fully discussed
in this report, was in substance the recommendation of the commission.

An analysis of the letter of the chairman of the commission, stating
the objections to the enactments of the proposed amendment into law,
sustains many of the reasons which have been urged in this report
against the approval of the principle announced by that amendment.
The committee quotes from the letter, as follows:

    "(a) To give to the protest of a single shipper the effect of
    preventing the advance of any rate until the reasonableness of
    that advance was affirmatively determined by the commission,
    would establish a hard and fast rule of doubtful fairness to
    the railroads and questionable advantage to the public.

    "(b) Under existing conditions we are of the opinion that it
    would be unwise to adopt the arbitrary limitation which this
    bill proposes.

    "(c) If every proposed advance had to be investigated by the
    commission and officially sanctioned before it could take
    effect the number of cases to be considered would presumably be
    so great as to render this prompt disposition almost impossible.

    "(d) It is further to be observed that the passage of such a
    bill at this time would impose a burden upon the commission,
    which it should not be asked to undertake.

    "(e) In instances of justifiable increase all necessary delay
    resulting from probable volume of cases would work injustice to
    the carriers.

    "(f) Until conditions become more stable and the substantive
    operations of the act are more completely observed in railway
    tariffs and practices, we entertain the belief that a wider
    latitude of discretion on the part of carriers than this
    measure allows would be permitted.

    "(g) It is also suggested that the practical effect of a
    proposed amendment might be to prevent voluntary reductions of
    rates by the carriers.

    "(h) If no rate could be increased without the approval of the
    commission after affirmative showing by the carrier, it might
    happen that many reductions now voluntarily accorded would not
    be made."

The nine reasons suggested by the commission why the original
amendment offered to section 6 should not be adopted, fully sustain
the committee in reporting the bill adversely, and to a great extent,
fully justify the views which it has expressed in this report as
influencing the actions of the committee in its adverse report upon
the amendment proposed in the committee.

The committee is unable to appreciate the force of the suggestion
of the modification proposed to the original amendment, as in any
way changing the principle embodied in it, or the practical results
which would flow from its adoption. If the power was conferred upon
the commission, when a rate was advanced, upon complaint to suspend
the going into effect of that rate until a final hearing, every
objection urged by the commission to the adoption of the bill, but
the first two, would be applicable to the modification proposed by
the commission to the original amendment.

Under the modification suggested by the commission the burden
imposed upon it would be greater, if possible, than under the
original amendment. Under the original amendment, by force of the
statute, the filing of the protest would suspend the advanced rate,
and the hearing upon the merits would take place after the thirty
days had expired. Under the suggestion of the commission conferring
upon it the discretionary authority upon complaint to determine
whether the rate should go into effect at the time prescribed by
law or be suspended, there is imposed an official quasi judicial
duty upon the commission, which it should not perform except upon
proof that probably the rate sought to be advanced would ultimately
be determined to be unreasonable. Remembering the large number of
changes of rates daily, and the fact that under the law the complaint
could be filed at any time within the thirty days, would it not be
an impossible undertaking for the commission to hope to perform this
official act with justice to the public or to the carrier? In the
multiplicity of duties now demanding its most earnest attention,
would not the practical operation of such a law compel it to enter
a pro forma order of suspension until the final hearing, when the
commission, upon an examination of the complaint, is satisfied that
it presented a prima facie case of unreasonable advance?

An official tribunal charged with the duty of preventing
an unreasonable advance in rates would be constrained, on
the presentation of such a complaint, to issue the order of
suspension. If the slightest doubt was raised in its mind as to the
reasonableness of the advance, its official obligation would require
it to enter the order of suspension. Is there any question that such
a prima facie case could be made where the consideration of the
protest would, of necessity, be ex parte?

The committee is not, therefore, able to draw a distinction between
the original amendment and that proposed in committee. In the opinion
of the committee the reasons stated in the letter of the chairman
of the commission, and the reasons given in this report, not only
justify it but compel an adverse report.


CONDITIONS CONFRONTING CONGRESS.

10. The act of June 29, 1906, took effect August 28, 1906. It has
been operative only about twenty-eight months. During half of that
period of time the country has experienced the effects of a severe
commercial panic; business has been prostrated; transportation
paralyzed; thousands of cars have been stored on the sidings, and
hundreds of engines have been placed in the shops, awaiting the
revival of business. From conditions existing today, we have a right
to assume that before many months we shall be approaching normal
conditions. The commission has not had sufficient time to interpret
and construe the recent law and to promulgate its orders in reference
to the action of the carriers under it. Many of the traffic questions
involved, under the provisions of that law, are yet to be construed
and put in force by orders of the commission. Is it wise, under these
conditions, to begin amending that statute by introducing provisions
inconsistent with the basis of the act? It has been shown that under
the power conferred by that recent enactment, the commission is
vested with the power to change an existing unreasonable rate and
to fix for the future a reasonable rate. It has also the authority
conferred upon it to award reparation to the extent of any injury
resulting to a shipper, by reason of the existence of an unreasonable
rate.

Attention has been called to the opinion of the commission, as
expressed in its decisions, narrowing very greatly the right of the
carrier to advance a rate that would meet with its approval upon
hearing. The committee must assume, in considering this question,
that both the shippers and traffic officials, with knowledge of the
views entertained by the commission upon the question of an advance
of rates, will in the one case be prompt to avail themselves of that
attitude of the commission, and in the other that they will seek to
so adjust their rates as to bring their schedules within the rulings
of that tribunal. The committee believes the highest duty of the
commission is to bring together shippers and carriers, to the end
that each may see that neither can be permanently prosperous at the
expense of the other. It further believes that in many instances
this effort has been made by the commission, and successfully made.
It cannot be accomplished by statutes causing rigidity of rates. The
most sensitive spot in the great business dealings of the country
is the railroad rate. This rate must be raised or lowered, not in
obedience to a rigid statutory law, but in obedience to the varying
conditions of trade and commerce.

The National Board of Trade, one of the most important commercial
organizations in the country and one of the most influential, met in
Washington on Tuesday, January 19, 1909. Two proposed resolutions
were submitted to that convention. First, by the Philadelphia Press
League, urging an amendment to the interstate commerce law, to permit
railroads engaged in interstate traffic to enter into the making
of agreements under the supervision and control of the Interstate
Commerce Commission. The second proposition was submitted by the
Scranton Board of Trade, embodying the provisions of the amendment
offered in the committee upon the consideration of Senate bill 423,
and approved in the report of the Interstate Commerce Commission as
to the advance of rates.

These resolutions were referred to the committee on resolutions
having charge of interstate commerce matters. That committee, through
its chairman, made the following report, which was unanimously
indorsed by the convention of the National Board of Trade:

    "The committee on interstate commerce law respectfully reports
    that, in its judgment, the National Board of Trade ought not
    at this time to recommend any change in the laws relating to
    interstate commerce."

The convention was not satisfied with the passage of this resolution,
but the chairmen of the several committees of that association were
subsequently authorized and directed by resolution to urge the
conclusions of the board in its name whenever possible.

The country is now demanding repose in its industrial upbuilding. It
is not a time to experiment and to change the basis upon which the
former acts to regulate commerce have been predicated. The recent
law passed by Congress so greatly enlarging the authority of the
commission should, before changes are sought, have the opportunity
of at least a fair trial as to the value of its provisions in the
regulation of interstate commerce. When trial has been given and
normal conditions have been restored, any defect in the regulating
statute can then, in the light of experience, be promptly remedied.


FOOTNOTE:

[J] The average rate per ton mile in 1908 was 7.54 mills.




STATISTICS OF AMERICAN RAILWAYS

FOR THE YEAR ENDING JUNE 30

1909

PREPARED BY

SLASON THOMPSON

MANAGER OF THE BUREAU OF RAILWAY NEWS AND STATISTICS


INTRODUCTION

    "The function of accounts is to record facts. True accounting
    is nothing more, nor nothing less, than the correct statement
    of what in fact has taken place, and the measurement of that
    fact in an appropriate figure."--Prof Henry C. Adams.

    To be of the highest value, statistics must be accurate,
    uniform and continuous.

Nothing in the nature of statistics under official authority more
confusing and misleading has ever been issued from the government
printing office than those portions of the Twenty-third Annual Report
of the Interstate Commerce Commission for the year ending June 30,
1909, purporting to deal with the financial results of the railways
of the United States for the fiscal years 1908 and 1909.

On the first page of the Report the financial results of the last two
fiscal years are set down thus:


  ===================================================================
       |   Operating    |   Operating    |             |  Operating
       |   Revenues     |   Expenses     |    Taxes    |   Income
  -----+----------------+----------------+-------------+-------------
  1908 | $2,461,521,345 | $1,721,327,155 | $83,775,869 | $655,418,321
  1909 |  2,494,115,589 |  1,662,102,172 |  89,026,226 |  742,987,191
  -----+----------------+----------------+-------------+-------------

The mileage operated in 1908 is stated as 228,164.80 and in 1909 as
233,002.67 miles.

On page 54 of the report the summary compiled from the monthly
reports gives the following comparative figures for the same years:


  ===================================================================
       |      Total     |      Total     |              |
       |    Operating   |    Operating   | Net Revenue  |   Taxes
       |    Revenues    |    Expenses    |              |
  1908 | $2,421,542,004 | $1,687,144,975 | $734,397,029 | $83,775,869
  1909 |  2,443,312,232 |  1,615,497,233 |  827,814,998 |  89,026,226
  -----+----------------+----------------+--------------+------------

The mileage is the same as above, with the added information that the
mileage operated at the end of the fiscal year 1908 was 229,952.36;
and at the end of 1909, 234,182.70.

It will be observed that the taxes in both summaries are identical,
but in one they are subtracted from net revenues and in the other
they are not.

An insert facing page 54, giving the details of the monthly reports
from which the table on that page is compiled, reveals the common
source of both sets of returns and gives the key to the discrepancy
between them. This is no less than the inclusion in the former of the
revenues and expenses from "outside operations," which are excluded
from the summary on page 54, in which the "net revenue" only from
such outside source is mentioned and added to the net revenue from
rail operations.

The impropriety and inaccuracy of such accounting becomes manifest
when its effect is seen to vary the ratio of operating expenses to
earnings from 69.67% to 69.93% in 1908, and from 66.12% to 66.64% in
1909.

On pages 64 and 65 appears another set of income figures for the year
ending June 30, 1908. This is compiled from the annual reports of the
carriers operating 230,494 miles of line, from which _the mileage
of switching and terminal companies is excluded_. It supplies the
following summary:


  YEAR ENDING JUNE 30, 1908.

  ===========================================+=================
  Rail operations:                           |
    Operating revenues                       |   $2,393,805,989
    Operating expenses                       |    1,669,547,876
    Net operating revenue                    |      724,258,113
    Taxes                                    |       78,673,794
    Net revenue from outside operations      |        5,977,268
    Operating income                         |      651,561,587
    Ratio of operating expenses to earnings  |            69.72
  -------------------------------------------+-----------------

As these figures are compiled from the only returns which furnish
data respecting all the various phases of railway operation in the
United States, they will be accepted in subsequent pages as the
official returns for 1908.

The above figures are exclusive of returns from switching and
terminal companies, whose earnings, according to the monthly reports
in 1908, were $23,028,773; expenses, $16,383,481, and taxes,
$1,245,261.


GROSSLY EXAGGERATED DIVIDENDS.

But these are venial variations compared to the deliberate
misrepresentation as to dividends on page 62 of the report, where it
is stated:

"The amount of dividends declared during the year was $386,879,362,
being equivalent to 7.99 per cent on dividend-paying stock. For the
year ending June 30, 1907, the amount of dividends declared was
$308,088,627."

This statement is the more reprehensible because the inaccuracy
of the reference to dividends in 1907 was exposed a year ago, and
$115,550,909 of the 1908 total is proved to be fictitious by the line
in the condensed income statement of the report (page 65) reading:
"Dividends declared from current income, $271,388,453." It takes
dividends from surplus, dividends by leased companies, and dividends
from surplus of leased companies to make up that gross deception as
to the dividends declared in 1908. And all these "several dividends"
are only made statistically possible by including in current income
$274,450,192 "other income" NOT derived from transportation.

It is impossible to overestimate the harmful popular effect of
exaggerating the dividends paid by the railways by $80,693,665 in
1907 and $115,550,909 in 1908. The public mind does not stop to
distinguish between dividends "declared," dividends paid out of
"income" and net dividends actually paid out of net earnings of
railway traffic.

This whole statistical structure of fictitious dividends has been
built up in successive reports upon the false premise of including
intercorporate payments on both sides of the income account. What the
public is entitled to know is the disposition of the gross sum paid
by it for transportation services--those services which the Act to
Regulate Commerce was passed to regulate.


BEWILDERING CHANGES IN NOMENCLATURE.

Scattered through the official reports for 1908 the student is
confronted with numerous changes in terminology, many of which are
for the better, but nearly all impair that continuity of names
and phrases which is so desirable in comparative statistics. For
instance, the public has been taught, by official practice, to speak
of the revenues of the railways derived from the transportation
of passengers, freight, mail and express, as "Gross earnings from
operation." The phrase is descriptive, definite and clear. For this
the Commission has substituted "Rail operations, operating revenues."
Former reports spoke of "Income from operation," which now gives
place to "Net operating revenue." To this is added the "net revenue
from outside operations," making a "Total net revenue," from which
"Taxes accrued" are deducted, the remainder being "Operating income."

It will be perceived that this last phrase, which covers revenues
from which operating expenses and taxes have been deducted and to
which the net revenues from outside operations (sometimes they
involve a deficit) have been added, comes perilously near the "Income
from operation" of preceding reports.

The exclusion of the reports from switching and terminal companies
in some instances, while they are included in others, introduces an
element of perplexing uncertainty at every turn and really vitiates
all comparisons with former reports.

The Commission itself seems to realize the bog into which the
official statistician has plunged its accounts, when it says:

"The changes in the income account submitted in the report under
consideration _are so far reaching in their results_, in a number of
instances, as to impair direct or close comparison with figures for
similar items in previous statistical reports."

And now it is proposed to throw all the accumulated statistics of
twenty-two years out of consecutive gear by substituting the calendar
for the fiscal year.

       *       *       *       *       *

The writer has deemed the foregoing comments necessary to clear the
atmosphere before proceeding to the introductory summary showing
the salient features of the railway industry in 1909 compared with
similar items in 1899 and 1889. The data for 1909 is compiled from
the annual reports to this Bureau covering 221,132 miles of operated
line, together with the monthly reports to the Commission of earnings
and expenses of all classes of roads for that year, covering an
average operated mileage of 233,002.


SUMMARY OF RAILWAY RESULTS IN 1909, 1899 AND 1889, WITH PERCENTAGES
OF INCREASE FOR EACH ITEM BY DECADES.

  (m = 1,000;   d = decrease.)

  ====================================+============+============
                                      |            |
          Item                        |    1889    |    1899
                                      |            |
                                      |            |
  ------------------------------------+------------+------------
  Miles of line                       |     153,385|     187,534
  Miles of all track                  |     195,958|     250,784
                                      |            |
  Net capitalization (m)              |  $7,366,745|  $9,432,041
  Net capitalization per mile of line |      48,021|      51,764
  Net capitalization per mile of track|      37,593|      38,527
                                      |            |
  Gross earnings from operation (m)   |     964,816|   1,313,610
  Gross earnings per mile of line     |       6,290|       7,005
  Expenses of operation (m)           |     644,706|     856,968
  Expenses of operation per mile of   |            |
    line                              |       4,204|       4,570
  Net earnings from operation (m)     |     320,101|     456,642
  Net earnings per mile of line (m)   |       2,086|       2,435
  Ratio of expenses to earnings       |       66.81|       65.24
                                      |            |
  Receipts from freight (m)           |    $254,041|    $291,113
  Receipts from passengers (m)        |     642,662|     913,737
  Receipts from mail (m)              |      21,901|      35,999
  Receipts from express (m)           |      19,778|      26,756
                                      |            |
  Passengers carried (m)              |     472,171|     523,176
  Passengers carried one mile (m)     |  11,553,820|  14,591,327
  Receipts per passenger per mile     |            |
    (cents)                           |       2.165|       1.978
                                      |            |
  Freight tons carried (m)            |     539,639|     959,763
  Freight tons carried one mile (m)   |  68,727,223| 123,667,257
  Receipts per ton per mile (mills)   |        9.22|        7.24
                                      |            |
  Locomotives, number                 |      29,036|      36,703
  Locomotives, weight (tons)          |   1,161,440|   1,945,259
                                      |            |
  Passenger cars (number)             |      24,586|      33,850
                                      |            |
  Freight cars, number                |     829,885|   1,295,510
  Freight cars, capacity (tons)       |  16,597,700|  34,978,770
                                      |            |
  Average tons in train               |         179|         243
                                      |            |
  Employes, number                    |     704,743|     928,924
  Employes, compensation              |$389,785,664|$522,967,896
  Proportion of gross earnings        |       40.40|       39.80
  Proportion of operating expenses    |       60.46|       61.02
                                      |            |
  Taxes                               | $27,590,394| $46,337,632
  Per mile of line                    |         180|         247
  Proportion of gross earnings        |        2.86|        3.53
  ------------------------------------+------------+------------

  {table continued}
  ====================================+==============+=================
                                      |              |Increase|Increase
          Item                        |    1909      |  over  |  over
                                      |              |  1889  |  1899
                                      |              |   %    |   %
  ------------------------------------+--------------+--------+--------
  Miles of line                       |       234,182|   52.7 |   24.9
  Miles of all track                  |       340,000|   73.5 |   35.5
                                      |              |        |
  Net capitalization (m)              |   $13,508,711|   83.3 |   43.2
  Net capitalization per mile of line |        57,962|   20.7 |   11.9
  Net capitalization per mile of track|        39,730|    5.6 |    3.1
                                      |              |        |
  Gross earnings from operation (m)   |     2,443,312|  153.2 |   86.0
  Gross earnings per mile of line     |        10,486|   66.7 |   49.7
  Expenses of operation (m)           |     1,615,497|  150.5 |   88.4
  Expenses of operation per mile of   |              |        |
    line                              |         6,933|   64.9 |   51.7
  Net earnings from operation (m)     |       827,814|  157.9 |   81.2
  Net earnings per mile of line (m)   |         3,552|   70.2 |   45.8
  Ratio of expenses to earnings       |         66.12| d  2.3 |    1.0
                                      |              |        |
  Receipts from passengers (m)        |      $564,302|  122.1 |   93.8
  Receipts from freight (m)           |     1,682,919|  161.8 |   84.1
  Receipts from mail (m)              |        50,935|  132.6 |   41.5
  Receipts from express (m)           |        63,669|  221.9 |  137.9
                                      |              |        |
  Passengers carried (m)              |       880,764|   86.5 |   68.3
  Passengers carried one mile (m)     |    29,452,000|  154.8 |  101.8
  Receipts per passenger per mile     |              |        |
    (cents)                           |         1.916| d 11.5 | d  3.1
                                      |              |        |
  Freight tons carried (m)            |     1,486,000|  175.3 |   54.8
  Freight tons carried one mile (m)   |   222,900,000|  224.3 |   80.2
  Receipts per ton per mile (mills)   |          7.55| d 17.0 |    4.2
                                      |              |        |
  Locomotives, number                 |        57,220|   97.0 |   55.9
  Locomotives, weight (tons)          |     4,158,000|  258.0 |  113.7
                                      |              |        |
  Passenger cars (number)             |        46,026|   87.2 |   35.9
                                      |              |        |
  Freight cars, number                |     2,113,450|  154.6 |   63.1
  Freight cars, capacity (tons)       |    73,126,370|  340.5 |  109.0
                                      |              |        |
  Average tons in train               |           388|  116.9 |   59.6
                                      |              |        |
  Employes, number                    |     1,524,000|  116.2 |   64.0
  Employes, compensation              |$1,003,270,000|  157.4 |   91.8
  Proportion of gross earnings        |         41.00|    1.4 |    3.0
  Proportion of operating expenses    |         62.10|    2.7 |    1.7
                                      |              |        |
  Taxes                               |   $91,280,000|  230.8 |   96.9
  Per mile of line                    |           390|  116.6 |   57.9
  Proportion of gross earnings        |          3.73|   30.4 |    5.6
  ------------------------------------+--------------+--------+--------

There is not a line or figure of this table, with its percentages
of increase, that does not testify at once to the amazing growth of
American railways and to the equally amazing economical basis upon
which they render incalculable services to the American people on
terms that challenge the admiration of less favored peoples.


REVIEW OF THE LAST THREE CALENDAR YEARS.

Where the Twenty-second Annual Report of the Interstate Commerce
Commission minimized the loss inflicted on the railways by the
business depression of 1908, the Twenty-third Annual Report
naturally, and by reason of the same cause, minimizes the substantial
recovery of 1909. Where the former showed a loss in gross earnings of
only $164,464,941 below the preceding year, when the actual result
of the depression was nearly $300,000,000 ($298,457,576), the latter
shows a recovery of only $21,770,228, when it was approximately
$282,000,000 ($281,934,932).

The explanation of this discrepancy is, of course, the Commission's
adherence to its own fiscal periods of statistics, which do not
happen, in this instance, to coincide with the ebb and flow of
adversity and prosperity. The true movement of railway traffic
before, during and after the recent business depression is more
nearly reflected in the following figures for the calendar years
1907, 1908 and 1909, compiled from the monthly returns to the
Interstate Commerce Commission, divided into periods of six months:


SUMMARY OF GROSS EARNINGS OF THE RAILWAYS DURING THE CALENDAR YEARS
1907, 1908 AND 1909, BY MONTHS AND HALF-YEARLY DIVISIONS.

  ======================+================+================+===============
                        |      1907      |      1908      |     1909
  ----------------------+----------------+----------------+---------------
  January               |   $199,000,000 |   $173,611,809 |   $183,139,419
  February              |    178,300,000 |    161,085,493 |    174,425,832
  March                 |    211,700,000 |    183,509,935 |    205,700,012
  April                 |    214,800,000 |    175,071,604 |    196,993,104
  May                   |    224,800,000 |    174,527,138 |    201,572,072
  June                  |    223,000,000 |    184,047,216 |    210,356,965
                        +----------------+----------------+---------------
      Half year         | $1,251,600,000 | $1,051,853,195 | $1,172,185,404
                        +----------------+----------------+---------------
  July                  |   $228,672,250 |   $195,245,655 |   $219,964,739
  August                |    241,303,469 |    206,877,014 |    236,559,877
  September             |    234,386,899 |    219,013,703 |    246,065,955
  October               |    250,575,757 |    233,105,042 |    260,613,053
  November              |    220,445,465 |    211,281,504 |    247,370,954
  December              |    194,304,969 |    205,455,170 |    222,006,183
                        +----------------+----------------+---------------
      Half year         | $1,369,688,809 | $1,270,978,038 | $1,432,580,761
          Total         |  2,621,288,809 |  2,322,831,233 |  2,604,766,165
  Average mileage       |        227,000 |        231,584 |        234,950
  Earnings per mile     |        $11,548 |        $10,030 |        $11,086
                        |                |                |
  ----------------------+----------------+----------------+---------------


SUMMARY OF OPERATING EXPENSES OF THE RAILWAYS DURING THE CALENDAR
YEARS 1907, 1908 AND 1909, BY MONTHS AND HALF-YEARLY PERIODS, WITH
RATIOS TO GROSS EARNINGS.

  ======================+================+================+===============
                        |      1907      |      1908      |      1909
  ----------------------+----------------+----------------+---------------
  January               |   $134,225,000 |   $132,502,830 |   $132,659,037
  February              |    121,500,000 |    123,773,906 |    125,229,071
  March                 |    142,425,000 |    128,200,065 |    136,086,299
  April                 |    144,990,000 |    124,284,164 |    134,612,576
  May                   |    151,740,000 |    123,932,568 |    135,846,301
  June                  |    150,525,000 |    124,208,561 |    136,160,775
                        +----------------+----------------+---------------
      Half year         |   $845,405,000 |   $756,902,094 |   $800,594,059
      Ratio             |          67.7% |            72% |          68.3%
                        +----------------+----------------+---------------
  July                  |   $152,992,445 |   $127,978,304 |   $141,613,967
  August                |    156,837,914 |    131,557,475 |    146,175,338
  September             |    156,631,780 |    137,155,143 |    150,621,999
  October               |    166,999,266 |    144,195,330 |    156,628,513
  November              |    154,150,468 |    136,809,421 |    153,043,599
  December              |    142,631,008 |    136,867,622 |    153,699,578
                        +----------------+----------------+---------------
      Half year         |   $930,242,881 |   $814,563,295 |   $901,782,994
      Ratio             |            68% |          64.1% |          62.9%
                        +----------------+----------------+---------------
          Total         | $1,775,647,881 | $1,571,465,389 | $1,702,377,053
      Ratio             |          67.8% |          67.7% |          65.4%
                        +----------------+----------------+---------------
  Net operating revenue |   $845,640,928 |   $751,365,844 |   $902,389,113
  Taxes                 |     83,156,188 |     86,872,885 |     92,964,510
                        +----------------+----------------+---------------
  Net operating income  |   $762,484,740 |   $664,492,959 |   $809,424,603
  ----------------------+----------------+----------------+---------------

Through these tables the reader is able to trace the upward course
of railway receipts in 1907 to their culmination in October of that
year; their rapid drop to February, 1908; through the hard summer
following to the gradual recovery of 1909, until in October last they
reached the highest monthly total on record.

Concurrently with this story of the depression of 1908, the tale
of railway distress and of the drastic measures adopted to meet
the emergency can be read in the half-yearly ratios. The ratio for
the fiscal year 1906-'07 was 67.53%, and the shadow of approaching
trouble was shown in an increase of this ratio to 67.7% for the first
six months in the table. By December this ratio had risen to 73.40%.
The enormous receipts of the autumn months held the ratio for the
six months down to 68%. In February, 1908, it marked the high and
ruinous figure of 76.84, and from that point the trend, due to severe
retrenchments, was steadily downward until it touched 60.10% in
October, 1909.

The ratio of 64.1% for the second half of 1908 is the true measure
of the ability of the railways to cut their expenditures to fit the
times. But they were on bed rock, as the succeeding months of small
receipts proved, when the ratio went up to 72.43% in January, and
averaged the high figure of 68.3% for the first six months of 1909.
The heavy receipts of October and November without a corresponding
expansion of expenditures resulted in the phenomenally low ratios
of these months. But the severity and necessities of operating
conditions in December, 1909, ran the ratio of expenses up to 69.23%.

The net earnings for the three years under consideration are apt to
lead to erroneous conclusions as to the effect of the depression.
Neither the loss in 1908 nor the recovery in 1909 reflects the
true swing of the pendulum. The one minimizes the loss, because it
conceals the cessation of all constructive work, the curtailment of
betterments and improvements, and the postponement of all purchases
for replacements except of the most immediate and imperative nature;
the other exaggerates the recovery because of heavy receipts without
the resumption of the concurrent expenditures that should attend
them. The railways in the fall of 1909 were simply doing business
on the margin of facilities provided during the fat months of 1907
in anticipation of a continuation of prosperous times. Some idea of
the extent of this margin may be gained from the parking of 400,000
freight cars in the yards with 200,000 in the shops in April, 1908.
At no time since has this margin been wholly exhausted.

But a continuation of traffic on the scale of the past six months
will necessitate an immediate expenditure of $100,000,000 to
$150,000,000 for the replacement of freight cars alone.


INCOME ACCOUNT FOR THE CALENDAR YEAR 1909.

The monthly summaries issued by the Interstate Commerce Commission
from time to time afford the details for the construction of the
following statement of the transportation revenues and expenses of
the railways for the calendar year 1909, from which the averages per
mile and the ratios have been computed on the basis of 234,950 miles
of operated line.


STATEMENT OF OPERATING RECEIPTS AND EXPENSES OF THE RAILWAYS OF THE
UNITED STATES FOR THE CALENDAR YEAR ENDING DECEMBER 31, 1909, WITH
AMOUNTS PER MILE AND RATIOS.

(Average miles of line operated, 234,950.) (a)

  ====================================+================+=========+========
                                      |                |         |Ratio to
                                      |     Amount     |Per Mile |  Gross
                                      |                |         |Earnings
  ------------------------------------+----------------+---------+--------
  Receipts from:                      |                |         |
      Freight                         | $1,796,258,314 | $ 7,645 |  68.96
      Passengers                      |    601,722,959 |   2,561 |  23.10
      Other transportation revenues   |    182,706,090 |     777 |   7.01
      Non-transportation sources      |     24,080,802 |     103 |    .93
                                      +----------------+---------+--------
          Total revenues              | $2,604,766,165 | $11,086 | 100.00
                                      |                |         |
  Expenses:                           |                |         |
    Maintenance of way and structures |  $ 339,167,666 | $ 1,448 |  13.06
    Maintenance of equipment          |    387,155,080 |   1,644 |  14.83
    Traffic expenses                  |     53,257,408 |     223 |   2.01
    Transportation                    |    857,339,037 |   3,650 |  32.92
    General expenses                  |     65,441,053 |     280 |   2.52
    Unclassified                      |         16,809 |     --  |    --
                                      +----------------+---------+--------
          Total expenses              | $1,702,377,052 | $ 7,245 |  65.35
  Net operating revenues              |    902,389,112 |   3,841 |  34.65
  Profit from outside operations      |      3,367,713 |      14 |
                                      +----------------+---------+--------
  Net revenues                        |  $ 905,756,825 |     --  |    --
  Taxes                               |     92,964,510 |     395 |   3.56
                                      +----------------+         |
          Net income                  |  $ 812,792,315 | $ 3,460 |
  ------------------------------------+----------------+---------+--------

  (a) At the close of the year the reports covered 236,166 miles of
      operated line.

Unfortunately there are no similar figures for the calendar year
1907 with which comparisons may be made, but the official returns
for the year ending June 30, 1907, when railway earnings reached
their maximum before the panic of that year, afford the following
instructive comparisons:


  ===============================+=====================+================
                                 |        Year to      |      Year to
                                 |     June 30, 1907   |   Dec. 31, 1909
  -------------------------------+---------------------+----------------
  Gross earnings                 |      $2,589,105,578 | $2,604,766,165
    Per mile                     |              11,383 |         11,086
  Operating expenses             |       1,748,515,814 |  1,702,377,053
    Per mile                     |               7,687 |          7,245
    Ratio                        |               67.53 |          65.35
  Net revenues                   |         840,589,764 |    902,389,112
    Per mile                     |               3,696 |          3,841
  Taxes                          |          80,108,006 |     92,964,510
    Per mile                     |                 367 |            395
  -------------------------------+---------------------+----------------

It will be perceived that while the earnings in 1909 exceeded those
of 1907 by over 15½ millions they were almost $300 less per mile,
while the operating expenses were actually $442 less per mile. The
decreased operating ratio in 1909 bears unmistakable testimony as to
where the increase in net revenues came from.

With an increase of nearly 9,000 miles of line only $339,167,665
was spent on maintenance of way and structures in 1909 against
$343,544,907 in 1907, and the urgent demands of returning activity
made the expenditures on this account liberal in comparison with
those for the year ending June 30, 1909, i. e. $311,368,083, or
$1,336 per mile. It will be years before the railways recover from
the economies forced on them by the loss of $300,000,000 in revenues
in 1908.


UNREGULATED REGULATION OF AMERICAN RAILWAYS.

Today the railways of the United States are "cribb'd, cabin'd and
confined" in their services to the American people, not so much by
the laws for their regulation as by the spirit in which those laws
are administered. To the general tenor and purposes of statutory
regulation the railways have become largely reconciled; but from the
spirit in which the laws are sought to be enforced, there has to be
continuous appeal to the courts and to the public sense of justice.

Regulation of railways has been persistently interpreted by political
Commissions to spell reduction of rates and exacting conditions
that would drain the purse of Fortunatus. Between 1889, when the
Interstate Commerce Commission's statistics first became a valuable
index of railway operation, and 1909, the average rate per ton mile
has fallen from 9.22 to 7.55 mills. On the freight tonnage of 1909
this meant a reduction of over $372,000,000 in the yearly revenues of
the railways. The railways suffered that loss from their income when
they needed every cent of it to maintain the people's highway in a
condition to transport the people's ever-growing traffic.

The railways lost it, but who got it? The people? Search the market
reports of the land, from Eastport to San Diego, and you will find
incontestable proof that not one cent of these millions reached the
pockets of the people, in whose name all regulation of railways
is demanded and for whose benefit all reductions are claimed. The
average rate on all commodities has gone down, the price of every
commodity transported by the railways has gone up. Who has pocketed
the difference?

There can be only one answer--the producers, the shippers and the
traders. Today nine-tenths of the increased cost of living in the
United States is chargeable to this ever vigilant and aggressive
coalition. For everything the railways must buy--labor, supplies,
money--they have to pay the advanced prices of the day. But the
protests of the shippers and the rulings of the Commission forbid
their raising a rate or adopting a money-saving economy. They
attempted to readjust freight rates in 1900 one-fiftieth of a cent
per ton mile above a ruinously low average and the outraged shippers
secured the passage of the Hepburn Act!

How the federal Commission and shippers work together for the
so-called regulation of the railways is evidenced in the unbroken
tenor of the decisions handed down by the Commission. Out of 357
decisions printed during the year 1908-09, no less than 219, or
61.3%, were orders granting reductions of rates or reparation for
charges found comparatively excessive or unreasonable. In not one
case in a score was the rate found excessive or unreasonable per se.
In only one case out of the 357 was an increased rate ordered, and
this was done reluctantly and as unavoidable.

Although the decisions are for the most part the unanimous finding of
the Commission, the following table distributes the opinions of the
year among its members into dismissals and reductions or reparations
among the Commissioners writing them:


  =================================+============+==============
                                   |            |   Granting
         Opinion by                | Dismissing | Reductions or
                                   | Complaints |  Reparation
  ---------------------------------+------------+--------------
  Chairman Knapp                   |     21     |      20
  Commissioner Clement             |     16     |      29
      "        Prouty              |     13     |      40
      "        Cockerill           |     20     |      20
      "        Lane                |     20     |      42
      "        Clark               |     29     |      28
      "        Harlan              |     19     |      40
                                   +------------+--------------
      Total                        |    138     |     219
      Per cent                     |   39.7     |    61.3
  ---------------------------------+------------+--------------

Some of the cases upon which the Commission is called on to pass are
so trivial as to be beneath the notice of a justice's court, while
others involve issues so momentous as to threaten the whole structure
of railway rates by which the unparalleled prosperity of the country
has been made possible.

But the number of cases reaching the Commission for adjudication is
insignificant compared with the grist of informal reparation orders
that runs an endless stream through its regulating rollers. In the
twelve months from December 1, 1908, to November 30, 1909, these
aggregated no less than 2,223 separate orders involving amounts all
the way from 47 cents to $14,717.64, as seen in the following orders:

    7100. _Larabee Flour Mills Company_ v. _Atchison, Topeka &
    Santa Fe Railway Company_. September 11, 1909. Refund of
    $0.47 on shipment of cotton bags from Kansas City, Mo., to
    Hutchinson, Kas., on account of excessive rate.

    3629. _Lackawanna Steel Company_ v. _Central Railroad Company
    of New Jersey_. June 26, 1909. Refund of $14,717.64 on
    shipments of spiegeleisen from Newark, N. J., and Hazard, Pa.,
    to Buffalo, N. Y., on account of excessive rates.

Multiplying these awards by the number of orders enables the reader
to imagine the range of their respective pettiness or portentous
possibilities.

It is doubtful if the American people, or even the Interstate
Commerce Commissioners themselves, realize how the formal decisions
and informal orders of the Commission are slowly but surely whittling
away the safe margin of American railway profits. At the rate of two
decisions every three days and forty informal orders per week, the
work of incipient confiscation proceeds with remorseless enthusiasm.

With the best intentions in the world the present Interstate Commerce
Commission is so enmeshed in its own anti-railway traditions, so
enamored of the administrative control theories of its statistician,
so covetous of unbridled, irresponsible authority to tear down where
it has no constructive capacity, that anything like co-operation
between the Commission and the railway management for the public good
seems out of the question.

To the writer it appears that only blind rejection of facts can find
any conserving element in the regulation of railways as at present
administered. Signs of a helpful disposition in official acts are
entirely lacking. The Senate and House calendars groan under bills
for the further regulation and restriction of the railways, but not
one contains a promise of relief. For not one is there a genuine
public demand.

And what is the situation as this is written? It can be stated in
a few lines. As a consequence of the drop of $300,000,000 in gross
earnings in 1908, the railways in 1908 and 1909 cut $277,000,000
out of their expenditures. This was done mainly at the expense of
maintenance of way and structures and in a cessation in the purchase
of equipment, but the so-called economies of postponed expenditures
permeated every line of railway extension, operation and replacement.
In 1908, with 6,000 more miles of track to maintain, $18,788,217 less
was spent for maintenance than in 1907, and in 1909 with 12,000 more
miles of track $32,176,824 less was expended.

Between 1897 and 1907 the expenditures for maintenance of way
increased from $159,434,403 to $343,544,907, or over 115%. This means
an increase of approximately 8% a year, or at least $25,000,000 on
present plant. Therefore at least $43,000,000 was withheld from this
essential line of railway maintenance in 1908 and fully $82,000,000
in 1909, a total of $125,000,000. The saving on equipment was nearly
as great and is dealt with in the body of the report.

A comparison of the income accounts for the month of October, 1907
and 1908, corroborates the foregoing statement as to the economies
forced on the railways by the adverse winds of regulation and
business depression.


  =================================+===============+=============
          Month of October         |    1907       |    1909
  ---------------------------------+---------------+-------------
  Earnings from operation          | $250,575,757  | $260,613,053
  Operating expenses               |  166,999,266  |  156,628,513
                                   +---------------+-------------
  Net earnings                     | $ 83,576,491  | $113,984,540
  Operating ratio                  |        66.64  |        60.10
  ---------------------------------+---------------+-------------

The canker worm in this, the most promising flower of returning
prosperity, is revealed in the abnormal ratio of 60.10 for October,
1909, or nearly 7% below the American average. Now this 7% on the
revenues of last October means that in some way over $16,000,000 less
than normal was expended on American railways in that month alone.
And October, 1909, was only a sample of how railways had cut expenses
for 24 consecutive months.

That this should be so, with no reduction in the scale of wages or
the price of supplies, is, in the view of the writer, a situation
of serious national concern. Happily he is not charged with any
commission to suggest how or where the deferred debt of nearly
$300,000,000 to efficient railway road and equipment is to be met.
But that it must be met, to place the railways in as good condition
as they were before the panic of 1907, when the cry was for more,
not less facilities, does not admit of question. If it, together
with the advance in wages now being adjusted, is to be met out of
income, only an advance in freight rates can take care of it. If out
of fresh capital, it can only be coaxed from the pockets of shrewd
investors by rates of interest that discount the risk attendant on
the unregulated and irresponsible regulation of railway revenues,
resources and responsibilities. And it is proposed to make an
irresponsible Commission, unfamiliar with the necessities of the
situation and unversed in the ways and means of raising capital
arbiters of these necessities, ways and means.

All attempts to meet such a situation by legislation, unless it be
directed to a reform of the instrumentalities of regulation, must
prove ineffectual. In a broader, saner, more helpful administration
of the laws already on the federal and state statute books lies the
hope for the future of the great American transportation industry.
"Whate'er is best administered is best."


THE BUREAU'S STATISTICS FOR 1909.

Thus far what has been written has related almost wholly to the
financial aspect of the transportation industry as presented through
the monthly reports of the railways. While these in their way serve
as an admirable barometer in keeping the public informed as to
general business conditions throughout the Union, they throw little
light upon the railway operations behind the financial results. They
are absolutely dumb on the main question upon which all railway
legislation and regulation should hinge--adequate and efficient
public service.

In the following pages the Bureau attempts to remedy this omission,
in the essential particulars for the year ending June 30, 1909. The
reports from which its summaries have been compiled were received
almost a month earlier this year than last, but the publication
of the Bureau's statistics has been delayed in order to make the
usual comparisons with the Official Statistics for 1908. The writer
is advised from Washington that the fault for this unusual delay
rests with the Government printer--whose office is overwhelmed with
Congressional and departmental work--and not with the Interstate
Commerce Commission or its Bureau of Statistics and Accounts.

For the first time, the reports to this Bureau cover the division of
freight movement into the seven chief commodities; the separation
of revenues from Mail and Express; the distribution of expenses for
injuries and damages, and the summaries of expenses for maintenance
of way and equipment, traffic expenses, transportation expenses and
general expenses. It is believed that with the addition of these
accounts the annual report of the Bureau has become so comprehensive
as to warrant its publication hereafter at an earlier date, without
waiting on the publication of the official statistics for the
preceding year.

This year the Bureau has received reports from 368 roads operating
221,132 miles of line or approximately 94.4% of the mileage and
carrying over 97% of the traffic of the country. Last year reports
were received covering 216,460 miles. The increase of 4,672 miles
fairly represents the actual increase of railway mileage in the
United States for the twelve months.

In presenting these statistics, the writer has endeavored to make
them as colorless summaries of facts as an earnest desire to arrive
at the truth permits. Such comment as accompanies them will be
confined to comparisons and elucidation and not to the furtherance of
any personal theories.

For the sake of brevity, the Interstate Commerce Commission will be
referred to herein as the "Commission"; the Commission's "Statistics
of Railways in the United States" as "Official Statistics" and "the
year ending June 30th" will be implied before the year named unless
otherwise specified.

The statements as to foreign railways are compiled from the latest
official sources available.

Here the writer wishes to record his personal appreciation of the
assistance rendered by the executives and accounting officials of
the railways, whose co-operation has made this report possible. In
the midst of increasing burdens imposed on them in reporting to
federal and state commissions and legislatures, the requests for
information from this Bureau might have seemed excusably negligible.
The completeness of the report itself testifies to the cordiality
with which the Bureau's work is viewed.

Acknowledgments are also due to Federal and State officials for their
uniform courtesy in responding to the many requests from this Bureau,
and the writer has been much gratified to receive from the chief
government railway official of one foreign country the assurance that
he considers its Annual Report "one of the most comprehensive and
useful compilations of statistical matter relating to railways that
has come into his hands."

  SLASON THOMPSON.

  CHICAGO, April 30, 1910.




I

MILEAGE IN 1909


According to the preliminary income report of the Interstate Commerce
Commission for the year ending June 30, 1909, compiled from the
monthly returns, the average railway mileage operated in the United
States during the year was 233,002.67 miles; and the total mileage
operated at the end of the year was 234,182.70.


  ============================================+=================
  The former total is made up of:             |
      Large roads operating 251 miles or more | 214,916.86 miles
      Small roads     "     250   "   or less |  16,801.52   "
      Switching or terminal companies         |   1,284.29   "
                                              +-----------------
          Total                               | 233,002.67 miles
  --------------------------------------------+-----------------

The returns to this Bureau, compiled from the annual reports for the
same year, cover 221,132 miles, against 216,460 in 1908, an increase
of 4,672 miles. Reports to the Commission for December, 1909, showed
a total operated mileage of 236,166 miles.

In its report dated December 21, 1909, the Commission stated that for
the year ending June 30, 1908, substantially complete returns had
been received for 230,494 miles of line operated, including 8,661.34
miles used under trackage rights. These are the official figures of
mileage for 1908, which will be used in all subsequent comparisons
with the Bureau's figures for 1909--the latter, however, may include
some switching and terminal mileage excluded from the former.

Of the mileage reporting to this Bureau, 8,927 miles were operated
under trackage rights, leaving a net of 212,205 miles of line covered
by capitalization and rental.

Assuming that the total operated mileage in the United States at the
close of the fiscal year 1909 was 234,182, the complete returns to
this Bureau cover approximately 94.4% of the mileage and 97% of the
traffic of all the railways in the United States. No attempt has been
made, or will be made, to segregate the returns of switching and
terminal companies from the Bureau's figures, of which they are an
integral part.

The first summary under this table presents the _operated_ mileage
reported to this Bureau in 1909 and 1908, classified by states and
territories in comparison with the official figures of mileage owned
in 1908, with relation to area and population of the respective
territorial divisions:


SUMMARY OF RAILWAY MILEAGE IN THE UNITED STATES BY STATES AND
TERRITORIES IN 1909, 1908 AND 1907 AND ITS RELATION TO AREA AND
POPULATION.

  ================|=================|==========|============|===========
                  |Bureau's Figures |          |  Miles of  |
                  +--------+--------+  1907(a) |    Line    |Inhabitants
                  |  1909  |  1908  |  Owned   |  per 100   |    per
                  |Operated|Operated|(Official)|Sq. Miles of|  Mile of
                  |  Miles |  Miles |  Miles   | Territory  |   Line
  ----------------+--------+--------+----------+------------+-----------
  Alabama         |  4,917 |  4,644 |   4,840  |    9.77    |    406
  Arkansas        |  3,996 |  3,758 |   4,861  |    9.21    |    301
  California      |  6,376 |  6,251 |   6,664  |    4.38    |    243
  Colorado        |  5,229 |  5,096 |   5,295  |    5.11    |    114
  Connecticut     |    930 |    936 |   1,016  |   20.96    |    999
  Delaware        |    342 |    343 |     336  |   17.14    |    615
  Florida         |  3,117 |  2,960 |   3,970  |    7.39    |    148
  Georgia         |  6,485 |  6,293 |   6,783  |   11.65    |    361
  Idaho           |  1,651 |  1,568 |   1,731  |    2.09    |    102
  Illinois        | 13,216 | 12,796 |  12,137  |   21.80    |    442
  Indiana         |  7,774 |  7,326 |   7,259  |   20.24    |    388
  Iowa            |  9,923 |  9,865 |   9,867  |   17.87    |    252
  Kansas          |  9,125 |  9,175 |   8,936  |   10.94    |    184
  Kentucky        |  3,229 |  3,205 |   3,441  |    8.71    |    690
  Louisiana       |  3,860 |  3,805 |   4,558  |   10.43    |    326
  Maine           |  1,984 |  1,750 |   2,093  |    7.19    |    361
  Maryland        |  1,325 |  1,278 |   1,432  |   14.90    |    906
  Massachusetts   |  2,079 |  2,079 |   2,112  |   26.45    |  1,492
  Michigan        |  8,384 |  8,312 |   8,941  |   15.63    |    302
  Minnesota       |  8,258 |  8,100 |   8,246  |   10.46    |    236
  Mississippi     |  3,545 |  3,281 |   4,081  |    9.00    |    416
  Missouri        |  8,200 |  8,141 |   8,039  |   11.79    |    429
  Montana         |  3,537 |  3,406 |   3,307  |    2.28    |     91
  Nebraska        |  6,099 |  6,083 |   5,932  |    7.76    |    200
  Nevada          |  1,621 |  1,540 |   1,700  |    1.55    |     28
  New Hampshire   |  1,211 |  1,211 |   1,248  |   13.86    |    369
  New Jersey      |  2,046 |  2,046 |   2,250  |   30.59    |    917
  New York        |  8,106 |  7,989 |   8,472  |   17.86    |    957
  North Carolina  |  3,567 |  3,332 |   4,385  |    9.21    |    473
  North Dakota    |  4,026 |  4,025 |   3,906  |    5.56    |    118
  Ohio            |  8,951 |  9,041 |   9,261  |   22.75    |    502
  Oklahoma        |  5,572 |  5,532 |   2,821  |    7.84    |    202
  Oregon          |  1,687 |  1,600 |   1,939  |    2.07    |    237
  Pennsylvania    | 10,532 | 10,224 |  11,259  |   25.25    |    621
  Rhode Island    |    192 |    190 |     208  |   20.11    |  2,262
  South Carolina  |  2,892 |  2,975 |   3,271  |   11.02    |    451
  South Dakota    |  3,646 |  3,568 |   3,703  |    4.82    |    122
  Tennessee       |  3,283 |  3,528 |   3,725  |    9.01    |    600
  Texas           | 12,847 | 12,932 |  12,932  |    4.95    |    263
  Utah            |  1,820 |  1,772 |   1,957  |    2.42    |    156
  Vermont         |    941 |    926 |   1,071  |   11.98    |    351
  Virginia        |  4,099 |  3,900 |   4,056  |   10.43    |    495
  Washington      |  3,353 |  3,207 |   3,767  |    5.69    |    152
  West Virginia   |  2,846 |  2,777 |   3,264  |   13.62    |    320
  Wisconsin       |  7,039 |  6,900 |   7,459  |   14.01    |    304
  Wyoming         |  1,429 |  1,414 |   1,526  |    1.56    |     70
  Arizona         |  1,705 |  1,684 |   1,928  |    1.71    |     71
  New Mexico      |  2,782 |  2,521 |   2,965  |    2.42    |     74
  District of     |        |        |          |            |
    Columbia      |     51 |     42 |      31  |   53.53    |  9,709
  Canada(b)       |  1,343 |  1,273 |          |            |
                  +--------+--------+----------+------------+-----------
  United States   |221,132 |216,460 | 227,671  |    7.74    |    370
  ----------------+--------+--------+----------+------------+-----------

  (a) Official mileage by States not available for 1908.

  (b) Mileage operated in Canada by American roads.


SUMMARY OF RAILWAY MILEAGE IN THE UNITED STATES BY STATES AND
TERRITORIES IN 1909 AND 1908 AND ITS RELATION TO AREA AND
POPULATION--Continued.

  =================================+===========+============+===========
                                   |   1908    |  Miles of  |
                                   |  Owned    |    Line    |Inhabitants
                                   |(Official) |  per 100   |    per
                                   |   Miles   |Sq. Miles of|  Mile of
                                   |           |  Territory |    Line
  ---------------------------------+-----------+------------+-----------
  United States, 1909              |  234,182  |    7.88    |      379
     "      "    1908              |  230,494  |    7.76    |      378
     "      "    1907              |  227,671  |    7.74    |      370
     "      "    1906              |  222,575  |    7.55    |      373
     "      "    1905              |  217,018  |    7.34    |      378
     "      "    1904              |  212,577  |    7.20    |      379
     "      "    1903              |  207,187  |    7.00    |      384
     "      "    1902              |  201,673  |    6.82    |      388
     "      "    1901              |  196,075  |    6.64    |      391
     "      "    1900              |  192,941  |    6.51    |      393
     "      "    1899              |  188,277  |    6.37    |      395
     "      "    1898              |  185,371  |    6.28    |      394
     "      "    1897              |  182,920  |    6.21    |      390
     "      "    1896              |  181,154  |    6.15    |      384
     "      "    1895              |  179,176  |    6.08    |      382
     "      "    1894              |  176,603  |    6.02    |      379
     "      "    1893              |  170,332  |    5.94    |      377
     "      "    1892              |  165,691  |    5.78    |      380
     "      "    1891              |  164,603  |    5.67    |      380
     "      "    1890              |  159,272  |    5.51    |      384
  ---------------------------------+-----------+------------+-----------

The column of operated mileage in 1909 testifies to the comprehensive
character of the reports to this Bureau, while the last two columns
demonstrate how railway extension has kept pace with the growth
of the country. Territorially the United States now has 43% more
railway mileage than it had in 1890, and the last column proves that
the mileage is greater proportionately to the population than it
was twenty years ago. The contrast in the density of population per
mile of line between Rhode Island and Nevada is illustrative of the
startling diversity of conditions under which railways are operated
in the United States.


RAILWAYS BUILT IN 1909.

The new mileage reported as constructed in 1909 tallies more nearly
than usual with the increase in mileage for which operating reports
are received. As reported in the _Railway and Engineering Review_,
February 19, 1910, the new mileage by states was as follows:


MILES OF LINE CONSTRUCTED DURING THE CALENDAR YEAR 1909 BY STATES AND
TERRITORIES.

  ==============================+========
                                |  Miles
            State               |  Built
                                |   1909
  ------------------------------+--------
  Alaska                        |   48
  Alabama                       |   35.62
  Arkansas                      |  155.20
  Arizona                       |   48.02
  California                    |  248.60
  Colorado                      |   98.13
  District of Columbia          |    3.81
  Florida                       |  102.81
  Georgia                       |  138.70
  Idaho                         |   50.49
  Illinois                      |   23.45
  Indiana                       |   10.82
  Kansas                        |   87.21
  Kentucky                      |  101.52
  Louisiana                     |  131.57
  Maine                         |   87.00
  Maryland                      |    4.68
  Michigan                      |   77.58
  Minnesota                     |  164.70
  Mississippi                   |   36.60
  Missouri                      |   11.84
  Montana                       |  125.08
  Nebraska                      |   13.15
  Nevada                        |  304.50
  New Hampshire                 |    1.55
  New Jersey                    |   33.95
  New Mexico                    |   35.00
  New York                      |   52.20
  North Carolina                |  111.92
  Ohio                          |   18.41
  Oklahoma                      |  163.20
  Oregon                        |  158.38
  Pennsylvania                  |  106.66
  South Carolina                |   66.14
  Tennessee                     |   94.26
  Texas                         |  650.61
  Utah                          |   28.00
  Virginia                      |   85.75
  Washington                    |  209.84
  West Virginia                 |  131.78
  Wisconsin                     |   68.30
  Wyoming                       |   15.57
  ------------------------------+--------
    Total                       |4,040.60
    Second track, sidings, etc. |1,515.07
                                |--------
    Total all tracks            |5,555.67
  ------------------------------+--------


RAILWAY MILEAGE OF FOREIGN COUNTRIES.

The ratios of railway mileage to area and population in the table on
page 19 may be compared with those of foreign countries for 1907 in
the following statement:


SUMMARY OF THE WORLD'S RAILWAYS AND RATIO OF THE MILEAGE TO THE AREA
AND POPULATION OF EACH COUNTRY IN 1907.

  _From Archiv fur Eisenbahnwesen_, May-June, 1909.

  ===================================+=========+============+===========
                                     |         |  Miles of  |Inhabitants
                                     |  Miles  |  Line per  |    per
            Countries                |  1907   | 100 Square |  Mile of
                                     |         |   Miles    |    Line
  -----------------------------------+---------+------------+-----------
  Europe:                            |         |            |
    Germany                          |  36,065 |    17.2    |    1,563
    Austria-Hungary                  |  25,852 |    10.0    |    1,818
    Great Britain and Ireland        |  23,084 |    19.0    |    1,785
    France                           |  29,716 |    14.2    |    1,316
    Russia in Europe and Finland     |         |            |
        (2,057 miles)                |  36,279 |     1.8    |    2,941
    Italy                            |  10,312 |     9.3    |    3,125
    Belgium                          |   4,874 |    42.8    |    1,370
    Netherlands and Luxemburg        |   2,230 |    15.0    |    2,564
    Switzerland                      |   2,763 |    12.2    |    1,205
    Spain                            |   9,227 |     4.8    |    1,923
    Portugal                         |   1,689 |     4.7    |    3,226
    Denmark                          |   2,141 |    14.3    |    1,150
    Norway                           |   1,606 |     1.3    |    1,390
    Sweden                           |   8,321 |     4.8    |      617
    Servia                           |     379 |     2.1    |    6,666
    Roumania                         |   1,994 |     3.2    |    2,941
    Greece                           |     771 |     3.1    |    3,125
    Turkey in Europe, Bulgaria and   |         |            |
        Rumelia                      |   1,967 |     1.9    |    5,000
    Malta, Jersey and Isle of Man    |      68 |    16.1    |    5,273
                                     +---------+------------+-----------
  Total for Europe, 1907             | 199,345 |     5.3    |    1,887
    "    "    "     1906             | 196,437 |     5.2    |    1,993
    "    "    "     1905             | 192,507 |     5.1    |    2,084
    "    "    "     1904             | 189,806 |     5.0    |    2,084
    "    "    "     1903             | 186,685 |     5.0    |    2,084
    "    "    "     1902             | 183,989 |     4.9    |    2,127
    "    "    "     1901             | 180,817 |     4.8    |    2,174
    "    "    "     1900             | 176,396 |     4.7    |    2,220
    "    "    "     1899             | 172,953 |     4.6    |    2,220
    "    "    "     1898             | 167,614 |     4.4    |      --
    "    "    "     1897             | 163,550 |     4.3    |      --
    "    "    "     1896             | 160,030 |     4.2    |      --
                                     +---------+------------+-----------
  Increase in eleven years           |  39,315 |      --    |      --
                                     |         |            |
  Other Foreign Countries in 1907:   |         |            |
    Canada                           |  22,447 |     0.6    |      373
    Mexico                           |  13,612 |     1.8    |      321
    Brazil                           |  10,713 |      .32   |    1,408
    Argentine Republic               |  13,673 |     1.3    |      356
    Peru                             |   1,332 |      .32   |    3,449
    Uruguay                          |   1,210 |     1.8    |      769
    Chili                            |   2,939 |     1.0    |     1.123
    Central Russia in Asia           |   2,808 |     1.3    |     2,777
    Siberia and Manchuria            |   5,664 |      .11   |     1,020
    Japan                            |   5,012 |     3.1    |     9,090
    China                            |   4,162 |     0.1    |    85,820
    British India                    |  29,892 |     1.4    |    10,000
    New Zealand                      |   2,570 |     2.4    |       324
    Victoria                         |   3,428 |     3.9    |       351
    New South Wales                  |   3,471 |     1.1    |       394
    South Australia                  |   1,924 |     0.16   |       188
    Queensland                       |   3,404 |     0.5    |       142
    Egypt                            |   3,445 |     1.0    |     2,860
    Cape Colony                      |   3,804 |     1.3    |       463
    Natal                            |     976 |     3.5    |       793
    Transvaal                        |   1,361 |     1.1    |       636
  Recapitulation:                    |         |            |
    Total for Europe                 | 199,345 |     5.3    |     1,889
      "    "  America                | 302,927 |     2.3    |       524
      "    "  Asia                   |  56,283 |     0.38   |    15,540
      "    "  Africa                 |  18,516 |     0.16   |     8,014
      "    "  Australia              |  17,766 |     0.6    |       279
      "    "  the whole world        | 594,837 |      --    |       --
  -----------------------------------+---------+------------+-----------

Of the above total railway mileage for the whole world, no less
than 332,360 miles, or nearly 56%, is operated in English speaking
countries, the mileage of the United States alone being over 35% of
the whole.

To the most casual student the disparity between the density of
population to railway mileage in the United States and Europe of one
to five, is as apparent as it is significant of our necessity for so
much greater provision of transportation facilities per capita. If
our per capita mileage were relatively the same as that of Europe,
the United States would be set back to the transportation facilities
of 1869, when the completion of the Union Pacific raised its total
mileage to 47,254 miles. But even then it had a ratio of one mile
of railway to 810 inhabitants, which was higher than Europe's ratio
today.

Clearly there is nothing in the statistics of the railway mileage
of the world to account for the epidemic of railway phobia that
periodically convulses the people and legislatures of the United
States of America.


MILEAGE OF ALL TRACKS IN 1909.

Of almost equal importance to the mileage of American railways are
the auxiliary tracks upon which the extent and efficiency of their
public service so largely depends. As the next statement shows, these
continue to increase more rapidly than the miles of line.


SUMMARY OF MILEAGE OF SINGLE TRACK, SECOND TRACK, THIRD TRACK, FOURTH
TRACK AND YARD TRACK AND SIDINGS, IN THE UNITED STATES, 1897 TO 1909.

  ==============+===========+========+=======+=======+========+=========
                |           |        |       |       |        |   Total
                |   Single  | Second | Third |Fourth | Yard   |  Mileage
        Year    |   Track   | Track  | Track |Track  | Track  | Operated
                |           |        |       |       |  and   |   (all
                |           |        |       |       |Sidings |  tracks)
  --------------+-----------+--------+-------+-------+--------+---------
  1909 (94.4%)  |           |        |       |       |        |
       Bureau   |   221,132 | 20,637 | 2,186 | 1,491 | 80,669 |  326,115
  1908 Official |(a)230,494 | 20,209 | 2,081 | 1,409 | 79,452 |  333,646
  1907          |   227,455 | 19,421 | 1,960 | 1,390 | 77,749 |  327,975
  1906          |   222,340 | 17,396 | 1,766 | 1,279 | 73,760 |  317,083
  1905          |   216,973 | 17,056 | 1,609 | 1,215 | 69,941 |  306,796
  1904          |   212,243 | 15,824 | 1,467 | 1,046 | 66,492 |  297,073
  1903          |   205,313 | 14,681 | 1,303 |   963 | 61,560 |  283,821
  1902          |   200,154 | 13,720 | 1,204 |   895 | 58,220 |  274,195
  1901          |   195,561 | 12,845 | 1,153 |   876 | 54,914 |  265,352
  1900          |   192,556 | 12,151 | 1,094 |   829 | 52,153 |  258,784
  1899          |   187,543 | 11,546 | 1,047 |   790 | 49,223 |  250,142
  1898          |   184,648 | 11,293 | 1,009 |   793 | 47,589 |  245,333
  1897          |   183,284 | 11,018 |   995 |   780 | 45,934 |  242,013
  --------------+-----------+--------+-------+-------+--------+---------

  (a) To the figures for 1908 should be added the 1,626 miles of main
      track and 2,085 of yard track and sidings of switching and
      terminal companies, excluded by the Official Statistician, raising
      the total of all tracks to 337,357.

By adding the auxiliary trackage reported to this Bureau for 1909
to the 234,182 miles of operated line reported to the Interstate
Commerce Commission for June 30 of that year, it appears that the
total of all tracks on that date was _upwards of 340,000 miles_.

It will be observed that in every instance the mileage of second,
third and fourth track and yard track and sidings reported to this
Bureau in 1909, the year of comparative stagnation in railway
construction, exceeded the complete mileage of these tracks in 1908
reported to the Commission.

The above table (with the Commission's figures for single track)
shows that where there has been an increase of only 50,798 miles of
single track, or 27.7%, in twelve years, all trackage has increased
over 98,000, or 42%, during the same period. It also shows that
during the same twelve years second track has increased 87%; third
track 120%; fourth track 91%, and yard track and sidings 76%.


MILEAGE AND TRACK OF BRITISH RAILWAYS.

As English railways are so often brought into comparison with
American railways, it is well to know the total of all tracks in
the United Kingdom as well as the mileage. Both are given in the
following statement, compiled from returns to the British Board of
Trade for the years ending December 31, 1904 to 1908:

  ---------------------------+--------+--------+--------+--------+-------
    Description of Track     |  1908  |  1907  |  1906  |  1905  |  1904
  ---------------------------+--------+--------+--------+--------+-------
  Single track (miles)       | 23,209 | 23,112 | 23,063 | 22,870 | 22,601
  Second track               | 13,048 | 12,963 | 12,934 | 12,819 | 12,692
  Third track                |  1,435 |  1,385 |  1,363 |  1,324 |  1,271
  Fourth track               |  1,141 |  1,103 |  1,091 |  1,067 |  1,030
  Fifth track                |    208 |    195 |    186 |    170 |    153
  Sixth track                |    122 |    117 |    111 |     97 |     85
  Seventh track              |     59 |     51 |     47 |     40 |     35
  Eighth to twentieth tracks |     94 |     87 |     75 |     44 |     34
  Sidings                    | 14,353 | 14,145 | 14,032 | 13,891 | 13,733
                             +--------+--------+--------+--------+-------
      Total trackage         | 53,669 | 53,189 | 52,904 | 52,322 | 51,634
  ---------------------------+--------+--------+--------+--------+-------

Here it will be perceived the mileage of British roads increased only
608 miles and the trackage only 2,035 miles in four years. During the
same period, as shown in the preceding table, the mileage of American
railways increased 18,251 miles and their total trackage 36,543. It
is this continuous demand for increased mileage and trackage in the
United States, to say nothing of equipment, that differentiates the
problem confronting American railway management from British. In the
United States we need more railways and still more railways, and the
problem is to get the capital on reasonable terms to provide the
facilities.

In railroad mileage alone we have over ten times that of the United
Kingdom and we have more than six times as many miles of track. We
have enough trackage in our yards and sidings to double track all the
British railways, with enough over to put four tracks where they have
only two tracks now.




II

EQUIPMENT

AN OBJECT LESSON IN EQUIPMENT.


No car shortage occurred to interrupt the orderly movement of railway
traffic during the fiscal year 1908-09. On the contrary, there was
an unprofitable surplus of cars throughout the year, ranging from
110,912 in September, 1908, to 333,019 in January, 1909. From this
high figure the surplus was slowly reduced by the demands of traffic
until subsequent to the close of the fiscal year, in September last,
it reached a practical level of shortages and surpluses. During the
year there was an average of 150,000 freight cars in the shops, where
in times of ordinary activity the mean would be in the neighborhood
of 100,000.

These conditions, which prevailed since November, 1907, account for
the greatly reduced purchases of rolling stock during the years 1908
and 1909 shown in the following record of locomotives and cars built
in the United States during the past eleven years:


ELEVEN YEARS' OUTPUT OF CARS AND LOCOMOTIVES.

  _From the Railroad Age-Gazette._

  ========================+=============+===========+==========
                          |             |  Number   |
           Year           | Locomotives | Passenger |   Freight
                          |             |   Cars    |    Cars
  ------------------------+-------------+-----------+----------
  1909(a)                 |    2,887    |   2,849   |    96,419
  1908(a)                 |    2,342    |   1,716   |    76,555
  1907(a)                 |    7,362    |   5,457   |   284,188
  1906(a)                 |    6,952    |   3,167   |   243,670
  1905(a)                 |    5,491    |   2,551   |   168,006
  1904                    |    3,441    |   2,144   |    60,806
  1903                    |    5,152    |   2,007   |   153,195
  1902                    |    4,070    |   1,948   |   162,599
  1901                    |    3,384    |   2,055   |   136,950
  1900                    |    3,153    |   1,636   |   115,631
  1899                    |    2,475    |   1,305   |   119,886
                          +-------------+-----------+----------
      Total               |   46,709    |  26,835   | 1,617,905
  ------------------------+-------------+-----------+----------

  (a) Includes Canadian output.

Between 1898 and 1908 the Interstate Commerce Commission reported an
increase of 21,464 locomotives, 11,697 passenger cars, and 856,999
freight and company cars. Allowing for the Canadian output in the
above table, this would show 22,742 more locomotives, 13,821 more
passenger cars, and 674,023 more freight cars built in ten years
than are accounted for in the official returns. Roughly speaking,
these last figures represent the number of locomotives and cars worn
out beyond repair or destroyed that have to be replaced annually.
It means that provision has to be made every year for the purchase
of new equipment amounting to approximately 5% of locomotives and
passenger cars and 4% of freight cars in order to maintain the
equipment numerically, irrespective of the sums spent on maintaining
the remainder in serviceable condition.

On the equipment reported by the Commission for 1908 this would
necessitate the following outlay for replacement alone:


  ======================+===========+=============+=========+=============
                        |  Number   | Needed for  | Average |  Total
                        |           | Replacement |  Cost   |   Cost
  ----------------------+-----------+-------------+---------+-------------
  Locomotives           |    57,698 | 5% =  2,884 | $15,000 | $ 43,260,000
  Passenger cars        |    45,292 | 5% =  2,214 |   6,000 |   13,284,000
  Freight cars          | 2,100,784 | 4% = 84,031 |   1,000 |   84,000,000
  Company cars          |    98,281 |       3,931 |     500 |    1,965,500
                        |           |             |         +-------------
    Total cost for      |           |             |         |
    replacing equipment |           |             |         | $142,509,500
  ----------------------+-----------+-------------+---------+-------------

It is probable that the computed percentage for the replacement of
locomotives and passenger cars is too high and that for freight cars
too low. This is the opinion of operating officials. If so, it would
amount to a set off and the aggregate would still be approximately
$142,000,000 to be expended annually for new equipment to take the
place of old, worn out and discarded rolling stock. Conditions
forbade the expenditure of any such sum in 1908 and 1909.


NUMBER AND CAPACITY OF LOCOMOTIVES FOR EIGHT YEARS, 1909 TO 1902.

Next follows a summary giving the number and capacity of locomotives
for the seven years since the Commission has included capacity in the
published returns:


  ==========================+========+===========================+========
                            |        |               |   Weight  |
                            |        |   Tractive    |  without  | Average
           Year             | Number |     Power     |   Tender  |  Weight
                            |        |   (Pounds)    |   (Tons)  |  (Tons)
  --------------------------+--------+---------------|-----------+--------
  1909 (94.4% represented)  | 55,495 | 1,421,114,798 | 4,033,309 |   72.7
  1908 Final returns        | 57,698 | 1,519,568,551 | 4,071,554 |   71.5
  1907                      | 55,388 | 1,429,626,658 | 3,828,045 |   69.1
  1906                      | 51,672 | 1,277,865,673 | 3,459,052 |   66.9
  1905                      | 48,357 | 1,141,330,082 | 3,079,673 |   63.6
  1904                      | 46,743 | 1,063,651,261 | 2,889,492 |   62.1
  1903                      | 43,871 |   953,799,540 | 2,606,587 |   59.4
  1902                      | 41,225 |   839,073,779 | 2,323,877 |   56.3
                            +--------+---------------+-----------+--------
    Increase seven years    |        |               |           |
      to 1909               |  34.6% |         69.4% |     73.6% |   29.1
  --------------------------+--------+---------------+-----------+--------

Complete returns will raise the totals for 1909 approximately to
57,704 locomotives of 1,465,070,000 pounds tractive power and
4,158,000 tons weight, exclusive of tenders. These figures bear out
the conclusion expressed above that the purchase of new locomotives
in 1909 was barely sufficient to replace those abandoned or destroyed
during the year. The loss, however, was in a measure made good by
the greater weight of the new engines. As the average weight of
locomotives in 1899 was approximately 53 tons, the figures just given
indicate an increase of nearly 114% in the weight of all locomotives
during the decade.

In connection with the estimate of $15,000 put on locomotives in this
report, it is of interest to reproduce the return to the legislature
of New South Wales of the cost of engines built in the railway shops
at Sydney recently. The figures refer to 6-wheel-coupled heavy
mail and express engines weighing, with tender, 163,128 pounds, as
published in the _Railway Age-Gazette_, December 3, 1909:


DETAILS OF LOCOMOTIVE COSTS.

  ====================================+=============+============+========
                                      | 10 Engines  |    Cost    |  Per
                                      |             | Per Engine |  Ton(a)
  ------------------------------------+-------------+------------+--------
  Direct charges:                     |             |            |
    Materials                         | $117,462.77 | $11,746.28 | $161.29
    Wages                             |   76,484.23 |   7,648.42 |  104.99
                                      +-------------+------------+--------
       Total                          | $193,947.00 | $19,394.70 | $266.28
                                      |             |            |
  Indirect charges:                   |             |            |
    Percentage of shop charges        |             |            |
      (exclusive of superintendence)  |             |            |
      on wage basis in each shop,     |             |            |
      37.84%                          |   28,943.79 |   2,894.38 |   39.74
    Superintendence, on wage basis,   |             |            |
      3%                              |    2,294.51 |     229.45 |    3.10
    Interest on capital cost of new   |             |            |
      shop and machinery, including   |             |            |
      land                            |    4,850.52 |     485.05 |    6.63
    Proportion of interest on capital |             |            |
      cost of old shops on locomotive |             |            |
      work produced for new engines   |    5,449.53 |     544.95 |    7.45
    Depreciation of machinery and     |             |            |
      plant, 2% on capital cost       |    5,149.99 |     515.00 |    7.03
                                      +-------------+------------+--------
        Total indirect charges        |  $46,688.34 | $ 4,668.83 | $ 63.95
                                      |             |            |
        Total charges                 | $240,635.34 | $24,063.53 | $330.23
    ----------------------------------+-------------+------------+--------

  (a) Ton of 2,240 lbs.

Applied to a Mallet articulated compound locomotive, such as that
built for the Erie weighing 410,000 pounds on the drivers, the rate
per ton paid by the government of New South Wales would make it cost
over $60,000. It did not cost any such sum, but the Australian
experience is a straw which shows how the cost of locomotives is
soaring. American railways find it necessary economy to build engines
whose average weight is well above that built in the government shops
at Sydney.


PASSENGER AND FREIGHT CARS.

During the same period, 1902 to 1909, covered in the table relating
to locomotives, for which alone full data is available, the increase
in the number of passenger cars and freight cars, and in the capacity
of the latter, is shown in the following statement:


  ===================+=========+========================+=======+=========
                     |         |  Freight Service       |       |
                     |         +-----------+------------+       |Company's
          Year       |Passenger|  Number   |  Capacity  |Average| Service
                     | Service |           |   (tons)   | tons  | Number
  -------------------+---------+-----------+------------+-------+---------
  1909               |         |           |            |       |
   (97% represented) |  44,665 | 2,050,049 | 71,028,266 |  34.6 |  96,739
  1908               |         |           |            |       |
   (Final returns)   |  45,292 | 2,100,784 | 73,526,440 |  35   |  98,281
  1907               |  43,973 | 1,991,557 | 67,216,144 |  34   |  91,064
  1906               |  42,282 | 1,837,914 | 59,196,230 |  32   |  78,736
  1905               |  40,713 | 1,731,409 | 53,372,552 |  31   |  70,749
  1904               |  39,752 | 1,692,194 | 50,874,723 |  30   |  66,615
  1903               |  38,140 | 1,653,782 | 48,622,125 |  29   |  61,467
  1902               |  36,987 | 1,546,101 | 43,416,977 |  28   |  57,097
                     +---------+-----------+------------+-------+---------
    Seven years'     |         |           |            |       |
      increase(a)    |  20.8%  |    35.9%  |    64.0%   | 23.5% |   69.6%
  -------------------+---------+------------------------+-------+---------

  (a) Final returns for 1909 will raise these percentages materially.

It is in the increased capacity of locomotives and cars rather
than in their numbers that the seeker after truth will find the
explanation of how American railways have been able to handle freight
traffic that has increased in volume over 80% in ten years where
numerically the increase of equipment has been less than 60%. During
that period the average capacity of the freight car has increased
from 27 to nearly 35 tons, accounting for an aggregate increase of
109.6%.

Between 1899 and 1909 the population of the United States increased
from 74,318,000 to 88,806,000, or 19.5%. (On April 1, 1910, the
treasury estimate was an even 90,000,000.) In the same ten years the
number of passenger cars increased over 36%, accompanied by a steady
advance in their size, strength and conveniences.

Between 1902 and 1907 the Official Statistics furnish the following
information showing the gradual transformation taking place in the
number and capacity of freight cars:


NUMBER AND CAPACITY OF DIFFERENT SIZES OF FREIGHT CARS, 1902-1907.

  ===========+==========+=========+===========+============
             | Capacity |         |           | Increase or
     Class   |  Pounds  |   1902  |    1907   |  Decrease
             |          |         |           |  Per Cent
  -----------+----------+---------+-----------+------------
           I |   10,000 |   5,122 |     4,277 | Dec.   16.5
          II |   20,000 |  15,615 |     7,244 |  "     53.5
         III |   30,000 |  46,353 |    10,132 |  "     78.1
          IV |   40,000 | 327,342 |   204,583 |  "     37.5
           V |   50,000 | 246,684 |   178,827 |  "     27.5
          VI |   60,000 | 634,626 |   802,187 | Inc.   26.4
         VII |   70,000 |  22,493 |    34,652 |  "     53.6
        VIII |   80,000 | 158,179 |   452,070 |  "    185.9
          IX |   90,000 |     310 |     5,054 |  "  1,527.1
           X |  100,000 |  48,834 |   285,241 |  "    484.3
          XI |  110,000 |     389 |     1,476 |  "    279.4
         XII |  120,000 |      43 |        60 |  "     39.5
    All over |  120,000 |       2 |       214 |
  -----------+----------+---------+-----------+------------

The line of cleavage between former and modern railway methods of
handling freight is clearly shown in the above table to lie between
cars of 25 and 30 ton capacity. The former and all of less capacity
are on the decline, whereas the latter and all of greater capacity
are on the increase. Numerically the 30-ton cars still exceed those
of 40 and 50 tons, but already they are exceeded by the combined
capacity of the latter.


THE SURPLUS OF FREIGHT CARS.

For two years (28 months as this is written) the reports of the
Committee on Car Efficiency of the American Railway Association show
that the supply of freight cars has been in excess of the demand. In
other words, the railways during that period were paying interest on
a considerable percentage of unremunerative equipment, besides the
cost of its maintenance. The rise and fall of this surplus of freight
cars is set forth below:


FREIGHT CAR SHORTAGES AND SURPLUS BY MONTHS FROM JANUARY, 1907, TO
APRIL, 1910.

  ===========================+==========+=========+=========+========
                             |  1907    |  1908   |  1909   |  1910
          Month              | Shortage | Surplus | Surplus | Surplus
  ---------------------------+----------+---------+---------+--------
  January                    | 110,000  | 342,580 | 333,019 |  52,309
  February                   | 150,000  | 322,513 | 301,571 |  45,513
  March                      | No data  | 297,042 | 291,418 |  45,672
  April                      | 100,000  | 413,605 | 282,328 |  84,887
  May                        |  60,000  | 404,534 | 273,890 |     --
  June                       |  40,000  | 349,994 | 262,944 |     --
  July(a)                    |  20,000  | 308,680 | 243,354 |     --
  August(a)                  |  15,000  | 253,003 | 159,424 |     --
  September                  |  60,000  | 133,792 |  78,798 |     --
  October                    |  90,757  | 110,912 |  35,977 |     --
  November                   |  57,003  | 132,829 |  39,528 |     --
  December (surplus)         | 209,310  | 222,077 |  58,354 |     --
  ---------------------------+----------+---------+---------+--------

  (a) In July and August, 1907, there was a net surplus.

At the date of one report in October, 1909, a surplus of cars in one
territory was practically offset by a shortage in another territory.


FREIGHT CAR PERFORMANCE.

According to Statistical Bulletin No. 58 of the Committee on
Relations between Railroads of the American Railway Association, the
average performance of the freight cars of American and Canadian
railways during the year ending June 30, 1909, including and
excluding surplus cars, was as follows:


  ==================+=======================+======================
                    |    Average Miles      |   Average Ton Miles
                    |       per Day         |    per Car per Day
                    +-----------+-----------+-----------+----------
      Month         | Including | Excluding | Including | Excluding
                    |  Surplus  |  Surplus  |  Surplus  |  Surplus
                    |   Cars    |   Cars    |    Cars   |   Cars
  ------------------+-----------+-----------+-----------+----------
  July,    1908     |   20.0    |   24.8    |     275   |    342
  August,    "      |   20.8    |   25.1    |     292   |    354
  September, "      |   22.0    |   25.2    |     320   |    367
  October,   "      |   23.8    |   25.9    |     346   |    376
  November,  "      |   23.5    |   25.8    |     341   |    375
  December,  "      |   22.3    |   25.2    |     332   |    376
  January, 1909     |   20.9    |   25.3    |     293   |    354
  February,  "      |   21.7    |   25.9    |     306   |    365
  March,     "      |   22.7    |   27.2    |     330   |    393
  April,     "      |   22.4    |   26.8    |     310   |    371
  May,       "      |   22.5    |   26.8    |     304   |    362
  June,      "      |   22.4    |   26.5    |     314   |    371
  ------------------+-----------+-----------+-----------+----------

These figures of the average miles per day of freight cars are the
delight of demagogues and other detractors of American railways who
ignore, or have never been able to comprehend, that the average
performance of a car per day depends from six to nine times more on
the time allowed for shippers to load and unload cars than on its
speed in transit. This speed runs all the way from ten to forty miles
and over an hour. But if freight trains averaged 40 miles an hour
it would make little impression on the per day average of cars so
long as 48 hours has to be allowed as a minimum at either end for
loading and unloading and almost as much more for placing notices
and disposing of cars, to say nothing of time consumed in making up
trains.

The salient and significant feature of this table is the proof it
affords that each car of those in commission averages the movement of
one ton 367 miles per day. This means an average load of 14 tons per
car. It would take at least three English or European freight cars to
average such a load.


SAFETY APPLIANCES.

Of all the locomotives and cars in railway service in 1908,
aggregating 2,302,055, less than 4% were not fitted with train
brakes, and less than three quarters of 1% were unprovided with
automatic couplers.


BLOCK SIGNALS.

While the gain in mileage protected by some form of block signals
in 1909 is only slightly more than half the increase in 1907, it
shows a healthy revival of this most important constructive work.
At the close of the last calendar year, according to the _Railroad
Age-Gazette,_ the mileage on which some system of block signals had
been installed was as follows:


  ====================+===============+=============+========+=======
       System         |  Single Track |   Two or    | Total  | Total
                      |               | More Tracks |  1909  |  1908
  --------------------+---------------+-------------+--------+-------
  Automatic block     |               |             |        |
    signals (miles)   |     6,436     |      7,983  | 14,419 | 11,932
  Non-automatic block |               |             |        |
    signals (miles)   |    40,323     |      8,593  | 48,916 | 48,777
                      +---------------+-------------+--------+--------
       Total miles    |    46,759     |    16,576   | 63,335 | 60,709
  --------------------+---------------+-------------+--------+--------

  Miles of line operated by the companies, 1909             158,938

The second annual report of the government Block Signal and Train
Control Board shows that little advance has been made in the search
after the perfect system of automatic mechanical operation. Since
the organization of the board in 1907 no less than 835 plans and
descriptions of inventions designed to enhance the safety of railway
operation have been submitted for its consideration. Of these 184
were examined and reported upon in 1908 and 12 were found worthy of
further investigation. During the past year 327 others have been
reviewed with a net result that again 12 have been found to possess
enough merit to warrant the Board in conducting further tests. It
finds that the vast majority of the proposed devices are unsound
either in principle or design.

With regard to some form of automatic stop, the Board says that it
is not yet prepared to make a definite and positive recommendation,
but it thinks it reasonable to expect that several forms of automatic
train controlling devices will be found available for use. In this
connection it very sensibly concludes:

"It is not to be expected that trials or tests conducted by the
government will, independently of extended use by railways, result in
the production of devices or systems fully developed to meet all the
exacting conditions of railway operation."




III

EMPLOYES AND THEIR COMPENSATION

NUMBER 1,524,400

COMPENSATION $1,008,270,000


The 368 railway companies reporting to this Bureau had 1,463,429
persons in their employ June 30, 1909, and their pay roll for the
twelve months to that date amounted to $973,172,497. Experience has
shown that these roads employ over 96% of the labor and pay 97% of
the compensation earned by railway employes. From which it appears
that the employes of all the railways in 1909 numbered 1,524,400,
whose compensation for that year was approximately $1,003,270,000.
This would show an increase of 66,756 men employed and a decrease of
$48,362,225 in compensation--a discrepancy accounted for by the fact
that the pay roll in June, 1908, was numerically at low tide while
the aggregate compensation was swelled by the large pay rolls of
the first six months of the fiscal year. The conditions were nearly
reversed in 1909, for the pay roll was at the ebb during the first
half of the year whereas the number on it did not begin to show the
demands of increasing traffic until the very close of the fiscal year.

These statistics would be more enlightening if the number of employes
was determined by the average from the monthly pay rolls throughout
the year and not as at present "from the pay rolls on June 30."
The discrepancies noted are liable to increase if the Commission
succeeds in getting the permission of Congress to substitute December
31st for June 30th as the end of its statistical year. Under the
present practice, the summary which follows reflects the improvement
of business in the increase of employes, while their aggregate
compensation continues to show the effect of the depression that
prevailed throughout the greater part of the year. When, however,
that compensation comes to be divided by the "Aggregate number of
days worked by all employes" during the year, the daily average which
results is found to be within a fraction of a cent the same as for
the preceding year.

The aggregate number of days worked by the employes of the roads
reporting to this Bureau was 434,328,026 days in 1909 against
453,002,228 for the preceding year.

The first summary under this title gives the number, compensation and
average pay of the several classes of employes of the roads reporting
for the year 1909, together with the aggregates as reported to the
Interstate Commerce Commission for the preceding years:


SUMMARY OF RAILWAY EMPLOYES, COMPENSATION AND RATES OF PAY BY CLASSES
IN 1909 AND AGGREGATES FROM 1889 TO 1909.

  ======================+=========+=====+==============+=======+========
       Class 1909       |        |Per 100|             |Average|Per Cent
     (221,132 Miles     | Number | Miles | Compensation|  Pay  |of Gross
       Represented)     |        |of Line|             |per Day|Receipts
  ----------------------+---------+-----+--------------+-------+--------
  General officers      |   3,312 | 1.6 |  $15,484,008 | 14.82 |  0.6
  Other officers        |   7,415 | 3.3 |   16,847,754 | 6.53  |  0.7
  General office clerks |  67,222 |  30 |   51,945,231 | 2.31  |  2.2
  Station agents        |  34,765 |  15 |   24,944,100 | 2.10  |  1.0
  Other station men     | 135,056 |  61 |   78,289,039 | 1.81  |  3.3
  Enginemen             |  55,747 |  25 |   77,762,158 | 4.46  |  3.3
  Firemen               |  58,927 |  27 |   47,591,953 | 2.67  |  2.0
  Conductors            |  42,325 |  19 |   50,269,581 | 3.76  |  2.1
  Other trainmen        | 112,398 |  51 |   88,751,753 | 2.60  |  3.7
  Machinists            |  47,629 |  22 |   41,381,054 | 2.98  |  1.7
  Carpenters            |  59,477 |  27 |   42,954,993 | 2.43  |  1.8
  Other shopmen         | 192,784 |  87 |  118,891,679 | 2.13  |  5.0
  Section foremen       |  39,953 |  18 |   26,377,380 | 1.96  |  1.2
  Other trackmen        | 308,369 | 140 |  107,734,419 | 1.38  |  4.5
  Switch tenders,       |         |     |              |       |
    crossing tenders    |         |     |              |       |
    and watchmen        |  44,155 |  20 |   26,019,105 | 1.78  |  1.1
  Telegraph operators   |         |     |              |       |
    and dispatchers     |  38,656 |  17 |   29,655,916 | 2.30  |  1.3
  Employes, account     |         |     |              |       |
    floating equipment  |   8,632 |   4 |    6,537,196 | 2.32  |  0.3
  All other employes    |         |     |              |       |
    and laborers        | 206,607 |  93 |  121,735,178 | 1.98  |  5.2
                        +---------+-----+--------------+-------+------
    Total (94.4% mileage|         |     |              |       |
           represented) |1,463,429| 661 |  $973,172,497| 2.24  | 41.00
                        |         |     |              |       |
  1908 Official figures |1,458,244| 632 |$1,051,632,225|(b)2.25| 43.38
  1907                  |1,672,074| 735 | 1,072,386,427| 2.20  | 41.42
  1906                  |1,521,355| 684 |(a)930,801,653| 2.09  | 40.02
  1905                  |1,382,196| 637 |   839,944,680| 2.07  | 40.34
  1904                  |1,296,121| 611 |   817,598,810|No data| 41.36
  1903                  |1,312,537| 639 |   775,321,415|No data| 40.78
  1902                  |1,189,315| 594 |   676,028,592|No data| 39.28
  1901                  |1,071,169| 548 |   610,713,701|No data| 38.39
  1900                  |1,017,653| 529 |   577,264,841|No data| 38.82
  1899                  |  928,924| 495 |   522,967,896|No data| 39.81
  1898                  |  874,558| 474 |   495,055,618|No data| 39.70
  1897                  |  823,476| 449 |   465,601,581|No data| 41.50
  1896                  |  826,620| 454 |   468,824,531|No data| 40.77
  1895                  |  785,034| 441 |   445,508,261|No data| 41.44
  1894                  |  779,608| 444 |    No data   |No data|   --
  1893                  |  873,602| 515 |    No data   |No data|   --
  1892                  |  821,415| 506 |    No data   |No data|   --
  1891                  |  784,285| 486 |    No data   |No data|   --
  1890                  |  749,301| 479 |    No data   |No data|   --
  1889                  |  704,743| 459 |    No data   |No data|   --
  ----------------------+---------+-----+--------------+-------+------

  (a) Includes $30,000,000 estimate pay-roll of Southern Pacific, whose
      records were destroyed in the San Francisco disaster.

  (b) Bureau computations.

This table brings out clearly the effect of the depression of 1908 on
railway labor. While there was a decrease in numbers employed in 1908
of 213,830 or nearly 13%, coincident with a proportionate decrease in
gross revenues, the reduction in compensation amounted to less than
2%. This anomaly was due to the fact that the increased scale of pay
adopted in the winter of 1906-07 was only effective during six months
of the fiscal year 1907, whereas it was in full operation throughout
1908, as it still is, with demands, negotiations and arbitrations
regarding wages all tending upward.


UNREMUNERATIVE EXPENDITURES.

Last year attention was called to the unremunerative burdens
imposed on the railways by the multiplying demands of legislatures
and commissions for reports on every conceivable feature of their
multifarious affairs. This year with the compensation of every other
class showing the effects of the enforced retrenchments of the
period, that of the several classes especially affected by these
requirements and the enactments relating to the hours and conditions
of employment continue to be the only ones marked by advances over
the record figures of 1907, as appears from the following comparison:


COMPENSATION OF CLASSES ESPECIALLY AFFECTED BY MULTIPLYING DEMANDS OF
COMMISSIONS AND LEGISLATURES IN 1907 AND 1909.

  =====================================+==============+==============
                                       |     1907     |     1909
                      Class            | 227,455 Miles| 221,132 Miles
                                       | Represented  |  Represented
  -------------------------------------+--------------+--------------
  Other officers                       |  $15,012,226 |  $16,847,754
  General office clerks                |   48,340,123 |   51,945,231
  Station agents                       |   24,831,066 |   24,944,100
  Telegraph operators and dispatchers  |   29,058,251 |   29,655,916
  Employes, account floating equipment |    6,035,415 |    6,537,196
                                       +--------------+--------------
       Total                           | $123,277,081 | $129,930,197
  -------------------------------------+--------------+--------------
  Add 4% for unreported mileage, 1909                 |    5,197,207
       Total                                          | $135,127,404
  Increase over 1907                                  |   11,850,323
  ----------------------------------------------------+--------------

Moreover, had the aggregate compensation of these five classes
followed the general trend of all other railway compensation, the
expenditure on this account would have been at least $22,000,000 less
than it was. This sum represents only a part of what the railways
have to pay for a system of accounting and reporting out of all
proportion to its published results. The public has no idea of the
onerous and unprofitable burdens imposed on the railways by the
impractical theory of administering railways through the medium of
arbitrary and theoretical accounts.


AVERAGE DAILY COMPENSATION 1909-1892.

Where the data in regard to total compensation of railway employes
has been kept since 1895, that of their daily average pay runs back
to 1892, thus covering the period of the last preceding severe panic.
Under instructions of the Official Statistician, these averages are
computed by dividing the compensation paid by the actual days worked
throughout the year in the several classes as nearly as it has been
practicable to do so. Although the formula is more or less arbitrary,
the system has been continuous and so the results are reliable for
comparative purposes.

In the statement following, figures for 1895, 1896 and 1905 have been
omitted to economize space, and because they present no significant
variations from the years preceding them.


COMPARATIVE SUMMARY OF AVERAGE DAILY COMPENSATION OF RAILWAY EMPLOYES
FOR THE YEARS ENDING JUNE 30, 1908 TO 1892.

  ======================+=======+========+=====+=====+=====+=====+=====
           Class        |1909(a)| 1908(a)| 1907| 1906| 1904| 1903| 1902
  ----------------------+-------+--------+-----+-----+-----+-----+-----
  General officers      | 14.82 | 15.18  |11.93|11.81|11.61|11.27|11.17
  Other officers        |  6.53 |  6.42  | 5.99| 5.82| 6.07| 5.76| 5.60
  General office clerks |  2.31 |  2.35  | 2.30| 2.24| 2.22| 2.21| 2.18
  Station agents        |  2.10 |  2.10  | 2.05| 1.94| 1.93| 1.87| 1.80
  Other station men     |  1.81 |  1.82  | 1.78| 1.69| 1.69| 1.64| 1.61
  Enginemen             |  4.46 |  4.46  | 4.30| 4.12| 4.10| 4.01| 3.84
  Firemen               |  2.67 |  2.65  | 2.54| 2.42| 2.35| 2.28| 2.20
  Conductors            |  3.76 |  3.83  | 3.69| 3.51| 3.50| 3.38| 3.21
  Other trainmen        |  2.60 |  2.64  | 2.54| 2.35| 2.27| 2.17| 2.04
  Machinists            |  2.98 |  2.95  | 2.87| 2.69| 2.61| 2.50| 2.36
  Carpenters            |  2.43 |  2.40  | 2.40| 2.28| 2.26| 2.19| 2.08
  Other shopmen         |  2.13 |  2.13  | 2.06| 1.92| 1.91| 1.86| 1.78
  Section foremen       |  1.96 |  1.96  | 1.90| 1.80| 1.78| 1.78| 1.72
  Other trackmen        |  1.38 |  1.45  | 1.46| 1.36| 1.33| 1.31| 1.25
  Switchmen, flagmen    |       |        |     |     |     |     |
  and watchmen          |  1.78 |  1.82  | 1.87| 1.80| 1.77| 1.76| 1.77
  Telegraph operators   |       |        |     |     |     |     |
  and dispatchers       |  2.30 |  2.30  | 2.26| 2.13| 2.15| 2.08| 2.01
  Employes account      |       |        |     |     |     |     |
  floating equipment    |  2.32 |  2.37  | 2.27| 2.10| 2.17| 2.11| 2.00
  All other employes and|       |        |     |     |     |     |
  laborers              |  1.98 |  1.98  | 1.92| 1.83| 1.82| 1.77| 1.71
  ----------------------+-------+--------+-----+-----+-----+-----+-----

  {table continued}
  ======================+=====+=====+=====+=====+=====+=====+=====+=====
           Class        | 1901| 1900| 1899| 1898| 1897| 1894| 1893| 1892
  ----------------------+-----+-----+-----+-----+-----+-----+-----+-----
  General officers      |10.97|10.45|10.03| 9.73| 9.54| 9.71| 7.84| 7.62
  Other officers        | 5.56| 5.22| 5.18| 5.21| 5.12| 5.75|  -- |  --
  General office clerks | 2.19| 2.19| 2.20| 2.25| 2.18| 2.34| 2.23| 2.20
  Station agents        | 1.77| 1.75| 1.74| 1.73| 1.73| 1.75| 1.83| 1.81
  Other station men     | 1.59| 1.60| 1.60| 1.61| 1.62| 1.63| 1.65| 1.68
  Enginemen             | 3.78| 3.75| 3.72| 3.72| 3.65| 3.61| 3.66| 3.68
  Firemen               | 2.16| 2.14| 2.10| 2.09| 2.05| 2.03| 2.04| 2.07
  Conductors            | 3.17| 3.17| 3.13| 3.13| 3.07| 3.04| 3.08| 3.07
  Other trainmen        | 2.00| 1.96| 1.94| 1.95| 1.90| 1.89| 1.91| 1.89
  Machinists            | 2.32| 2.30| 2.29| 2.28| 2.23| 2.21| 2.33| 2.29
  Carpenters            | 2.06| 2.04| 2.03| 2.02| 2.01| 2.02| 2.11| 2.08
  Other shopmen         | 1.75| 1.73| 1.72| 1.70| 1.71| 1.69| 1.75| 1.71
  Section foremen       | 1.71| 1.68| 1.68| 1.69| 1.70| 1.71| 1.75| 1.76
  Other trackmen        | 1.23| 1.22| 1.18| 1.16| 1.16| 1.18| 1.22| 1.22
  Switchmen, flagmen    |     |     |     |     |     |     |     |
  and watchmen          | 1.74| 1.80| 1.77| 1.74| 1.72| 1.75| 1.80| 1.78
  Telegraph operators   |     |     |     |     |     |     |     |
  and dispatchers       | 1.98| 1.96| 1.93| 1.92| 1.90| 1.93| 1.97| 1.93
  Employes account      |     |     |     |     |     |     |     |
  floating equipment    | 1.97| 1.92| 1.89| 1.89| 1.86| 1.97| 1.96| 2.07
  All other employes and|     |     |     |     |     |     |     |
  laborers              | 1.69| 1.71| 1.68| 1.67| 1.64| 1.65| 1.70| 1.67
  ----------------------+-----+-----+-----+-----+-----+-----+-----+-----

  (a) Averages for 1909 and 1908 are calculated from the returns to the
      Bureau of days worked and compensation of the several classes of
      roads representing 97% of the traffic.

The average pay of general officers for 1909 and 1908 in this summary
is out of proportion, for the reason that the returns to the Bureau
cover only 60% of the class numerically and include all the larger
systems. Before 1894, this class included "Other officers," so the
returns for 1893 and 1892 are not comparable with those for this
class in subsequent years.

Comparing the average daily compensation of the four great classes
most intimately associated in the public mind with railway operations
in 1899 and 1909, it appears that during the decade the average
wages of enginemen increased approximately 20%; of firemen 27%; of
conductors 20%; and of other trainmen, including switchmen, brakemen
and baggagemen--the most numerous body--34%.

An estimate based on the number employed and their aggregate
compensation in 1899, allowing 310 working days to the year, would
place the increase for all employes during the decade at 23%.

The relation of the compensation of railway employes to the gross
earnings of the railways, which furnish the fund from which they are
paid, and also to the sum of the expenses incurred in producing those
earnings for the past ten years, is shown in the next summary, in
conjunction with the operating ratio:


SUMMARY SHOWING PROPORTION OF COMPENSATION OF EMPLOYES TO GROSS
EARNINGS AND OPERATING EXPENSES, AND OF OPERATING RATIO TEN YEARS,
1899 TO 1909.

  ===============+==============+==================+==================
                 |     Ratio    |       Ratio      |    Ratio of
                 | Compensation |   Compensation   |Operating Expenses
                 | of Labor to  |   of Labor to    |       to
                 |Gross Earnings|Operating Expenses|  Gross Earnings
  ---------------+--------------+------------------+------------------
  1909           |    41.00%    |      62.06%      |      66.12%
  1908           |    43.38%    |      62.33%      |      69.67%
  1907           |    41.42%    |      61.41%      |      67.53%
  1906           |    40.02%    |      60.79%      |      66.08%
  1905           |    40.34%    |      60.40%      |      66.78%
  1904           |    41.36%    |      61.07%      |      67.79%
  1903           |    40.78%    |      61.65%      |      66.16%
  1902           |    39.28%    |      60.58%      |      64.66%
  1901           |    38.39%    |      59.27%      |      64.86%
  1900           |    38.82%    |      60.04%      |      64.65%
  1899           |    39.81%    |      61.04%      |      65.24%
                 |              |                  |
  Increase 1899  |              |                  |
        to 1909  |     3.00%    |       1.65%      |       1.35%
  ---------------+--------------+------------------+------------------

The significance of this statement is that in spite of all the labor
saving devices and economies of operation--reduced grades, modified
curves and more efficient equipment--adopted by the railways during
the past decade, the proportionate cost of labor to earnings and to
expenses has increased. It reached an abnormally high ratio in 1908
because of the unprecedented recession in revenues during the second
half of the year. The fact that it has been above 40% persistently
since 1902 proves that labor continues to receive its full proportion
of the receipts of American railways.


PAY OF EMPLOYES ON BRITISH RAILWAYS.

Although the statistics of British railways are singularly barren of
details respecting the compensation of British railway "servants," as
they are termed, the reports of Boards of Conciliation afford data as
to the rates of pay of several classes as follows:


SCALE OF WAGES OF DRIVERS AND FIREMEN ON NORTH BRITISH RAILWAY, 1909.

  ======================================================+===============
                                                        |Rate per Day of
                                                        |    12 Hours
                                                        +-------+-------
                                                        |Drivers|Firemen
  ------------------------------------------------------+-------+-------
  Passenger engines, main line, long road               | $1.56 | $0.88
  Passenger engines running into chief terminal station |  1.44 |   .84
  Passenger engines, branch lines                       |  1.32 |   .80
  Goods engines, main line, long road, trip men         |  1.44 |   .88
  Goods engines, main line, other than long road        |  1.32 |   .84
  Goods and mineral engines running into depots and     |       |
    terminal stations                                   |  1.20 |   .80
  Goods and mineral engines working branch lines and    |       |
    collieries                                          |  1.14 |   .76
  Mineral pilot, pilot and shunting engines             |  1.04 |   .72
  ------------------------------------------------------+-------+-------

In his award in the case of the North Eastern Railway, Sir James
Woodhouse fixed the following scales:

Firemen.--First year, 84 cents per day; 2d year, 90 cents; 3d year,
96 cents; 4th and 5th years, $1.02; 6th year, $1.08; 7th year, $1.14;
8th year, and subsequent years, $1.20. Firemen to pass for drivers
during the 8th year.

Cleaners.--Age 16 to 17 years, $2.40 per week; 17 to 18 years, $2.64;
18 to 19 years, $3.12; 19 to 20 years, $3.60; 20 to 21 years, $4.08;
and an advance of 24 cents per week for each subsequent year up to a
maximum of $4.80 per week.

"That the wages of all goods and mineral guards be increased as
follows:

"(a) The wages of those who have been in receipt of $7.20 (the
maximum of the existing scale) for not less than two years shall be
increased to $7.44 per week.

"(b) The wages of those who have been in receipt of the said maximum
for not less than five years shall be increased to $7.68 per week.

"The bonus for working with large engines on freight trains
discontinued when any guard becomes entitled to the maximum wages of
$7.68 per week."

Men working in the London district get from 6 to 12 cents more per
day than those in outside districts.

The award in the case of the Great Northern made an addition of 24
cents to the weekly scale of the following grades: Signalmen $4.32,
$4.56, $4.80 and $5.04; passenger guards and brakemen $5.28 up to
$6.00; goods guards and brakemen $5.04 up to $6.24; ticket collectors
$5.04 up to $5.52; horse shunters $4.56 up to $5.04; parcels porters
$4.32 to $5.04; carriage cleaners $4.08 to $4.32; plate layers,
second men and under men $4.32 and less up to $5.04; ballast train
guards, flagmen and greasers rates less than $5.04 per week.

An additional allowance of 24 cents per week is made to men stationed
in the London district.

From these figures a fair idea is gained of the average pay of
British railway labor. They support the statement that there are
over 100,000 railway men in the United Kingdom working for less
than one pound ($4.87) a week. The total compensation paid British
railway employes in 1908 was $150,248,000 against $162,440,000 for
the preceding year. But whether the decrease was due to a reduction
in pay or in numbers employed cannot be told, as there has been no
census of railway "servants" since 1907. The average pay may be
safely approximated at $260 per year per man, boy and porter, who two
years ago numbered 621,341.

In 1907, Special Agent Ames, of the Interstate Commerce Commission,
reported wages on the railways of the United Kingdom as follows:


  =================+=================
  Enginemen        |  $9.32  per week
  Firemen          |   5.76   "   "
  Conductors       |   6.26   "   "
  Brakemen         |   6.44   "   "
  Shunters         |   5.80   "   "
  Examiners        |   5.80   "   "
  Signalmen        |   5.66   "   "
  Trackmen         |   5.58   "   "
  -----------------+-----------------


PAY OF RAILWAY EMPLOYES IN OTHER COUNTRIES.

The contrast between the wages of American and European railway
employes is emphasized by those paid on the continent. The official
statistics of the empire show an increase of 5% in the average yearly
compensation of German railway employes in 1908. Their number and
pay for that year to December 31st in the four main classes into
which they are divided were as follows:


NUMBER AND PAY OF GERMAN RAILWAY EMPLOYES BY PRINCIPAL DIVISIONS FOR
THE YEAR ENDING DECEMBER 31, 1908.

  ==========================+==========+==============+=========+========
         Division           | Employes | Compensation |Average |Increase
                            |  Number  |   (Total)    |per year|over 1907
  --------------------------+----------+--------------+--------+---------
  General administration    |   31,996 |  $25,167,240 |  $787  |   $34
  Maintenance and guarding  |          |              |        |
    road                    |  177,633 |   42,891,753 |   241  |     5
  Station service and train |          |              |        |
    crews                   |  302,343 |  116,219,657 |   384  |    24
  Switching crews and shops |  187,183 |   75,328,084 |   402  |    18
                            +----------+--------------+--------+---------
         Total              |  699,155 | $259,606,734 |  $371  |   $19
                            |          |              |        |
  Increase over 1907        |    3,598 |   14,216,875 |    --  |    --
  --------------------------+----------+--------------+--------+---------

Combined with a falling off in revenues and an increase in the cost
of materials this increase in the compensation of employes had the
effect of raising the operating ratio of German railways from 69.01
in 1907 to 73.56 in 1908. It also increased the proportion of wages
to gross earnings from 37.25 to 40.1% and had the effect of reducing
the net revenues from 5.60% to 4.51% on the cost of construction.

How railway labor fares under government ownership in a republic as
compared with its pay in an empire may be judged from a comparison of
the following statement as to the number and pay of the railways of
Switzerland with the like classes in the preceding table for Germany.


NUMBER AND PAY OF SWISS RAILWAY EMPLOYES BY PRINCIPAL DIVISIONS IN
1907.

  ==================================+==========+==============+=========
         Division                   | Employes | Compensation | Average
                                    |  Number  |   (Total)    | per Year
  ----------------------------------+----------+--------------+---------
  General administration            |   1,631  |  $  780,715  |  $478
  Maintenance and inspection of way |  10,308  |   1,459,977  |   142
  Transportation and train service  |  17,815  |   6,829,426  |   383
  Porters and laborers              |  12,219  |   3,209,810  |   262
                                    +----------+--------------+---------
  Total                             |  41,973  | $12,279,928  |  $292
  ----------------------------------+----------+--------------+---------

The wages paid the employes of Swiss railways in 1907 amounted to
only 31.9 per cent. of the gross earnings, and yet they added enough
to the cost of operation to help increase the telltale ratio of
expenses to revenues from 64.99 in 1906 to 67.29 in 1907. The result
was increased operating expenses per mile and a decrease in the
amount available for interest in dividends from 3.26% in 1906 to
3.23% in 1907.

As the Swiss republic has to pay 3½% on government loans its
investment in railways does not appear to be a very profitable one.


EMPLOYES OF FRENCH RAILWAYS.

The employes of the railways of France are divided into the following
classes:


  ==================================================
  General administration                  |    3,119
  Transportation and traffic              |  128,823
  Traction and material                   |   80,732
  Way and structures                      |   81,897
  Auxiliaries                             |   82,809
  Female employes                         |   29,178
                                          |---------
       Total                              |  406,558
  --------------------------------------------------

The official statistics only give the compensation of employes in the
division of traction and material, where the 80,732 men employed get
an average of $187 per year.

On the state railways of Belgium, firemen receive from $15.20 to
$22.80 per month, the higher wage only after 15 years' service;
enginemen begin at $22.50 per month and at the end of 24 years'
service work up to $38.00 per month; conductors earn from $15.97 per
month up to a maximum of $34.70; brakemen, beginning as shunters
(switchmen) at 45 cents a day, when promoted get a minimum of $17.10
per month, from which they are slowly advanced to a maximum of
$22.00. The average railway worker in Belgium gets 2.22 francs (43
cents) a day.

Whole classes of American railway employes get more in a month than
Belgian railway employes average in a year.


THE COST OF LIVING.

    What and how great the virtue and the art,
    To live on little with a cheerful heart.--Pope.

Not because it has any legitimate place in fixing the standard
of railway wages, which should be relative to the part capacity,
intelligence, industry, loyalty and experience play in railway
service, but because in recent years the steady increase in the cost
of living has been made the fulcrum on which every lever to advance
wages works, is it proper to refer to the subject in this report.

Now there is nothing in the whole wilderness of economics so utterly
illusive and misleading as this same cost of living. It is as
incapable of statistical expression as the airy imaginings of a dream
and yet it broods over the domestic happiness of nations with all
the disquieting effects of a nightmare--and like every nightmare it
comes from eating too much and wanting to eat more.

In economics, beyond the barest subsistence, the cost of living is
not ruled by necessity but by individual choice. Each person and
family settles it along the lines of abstinence or indulgence. It
ranges from the "dinner of herbs where love is" and the virtues of
self-denial are nourished, to the feasts of Lucullus and Pompeian
profligacy in whose indulgence whole peoples have perished.

In every discussion of the subject first consideration is given to
the price of food. This amounts to measuring the cost of living
with an elastic string. The proportion of the cost of food to the
cost of living varies in every land, in every occupation and in
every household. It amounts to less than 40% in an average American
family, but each family fixes it for itself. Following certain well
recognized economic laws the percentage for subsistence increases as
the income decreases. For instance, in France families with an income
of under $4.80 per week spend 63% of it for food alone, whereas those
with $9.60 a week spend 53%. In England, families averaging $5.12
a week spend 67% on food, while those of $9.60 spend 57% or less.
In Germany, a similar inquiry showed that families with an average
income of $4.23 per week spent 68.7% on food (excluding beer), or
69.5% (with beer); whereas families with an income of $9.60 per week
spent less than 57% on food "excluding beer."

The exhaustive investigation made by Commissioner Carroll D. Wright
when head of the Bureau of Labor in 1903 anticipated for the United
States these results of more recent European inquiries, as appears
from the following table showing the per cent of total expenditure
made for various purposes in normal families according to classified
incomes:


PER CENT OF EXPENDITURE FOR VARIOUS PURPOSES IN 11,156 NORMAL
FAMILIES, BY CLASSIFIED INCOMES, 1901.

  ========================+======+=====+========+======+========+========
      Classified income   |Rent  |Fuel |Lighting| Food |Clothing|Sundries
  ------------------------+------+-----+--------+------+--------+--------
  Under $200              |16.93 |6.69 |  1.27  | 50.85|  8.68  | 15.58
    $200 or under  $300   |18.02 |6.09 |  1.13  | 47.33|  8.66  | 18.77
    $300 or under  $400   |18.69 |5.97 |  1.14  | 48.09| 10.02  | 16.09
    $400 or under  $500   |18.57 |5.54 |  1.12  | 46.88| 11.39  | 16.50
    $500 or under  $600   |18.43 |5.09 |  1.12  | 46.16| 11.98  | 17.22
    $600 or under  $700   |18.48 |4.65 |  1.12  | 43.48| 12.88  | 19.39
    $700 or under  $800   |18.17 |4.14 |  1.12  | 41.44| 13.50  | 21.63
    $800 or under  $900   |17.07 |3.87 |  1.10  | 41.37| 13.57  | 23.02
    $900 or under $1000   |17.58 |3.85 |  1.11  | 39.90| 14.35  | 23.21
   $1000 or under $1100   |17.53 |3.77 |  1.16  | 38.79| 15.06  | 23.69
   $1100 or under $1200   |16.59 |3.63 |  1.08  | 37.68| 14.89  | 26.13
   $1200 or over          |17.40 |3.85 |  1.18  | 36.45| 15.72  | 25.40
                          +------+-----+--------+------+--------+--------
          All classes     |18.12 |4.57 |  1.12  | 43.13| 12.95  | 20.11
  ------------------------+------+-----+--------+------+--------+--------

While it is scarcely believable that many American families with
incomes under $200 spent less than $100 a year on food--the European
percentage in such cases being more credible--there is no reason
to question the general economic law reflected in this table, that
"the proportion of income spent on food diminishes as the income
increases." But it is governed more by individual tendencies,
character and taste than by any rule or principle. Each family works
out the problem on its own account.

According to the evidence presented at recent arbitration hearings in
this city, American switchmen, as a body, belong in the classes whose
family expenditures are $1,000 or over. Irrespective of the incomes
of other members of their families, the arbitrators found "that the
actual monthly earnings of switchmen in the Chicago district, for
those who worked full time _runs from about $80 to $100 per month_."
This means over $1,000 yearly compensation. Therefore they are in the
class which spends less than 39% of its income on food.

The average income for all railway employes engaged in train
service, that is, enginemen, firemen, conductors and other trainmen,
is probably above the highest figure in the foregoing table and
therefore the proportion of their income spent for food would be
approximately 36%.

But accepting 40% as approximately the proportion of the pay of
all railway employes spent on food, it follows that it takes only
two-fifths of one per cent increase in wages to take care of an
increase of one per cent in the price of food.

With this in mind it becomes instructive to follow the retail prices
of the various articles of food as selected by Mr. Wright in his
inquiry into the cost of living in 1901 and adopted by the Bureau of
Labor in subsequent Bulletins. These for thirty articles of food for
the eighteen years 1890 to 1907, as given in Bulletin No. 77 of the
Bureau of Labor, and for the two years 1908-1909 as computed from
Bradstreet's index and other sources of commodity prices, are given
in the following statement relatively to the average price for 1890
to 1899 == 100:


RELATIVE RETAIL PRICES OF THE PRINCIPAL ARTICLES OF FOOD IN THE
UNITED STATES, 1890 TO 1909. (Average price for 1890-1899 == 100.0.)

  =====+======+======+======+======+======+======+======+======+======+======
       |      |      |      |      |      |      |      |      |Chickns|
       |      |      |      |      |      |      |      |      | (year |
       |Apples|Beans,|Beef, |Beef, |Beef, |Bread,|Butter|Cheese|or more|Cof-
  Year |Evapo-| Dry  |Fresh,|Fresh,|Salt  |Wheat |      |      |  old) | fee
       | rated|      |Roasts|Roasts|      |      |      |      |dressed|
  -----+------+------+------+------+------+------+------+------+------+------
  1890 |109.0 |103.3 | 99.5 | 98.8 | 97.5 | 100.3|  99.2| 98.8 | 101.3| 105.4
  1891 |110.3 |106.2 |100.0 | 99.4 | 98.3 | 100.3| 106.4|100.3 | 104.0| 105.2
  1892 | 99.3 |102.4 | 99.6 | 99.3 | 99.5 | 100.3| 106.8|101.5 | 103.8| 103.8
  1893 |107.0 |105.0 | 99.0 | 99.6 |100.3 | 100.1| 109.9|101.8 | 104.2| 104.8
  1894 |105.8 |102.8 | 98.3 | 98.2 | 98.9 |  99.9| 101.7|101.6 |  98.6| 103.3
  1895 | 97.4 |100.5 | 98.6 | 99.1 | 99.6 |  99.7|  97.0| 99.2 |  98.4| 101.7
  1896 | 88.6 | 92.7 | 99.1 | 99.5 | 99.8 |  99.9|  92.7| 97.9 |  97.1|  99.6
  1897 | 87.8 | 91.5 |100.3 |100.2 |100.9 | 100.0|  93.1| 99.0 |  94.0|  94.6
  1898 | 95.4 | 95.9 |101.7 |102.0 |102.1 |  99.8|  95.1| 97.5 |  96.8|  91.1
  1899 | 99.5 | 99.7 |103.7 |103.9 |103.2 |  99.6|  97.7|102.4 | 101.8|  90.5
  1900 | 95.2 |110.0 |106.5 |106.4 |103.7 |  99.7| 101.4|103.9 | 100.8|  91.1
  1901 | 96.8 |113.9 |110.7 |111.0 |106.1 |  99.4| 103.2|103.3 | 103.0|  90.7
  1902 |104.4 |116.8 |118.6 |118.5 |116.0 |  99.4| 111.5|107.3 | 113.2|  89.6
  1903 |100.8 |118.1 |113.1 |112.9 |108.8 | 100.2| 110.8|109.4 | 113.5|  89.3
  1904 | 99.2 |116.8 |112.8 |113.4 |108.3 | 103.9| 109.0|107.4 | 120.7|  91.8
  1905 |106.0 |116.3 |112.2 |112.9 |107.9 | 104.5| 112.7|110.9 | 123.6|  93.6
  1906 |115.6 |115.2 |115.7 |116.5 |110.8 | 102.3| 118.2|115.5 | 129.1|  94.7
  1907 |124.6 |118.8 |119.1 |120.6 |114.1 | 104.5| 127.6|123.2 | 131.4|  95.0
  1908 |126.4 |138.9 |126.2 |131.5 |116.4 | 124.5| 123.5|121.3 | 128.6|  94.7
  1909 |128.6 |141.2 |132.6 |134.1 |128.2 | 124.5| 134.8|142.0 | 150.2| 108.6
       |      |      |      |      |      |      |      |      |      |
  -----+------+------+------+------+------+------+------+------+------+------
       |      |      |      |      |      |      |Milk, |      |      |
  Year | Corn | Eggs |Fish, |Fish, |Flour | Lard |Fresh,|Mola- |Mutton|Pork,
       | Meal |      |Fresh | Salt |Wheat |      |unski-| sses |      |Fresh
       |      |      |      |      |      |      |mmed  |      |      |
  -----+------+------+------+------+------+------+------+------+------+------
  1890 |100.0 |100.6 | 99.3 |100.7 |109.7 |  98.2| 100.5|104.7 | 100.7|  97.0
  1891 |109.7 |106.9 | 99.6 |101.7 |112.5 |  99.8| 100.5|101.7 | 100.6|  98.7
  1892 |105.2 |106.8 |100.1 |102.2 |105.1 | 103.6| 100.6|101.2 | 101.0| 100.5
  1893 |103.1 |108.1 |100.1 |103.4 | 96.1 | 117.9| 100.4|100.6 |  99.9| 107.0
  1894 |102.2 | 96.3 |100.4 |101.5 | 88.7 | 106.9| 100.2|100.3 |  97.8| 101.8
  1895 |100.8 | 99.3 | 99.8 | 98.9 | 89.0 | 100.1| 100.0| 99.0 |  98.7|  99.7
  1896 | 95.0 | 92.8 |100.2 | 97.5 | 92.7 |  92.5|  99.9| 98.7 |  98.7|  97.4
  1897 | 93.7 | 91.4 | 99.8 | 95.2 |104.3 |  89.8|  99.7| 97.7 |  99.6|  97.6
  1898 | 95.0 | 96.2 |100.5 | 98.8 |107.4 |  93.9|  99.4| 97.9 | 100.4|  98.6
  1899 | 95.1 |101.1 |100.2 |100.2 | 94.6 |  97.1|  98.9| 98.2 | 102.6| 101.7
  1900 | 97.4 | 99.9 |100.4 | 99.1 | 94.3 | 104.4|  99.9|102.2 | 105.6| 107.7
  1901 |107.1 |105.7 |101.4 |100.9 | 94.4 | 118.1| 101.1|101.3 | 109.0| 117.9
  1902 |118.8 |119.1 |105.0 |102.8 | 94.9 | 134.3| 103.3|102.1 | 114.7| 128.3
  1903 |120.7 |125.3 |107.3 |108.4 |101.2 | 126.7| 105.8|103.8 | 112.6| 127.0
  1904 |121.5 |130.9 |107.9 |111.7 |119.9 | 117.3| 106.3|104.0 | 114.1| 124.0
  1905 |122.2 |131.6 |109.9 |113.8 |119.9 | 116.6| 107.0|104.4 | 117.8| 126.6
  1906 |123.2 |134.2 |116.2 |116.8 |180.1 | 128.0| 108.9|105.3 | 124.1| 137.7
  1907 |131.6 |137.7 |120.6 |121.6 |117.7 | 134.2| 116.8|107.7 | 130.1| 142.5
  1908 |154.0 |140.2 |116.2 |118.4 |140.0 | 132.1| 115.4|102.2 | 126.4| 141.6
  1909 |160   |142.2 |120.4 |122.6 |154.4 | 153.8| 141.6|106.4 | 134.8| 168.2
       |      |      |      |      |      |      |      |      |      |
  -----+------+------+------+------+------+------+------+------+------+------
       |Pork, |Pork, | Pork,|Potat-|      |      |      |      |      |
  Year |Salt, |Salt, | Salt,| oes, |Prunes| Rice | Sugar|  Tea | Veal |Vine-
       |Bacon |dry or| Ham  |Irish |      |      |      |      |      | gar
       |      |pickled|     |      |      |      |      |      |      |
  -----+------+------+------+------+------+------+------+------+------+------
  1890 | 95.8 | 95.3 | 98.7 |109.3 |116.8 | 101.3| 118.6| 100.0|  98.8| 102.9
  1891 | 96.6 | 98.9 | 99.3 |116.6 |116.5 | 102.5| 102.7| 100.4|  99.6| 105.5
  1892 | 99.1 |100.5 |101.9 | 95.7 |113.5 | 101.3|  96.2| 100.2| 100.0| 102.7
  1893 |109.0 |108.7 |109.3 |112.3 |115.6 |  98.4| 101.5| 100.1| 100.0|  99.5
  1894 |103.6 |103.4 |101.9 |102.6 |100.9 |  99.0|  93.8|  98.7|  98.7|  99.8
  1895 | 99.4 | 99.2 | 98.8 | 91.8 | 94.2 |  98.8|  91.8|  98.5|  98.5|  98.9
  1896 | 96.7 | 95.5 | 97.6 | 77.0 | 86.8 |  96.7|  96.6|  98.8|  99.5|  97.2
  1897 | 97.4 | 97.3 | 98.2 | 93.0 | 84.3 |  97.9|  95.7|  98.5|  99.9|  97.4
  1898 |100.2 | 99.1 | 95.1 |105.4 | 86.3 | 101.7| 101.3| 100.7| 101.2|  97.9
  1899 |102.9 |101.8 | 99.2 | 96.1 | 85.1 | 102.4| 101.7| 104.4| 103.7|  98.3
  1900 |109.7 |107.7 |105.3 | 93.5 | 83.0 | 102.4| 104.9| 105.5| 104.9|  98.5
  1901 |121.0 |117.5 |110.2 |116.8 | 82.6 | 103.5| 103.0| 106.7| 108.8|  98.9
  1902 |135.6 |132.5 |119.4 |117.0 | 83.4 | 103.5|  96.1| 106.0| 114.9|  99.1
  1904 |137.9 |125.8 |118.4 |121.3 | 79.6 | 101.6| 101.9| 105.8| 115.5|  98.9
  1905 |138.8 |126.0 |118.5 |110.2 | 81.4 | 102.6|  98.2| 105.5| 123.2| 102.6
  1907 |157.3 |141.2 |130.7 |120.6 | 88.4 | 108.5|  99.6| 105.3| 125.0| 104.5
  1908 |142.4 |137.4 |112.0 |138.4 |  --  | 105.1| 100.0| 108.6| 124.2| 112.4
  1909 |180.0 |151.2 |145.0 |120.0 |  --  | 103.3| 105.0| 109.0| 130.2| 113.0
       |      |      |      |      |      |      |      |      |      |
  -----+------+------+------+------+------+------+------+------+------+------

No authority is claimed for the prices in these tables for the
years 1908 and 1909. They merely represent the tendencies in those
years, as found in official and unofficial wholesale prices of the
several commodities, and there are often striking divergences between
wholesale and retail prices over short periods. Eventually they
follow the same course, although not always in the same proportion.

Now let us see how the average retail price of these 30 articles of
food compares with the average daily pay of the four representative
classes of railway employes in train service for the ten years 1899
to 1909.


  =====================+========================================+=========
                       |       Average Daily Compensation       |Relative
                       +---------+---------+----------+---------+Prices of
                       |         |         |          |  Other  |  Food,
       Year            |Enginemen| Firemen |Conductors| Trainmen|1890-1899
                       |         |         |          |         |  = 100
  ---------------------+---------+---------+----------+---------+---------
  1899                 |  $3.72  |  $2.10  |  $3.13   |  $1.94  |   99.6
  1900                 |   3.75  |   2.14  |   3.17   |   1.96  |  101.5
  1901                 |   3.78  |   2.16  |   3.17   |   2.00  |  105.5
  1902                 |   3.84  |   2.20  |   3.21   |   2.04  |  110.9
  1903                 |   4.01  |   2.28  |   3.50   |   2.27  |  111.6
  1905                 |   4.12  |   2.38  |   3.50   |   2.31  |  112.5
  1906                 |   4.12  |   2.42  |   3.51   |   2.35  |  116.2
  1907                 |   4.30  |   2.54  |   3.69   |   2.54  |  120.7
  1908                 |   4.46  |   2.65  |   3.83   |   2.64  |  117.7
  1909                 |   4.46  |   2.67  |   3.76   |   2.60  |  127.7
                       +---------+---------+----------+---------+---------
    Per cent. increase |   19.9  |  27.1   |  20.1    |  34.0   |   28.2
  ---------------------+---------+---------+----------+---------+---------

Here it will be observed the percentage of increase in the average
daily compensation of "Other trainmen" exceeds the relative increase
in the price of food, that of firemen almost equals it, while that of
enginemen and conductors is below it by approximately 8 points. But,
as demonstrated in the table from the Eighteenth Annual Report of
the Commissioner of Labor (1903), a smaller percentage of the income
of enginemen and conductors is spent on food than of those employes
receiving lower pay.

Moreover as only two-fifths of all expenditures is spent on food
an increase of 20% in wages would take care of a 50% advance in
the average price of food--provided the increase in wages was not
attended by a corresponding increase in every other item entering
into the cost of living.

And right here's the rub with any attempt to measure wages by the
cost of living. Which is the egg and which is the hen, in the matter
of precedence. Does the cost of living lay the income or does the
income hatch the cost of living?

Economically and theoretically it is not up to the railways to
solve this world old conundrum. Practically they are called on
to meet every advance in the cost of living of their employes to
which in twenty years they have not added a nickel, and they are
denied the privilege, enjoyed by every other employer of labor,
to add its increased cost to the price of their only commodity or
service--transportation.

Today the advances in the scale of railway wages awarded, proposed
and demanded mean an increase of from $60,000,000 to $75,000,000 in
the annual "cost of living" of the railways. The advance made in
1906-07 added $120,000,000 to the pay roll of 1908. Combined, these
two advances within three years mean an increase of approximately
$200,000,000 a year to the operating expenses of the railways without
adding a single unit to efficiency of the labor factor in railway
operation.

_This is equal to an annual first charge of 5% on $4,000,000,000!_
Imagine the hue and cry from the press, the immediate injunctions
from Washington, the despondent wail from Wall Street, if the
railways proposed to pour that much "water" into their own cost of
living without getting a mile of track, a single engine, car, or
coach, a cubic yard of ballast, one untreated tie or any semblance of
improvement or new facility to show for the vast expenditure!

And yet the railways have their increased cost of living to meet just
as the rest of us. Nothing they need and must have can be purchased
at the prices of a few years back. When you mention steel rails you
have named about the only railway necessity that has not advanced
its cost of living in recent years, and the railways have to buy
100-pound rails where five years ago 80-pound rails sufficed, and ten
years ago 70 pounds was heavy enough for the lighter cars and engines
of the time.

But at the first suggestion of advancing rates to meet advancing
prices of commodities the Commissions were overwhelmed with protests
from shippers and the paring of freight rates down went on as the
prices of the goods they carried went up.

In ten years the price of lumber advanced nearly 50%. As a cheap
bulky commodity it had enjoyed a low rate in order to move it and
it was moved at the expense of other commodities. When it was
able to pay a little more toward the cost of getting it to market
the proposal of an advance was met with indignant protests from
lumber shippers and dealers and reversed thumbs by the sympathetic
commissions.

The railways pay more for their lumber and other material today than
they did ten years ago but they will have to fight for any advance
in rates to meet this part of their cost of living. It is said to
be a poor rule that will not work both ways--but the cost of living
seems to have only one way of working so far as railway economics are
concerned.

Just as a straw to indicate that high prices of food are the result
and not the basis of high wages the following table of comparative
prices in London and New York from the New York _Times_ of March 27,
1910, is instructive:


COMPARATIVE RETAIL PRICES OF ARTICLES OF FOOD IN LONDON AND NEW YORK
IN MARCH, 1910.

  =====================================+============+=============
                                       |  London.   |   New York.
                                       |   Cents.   |    Cents.
  -------------------------------------+------------+-------------
  Apples, 1 lb                         |   4 to 6   |      10
  Bread, 1 lb                          |      4     |       5
  Butter, 1 lb                         |  24 to 32  |   30 to 35
  Cheese, 1 lb                         |  14 to 16  |   18 to 22
  Cocoa, 1 lb                          |  16 to 36  |   25 to 50
  Coffee, 1 lb                         |  16 to 30  |   20 to 50
  Currants, 1 lb                       |   4 to 8   |    8 to 12
  Eggs, 12 to 16                       |     25     |  6 to 12--25
  Codfish, 1 lb                        |   8 to 12  |   15 to 29
  Fish (general), 1 lb                 |   4 to 12  |   10 to 25
  Flour, 3 lbs                         |   9 to 10  |      12
  Meats:                               |            |
    Bacon, 1 lb                        |  16 to 24  |   25 to 30
    Beef, 1 lb                         |  16 to 20  |   22 to 30
    Pork, 1 lb                         |  12 to 16  |   20 to 24
  Milk, 1 pint                         |      4     |    4 to 5
  Oatmeal, 1 lb                        |   4 to 6   |    5 to 10
  Onions, 1 lb                         |      2     |       4
  Oranges, 1 doz                       |  10 to 12  |   18 to 50
  Potatoes, 1 lb                       |   1 to 2   |    3 to 4
  Prunes, 1 lb                         |   8 to 12  |   10 to 18
  Raisins, 1 lb                        |   6 to 10  |   10 to 16
  Rice, 1 lb                           |      4     |       6
  Syrup, 1 lb                          |      6     |      10
  Sugar white, 1 lb                    |      6     |       6
  Sugar, yellow, 1 lb                  |      4     |       5
  Tapioca, 1 lb                        |      8     |      10
  Tea, 1 lb                            |  20 to 60  |   30 to 1.50
  Tomatoes, 1 lb                       |      8     |      12
  -------------------------------------+------------+-------------

The amazing feature of this statement is that the United States
produces and exports to the United Kingdom enormous quantities of
breadstuffs, meat and provisions, which constitute the chief articles
of food in London and which are sold there at prices from 20% to 25%
lower than in New York. Clearly it is the high scale of wages that
fosters the high cost of living in the United States and there can be
little question but it breeds the high wages it feeds on.

It is humanly certain, though economically unsound, that wages will
continue to advance with the cost of living and will not recede
proportionately as prices of food fall. But both will decline
together when for any considerable period there is a surplus of
efficient labor for the requirements of American industry. Even
railway labor in the most stable of all employments yielded to this
influence in 1893 and 1894; and the prices of food receded to the low
mark in the following years 1895, 1896 and 1897. Not until wages took
their upward turn in 1898 did the cost of food begin to show above
the index average of 1890-1899.




IV

CAPITALIZATION


According to the Twenty-third Annual Report of the Interstate
Commerce Commission the amount of railway capital, including stocks
and bonds "outstanding in the hands of the public on June 30, 1908,
was $12,840,091,462, which, if assigned on a mileage basis, shows a
capitalization of $57,230 per mile of line."

In the face of all the fustian about over-capitalization of American
railways, this is a most remarkable admission, not only of their
moderate, but of their decreasing capitalization per mile.

In its report on the Intercorporate Relationships of Railways, dated
March 10, 1908, the Commission found that as the result of its
investigation the figure for railway capital outstanding in the hands
of the public, "Measuring the claim of railway securities on railway
revenues," reduced the amount "from $67,936 per mile of line (1906)
to $58,050 per mile of line."

Of course there was never any justification for using the larger sum
as a true measure of railway capitalization, for it was known to
contain at least 15% duplicated capital.

In its Statistics of Railways for the year ending June 30, 1907, the
Commission gave the net amount of railway capital outstanding in the
hands of the public at that date, "assigned on a mileage basis as
$58,298 per mile of line," or $1,068 more than the figure reported
for 1908.

As the computation for 1908 was made on a basis of 224,363 miles of
line, this would indicate a shrinkage of no less than $239,616,480 in
the par value of railway capital. It is needless to say there was no
such shrinkage.


NET CAPITALIZATION IN 1909.

Following the earlier judgment of the Official Statistician, this
Bureau seeks to arrive at a fair approximation of the capitalization
of the railways of the United States through the reports of operating
roads and the capitalization of the rentals paid for leased roads.
This, in the more recent language of the Statistician, furnishes the
only capitalization that "measures the claim of railway securities on
railway revenues."

Applied to the returns received by this Bureau from 221,132 miles of
operated line, this formula yields the following result for the year
ending June 30, 1909:


SUMMARY SHOWING CAPITALIZATION OF 368 COMPANIES OPERATING 221,132
MILES OF LINE FOR THE YEAR ENDING JUNE 30, 1909.

  ======================================+=================================
                                        |       Capitalization
                                        |           1909
                                        |     (182,046 Miles Owned)
  --------------------------------------+----------------+----------------
  Capital stock                         | $6,199,919,551 |
  Funded debt                           |  8,015,841,805 |
  Receivers' certificates               |     20,497,447 |
                                        |----------------+ $14,236,258,803
  Rental of 39,086 miles, $120,784,982, |                |
      capitalized at 5%.                |                |   2,415,699,640
                                        |                +----------------
           Total                        |                | $16,651,958,443
                                        |                |
  Deduct:(a)                            |                |
    Railway stocks owned (actual value) | $1,889,157,214 |
    Other stocks owned (actual value)   |    206,461,423 |
    Railway bonds owned (actual value)  |  1,054,095,905 |
    Other bonds owned (actual value)    |    140,282,728 |
                                        |----------------+   3,289,997,270
                                        |                |
  Net capitalization, 1909              |                | $13,361,961,173
  Net capitalization per mile operated  |                |          60,425
  --------------------------------------+----------------+----------------

  (a) The par value of these stocks and bonds owned is given
      as $4,739,231,832.

An estimate of $25,000 per mile for the 11,870 miles of line not
reporting to this Bureau would add $296,750,000 to the above total.
From this should be deducted $150,000,000 for the sum assigned by
the Official Statistician "to other properties," and we arrive at
the following close approximation of the true measure of the capital
employed in the transportation industry of the United States:


  =======================================================+===============
  Net capitalization, 233,002 miles operated line, 1909  |$13,508,711,173
  Net capitalization per mile of line                    |         57,962
  Net capitalization per mile of track                   |         39,730
  -------------------------------------------------------+---------------

In computing the average capital per mile last given, no allowance
has been made for the 8,927 miles operated under trackage rights for
the sufficient reason that the rental paid therefor is represented in
the total capitalization just as fully as if so much capital had been
expended in the construction of that many miles of line.

It is worthy of note that the net capitalization thus arrived at
through a straightforward analysis of the returns of the operating
companies is in substantial agreement with the Commission's report on
the Intercorporate Relationship of Railways in 1908. The construction
of 11,000 miles of line since 1906 would undoubtedly account for the
difference between $58,050 and $57,962 per mile of line.


SUMMARY SHOWING NET CAPITALIZATION OF THE RAILWAYS OF THE UNITED
STATES, 1909-1904.

  ==================+==================+=========
      Year          |     Net          | Per Mile
                    |    Capital       | of Line
  ------------------+------------------+---------
  1909              | $13,508,711,173  | $57,962
  1908              |  13,007,012,563  |  58,864
  1907              |  13,064,279,303  |  59,600
  1906              |  12,628,000,000  |  57,966
  1905              |  11,167,105,992  |  53,328
  1904              |  10,711,794,278  |  52,099
  ------------------+------------------+---------

Owing to the intercorporate ownership of stocks and bonds and the
consequent intercorporate payments of interest and dividends, it
is no easy matter to make an entirely satisfactory estimate of the
return paid to capital out of the purely transportation revenues
of the railways. But the persistent reiteration by the Official
Statistician of the fictitious aggregate of all the dividends paid by
operating and non-operating companies, covering in 1908, by his own
admission, $3,927,453,365 duplicated capital, justifies the attempt.

The operating income of the roads reporting to this Bureau for the
year 1909 is arrived at thus:


  ===============================================+===============
  Gross earnings (221,132 miles operated)        | $2,375,141,766
  Operating expenses                             |  1,568,008,389
                                                 +---------------
      Net earnings from operation                | $  807,133,377
      Less taxes                                 |     82,650,214
                                                 +---------------
  Net operating income                           | $  724,483,163
  -----------------------------------------------+---------------

This $724,483,163 is the balance in the hands of the 368 companies
of the moneys received by them from transportation, or, as the
Official Statistician now calls it, "rail operations," for the
payment of interest, rent, other deductions, dividends, additions and
betterments, reserves, surplus and deficits. But before proceeding to
this distribution these companies received $200,725,696 income from
other sources, principally interest and dividends on stocks and bonds
owned and for rent of track, and a net balance of $5,410,338 from
outside operations. The total of these two sums, $206,136,034, may be
arbitrarily applied first to offset the item of rent, $120,784,982,
paid for leased lines and track, and the balance in payment of
interest and dividends in proportion to the value of bonds and stocks
owned as above, viz.: 36% and 64%, respectively.

This enables us to make the following distribution of the net
operating income of the railways reporting to this Bureau, as follows:


  ===============================+=============+==========================
  Net operating income, as above |             |             |$724,483,163
  Disposition of same:           |             |             |
    Interest on funded debt      |$324,181,521 |             |
    Less paid from "other income"|  30,843,416 |$293,338,105 |
    Interest on current liab-    |             |             |
          ilities                |             |  22,546,779 |
    Other deductions             |             |  70,174,473 |
    Dividends preferred stock    |  50,183,739 |             |
    Dividends common stock       | 176,607,550 |             |
                                 +-------------+             |
                                 |$226,791,289 |             |
    Less paid from "other income"|  54,832,742 | 171,958,547 |
                                 +-------------+             |
    Dividends on other securities|             |     769,222 |
    Additions and betterments    |             |             |
        charged to income        |             |  24,807,546 |
    Appropriations to reserves   |             |  16,984,447 |
    Miscellaneous                |             |   5,602,761 |
    Deficits of weak lines       |             |   4,996,195 |
    Surplus available for adjust-|             |             |
        ments and improvements   |             | 113,205,088 |$724,483,163
  -------------------------------+-------------+-------------+------------

This table shows the actual disposition made of the net income from
operation of the roads reporting to this Bureau, representing 97% of
the railway business of the United States, except that $120,784,982
of the income from other sources has been eliminated from the account
and applied to offset the rental paid by the reporting roads.

It will be observed that the gross dividends declared were only
$226,791,289, which is 3.64% on the par value of the stock of the 368
reporting companies.


MISREPRESENTATIONS AS TO DIVIDENDS.

The discrepancy between this condition and the official statement as
to dividends declared in 1908 calls for an analysis of the latter.
This reads, "The amount of dividends declared during the year (1908)
was $386,879,362, being equivalent to 7.99% on dividend-paying stock.
For the year ending June 30, 1907, the amount of dividends declared
was $308,088,027."

Two income accounts--one of operating roads and the other of leased
roads--for the year ending June 30, 1908, give a clew as to how the
Official Statistician more than doubles the dividends actually paid
out of transportation revenues. The gross total is made up of these
four items:


  ===================================================+=============
  Operating roads:                                   |
    Dividends declared from current income           | $271,328,453
    Dividends declared out of surplus                |   57,733,808
                                                     |
  Leased roads:                                      |
    Dividends declared from current income           |   33,843,577
    Dividends declared out of surplus                |   27,550,596
                                                     +-------------
        Total                                        | $390,456,434
  ---------------------------------------------------+-------------

As these income accounts show that the operating companies received
$280,427,460 "other income" from outside operations and sources other
than transportation, and the leased roads received $111,153,013
"income from lease of road," the source of the major part of this
fictitious dividend is revealed. The $280,427,460 from other sources
would pay the entire income of the leased roads and leave nearly
$170,000,000 to extinguish so much of the dividends declared by the
operating roads.

Modified as to details, this is what actually occurs every year. In
the year 1908 the total amount paid out of transportation revenues on
account of capital of the 97% of the railways of the United States
reporting to this Bureau was represented in the sums:


  ===================================================+=============
  Net interest on funded debt                        | $282,354,000
  Interest on current liabilities                    |   31,835,708
  Rent paid for lease of roads                       |  113,529,261
  Net dividends                                      |  104,074,006
                                                     +-------------
        Total                                        | $531,792,975
  ---------------------------------------------------+-------------

This total was equivalent to 4.15% on the net capitalization
of the roads represented. The rental paid the lessor roads
constituted the fund from which those roads paid their interest and
dividends. Further remark on the misleading and harmful statement
of the Official Statistician as to dividends declared in 1908 is
unnecessary.




V

COST OF CONSTRUCTION


Incomplete as are the figures of the cost of the railways of the
United States, and exclusive as they are of the millions put back
into the properties out of income for additions, betterments and
reconstruction in the process of operation, yet the statistics of the
cost of construction and equipment afford a complete answer to all
charges that American railways are over-capitalized.

Upon the question of the cost of road and equipment in 1909, the
returns of the 368 roads reporting to this Bureau furnish the
following data:


SUMMARY OF COST OF ROAD AND EQUIPMENT COVERING 221,132 MILES OF
OPERATED LINE FOR 1909.

  =====================================================+================
                         Item                          |    Amount
  -----------------------------------------------------+----------------
  Cost of road (182,046 miles owned)                   |  $6,603,504,463
  Cost of equipment                                    |   1,122,409,813
  Undistributed cost of road and equipment             |   3,080,064,960
  Cost of 39,086 miles leased lines rental capitalized |   2,415,699,876
                                                       +----------------
        Total                                          | $13,220,678,876
  -----------------------------------------------------+----------------

Adding to this $290,750,000 to represent the 11,870 miles of road not
reporting to this Bureau at $25,000 per mile, we obtain

  =$13,417,438,876=

as the cost of road and equipment of the 233,002 miles of line
employed in the transportation industry of the United States in 1909,
or

  =$58,031 per mile of line.=

This is an underestimate by reason of the failure of a few lines
to furnish even approximate figures on the accumulated cost of
their properties. Averaging the cost of locomotives at $15,000,
of passenger cars at $6,000, of freight cars at $800, and of
company's cars at $500 apiece--their present cost rates much
higher--the equipment of American railways represents an investment
of over $3,000,000,000, and its bare maintenance alone involves an
expenditure of nearly $400,000,000 annually.


PHYSICAL VALUATION OF THE RAILWAYS.

It is worthy of passing note that just as the railway companies have
shown their indifference to a physical valuation of their property,
the clamor of regulators and agitators in its favor has subsided.
The proposal lost its attractiveness to them the moment they became
convinced that such an investigation would put a valuation on the
roads so high as to take not only the wind out of their sails but the
last drop of water out of their mouths. To-day the only insistent
demand for this futile undertaking comes from quarters interested in
the distribution of the appropriation of several millions it would
cost.

Credit for the reversal in the popular and political attitude on this
subject is largely due to the valuations attempted by the states of
Minnesota, Washington and Wisconsin. The results in these states may
be briefly summarized as follows:


  ===============================+========+==============+===============
                                 |  Miles |Capitalization|  Valuation by
                                 | of Line|  per Mile    |State, per Mile
  -------------------------------+--------+--------------+---------------
  Minnesota, 1907                |  7,596 |    $44,206   |     $54,201
                                 |        |              |
  Washington, 1908:              |        |              |
    Great Northern               |    806 |     44,078   |      73,900
    Northern Pacific             |    942 |     70,278   |     106,500
    Oregon R. R. & Navigation Co |    501 |     43,012   |      38,900
                                 |        |              |
  Wisconsin, 1906                |  7,135 |     33,424   |      34,630
  -------------------------------+--------+--------------+---------------

Even Senator Albert B. Cummins of Iowa has seen such a bright light
on this subject that in his speech before the Traffic Club of Chicago
last February he said that he would not be willing to make a present
valuation of railroad property a basis for determining rates,
"for the reason that it was more than probable that the present
capitalization of between fifteen and sixteen billions would be
increased to twenty billions."

In the Bureau's Statistics for 1908 it was said:

"If the valuations in Minnesota and Washington, made by none too
friendly commissions, are any criterions of what a national valuation
made under presumably unbiased federal authority would be, the
present cost to reproduce the railways of the United States would be
nearer $20,000,000,000 than any sum within the anticipations of those
agitating for such valuation."


CAPITALIZATION OF FOREIGN RAILWAYS.

With both sides of the balance sheet testifying to a capital
investment in American railways of under $60,000, and official
valuation abandoned _because it would demonstrate that they could not
be reproduced for less than $80,000 per mile_, the reader is asked
to compare the American figures with those of the capitalization, or
cost of construction, of the principal foreign countries set forth
below. These have been compiled from the latest available official
returns.


SUMMARY OF RAILWAY CAPITALIZATION OF THE PRINCIPAL FOREIGN RAILWAYS
FROM LATEST DATA.

  ======+===========================+==========+=================+=========
   Year |         Country           | Miles of | Capital or Cost |   Per
        |                           |   Line   | of Construction |   Mile
  ------+---------------------------+----------+-----------------+---------
        |Europe:                    |          |                 |
  1908  |  United Kingdom           |   23,205 |  $6,382,296,742 | $275,040
  1908  |  Germany                  |   35,558 |   3,903,848,400 |  109,788
  1907  |  Russia in Europe (excl-  |          |                 |
        |     usive of Finland)     |   32,900 |(a)3,170,876,360 |   80,985
  1907  |  France                   |(b)24,730 |   3,447,366,000 |  139,390
  1907  |  Austria                  |   13,427 |   1,515,576,885 |  112,879
  1907  |  Hungary                  |   11,769 |     741,586,391 |   63,010
  1907-8|  Italy (State roads only) |    8,699 |   1,086,000,000 |  124,730
  1905  |  Spain (13 roads)         |    6,840 |     583,632,000 |   85,327
  1906  |  Sweden                   |    7,938 |     257,408,450 |   32,427
  1907  |  Belgium (State only)     |    2,537 |     430,800,000 |  169,806
  1907  |  Switzerland              |    2,740 |     298,709,210 |  109,000
        |                           |          |                 |
        |Other Countries:           |          |                 |
  1909  |  Canada                   |   24,104 |   1,608,990,656 |   66,752
  1908  |  British India            |   30,576 |   1,364,669,375 |   44,632
  1907  |  Argentine Republic       |   13,690 |     820,433,796 |   59,930
  1908  |  Japan                    |    4,444 |     190,173,728 |   42,800
  1909  |  United States of America |  233,002 |  13,508,711,173 |   57,976
  ------+---------------------------+----------+-----------------+---------

  (a) Russian capitalization, including railways in Asia, covers a total
      of 39,277 miles, from which the capital per mile is computed.

  (b) This is exclusive of 4,259 miles of local interest.

The most striking feature in this table is the steady advance it
shows in the capital cost of German railways. In ten years this has
increased from 251,597 marks per kilometer in 1898 to 283,608 in
1908, _i. e._ 31,731 marks per kilometer or $12,282 per mile. This
means an increase of $991,687,440 in capital cost for an increase of
only 5,525 miles of line.




VI

OWNERSHIP OF AMERICAN RAILWAYS


Returns to this Bureau place the number of stockholders of record at
the date of the last election of directors prior to June 30, 1909, of
the 368 roads reporting at 320,696. As only 182,046 of the 221,132
miles operated by these roads was covered by the capital stock, this
would show 1¾ stockholders for each mile of road and would indicate
that there are at least 415,000 stockholders in all the railways of
the United States. Owing to the incompleteness of the returns on this
subject and the fact that large blocks of stock are held in the names
of associations and trustees, it is safe to estimate that the actual
ownership of railway stock is distributed among at least 440,000
persons.

In 1905 the Commission reported the number of stockholders of record
prior to June 30, 1904, as 327,851, but has given no later figures.
It may be of interest to compare these figures with the partial
reports to this Bureau since then.


  ===================+=================+==============
  Year               |    Number       |   Number of
                     |   Reporting     |  Stockholders
  -------------------+-----------------+--------------
  1904               |  1,182 roads    |    327,851
  1906               |    284   "      |    226,986
  1907               |    317   "      |    240,554
  1908               |    315   "      |    315,727
  1909               |    340   "      |    320,696
  -------------------+-----------------+--------------

If the ownership of railway bonds, which is even more widely
distributed than that of stocks, could be traced, it would be found
that over a million investors are interested in the financial welfare
of the railways. This would give to each an interest of $13,000, from
which the average income is not over $520 a year.

The attempt of the Commission in 1908 to secure evidence that the
control of the railways was concentrated in a few hands by calling
for a statement of the "ten largest holders of voting securities"
of the reporting companies having established that nowhere did they
_own_ a majority or an approach to a majority of the controlling
stock, inquiry along that line was dropped in 1909.

In railways, as in any republic, the latent power is widely
distributed among the many, while the administrative responsibility
is necessarily entrusted to the few.




VII

PUBLIC SERVICE OF THE RAILWAYS


It is the reproach of our system of government statistics of railways
that their first concern is financial results, which the government
takes no thought to improve, and the harrowing roll of accidents, and
not the adequacy of the service and the steady development of the
means of transportation. Every month, almost every week, the public
is informed of the volume of traffic, and every quarter the record of
casualties is told in sensational head lines. It is left for belated
annual reports to record the public service of this great industry
upon whose progressive efficiency every other industry in the United
States depends.

It is not upon what the railways earn, but upon what they DO that the
whole industrial fabric of the republic rests. It is not upon the
dividends they pay but upon the traffic they carry, the net income
withheld from dividends and put into improvements, that their success
as carriers depends.


THE PASSENGER TRAFFIC.

In considering the public service of the railways it is customary to
give first attention to the passenger traffic. This is not because it
is the most important branch of the service but because passengers
are numbered by millions, where thousands suffice in the enumeration
of the shippers, who frequently mistake themselves for the entire
American people.

In twenty years between June 1, 1889, and June 1, 1909, the
population of the United States increased from 61,289,000 to
88,806,000, or nearly 45%. In the meantime the passenger cars
provided by the railways increased from 24,586 to 46,026, or over
87%. But this does not measure the liberal provision made by the
railway for the travelling public, which is more fully and accurately
expressed by the amazing growth of the number of passengers carried
one mile from 11,553,820,445 in 1889 to approximately 29,452,000,000
in 1909, or nearly 155%.

Here is shown an increase of cars not far short of double the
increase in population and an increase in passengers carried
proportionately greater than the numerical increase in cars.

In the meantime the average receipts of the traffic have declined
from 2.165 cents per passenger mile in 1889 to 1.916 in 1909--a
decline of over 11%, although every item involved in the service,
locomotives, cars, track, stations, labor, etc., cost more. The
passenger service, except as precursor to the freight service, and in
certain densely populated sections, was unremunerative in 1889 and is
more so now. It is maintained at the expense of the freight service
by what the Railroad Commission of Wisconsin has characterized as "a
species of piracy practiced upon the shippers of freight."

The salient features of the passenger service reported to this Bureau
for the year 1909, as compared with the final official returns for
the preceding year, are shown in the following statement:


  ======================================+================+================
            Item                        | Bureau Figures |Official Figures
                                        |    1909        |      1908
  --------------------------------------+----------------+----------------
  Miles of line represented             |        221,132 |        230,494
  Passengers carried.                   |    854,255,337 |    890,009,574
  Passengers carried 1 mile             | 28,788,855,000 | 29,082,836,944
  Passenger revenue                     |   $551,634,278 |   $566,832,746
  Mileage of passenger trains           |    491,903,107 |    505,945,582
  Average number of passengers in train |             58 |             54
  Average cars to a train               |            5.3 |
  Passenger car miles                   |  2,594,508,987 |  2,705,659,994
  Average passenger journey (miles)     |          33.71 |          32.66
  Average receipts per passenger mile   |                |
      (cents)                           |          1.916 |          1.937
  --------------------------------------+----------------+----------------

According to the monthly reports to the Interstate Commerce
Commission covering an average of 233,002 miles of line, the
passenger revenues in 1909 were $564,302,580, or $1,943,077 less than
the above revenues for only 228,164 miles of line in 1908.

The average receipts per passenger mile in 1909 are the lowest ever
reported for American railways.

Taken in connection with the official returns covering the period
since 1900, the above figures afford evidence of the confiscatory
effect of the 2-cent passenger laws on railway revenues, as appears
from the following statement:


SUMMARY OF PASSENGER MILEAGE, REVENUE AND RECEIPTS PER PASSENGER
MILE, 1900 TO 1909.

  ============+================+===========+==============+==========
              |                | Increase  |              |
              |   Passengers   |   Over    |              | Receipts
    Year      |    Carried     | Preceding |  Passenger   |   per
              |   One Mile     |   Year    |   Revenue    | Passenger
              |                |(Per Cent) |              |   Mile
  ------------+----------------+-----------+--------------+----------
  1900        | 16,038,076,200 |           | $323,715,639 |   2.003
  1901        | 17,353,588,444 |     8.2   |  351,356,265 |   2.013
  1902        | 19,689,937,620 |    13.4   |  392,963,248 |   1.986
  1903        | 20,915,763,881 |     6.2   |  421,704,592 |   2.006
  1904        | 21,923,213,536 |     4.8   |  444,326,991 |   2.006
  1905        | 23,800,149,436 |     8.6   |  472,694,732 |   1.962
  1906        | 25,167,240,831 |     5.7   |  510,032,583 |   2.003
  1907        | 27,718,554,030 |    10.1   |  564,606,343 |   2.014
  1908        | 29,082,836,944 |     4.9   |  566,245,657 |   1.937
  1909        | 29,452,000,000 |     1.3   |  564,302,580 |   1.916
              |                |           |              |
  Increase,   |                |           |              |
    per cent  |           83.7 |      --   |         74.6 |      --
  ------------+----------------+-----------+--------------+----------

Here it is shown that the passenger service rendered has increased
12% more than the passenger revenues. But more significant than
this is the column of yearly increases in service by percentages.
This utterly explodes the theory that passenger travel is greatly
stimulated by low fares--aside from some positive incentive to
increased travel, such as periodical expositions, the Louisiana
Purchase Exposition for instance, the effect of which is clearly
traceable in the increased service in 1905, which includes the heavy
travel during the months of heavy attendance, July 1 to December 1,
1904.

The 2-cent passenger laws were passed so as to become generally
effective July 1, 1907, and their effect on passenger receipts during
the following year was such that these receipts were actually less in
1909 than in 1907, although the service performed by the railways was
over 6% greater. Had the railways received the same rate in 1909 that
they did in 1907 their revenue from passengers would have been nearly
$29,000,000 more than it was.


PASSENGER TRAFFIC 1909-1888.

In the next statement the salient facts in regard to the passenger
traffic since the Commission began collecting the data is passed
under review.


  ======+==========+==========+=======+========+=======+=======+========
        |          |          |       |        |       |       |Average
        |Passengers|Passengers|Mileage|Average |Average|Pass.  |Receipts
  Year  | Carried  | Carried  | Pass. | Pass.  |Journey|Revenue| per
        |(Millions)| One Mile | Trains|in Train| Miles |(Mill.)|Pass.
        |          |(Millions)|(Mill.)|        |       |       |Mile
        |          |          |       |        |       |       |(Cents)
  ------+----------+----------+-------+--------+-------+-------+-------
  1909  |   888    |  29,452  |   507 |    58  |   33  |   504 | 1.916
  1908  |   890    |  29,082  |   500 |    59  |   33  |   566 | 1.937
  1907  |   873    |  27,718  |   509 |    51  |   32  |   564 | 2.014
  1906  |   797    |  25,167  |   479 |    49  |   31  |   510 | 2.003
  1905  |   738    |  23,800  |   459 |    48  |   32  |   472 | 1.962
  1904  |   715    |  21,923  |   440 |    46  |   31  |   444 | 2.006
  1903  |   694    |  20,915  |   425 |    46  |   30  |   421 | 2.006
  1902  |   649    |  19,689  |   405 |    45  |   30  |   392 | 1.986
  1901  |   607    |  17,353  |   385 |    42  |   29  |   351 | 2.013
  1900  |   576    |  16,038  |   363 |    41  |   28  |   323 | 2.003
  1899  |   523    |  14,591  |   347 |    41  |   28  |   291 | 1.978
  1898  |   501    |  13,379  |   334 |    39  |   27  |   267 | 1.973
  1897  |   489    |  12,256  |   335 |    37  |   25  |   251 | 2.022
  1896  |   511    |  13,049  |   332 |    39  |   26  |   266 | 2.019
  1895  |   507    |  12,188  |   317 |    38  |   24  |   252 | 2.040
  1894  |   540    |  14,289  |   326 |    44  |   26  |   285 | 1.986
  1893  |   593    |  14,229  |   335 |    42  |   24  |   301 | 2.108
  1892  |   560    |  13,362  |   317 |    42  |   24  |   286 | 2.126
  1891  |   531    |  12,844  |   308 |    42  |   24  |   281 | 2.142
  1890  |   492    |  11,847  |   285 |    41  |   24  |   260 | 2.167
  1889  |   472    |  11,553  |   277 |    42  |   25  |   254 | 2.199
  1888  |   412    |  10,101  |   252 |    40  |   24  |   237 | 2.349
  ------+----------+----------+-------+--------+-------+-------+-------
  Increase 1888 to |          |       |        |       |       |
  1907  115%       |    191%  |  101% |    45% |   38% |  138% |
  Decrease         |          |       |        |       |       | 18.4
  ------+----------+----------+-------+--------+-------+-------+-------
The several increases shown in the first, second, third and sixth
columns of the table reflect the general advancement in passenger
traffic. That of 45% in the average passengers to a train marks the
progress in density of that traffic which may eventually place it
on a profitable basis. In Massachusetts, where this density yields
an average of 79 passengers to a train there is no demand for a
two-cent rate statute, for the conditions have made a rate of 1.64
cents profitable. In the group of states consisting of Ohio, Indiana,
Michigan, Illinois, Iowa, Wisconsin and Minnesota, where the density
of traffic yields only 46 passengers by train, a statutory two-cent
fare becomes confiscatory because it costs at least one dollar to
operate a passenger train one mile and 46 times two cents is only
92 cents. Moreover the 46 passengers per train is only an average
and there are as many trains that average less as more. The average
has to be raised above 50 to yield any margin of profit on passenger
traffic. If it were not for the density of traffic in the New England
and North Atlantic group of states the average for the entire United
States would be well below 46 passengers per train.

The steady increase in the distance traveled per passenger reflects
the effect of trolley competition in diverting the short haul
passenger traffic.

The most noteworthy feature of the seventh column is the decline
of 98/1000ths of a cent in the average receipts per passenger mile
between 1907 and 1909, making a new low record after hovering around
the two cent mark for fourteen years. As noted above, this reduction
in the average cost the railways nearly $29,000,000 on the passenger
traffic of 1909.

In this connection it is interesting to recall that between 1888 and
1893 the Official Statistician, then as now Professor Adams, made the
following computation of the average cost of carrying one passenger
one mile for the whole United States:


  ============================+======+======+======+======+======+======
                              | 1888 | 1889 | 1890 | 1891 | 1892 | 1893
  ----------------------------+------+------+------+------+------+------
  Average cost of carrying a  |      |      |      |      |      |
    passenger one mile, cents | 2.042| 1.993| 1.917| 1.910| 1.939| 1.955
  ----------------------------+------+------+------+------+------+------

It will be observed that the average receipts per passenger mile in
1909 are below the computed cost in every one of the years above
named, except 1891. When the advance in the cost of everything
necessary to the service--track, labor, equipment, conveniences,
speed, terminal facilities--is considered, the practical coincidence
of average cost and receipts leaves no margin for legitimate profits.


RECEIPTS FROM MAIL AND EXPRESS.

Closely associated with the passenger traffic of the railways are
the mail and express services. Although principally carried by
passenger trains, each has a special service of its own by mail and
express trains. But all are included under the passenger service.
The receipts from these two branches of the service during the last
decade are shown in the following statement:


SUMMARY OF RECEIPTS FROM MAIL AND EXPRESS, 1899 TO 1908.

  ====================+=====================+=====================
                      |          Mail       |        Express
                      +------------+--------+---------------------
  Year                | Revenues   |Percent-|  Revenues  |Percent-
                      |            | age of |            |age of
                      |            |Earnings|            |Earnings
  --------------------+------------+--------+------------+--------
  1899                |$35,999,011 |  2.74  |$26,756,054 |  2.04
  1900                | 37,752,474 |  2.54  | 28,416,150 |  1.91
  1901                | 38,453,602 |  2.42  | 31,121,613 |  1.96
  1902                | 39,963,248 |  2.31  | 34,253,459 |  2.07
  1903                | 41,709,396 |  2.19  | 38,331,964 |  1.98
  1904                | 44,499,732 |  2.25  | 41,875,636 |  2.12
  1905                | 45,426,125 |  2.18  | 45,149,155 |  2.17
  1906                | 47,371,453 |  2.04  | 51,010,930 |  2.19
  1907                | 50,378,964 |  1.94  | 57,332,931 |  2.21
  1908                | 48,517,563 |  2.03  | 58,602,091 |  2.45
  1909                | 50,935,000 |  2.08  | 63,669,000 |  2.60
                      |            |        |            |
  Increase, per cent  |      41.5  |    --  |     138.0  |    --
  --------------------+------------+--------+------------+--------

Aside from the striking contrast in the percentages of increase of
revenues from these two sources, the most significant feature of this
table is the reversal it shows in their respective importance from
the railway revenue point of view. Prior to 1905, carrying the mails
brought larger, if not more profitable, returns to the railways.
Since then the returns from express have increased so much more
rapidly that they are now nearly 23% more than those from mails.

If proof were needed of the absolute falsity of the charge that the
railways are receiving an exorbitant rate for carrying mail, the
above table of their receipts from the service in connection with
the following statement of mail handled and revenues in view of the
finding of the Joint Commission of Congress in 1899 would furnish it.
After a thorough investigation of the subject lasting from August,
1898, to July, 1900, the Commission came to the following conclusion:

"Upon a careful consideration of all the evidence and the statements
and arguments submitted, and in view of all the services rendered
by the railroads, we are of the opinion that the prices now paid to
the railroad companies for the transportation of the mails are not
excessive, and recommend that no reduction thereof be made at this
time."

The increase in the railroad service since this report was made is
shown in the following statement of miles of mail transportation
by railroads, the postal revenues and the number of clerks in the
railway mail service since 1899:


  ===============================+==============+=============+=========
                                 |    Annual    |             |
                                 |Transportation|             |Number of
                                 |   of Mail    |   Postal    | Railway
                                 | by Railroads |  Revenues   |  Mail
                                 |    (Miles)   |             | Clerks
  -------------------------------+--------------+-------------+---------
  1899                           |  287,591,269 | $95,021,384 |  8,388
  1900                           |  297,256,303 | 102,354,579 |  8,695
  1901                           |  302,613,325 | 111,631,193 |  9,105
  1902                           |  312,521,478 | 121,848,047 |  9,627
  1903                           |  333,491,684 | 134,224,443 | 10,418
  1904                           |  353,038,397 | 143,582,624 | 11,621
  1905                           |  362,645,731 | 152,826,585 | 12,474
  1906                           |  371,661,071 | 167,932,783 | 13,598
  1907                           |  387,557,165 | 183,585,006 | 14,357
  1908                           |  407,799,039 | 191,478,663 | 15,295
  1909                           |              | 203,562,383 | 15,866
                                 |              |             |
  Increase in 10 years, per cent |         50.5 |       124.7 |   89.1
  -------------------------------+--------------+-------------+---------

Compared with the increase of only 41.5% in the revenues from mail
received by the railways during the same period, each one of the
above percentages testifies to a positive reduction in the rate
received by the railways for the service. And if the increase in
weight of mail carried in 1909 were known, the contrast between
the service and the pay would be more striking. In 1899 the total
weight of all mail was reported as 635,180,362 pounds. In 1907 the
estimates made from the special weighing placed the weight of mail
carried that year at 1,290,358,284 pounds, or an increase of nearly
105% in eight years. By reference to the above table it will be seen
that the railway revenues from mail between 1899 and 1907 increased
only 40%. The contrast is illuminating. In its light the charge that
the railways are in any way responsible for the postal deficit is
grotesque.


FREIGHT TRAFFIC

According to the monthly returns to the Interstate Commerce
Commission, the proportion of revenues from freight of the railways
of the United States to total earnings from operation, for the years
1908 and 1909, receded to the unusually low figures of 68.51% and
68.88% respectively. The official summary for 1908, based on the
annual returns, shows a proportion of 69.17% for that year, which
probably is nearer the mark.

The annual reports to this Bureau for 1909 yield a proportion of
69.18% for last year.

Accepting this proportion taken from the annual returns as being
based on the same character of reports as those from which former
ratios were derived, the preponderance of freight traffic is shown
in bold relief in the following statement of the ratio of its
revenues to total earnings from operation, 1899 to 1909:


  ===========+=================
             |  Proportion of
             | Freight Revenues
     Year    |    to Total
             |    Earnings
  -----------+-----------------
   1899      |      69.55%
   1900      |      70.56%
   1901      |      70.41%
   1902      |      69.93%
   1903      |      70.39%
   1904      |      69.82%
   1905      |      69.67%
   1906      |      70.54%
   1907      |      70.44%
   1908      |      69.17%
   1909      |      69.18%
  -----------+-----------------

The average proportion for the nine years preceding 1908 is seen to
be slightly above 70%, and the fact that it was almost one point
below 70% in 1908 and 1909 indicates that it was the freight traffic
that bore the brunt of the business depression which curtailed
railway revenues during those years.

In no other of the leading countries of the world does the freight
traffic assume the overwhelming relative proportion that it does in
the United States. In the United Kingdom it amounts to 50.35%; in
France to 53.64%; and in Germany, including express and mail, to 65%.
If these were classed with freight in the United States, it would
raise the proportion for that traffic here to over 74%.


FREIGHT TRAFFIC 1909 AND 1908.

The next statement presents the significant items of the freight
traffic in 1909 for the roads reporting to this Bureau compared with
those of the final official returns for the preceding year.


  ================================+=================+================
                                  |                 |
                  Item            |       1909      |      1908
                                  |  Bureau Figures |Official Figures
  --------------------------------+-----------------+----------------
  Miles operated                  |         221,132 |         230,494
  Number of tons carried          |   1,441,012,426 |   1,532,981,790
  Tons carried 1 mile             | 217,756,776,000 | 218,381,554,802
  Freight revenue                 |  $1,643,028,564 |  $1,655,419,108
  Mileage of freight trains       |     560,602,557 |     587,218,454
  Number of cars in train         |            29.7 |            28.3
  Average number of tons in train |             388 |          351.80
  Average haul per ton (miles)    |           151.1 |          143.83
  Average receipts per ton mile   |                 |
    (mills)                       |            7.54 |            7.54
  --------------------------------+-----------------+----------------

Experience has shown that in comparing these statements of averages
for passenger and freight traffic, allowance has to be made for the
fact that the Bureau's figures include all the great systems and
are exclusive of some 13,000 miles of minor lines. It is difficult
to estimate the effect of these discrepancies with anything like
exactness. But complete returns invariably show a shorter mean
haul and journey for the entire country than the Bureau's figures
indicate and also a less train load of passengers and freight, the
result being a slightly higher average for passenger and freight ton
receipts per mile.

Last year from its returns the Bureau computed the passenger mile
receipts at 1.933 cents and the ton mile receipts at 7.53 mills.
The Commission's final figures were 1.937 cents and 7.54 mills
respectively.


FREIGHT TRAFFIC 1909 TO 1888.

In the next summary is presented a condensed statement of the
significant data relating to the freight traffic for the twenty-two
years that the Commission has been compiling statistics.


SUMMARY OF TONS CARRIED, TON MILEAGE, MILEAGE OF FREIGHT TRAINS,
AVERAGE TONS IN TRAIN, FREIGHT REVENUES AND AVERAGE RECEIPTS PER TON
MILE.

  =====+==========+==========+========+=======+========+========+========
       |          |  Tons    |Mileage |       | Average|        |Receipts
       |  Tons    | Carried  |Freight |Average|Haul per|Freight |per Ton
  Year | Carried  | One Mile |Trains  |Tons in|  Ton   |Revenue |  Mile
       |(Millions)|(Millions)|(Mill.) | Train |(Miles) |(Mill.) |(Cents)
  -----+----------+----------+--------+-------+--------+--------+--------
  1909 |(a)1,486  |  222,900 |   579  |  388  |   151  | $1,682 |  .755
  1908 |   1,532  |  218,381 |   597  |  360  |   143  |  1,655 |  .754
  1907 |   1,796  |  236,601 |   629  |  357  |   131  |  1,823 |  .759
  1906 |   1,631  |  215,877 |   594  |  344  |   132  |  1,640 |  .748
  1905 |   1,427  |  186,463 |   546  |  322  |   130  |  1,450 |  .766
  1904 |   1,309  |  174,522 |   535  |  307  |   133  |  1,379 |  .780
  1903 |   1,304  |  173,221 |   526  |  310  |   132  |  1,338 |  .763
  1902 |   1,200  |  157,289 |   499  |  296  |   131  |  1,207 |  .757
  1901 |   1,089  |  147,077 |   491  |  281  |   135  |  1,118 |  .750
  1900 |   1,081  |  141,596 |   492  |  270  |   130  |  1,049 |  .729
  1899 |     943  |  123,667 |(b)507  |  243  |   131  |    913 |  .724
  1898 |     863  |  114,077 |   503  |  226  |   132  |    876 |  .753
  1897 |     728  |   95,139 |   464  |  204  |   130  |    772 |  .798
  1896 |     765  |   95,328 |   479  |  198  |   124  |    786 |  .806
  1895 |     696  |   85,227 |   449  |  189  |   122  |    729 |  .839
  1894 |     638  |   80,335 |   446  |  179  |   125  |    699 |  .860
  1893 |     745  |   93,588 |   508  |  183  |   125  |    829 |  .878
  1892 |     706  |   88,241 |   485  |  181  |   124  |    799 |  .898
  1891 |     675  |   81,073 |   446  |  181  |   120  |    736 |  .895
  1890 |     636  |   76,207 |   435  |  175  |   119  |    714 |  .941
  1889 |     539  |   68,727 |   383  |  179  |   127  |    644 |  .922
  1888 |     480  |   61,329 |   348  |  176  |   128  |    613 | 1.001
       +----------+----------+--------+-------+--------+--------+--------
  Increase 1888 to|          |        |       |        |        |
  1909      209%  |     263% |   66%  |  120% |   18%  |   174% |
  =Decrease=      |          |        |       |        |        | =24.0=%
  ----------------+----------+--------+-------+--------+--------+--------

  (a) Figures for 1909 computed on basis of returns to this Bureau.

  (b) Includes 75% of mixed train mileage, that being the practice prior
      to 1900.

Mark the one column which shows a decrease. This means a remission
of almost exactly a quarter of a cent per ton mile in the average
receipts from freight. On the tonnage carried in 1909 it meant a
saving of over $540,000,000 to the shippers. In the presence of the
present high price of everything carried by the railways, there is
no ground for assuming that any portion of this half billion dollars
withheld from the railways ever reached the ultimate consumer. On the
contrary the presumption is unavoidable that it has been absorbed by
the shippers and consignors, whose profits are greater than ever.


PROPORTION OF COMMODITIES MOVED 1899-1909.

Referring to the movement of different classes of commodities in his
report for 1904, the Official Statistician said: "A slight change in
the ratio of freight carried for any one of the classes named may
have decided results, not only upon the earnings of the roads, _but
upon the average rate per ton mile_." But without knowing the length
of the haul of the respective classes, any estimate of the effect of
such variation must be largely speculative.

In 1909, for the first time the Bureau undertook to collect the
information as to the tonnage of the main divisions of commodities
carried. Its inquiries were limited to the tonnage originating on
the several roads, and the next statement presents the results in
comparison with the official figures for 1907, which are the last
available:


TONNAGE AND PROPORTION OF DIFFERENT CLASSES OF COMMODITIES MOVED 1909
AND 1907.

  =======================+=======================+=======================
                         |          1909         |          1907
                         +-------------+---------+-------------+---------
  Class of Commodity     |   Tonnage   |         |   Tonnage   |
                         | Reported as |Per Cent | Reported as |Per Cent
                         | Originating |   of    | Originating |   of
                         |   on Line   |Aggregate|   on Line   |Aggregate
  -----------------------+-------------+---------+-------------+---------
  Products of agriculture|  76,955,131 |    9.49 |  77,030,071 |    8.62
  Products of animals    |  21,807,486 |    2.69 |  20,473,486 |    2.29
  Products of mines      | 449,938,248 |   55.50 | 476,899,638 |   53.39
  Products of forests    |  83,679,179 |   10.33 | 101,617,724 |   11.38
                         |             |         |             |
  Manufactures           | 109,625,669 |   13.52 | 137,621,443 |   15.41
  Merchandise            |  35,500,833 |    4.38 |  34,718,487 |    3.89
  Miscellaneous          |  33,318,272 |    4.09 |  44,824,123 |    5.02
                         +-------------+---------+-------------+---------
         Total           | 810,784,818 |  100.00 | 893,184,972 |  100.00
  -----------------------+-------------+---------+-------------+---------

  NOTE.--These tables fail to include nearly 200,000,000 tons unassigned.

The most significant feature of this statement is the marked
decrease, absolutely and relatively, in the tonnage of manufactures
carried. Great as was the decrease in the tonnage of animals carried
there was an increase relatively.

The next statement shows the percentages of commodity tonnage moved
since the Commission has compiled the information divided between low
and high rate freight.


SUMMARY SHOWING PERCENTAGE OF FREIGHT TRAFFIC MOVEMENT BY CLASSES OF
COMMODITIES, 1907 TO 1899.

  Table headings:
  Col A: Products of Agriculture
  Col B: Animals
  Col C: Mines
  Col D: Forest
  Col E: Total
  Col F: Manufactures
  Col G: Merchandise
  Col H: Miscellaneous
  Col I: Total

  =====+======================================+============================
       |          Low Rate Freight            |    High Rate Freight
       |       Percentage of Aggregate        |  Percentage of Aggregate
  Year +-------+------+-------+-------+-------+-------+------+------+------
       |   A   |  B   |   C   |   D   |   E   |   F   |  G   |  H   |   I
  -----+-------+------+-------+-------+-------+-------+------+------+------
  1899 | 11.33 | 3.12 | 51.47 | 10.89 | 76.81 | 13.45 | 4.49 | 5.25 | 23.19
  1900 | 10.35 | 2.87 | 52.59 | 11.61 | 77.42 | 13.41 | 4.26 | 4.91 | 22.58
  1901 | 10.76 | 2.91 | 51.67 | 11.67 | 77.01 | 13.75 | 4.16 | 5.08 | 22.99
  1902 |  9.23 | 2.64 | 52.36 | 11.64 | 75.87 | 14.49 | 4.37 | 5.27 | 24.13
  1903 |  9.56 | 2.63 | 51.56 | 11.67 | 75.42 | 14.39 | 4.69 | 5.50 | 24.58
  1904 |  9.59 | 2.74 | 51.56 | 12.53 | 76.42 | 13.41 | 4.83 | 5.34 | 23.58
  1905 |  9.03 | 2.54 | 53.59 | 11.24 | 76.40 | 13.60 | 4.32 | 5.68 | 23.60
  1906 |  8.56 | 2.32 | 53.09 | 11.24 | 75.21 | 14.81 | 4.06 | 5.92 | 24.79
  1907 |  8.62 | 2.29 | 53.39 | 11.38 | 75.68 | 15.41 | 3.89 | 5.02 | 24.32
  1908 |  8.74 | 2.46 | 55.72 | 11.35 | 78.27 | 13.15 | 4.04 | 4.54 | 21.73
  1909 |  9.49 | 2.69 | 55.50 | 10.33 | 78.01 | 13.52 | 4.38 | 4.09 | 21.99
  -----+-------+------+-------+-------+-------+-------+------+------+------

It will be observed that the percentage of low rate freight carried
in 1909 was greater than for any other year covered by these
statistics. This was due more to the falling off in manufactures and
miscellaneous freight than to any increased movement of low class
freight.


CAR SERVICE OPERATIONS.

What the Department of Commerce and Labor calls "a convenient index
to the traffic activities of the country" is found in the following
comparative statement of cars handled by the various car service
associations and demurrage bureaus, 1905-1909.


NUMBER OF CARS HANDLED BY 36 CAR SERVICE ASSOCIATIONS AND DEMURRAGE
BUREAUS DURING TWELVE MONTHS ENDING DECEMBER, 1905-1909.

  ==========================+=====================================
                            |     Twelve Months Ending December
                            +------------+------------+-----------
  Names of Associations and |            |            |
    Bureaus                 |     1905   |     1906   |     1907
  --------------------------+------------+------------+-----------
  Alabama                   |    752,982 |    744,548 |    779,402
  Central New York          |    611,601 |    654,861 |    753,269
  Central (St. Louis)       |    863,788 |    908,096 |    919,130
  Chicago                   |  2,166,910 |  2,251,763 |  2,282,191
  Cincinnati                |    675,117 |    748,763 |    771,990
                            |            |            |
  Cleveland (a)             |    640,364 |    796,687 |  1,016,003
  Colorado                  |    425,140 |    455,540 |    445,900
  Columbus                  |    394,152 |    443,638 |    469,773
  East Tennessee            |    320,855 |    358,733 |    388,066
  Indiana                   |    912,827 |    962,941 |  1,104,855
                            |            |            |
  Intermountain             |    116,533 |    158,231 |    184,577
  Lake Superior             |    332,633 |    371,312 |    415,642
  Louisville Car            |    495,095 |    541,945 |    506,528
  Memphis                   |    235,569 |    258,316 |    255,169
  Michigan                  |    687,428 |    766,950 |    838,928
                            |            |            |
  Missabe Range             |     30,241 |     37,613 |     42,786
  Missouri Valley           |  1,538,087 |  1,665,882 |  1,910,139
  Nashville                 |    300,602 |    336,110 |    351,572
  New York and New Jersey   |    997,304 |  1,100,067 |  1,409,161
  North Carolina            |    357,474 |    374,710 |    407,257
                            |            |            |
  Northeastern Pennsylvania |    802,072 |    836,443 |    917,936
  Northern                  |  1,467,041 |  1,722,345 |  1,736,981
  Pacific                   |    761,382 |    972,398 |  1,166,886
  Pacific Northwest         |    647,726 |    727,474 |    888,093
  Philadelphia              |  2,056,744 |  2,218,755 |  2,326,723
                            |            |            |
  Pittsburg                 |  3,375,530 |  3,295,463 |  2,935,299
  Southeastern              |    813,444 |    862,379 |    853,720
  Southern                  |    273,273 |    301,273 |    492,914
  Texas                     |    932,992 |    977,630 |    986,475
  Toledo                    |    262,875 |    312,329 |    530,617
                            |            |            |
  Virginia and West Virginia|    818,915 |    866,861 |    893,905
  Western New York          |    812,409 |    881,640 |    986,962
  Western (Omaha)           |    622,868 |    718,872 |    770,470
  Wisconsin                 |  1,157,036 |  1,119,326 |  1,118,720
                            +------------+------------+-----------
  Total reported by 34      |            |            |
    associations and        |            |            |
    bureaus (b)             | 27,659,009 | 29,749,894 | 31,858,039
                            +------------+------------+------------
  Baltimore and Washington  |            |            |
    Demurrage Bureau        | (c)721,428 | (c)740,903 | (c)735,103
                            |            |            |
  Illinois and Iowa         |            |            |
    Demurrage Bureau        |     (d)    |  3,054,315 |  3,258,770
  --------------------------+-------------------------+------------

  {table continued}
  ===================================================
                            |  Twelve Months Ending
                            |        December
                            +------------+-----------
  Names of Associations and |            |
    Bureaus                 |    1908    |    1909
  --------------------------+------------+-----------
  Alabama                   |    631,487 |    700,393
  Central New York          |    738,054 |    804,419
  Central (St. Louis)       |    838,017 |  1,001,136
  Chicago                   |  2,161,767 |  2,790,801
  Cincinnati                |    635,365 |    712,145
                            |            |
  Cleveland (a)             |    715,764 |    843,609
  Colorado                  |    385,260 |    428,760
  Columbus                  |    363,130 |    401,696
  East Tennessee            |    293,597 |    330,055
  Indiana                   |  1,077,786 |  1,211,793
                            |            |
  Intermountain             |    153,885 |    201,077
  Lake Superior             |    338,109 |    370,490
  Louisville Car            |    518,955 |    565,748
  Memphis                   |    239,156 |    224,648
  Michigan                  |    696,926 |    859,812
                            |            |
  Missabe Range             |     42,930 |     54,934
  Missouri Valley           |  1,606,758 |  1,863,052
  Nashville                 |    326,385 |    337,234
  New York and New Jersey   |  1,248,609 |  1,416,831
  North Carolina            |    404,334 |    445,398
                            |            |
  Northeastern Pennsylvania |    633,655 |    594,231
  Northern                  |  1,515,706 |  1,636,588
  Pacific                   |  1,147,345 |  1,390,948
  Pacific Northwest         |    845,405 |    987,115
  Philadelphia              |  1,921,142 |  2,508,204
                            |            |
  Pittsburg                 |  1,977,891 |  2,807,256
  Southeastern              |    823,948 |    981,737
  Southern                  |    513,437 |    649,384
  Texas                     |  1,118,622 |  1,302,211
  Toledo                    |    383,870 |    492,127
                            |            |
  Virginia and West Virgini |    778,940 |    942,231
  Western New York          |    806,488 |    931,185
  Western (Omaha)           |    733,346 |    775,828
  Wisconsin                 |  1,022,270 |  1,006,050
                            +------------+-----------
  Total reported by 34      |            |
    associations and        |            |
    bureaus (b)             | 27,638,339 | 32,569,156
                            +------------+-----------
  Baltimore and Washington  |            |
    Demurrage Bureau        |    588,930 |    672,954
                            |            |
  Illinois and Iowa         |            |
    Demurrage Bureau        |     (d)    |  3,561,740
  ---------------------------------------+-----------

  (a) Cleveland reported 10,016 lake coal cars for December, 1909.

  (b) The Butte Terminal Association was superseded by the Montana
      Demurrage Bureau in May, 1908. The returns of the new bureau for
      the twelve months ending December, is 448,381 cars.

  (c) Figures apply to larger territory; change and revision of 1907,
      1908 and 1909 figures made October 1, 1909.

  (d) Not reported.




VIII

EARNINGS AND EXPENSES


Having in the preceding pages given the facts as to the provision
made by the railways for fulfilling their obligations as common
carriers, it is now in order to present a brief review of their
receipts and expenditures in relation to their public service.

For the second successive year the Bureau has to warn the reader that
innovations in the forms of keeping railway accounts prescribed by
the Commission preclude the making of strictly accurate comparisons
of the returns for 1909 with those of any preceding year. In
submitting its report for 1908 the Commission made the following
explanation:

"A number of important changes have been made in the annual report
forms for 1908, particularly in the grouping of certain items in
connection with the Income Account and the Profit and Loss Account.
The figures which follow do not include returns applying to carriers
classed as switching and terminal. The changes in the income account
submitted in the report under consideration are so far reaching in
their results, in a number of instances, as to impair direct or close
comparison with figures for similar items contained in previous
statistical reports."

In the comparative Income Account below, which aims to present the
situation as it would result from the actual operations had such
operations been conducted by a single corporation, the Bureau has
sought to make the returns for 1908 and 1909 conform as nearly as
possible to "previous statistical reports." It should be premised,
however, that the official figures for 1908 exclude the returns from
switching and terminal companies, whereas the Bureau's figures for
1909 include some portion of these returns, which are as much an
integral part of the transportation service of American railways as
any they perform. The official figures for 1908 do not correspond
absolutely to the preliminary figures for the same year compiled from
the monthly reports as reviewed in the Introduction to this report.

With this by way of explanation, the comparative Income Account for
the years 1909 and 1908 is submitted:


COMPARATIVE INCOME ACCOUNT OF THE RAILWAYS IN THE UNITED STATES
CONSIDERED AS A SYSTEM FOR THE YEARS ENDING JUNE 30, 1909 AND 1908.

  ======================================================================
                                   |               Amount
              Item                 |
                                   |         1909      |           1908
                                   |  (221,132 miles   |  (230,002 miles
                                   |     operated)     |     operated)
  ---------------------------------+-------------------+----------------
  Passenger revenue                |   $ 551,634,278   |   $ 566,832,746
  Mail revenue                     |      49,508,972   |      48,517,563
  Express revenue                  |      61,883,695   |      58,692,091
  Freight revenue                  |   1,643,028,564   |   1,655,419,108
  Other earnings from operation    |      69,086,257   |      64,344,481
                                   +-------------------+----------------
  Gross earnings from operation    |  $2,375,141,766   |  $2,393,805,989
                                   |                   |
  Operating expenses               |  $1,568,111,272   |  $1,669,547,876
  Taxes                            |      82,650,214   |      78,673,794
                                   +-------------------+----------------
    Total                          |  $1,650,761,486   |  $1,748,221,670
                                   +-------------------+----------------
  Net earnings from operation      |     724,380,280   |     645,584,310
  Net revenue from outside         |                   |
  operations                       |       5,410,338   |       5,977,268
                                   |                   |
    Operating income               |   $ 729,790,618   |   $ 651,561,587
                                   |                   |
  Disposition:                     |                   |
    Net interest on funded debt    |   $ 293,338,105   |   $ 282,354,001
    Interest on current liabilities|      22,546,779   |      31,835,708
    Rent paid for lease of road    |     120,784,982   |     111,153,013
    Additions and betterments      |                   |
    charged to income              |      24,807,546   |      28,086,454
    Appropriations to reserves     |                   |
    and miscellaneous items        |      22,587,208   |      21,636,182
    Other deductions               |      70,174,473   |      64,669,546
                                   +-------------------+----------------
      Total deductions             |   $ 554,239,093   |   $ 539,734,904
                                   +-------------------+----------------
  Surplus available for dividends, |                   |
  adjustments and improvements     |     175,551,525   |     111,826,683
  Net dividends                    |     171,607,550   |     104,074,006
                                   +-------------------+----------------
    Balance to profit and loss     |     $ 3,943,975   |     $ 7,752,677
  ---------------------------------+-------------------+----------------

In 1909 the "Income Account" of the railways was swelled and confused
by including therein $200,725,696 of intercorporate payments, while
that for 1908 includes $274,450,192 "Other Income" which, as has
been formerly noted by the Official Statistician, swells the totals
to a fictitious figure. It is out of this fictitious income that
fictitious interest and dividends are paid, fictitious deductions
made, and fictitious surpluses accumulated. If "Other deductions" in
the above statement had been charged against "Other income" instead
of being deducted from earnings from operation the balance to Profit
and Loss for each year would have been so much larger.

What becomes of the rent paid by operating roads for leased roads is
well shown in the statement included in the Commission's preliminary
report of statistics for 1908 in which the amount received by the
latter mentioned in the table just submitted is disposed of.


CONDENSED INCOME ACCOUNT AND PROFIT AND LOSS ACCOUNT OF LEASED ROADS
FOR THE YEAR ENDING JUNE 30, 1908.

  =============================================+=============+============
                   Income Account              |             |
  ---------------------------------------------+-------------+------------
  Gross income from lease of road              |$111,153,013 |
  Salaries and maintenance of organization     |     390,841 |
  Taxes accrued                                |   5,881,352 |
                                               +-------------+
      Net income from lease of road            |             |$104,880,820
  Other income                                 |             |   5,436,129
                                               |             +------------
  Gross corporate income                       |             |$110,316,949
  Deductions from gross corporate income       |             |  62,232,508
                                               |             +------------
      Net corporate income                     |             |$ 48,084,441
                                               |             |
  Disposition of net corporate income:         |             |
    Dividends declared from current income     |$ 33,843,577 |
    Additions and betterments charged to income|   1,088,002 |
    Appropriations to reserves and             |             |
             miscellaneous items               |     258,580 |
                                               +-------------+
        Total                                  |             |$ 35,190,159
        Balance carried forward to credit of   |             |
             profit and loss                   |             |  12,894,282
  ---------------------------------------------+-------------+------------
  Profit and Loss Account
  -----------------------------------------------------------+------------
  Credit balance in Profit and Loss Account, June 30, 1907   |$ 45,852,031
  Credit balance brought from Income Account, June 30, 1908  |  12,894,282
                                                             +------------
        Total                                                |$ 58,746,313
                                                             |
  Dividends declared out of surplus                          |  27,550,596
  Other profit and loss items--debit balance                 |   2,006,573
                                                             +------------
  Balance credit June 30, 1908, carried to balance sheet     |$ 29,189,144
  -----------------------------------------------------------+------------

Included under the blind item of "Deductions from gross corporate
income, $62,232,508" in this statement may be mentioned rents of
other roads and facilities of which these leased roads are the
lessees, interest on funded debt and other interest, sinking funds
chargeable to income and other deductions not specifically provided
for elsewhere. In case of operating roads this item also includes the
balance of hire of equipment, to which, of course, there is a credit
with other operating roads.

The significant feature in this statement is the decrease in the
profit and loss credit balance of $16,662,887. But this does not
alter the fact that what becomes of rent paid for lease of road
is no more a concern of interstate commerce than what becomes of
the rent paid for warehouses or office space in any terminal. The
operating roads pay all the cost of maintenance of way and equipment.
The leased roads are not common carriers in any sense. They are
simply distributing mediums of the rents paid them--this rent being
the equivalent of interest on so much capital. As appears from the
foregoing table, the expense of maintaining the organization of these
leased properties amounted in 1908 to 35/100ths of 1 per cent.


DISTRIBUTION OF GROSS EARNINGS.

How the gross earnings of the railways reporting to this Bureau in
1909 ($2,375,141,766) were distributed is shown in the next statement
in comparison with a similar division of earnings in 1908 and 1907.


STATEMENT OF DISTRIBUTION OF GROSS EARNINGS OF 221,132 MILES OF LINE
IN 1909 COMPARED WITH THE PERCENTAGES FOR 1908 AND 1907.

(GROSS EARNINGS 1909, $2,375,141,766.)

  =======================================================================
                Item           |    Amount    |Per Cent|Per Cent|Per Cent
                               |     1909     |  1909  |  1908  |  1907
  -----------------------------+--------------+--------+--------+--------
  Operating expenses:          |              |        |        |
    Maintenance of way and     |              |        |        |
      structures               | $ 299,757,077|  12.62 |  13.41 |  13.27
    Maintenance of equipment   |   358,747,371|  15.10 |  15.42 |  14.22
    Traffic expenses           |    48,453,707|   2.08 |   2.00 |
    Transportation expenses    |   799,690,194|  33.67 |  36.24 |  37.50
    General expenses           |    61,462,923|   2.58 |   2.58 |   2.54
                               +--------------+--------+--------+--------
      Total                    |$1,568,111,272|  66.03 |  69.67 |  67.53
                               |              |        |        |
  Disposition of same:         |              |        |        |
    Pay of employes            | $ 973,174,419|  41.00 |  43.43 |  41.42
    Fuel for locomotives       |   184,359,112|   7.76 |        |   7.74
    Oil and water for          |              |        |        |
        locomotives            |    19,951,184|    .84 |        |    .88
    Material and supplies      |   219,463,028|   9.24 |        |  11.81
    Hire and rent of equipment |              |        |        |
      and facilities           |    54,638,243|   2.30 |        |   2.46
    Loss and damage            |    56,379,042|   2.37 |        |   1.83
    Miscellaneous(a)           |    60,146,242|   2.52 |        |   1.39
                               +--------------+--------+--------+--------
      Total expenses           |$1,568,111,272|  66.03 |  69.67 |  67.53
  Taxes(b)                     |    88,531,566|   3.72 |   3.53 |   3.10
  Rentals of leased roads      |   114,903,630|   4.84 |   4.64 |   4.69
  Interest on funded debt and  |              |        |        |
      current liabilities      |   315,884,884|  13.30 |  13.34 |  13.14
  Dividends                    |   171,607,550|   7.23 |   4.42 |   8.78
  Deficits of weak companies   |    20,223,246|    .85 |   1.24 |    .19
  Betterments, reserves and    |              |        |        |
      sundries                 |    47,494,754|   2.00 |   2.07 |   1.50
  Surplus                      |    48,384,864|   2.03 |   1.09 |   1.07
                               +--------------+--------+--------+--------
        Total (gross earnings) |$2,375,141,766| 100.00 | 100.00 | 100.00
        Gross earnings 1908    | 2,393,805,989|        |        |
        Gross earnings 1907    | 2,589,105,578|        |        |
  -----------------------------+--------------+--------+--------+--------

  (a) Legal expenses, advertising and insurance are included under
      "Miscellaneous"; stationery and printing under "Material and
      Supplies."

  (b) Includes taxes paid by leased lines and deducted from rent.

Owing to the fact that interest on funded debt and dividends are paid
out of the common fund derived from operation and investments, the
amounts devoted to these items in the above statement are necessarily
computations. That they are not underestimates is proved by the fact
that the surplus would not permit of larger charges for interest
and dividends paid out of net earnings. Any interest or dividends
materially greater than the amounts stated above, not paid out of the
rents accruing to leased roads as given, must necessarily be derived
from other sources than transportation revenues, and has no place in
railway accounts coming under the provisions of the Act to Regulate
Commerce among the several states.




IX

TAXES


So far as taxes are concerned, seasons of prosperity, depression and
marking time are alike to American railways. The burden of their
taxation knows no recession but mounts steadily, absolutely, per mile
and in proportion to gross earnings.

The 368 roads reporting to this Bureau owning 182,046 miles of line
and operating 221,132 miles, of which 39,086 miles were leased, paid
$82,650,214 taxes in 1909. The Commission's report for 1908 shows
that the leased roads paid $5,881,352 taxes out of their rents.
Putting a conservative estimate of $200 a mile on the 11,870 miles of
line not represented in this report would add $2,374,000 to the above
figures and bring the aggregate taxes paid by the railways of the
United States in 1909 up to the striking total of $90,905,566.

How railway taxation has increased absolutely and relatively to
earnings and mileage during the past twenty-one years is shown in the
following statement:


TAXES ANNUALLY AND RELATIVELY, 1889 TO 1909.

  ============================+=============+==========+===========
                              |             |          | Percentage
  Year                        | Taxes Paid  | Per Mile |     of
                              |             |          |  Earnings
  ----------------------------+-------------+----------+-----------
  1909 (Official figures)     | $89,026,226 |   $382   |    3.73
  1908                        |  84,555,146 |    367   |    3.53
  1907                        |  80,312,375 |    353   |    3.10
  1906                        |  74,785,615 |    336   |    3.21
  1905                        |  63,474,679 |    292   |    3.04
  1904                        |  61,696,354 |    290   |    3.12
  1903                        |  57,849,569 |    281   |    3.04
  1902                        |  54,465,437 |    272   |    3.15
  1901                        |  50,944,372 |    260   |    3.20
  1900                        |  48,332,273 |    250   |    3.24
  1899                        |  46,337,632 |    247   |    3.53
  1898                        |  43,828,224 |    237   |    3.51
  1897                        |  43,137,844 |    235   |    3.84
  1896                        |  39,970,791 |    219   |    3.48
  1895                        |  39,832,433 |    224   |    3.70
  1894                        |  38,125,274 |    216   |    3.56
  1893                        |  36,514,689 |    215   |    2.99
  1892                        |  34,053,495 |    209   |    2.90
  1891                        |  33,280,095 |    206   |    3.04
  1890                        |  31,207,469 |    199   |    2.96
  1889                        |  27,590,394 |    179   |    2.86
  ----------------------------+-------------+----------+-----------

In this table the figures for 1909 are based on the monthly reports
to the Commission and are subject to revision, but they are in
substantial agreement with the estimate on the returns to the Bureau.

Observe that the highest ratio of taxes to gross earnings shown
in this table was 3.84 per cent in 1897, when everything relating
to railways, except taxes, was prostrated under the reign of
receiverships that followed the panic of 1893. It was of 1897 that
the Official Statistician recorded the fact that "70.10 per cent
of outstanding stock paid no dividends, and 16.59 per cent of
outstanding bonds, exclusive of equipment trust obligations, paid no
interest."

There is instruction and warning behind the remarkable increase in
the ratio of taxation shown in the figures for 1894 to 1897. There is
the reflection of similar conditions in the rising ratios of 1908 and
1909.




X

DAMAGES AND INJURIES TO PERSONS


There are two items in railway accounts connected with the expense of
operation that give the management most serious concern, because no
means has been devised to limit or control them. In a leaflet issued
by this Bureau in September last, it was estimated that the payments
of American railways on account of "Injuries to Persons" and "Loss
and Damage" for the year 1908 would approximate $56,700,000, or more
than 2.3 per cent of their gross earnings. The Commission has not
yet made public the final figures for 1908, but the returns on these
accounts of the 368 roads reporting to this Bureau for the year 1909,
aggregate $56,379,024, or 2.37 per cent of their gross earnings.

Divided according to the new system of accounting adopted by the
Commission, these returns show the following figures:


SUMMARY OF PAYMENTS ON ACCOUNT OF INJURIES TO PERSONS AND LOSS AND
DAMAGE DURING THE YEAR 1909.

  ===========================================+=============+=========
                                             |             | Per Cent
                   Account                   |   Amount    |    of
                                             |             | Earnings
  -------------------------------------------+-------------+---------
  Injuries to persons                        | $23,456,038 |    .99
    Maintenance of way           $ 2,702,066 |             |
    Maintenance of equipment       2,315,119 |             |
    Transportation                18,438,853 |             |
                                             |             |
  Loss and damage                            |  32,922,986 |   1.38
    To freight                   $24,768,453 |             |
    To baggage                       300,869 |             |
    To property                    4,469,496 |             |
    To live stock, etc.            3,384,168 |             |
                                             +-------------+---------
       Total                                 | $56,379,024 |   2.37
  -------------------------------------------+-------------+---------

Unlike many of the other expenses of American railways, the burden of
this "cost of operation" does not fall heaviest on the large systems.
In the case of one road of moderate importance payments on these two
accounts amounting to 4.8 per cent of gross earnings were enough to
tip the balance into a deficit after paying interest on funded debt;
one minor but prosperous road, after paying 14 per cent of gross
receipts to meet these two accounts, had nothing left for dividends
after paying interest, which amounted to less than 10 per cent of its
earnings; and a small third road after being called on to pay 21.5
per cent of its earnings for injuries and damages had only 6 per cent
of its operating revenue left to pay interest on funded debt, which
called for 20 per cent of the earnings, and taxes reduced the net
operating revenue to less than 4 per cent.

These are extreme cases but they illustrate how the "Injury and
Damage" claims strike roads that can ill afford to pay them as well
as the great systems which are the common prey of every claimant with
enough of a grievance to interest an attorney who scents a contingent
fee.

That the claims behind these expenses are largely meretricious is
indicated, if not proved, by their disproportionate increase in the
past ten years, during which the railways have expended millions in
providing safeguards for their trains and employes. This increase
absolutely and relatively to gross earnings is shown in the following
statement:


PAYMENTS ON ACCOUNT OR "LOSS AND DAMAGE" AND "INJURIES TO PERSONS"
DURING THE DECADE 1899 TO 1909 AND PROPORTION TO GROSS EARNINGS.

  ======================+=======================+======================
                        |    Loss and Damage    |  Injuries to Persons
                        +------------+----------+------------+---------
          Year          |            | Per Cent |            | Per Cent
                        |   Amount   |    of    |   Amount   |    of
                        |            | Earnings |            | Earnings
  ----------------------+------------+----------+------------+---------
  1899                  |$ 5,976,082 |   .455   |$ 7,116,212 |   .541
  1900                  |  7,055,622 |   .474   |  8,405,980 |   .565
  1901                  |  8,109,637 |   .510   |  9,014,144 |   .567
  1902                  | 11,034,686 |   .639   | 11,682,756 |   .676
  1903                  | 13,726,508 |   .722   | 14,052,123 |   .739
  1904                  | 17,002,602 |   .861   | 15,838,179 |   .802
  1905                  | 19,782,692 |   .946   | 16,034,727 |   .770
  1906                  | 21,086,219 |   .907   | 17,466,864 |   .751
  1907                  | 25,796,083 |   .996   | 21,462,504 |   .829
  1908                  |        --  |    --    |        --  |    --
  1909                  | 32,922,986 |  1.386   | 23,456,038 |   .988
                        |            |          |            |
  Increase in 10 years, |            |          |            |
    per cent            |      450.5 |  204.6   |      229.6 |   82.6
  ----------------------+------------+----------+------------+---------

Startling as are these increases absolutely, those relatively to
earnings present a condition truly alarming, for which there is no
apparent relief except through a revulsion in the popular tolerance
of blackmail at the expense of the railways.

In no other country in the world are the railways held up on bogus
claims for damages to the extent they are in the United States. Under
the strict laws of the United Kingdom, as to compensation for damages
and injuries, the British railways paid less than 7/10ths of 1 per
cent of their earnings for all damages, losses and injuries, or less
than one-third the proportion paid by American railways on the same
account.




XI

LOCOMOTIVE FUEL


Despite the continuous improvements in the steam-producing capacity
of railway locomotives per ton of coal, the steady advance in the
cost of coal during the past ten years has more than offset the
economies of locomotive construction. This is shown in the next
statement, which gives the cost of locomotive fuel and its relative
proportion to gross earnings and operating expenses, and also the
average price per short ton of coal in the United States since 1899:


SUMMARY OF COST OF LOCOMOTIVE FUEL AND PROPORTION TO EARNINGS AND
EXPENSES OF AMERICAN RAILWAYS, 1909 TO 1899, WITH PRICE OF BITUMINOUS
COAL PER TON DURING THE SAME PERIOD.

  ======+=========+==============+==========+==========+==========
        |         |              |Proportion|Proportion|Price of
        |Miles of |    Cost of   |    to    |    to    | Coal at
   Year |  Line   |  Locomotive  | Operating|  Gross   |  Mines
        |         |     Fuel     | Expenses | Earnings |per Ton(a)
  ------+---------+--------------+----------+----------+----------
   1909 | 221,132 | $184,359,112 |  11.757  |   7.77   |    --
   1908 | 230,494 |  197,385,513 |  12.098  |   8.25   |   1.12
   1907 | 227,454 |  200,261,975 |  11.471  |   7.74   |   1.14
   1906 | 222,340 |  170,499,133 |  11.119  |   7.34   |   1.11
   1905 | 216,973 |  156,429,245 |  11.278  |   7.51   |   1.06
   1904 | 212,243 |  158,948,886 |  11.893  |   8.05   |   1.10
   1903 | 205,313 |  116,509,031 |  11.675  |   7.70   |   1.24
   1902 | 200,154 |  120,074,192 |  10.776  |   6.96   |   1.12
   1901 | 195,561 |  104,926,568 |  10.602  |   6.61   |   1.05
   1900 | 192,556 |   90,593,965 |   9.809  |   6.09   |   1.04
   1899 | 187,534 |   77,187,344 |   9.478  |   5.88   |    .87
  ------+---------+--------------+----------+----------+----------

  (a) These figures are from the latest report of the United States
      Geological Survey.

The significance of this table is that it cost the railways almost
one-third more for fuel per dollar earned in 1909 than it did in
1899, the increase in the proportion of fuel cost to gross earnings
having been 32%, due to the advance of 31% in the price of coal at
the mines during that period.

The effect of the anthracite coal strike and the Commission's award
of date March 18, 1903, upon the cost of bituminous coal is seen in
the sharp advances in 1902 and 1903.

The railways have not escaped the advance in their cost of living due
to the increased price of fuel any more than the public at large, and
so far they have not been able to shift any portion of that cost, as
manufacturers and shippers have done.




XII

THE SAFETY OF AMERICAN RAILWAYS


Never before in the history of railways has such a record for
comparative safety been made as that recorded of American railways
during the year ending June 30, 1909. Following its custom the
Interstate Commerce Commission has published the report of accidents.
It remains to set forth here the more remarkable record of safety.

OF THE 368 COMPANIES REPORTING TO THIS BUREAU, NO LESS THAN 347,
OPERATING 159,657 MILES OF LINE AND CARRYING 570,617,563 PASSENGERS,
WENT THROUGH THE YEAR WITHOUT A SINGLE FATALITY TO A PASSENGER IN A
TRAIN ACCIDENT.

Of the remaining 21 companies, no less than 10, operating 27,681
miles and carrying 185,447,507 passengers, only missed such perfect
immunity by a single fatality each in accidents to trains. This
leaves 11 roads whose misfortune it was to bear the burden of train
accident fatalities to passengers during the year.

The invariable rule of the Bureau precludes the publication of
the honor roll of safety. And it is well so, for it would lead to
invidious comparisons, where, in such matters as accidents, all
comparisons are as irrelevant as they are invidious.

But it may be stated that the roll of immunity includes roads in
every section of the union, from Maine to California, several great
systems operating over 7,000 miles of line each, as well as little
branch lines of below ten miles of single track; lines operated with
all the safety appliances known to twentieth century progress and
lines operated under as primitive conditions as prevailed on this
continent more than half a century ago.

THIS RECORD OF COMPLETE IMMUNITY, STRETCHING OVER 159,657 MILES OF
OPERATED LINE, REPRESENTS A MILEAGE NEARLY SEVEN TIMES THAT OF ALL
BRITISH ROADS, AND EQUALS THE AGGREGATE OF ALL EUROPE, EXCLUDING
RUSSIA BUT INCLUDING THE BRITISH ISLES.

What immunity to fatalities to passengers over such a vast mileage
means may be partly realized from the fact that only twice in half a
century has it occurred on the 23,000 miles of British railways, and
never, to the writer's knowledge, so far as statistics reveal, on the
railways of any of the great divisions of Europe. Certainly it has
never occurred on the aggregate railways of Europe.

It would take seven consecutive years of immunity from fatalities
to passengers in train accidents on British railways to equal this
phenomenal record of American roads.

In presenting similar returns for 1908, it was said that "considering
the myriad units of risk involved, the record for immunity from fatal
accidents to passengers is without parallel in the history of railway
operation." How that record has been not only equalled but surpassed
is shown in the following statement for the last two years:


SUMMARY OF MILEAGE AND TRAFFIC OF ROADS ON WHICH NO PASSENGER WAS
KILLED IN A TRAIN ACCIDENT DURING THE YEARS 1908 AND 1909.

  =====================================+=================+================
                                       |      1909       |      1908
  -------------------------------------+-----------------+----------------
  Number of operating companies        |             347 |             316
  Mileage of these companies           |         159,657 |         124,050
  Passengers carried                   |     570,617,563 |     455,365,447
  Passengers carried 1 mile            |  18,953,025,000 |  14,776,368,000
  Tons of freight carried              |   1,116,877,052 |     916,123,410
  Tons of freight carried 1 mile       | 151,974,495,000 | 121,589,399,000
  Passengers killed in train accidents |            None |            None
  Passengers injured in train accidents|           2,585 |           2,695
  -------------------------------------+-----------------+----------------

This table proves that the area of perfect safety, so to speak, was
extended over from 22% to 26% more units of risk in 1909 than in
1908, which already held the palm for immunity in train accident
fatalities to passengers.

The figures given above as to passengers injured in train accidents
are equally illuminating as to the safety of American railways,
for they demonstrate that with the multiplication of risks in 1909
the number of injured was less by 4%. The fact that no passenger
is killed in train accidents is more or less adventitious, but a
reduction in the number injured testifies to a reduction in the
opportunities for fatalities.

During the past ten years the average of passengers injured in train
accidents on British railroads has been 580, which, considering the
difference in the units of risk, is 100% higher than the above record
for 159,657 miles of American railway in 1909.

The following table, which includes no less than six great systems of
over 2,000 miles each, presents similar data in respect to the ten
roads whose record for safety to passengers in train accidents is
marred by a single fatality:


SUMMARY OF MILEAGE AND TRAFFIC OF ROADS ON WHICH ONLY ONE PASSENGER
WAS KILLED IN A TRAIN ACCIDENT DURING THE YEAR 1909.

  =========================================+===============
                                           |      1909
  -----------------------------------------+---------------
  Number of operating companies            |             10
  Mileage of these companies               |         27,681
  Passengers carried                       |    185,447,507
  Passengers carried 1 mile                |  5,778,621,000
  Tons of freight carried                  |    213,086,612
  Tons of freight carried 1 mile           | 40,177,881,000
  Passengers killed in train accidents     |             10
  Passengers injured in train accidents    |            778
  -----------------------------------------+---------------

These figures show a mileage of 4,481 miles greater than all the
railways of the United Kingdom, approximately one-half the passenger
mileage, and over three times the ton mileage, with only 10
passengers killed in train accidents, to an average of 20 on British
railways during the past ten years.

Further analysis of the returns to the Bureau, since data along this
line has been compiled, affords the following statement of the number
of roads and their mileage that have records of entire immunity from
fatalities to passengers in train accidents of from one up to six
years:


STATEMENT SHOWING NUMBER OF RAILWAYS AND MILEAGE ON WHICH NO
PASSENGER HAS BEEN KILLED IN A TRAIN ACCIDENT, 1904 TO 1909.

  =======================================+===========+=========
                                         | Number of | Miles of
                                         | Companies |    Line
  ---------------------------------------+-----------+---------
  Six consecutive years, 1904-1909       |     17    |    9,641
  Five     "        "    1905-1909       |     95    |   44,894
  Four     "        "    1906-1909       |    177    |   57,331
  Three    "        "    1907-1909       |    228    |   69,713
  Two      "        "    1908-1909       |    287    |  108,710
  One year, 1909                         |    347    |  159,657
  ---------------------------------------+-----------+---------

Gratifying and remarkable as was the immunity from fatalities of the
class under consideration in 1909, the fact that for a period of five
years 95 American roads with a mileage practically double that of
all British railways have carried hundreds of millions of passengers
without a fatality to one of them is so at variance with the popular
impression regarding the dangers of American railway travel as to
seem little short of marvelous.

The impressive character of this showing will be better appreciated
when it is understood that the immunity from fatalities in train
accidents represents consecutive years counting back from 1909.
No road has been admitted to the list where the immunity has been
interrupted by a single accident. With this fact in mind, the clean
slate of the 17 roads for six years challenges admiration, especially
as the Bureau's reports in 1904 covered less than two-fifths of the
operated mileage of the United States.


RAILWAY ACCIDENTS IN 1909.

Having thus shown the gratifying immunity from fatalities to
passengers in train accidents during the year 1909, and on 9,641
miles of line since 1904, it remains to present the reverse side
of the picture, which is so invariably thrust forward in official
documents. Accident Bulletin No. 32 of the Interstate Commerce
Commission furnishes the following data as to the number killed and
injured on the railroads of the United States during the last two
fiscal years:


SUMMARY OF CASUALTIES TO PERSONS IN RAILWAY ACCIDENTS FOR THE YEARS
ENDING JUNE 30, 1909 AND 1908.

  ================================+================================
                                  |             1909
                                  +---------------+----------------
      Class of Accident           |   Passengers  |    Employes
                                  +------+--------+-------+--------
                                  |Killed| Injured| Killed| Injured
  --------------------------------+------|--------+-------+--------
  Collisions                      |   94 |  3,033 |   248 |  2,362
  Derailments                     |   37 |  2,717 |   227 |  1,448
  Miscellaneous train accidents,  |      |        |       |
    including locomotive          |      |        |       |
    boiler explosions             |   -- |    115 |    45 |  1,067
                                  +------+--------+-------+--------
      Total train accidents       |  131 |  5,865 |   520 |  4,877
                                  +------+--------+-------+--------
  Coupling or uncoupling          |   -- |     -- |   161 |  2,353
  While doing other work          |      |        |       |
    about trains or while         |      |        |       |
    attending switches            |   -- |     -- |    93 | 14,315
  Coming in contact with          |      |        |       |
    overhead bridges, structures  |      |        |       |
    at side of track, etc         |    2 |     36 |    76 |  1,229
  Falling from cars or engines    |      |        |       |
    or while getting on or off    |  137 |  3,076 |   481 | 10,259
  Other causes                    |   65 |  3,139 | 1,125 | 18,771
                                  +------+--------+-------+--------
      Total (other than train     |      |        |       |
      accidents)                  |  204 |  6,251 | 1,936 | 46,927
                                  +------+--------+-------+--------
      Total (all classes)         |  335 | 12,116 | 2,456 | 51,804
                                  |      |        |       |
  Totals in 1907:                 |      |        |       |
    In train accidents            |  410 |  9,070 | 1,011 |  8,924
    In other than train accidents |  237 |  4,527 | 3,342 | 53,765
                                  +------+--------|-------+--------
    All classes of accidents      |  647 | 13,597 | 4,353 | 62,689
  --------------------------------+------+--------+-------+--------

  {table continued}
  ================================+================================
                                  |             1908
                                  +---------------+----------------
      Class of Accident           |   Passengers  |     Employes
                                  +------+--------+-------|--------
                                  |Killed| Injured| Killed| Injured
  --------------------------------+------|--------+-------+--------
  Collisions                      |  111 |  4,284 |   303 |  3,428
  Derailments                     |   54 |  3,057 |   260 |  2,065
  Miscellaneous train accidents,  |      |        |       |
    including locomotive          |      |        |       |
    boiler explosions             |   -- |     89 |    79 |  1,325
                                  +------+--------+-------+--------
      Total train accidents       |  165 |  7,430 |   642 |  6,818
                                  +------+--------+-------+--------
  Coupling or uncoupling          |   -- |     -- |   239 |  3,121
  While doing other work          |      |        |       |
    about trains or while         |      |        |       |
    attending switches            |   -- |     -- |   206 | 15,991
  Coming in contact with          |      |        |       |
    overhead bridges, structures  |      |        |       |
    at side of track, etc         |    4 |     37 |   110 |  1,353
  Falling from cars or engines    |      |        |       |
    or while getting on or off    |  159 |  2,501 |   668 | 11,735
  Other causes                    |   78 |  2,677 | 1,493 | 17,326
                                  +------+--------+-------+--------
      Total (other than train     |      |        |       |
      accidents)                  |  241 |  5,215 | 2,716 | 49,526
                                  +------+--------+-------+--------
      Total (all classes)         |  406 | 12,645 | 3,358 | 56,344
                                  |      |        |       |
  Totals in 1907:                 |      |        |       |
    In train accidents            |  410 |  9,070 | 1,011 |  8,924
    In other than train accidents |  237 |  4,527 | 3,342 | 53,765
                                  +------+--------|-------+--------
    All classes of accidents      |  647 | 13,597 | 4,353 | 62,689
  --------------------------------+------+--------+-------+--------

The same cause which accounted for the remarkable recession of
railway casualties in 1908 was still operative in a more marked
degree throughout 1909, as evidenced in the above table. Here is
shown a reduction from 1907 of 68% in fatalities to passengers in
train accidents and of nearly 50% in those to employes. Even in all
classes of accidents the decrease is almost as striking. A drop from
647 to 335 in fatalities to passengers and from 4,353 to 2,456 in
fatalities to employes, resulting from whatever cause, should be a
matter for national congratulation and thanksgiving.

That the facts herein set forth should have no lesson for national
authorities beyond moving them to appeal for additional control
of safety appliances is nothing short of a national scandal. As
for safety devices, the railways in 1907 were practically as well
equipped as in 1909. The percentage operated under the protection of
block signals was 27.1% in 1909 against 26.2% in 1907, a difference
inappreciable as compared with the recorded difference in fatalities.
The government inspectors reported the equipment in better condition
in 1907 than for any previous year by fully 30%, and yet that was the
worst year in the annals of railway accidents.

An English writer (H. Raynor Wilson), his vision unobscured by the
propinquity of patent devices, has placed his finger on the true
cause of the reduction in railway accidents in the United States in
1908 and 1909 when writing in "The Safety of British Railways" he
says:

    "Experience in America during the period of depression that has
    prevailed since the summer of 1907 shows that fewer accidents
    occur during such times. There are not so many goods trains,
    the men are less 'pushed,' they work fewer hours, and the
    careless and indifferent are weeded out."

But we do not have to go to England for a convincing analysis of the
causes of the remarkable decrease in accidents on American railways
in 1908 and 1909. In the presence of similar conditions Statistician
Adams in his official report for 1894 penned the following:

    "Another explanation may be suggested for this decrease in
    casualties to railway employes. The character of equipment
    used during the year covered by this report was undoubtedly of
    a higher grade than in previous years. A large number of old
    cars of abandoned type were destroyed during the year, while
    there was an increase in the better grades of cars equipped
    with train brakes and automatic couplers. This, however, is
    a suggestion merely, there being no statistical proof of any
    relation between a higher grade equipment and the decrease of
    accidents to employes. It is also probable, in view of the fact
    that liability to accident is increased by the employment of
    the shiftless and unskilled, that the grade of labor was raised
    through the discharge of so large a number of employes. This
    latter suggestion finds support in the fact that the ratio of
    casualties in the Southern States, where the grade of labor is
    somewhat inferior, has for a series of years been higher than
    in the Northern and Eastern States."

With a continuation of similar conditions as to traffic and labor
throughout 1895, the Official Statistician, having not yet accepted
the theory that violation of rules, carelessness and negligence are
amenable to patent appliances, emphasized the concluding suggestion
of his 1894 report in these terms:

    "From the above comparative statement it is clear that the year
    ending June 30, 1895, is more satisfactory, so far as accidents
    are concerned, than any previous year. Reference was made in
    last year's report to the fact that the marked reduction in
    the pay roll of the railways, by which the incompetent and
    inefficient were dropped from the railway service, and the
    consignment to the scrap heap of equipment worn out or out
    of date, were largely responsible for the greater safety in
    railway travel and railway employment shown by the statistics
    of the year. The result of raising the character of the
    railway service and grade of railway equipment is yet more
    marked during the present year, and to this must be added the
    fact that the demands upon the passenger service during the
    present year have been somewhat decreased. It is also worthy of
    suggestion, although the facts yet at command are not adequate
    for confident assertion, that the fitting of equipment with
    automatic devices is beginning to show beneficial results."

From that year to this the fitting of equipment with automatic
devices has proceeded with uninterrupted despatch. Where in 1895 only
27.7% of it was equipped with train brakes and 31.3% with automatic
couplers, in 1907 the Commission reported 94.4% equipped with train
brakes and 99% with automatic couplers. In every form of mechanical
safety device the railway equipment of 1907 was incomparably better
than in 1895, and yet the number of fatal accidents to employes in
1907 exceeded those in 1895 seven to three and to passengers three
and four-fifths to one. In the matter of deaths in coupling accidents
alone are "beneficial results" traceable to automatic safety devices.
The character of the men in the service, their automatic observance
of regulations, intelligence and alert devotion to duty are the best
preventives of railway accidents, and the conditions prevalent after
the panics of 1893 and 1907 are conducive to these conditions.

It is not likely, however, that the American people will welcome
experiences, even in homeopathic doses, such as we knew in 1904,
as the cure for railway accidents. But from the lessons of every
depression, as read in the statistics of railway fatalities, the
American people have a right to expect their representatives in
federal and state legislatures to learn that the prevention of
railway accidents rests on the intelligence, vigilance and experience
of the man and not with the multiplication of devices. Automatic
obedience to rules will prevent more accidents than all the safety
devices that cumber the shelves of the Patent Office at Washington.
Invention, however, is easier to the average American than plain
everyday observance of rules. Besides the selling of devices to
railways is a profitable business.


ACCIDENTS INCREASE IN 1909-10.

Accident Bulletin No. 33 for the first quarter of the current fiscal
year shows the unfavorable turn in casualties always attendant on
reviving business. Given in brief the figures are as follows:


CASUALTIES TO PERSONS, JULY, AUGUST AND SEPTEMBER, 1909.

  -----------------------------------+--------+--------
                                     | Killed | Injured
  -----------------------------------+--------+--------
  To passengers:                     |        |
    From accidents to trains         |    56  |  2,325
    By accidents from other causes   |    48  |  2,088
                                     |        |
  To employes:                       |        |
    From accidents to trains         |   137  |  1,427
    By accidents from other causes   |   611  | 13,401
                                     +--------+--------
      Total classes                  |        | 19,241
      Corresponding quarter 1908     |        | 16,545
  -----------------------------------+--------+--------

As this report goes to press, the Commission, through the Associated
Press, has issued a summary of Accident Bulletin No. 34 which states
that there were 1,073 persons (105 passengers and 969 employes)
killed and 21,849 injured on the steam railways of the United States
during the three months ending December 31, 1909.

This shows an increase over the corresponding quarter last year of
275 killed and 5,003 injured. For the same quarter in 1907 the killed
were 1,092; in 1906, 1,430; and in 1905, 1,109. As the quarter ending
December 31, 1909, saw railway traffic at its highest pressure, it
shows an improvement over the records of 1907, '06 and '05.

The number injured is the highest ever recorded for three months,
surpassing the quarter ending September 30, 1907, however, by only
126. But as explained elsewhere, "injuries" is too elastic a term for
comparative statistics.


ACCIDENTS TO OTHER PERSONS.

Where the quarterly Bulletins of the Commission make no mention
of the accidents to persons other than passengers and employes,
the annual reports of the carriers supply the missing data as to
"Other Persons." These include casualties at highway crossings, to
trespassers, persons walking, standing or sleeping on the track,
workmen in railway shops and all other accidents directly or
indirectly connected with the transportation industry. Accidents
to "Other Persons" cover over 60% of all fatalities charged to the
railways and of these over 80% are to trespassers.

The returns to this Bureau show the following casualties to persons
other than passengers and employes during the year ending June 30,
1909:


  ==================================+========+========
        Class                       | Killed | Injured
  ----------------------------------+--------+--------
  Trespassers (including suicides)  |  4,919 |  5,697
  Not trespassing                   |    820 |  3,069
                                    +--------+--------
      Total other persons           |  5,739 |  8,766
  ----------------------------------+--------+--------

These figures warrant the estimate that the total number of
trespassers and other persons killed and injured in the United States
in 1909 through the operation of railways was approximately 5,978 and
9,132 respectively. This marks a decrease from 1908, but not nearly
so great as in the case of passengers and employes.


FATALITIES IN RAILWAY ACCIDENTS SINCE 1888.

We are now enabled to present a complete statement of the fatalities
connected with the transportation industry since the Commission began
compiling casualty statistics in 1888. The figures in this summary
are confined to fatalities, for the reason given by the Commission
that it "is well known the term 'injury,' as used in statistics of
this character, is elastic." As a matter of fact the terms injury and
casualty are so individually or locally indefinite and variable as to
have little or no statistical value.


PASSENGERS, EMPLOYES AND OTHER PERSONS KILLED IN RAILWAY ACCIDENTS
FROM 1888 TO 1908.

  =========+==========+=========+===========================+=======
           |          |         |      Other Persons        |
    Year   |Passengers|Employes +-----------+---------------+ Total
           |          |         |Trespassers|Not Trespassing|
  ---------+----------+---------+-----------+---------------+-------
  1909     |    335   |  2,456  |    5,124  |        854    |  8,769
  1908     |    406   |  3,358  |    5,560  |        940    | 10,264
  1907     |    647   |  4,353  |    5,612  |      1,044    | 11,656
  1906     |    359   |  3,929  |    5,381  |        949    | 10,618
  1905     |    537   |  3,361  |    4,865  |        940    |  9,703
  1904     |    441   |  3,632  |    5,105  |        868    | 10,046
  1903     |    355   |  3,606  |    5,000  |        879    |  9,840
  1902     |    345   |  2,969  |    4,403  |        871    |  8,588
  1901     |    282   |  2,675  |    4,601  |        897    |  8,455
  1900     |    249   |  2,550  |    4,346  |        660    |  7,865
  1899     |    239   |  2,210  |    4,040  |        634    |  7,123
  1898     |    221   |  1,958  |    4,063  |        617    |  6,859
  1897     |    222   |  1,693  |    3,919  |        603    |  6,437
  1896     |    181   |  1,861  |    3,811  |        595    |  6,448
  1895     |    170   |  1,811  |    3,631  |        524    |  6,136
  1894     |    324   |  1,823  |    3,720  |        580    |  6,447
  1893     |    299   |  2,627  |    3,673  |        647    |  7,346
  1892     |    376   |  2,554  |    3,603  |        614    |  7,147
  1891     |    293   |  2,660  |    3,465  |        611    |  7,029
  1890     |    286   |  2,451  |    3,062  |        536    |  6,335
  1889     |    310   |  1,972  |     Not   |   (a)3,541    |  5,823
  1888     |    315   |  2,070  |    given  |   (a)2,897    |  5,282
  ---------+----------+---------+-----------+---------------+-------

  (a) Includes trespassers.

To the most casual student this table illustrates how railway
accidents increase and decline with periods of business activity and
recession. The effect of the panic of 1893-94 is seen in the decrease
in accidents in 1895 and 1896. The temporary slowing up in 1904 is
reflected in fewer fatalities in 1905, and a drop of 11% in the
business of 1908 was followed by a decreased death roll of 12% for
that year and 25% in 1909.


RELATION OF ACCIDENTS TO PASSENGER TRAFFIC.

The relation of railway accidents to passenger travel is most
accurately measured in the following statement of the number of
passengers carried one mile to one killed in train accidents during
the years for which these statistics have been compiled:


PASSENGERS CARRIED ONE MILE TO ONE KILLED.

  ==========+===================+====================+===================
            | Passengers Killed | Passengers Carried | Passengers Carried
   Year     |         in        |      One Mile      |     One Mile
            |  Train Accidents  |                    |  to One Killed
  ----------+-------------------+--------------------+-------------------
  1909      |       131(a)      |   29,452,000,000   |   288,745,100
  1908      |       165(b)      |   29,082,836,944   |   196,505,648
  1907      |       410         |   27,718,554,030   |    72,802,600
  1906      |       182         |   25,167,240,831   |   183,702,488
  1905      |       350         |   23,800,149,436   |    68,000,427
  1904      |       270         |   21,923,213,536   |    81,197,087
  1903      |       164         |   20,915,763,881   |   127,535,745
  1902      |       170         |   19,689,937,620   |   115,823,162
  1901      |       110         |   17,353,588,444   |   157,759,894
  1900      |        93         |   16,038,076,200   |   172,463,183
  1899      |        83         |   14,591,327,613   |   175,799,127
  1898      |        74         |   13,379,930,004   |   180,809,864
  1897      |        96         |   12,256,939,647   |   127,676,454
  1896      |        41         |   13,049,007,233   |   318,268,469
  1895      |        30         |   12,188,446,271   |   406,281,542
  1894      |       162         |   14,289,445,893   |    88,206,456
  1893      |       100         |   14,229,101,084   |   142,291,010
  1892      |       195         |   13,362,898,299   |    68,522,555
  1891      |       110         |   12,844,243,881   |   116,765,853
  1890      |       113         |   11,847,785,617   |   104,847,660
  1889      |       161         |   11,553,820,445   |    71,762,859
  ----------+-------------------+--------------------+-------------------

  (a) Of these only 102 were passengers in the ordinary sense of
      the term.

  (b) Of these only 148 were passengers in the ordinary sense of
      the term.

The student has to go back to the years of continued business
paralysis, 1895 and 1896, to find any record of immunity to
passengers from fatalities in train accidents at all comparable with
the conditions that prevailed in 1909.


DECREASED HAZARD TO TRAIN CREWS.

Never in the history of American railways has the occupation of the
men directly engaged in the operation of trains been as free from
fatalities as during the year 1909. This is proved by the following
statement showing the number of trainmen killed in all descriptions
of accidents since the figures have been compiled, with the ratio to
the number employed:


SUMMARY SHOWING NUMBER OF TRAINMEN KILLED IN RAILWAY ACCIDENTS 1889
TO 1909, WITH RATIO TO NUMBER EMPLOYED.

  ==========+==========+==========+===========+==========+==========
            |          |          |   Yard    |          | Number of
            | Trainmen | Trainmen | Trainmen  |   All    | Trainmen
            |          | in Yards | Switching | Trainmen |  for One
            |          |          |   Crews   |          |  Killed
  ----------+----------+----------+-----------+----------+----------
  1889      |   1,179  |          |           |   1,179  |    117
  1890      |   1,459  |          |           |   1,459  |    105
  1891      |   1,533  |          |           |   1,533  |    104
  1892      |   1,503  |          |           |   1,503  |    113
  1893      |   1,567  |          |           |   1,567  |    115
  1894      |   1,029  |          |           |   1,029  |    156
  1895      |   1,017  |          |           |   1,017  |    155
  1896      |   1,073  |          |           |   1,073  |    152
  1897      |     976  |          |           |     976  |    165
  1898      |   1,141  |          |           |   1,141  |    150
  1899      |   1,155  |          |           |   1,155  |    155
  1900      |   1,396  |          |           |   1,396  |    137
  1901      |   1,537  |          |           |   1,537  |    136
  1902      |   1,507  |          |           |   1,507  |    135
  1903      |   2,021  |          |           |   2,021  |    123
  1904      |   1,181  |    487   |    488    |   2,156  |    120
  1905      |   1,155  |    386   |    493    |   2,034  |    133
  1906      |   1,360  |    400   |    575    |   2,335  |    124
  1907      |   1,507  |    459   |    630    |   2,596  |    125
  1908      |   1,097  |    362   |    496    |   1,955  |    150
  1909      |     789  |    270   |    313    |   1,372  |    202
  ----------+----------+----------+-----------+----------+----------

The figures of the Interstate Commerce Commission have only made
the division of trainmen shown above since 1904. Here again the
last column proves the relation of accidents to the ebb and flow of
traffic.


FREIGHT TRAFFIC AND ACCIDENTS.

The preponderating part played by the immense freight traffic of
American railways as a cause of accidents is shown in the following
analysis of the sixty "prominent collisions" described in the
Commission's quarterly Accident Bulletins for the year 1909:


  =================================+============+========+========
    Kind of Train in Accident      | Number of  | Killed | Injured
                                   | Collisions |        |
  ---------------------------------+------------+--------+--------
  Passenger and passenger          |      8     |   30   |   225
  Freight and passenger            |     18     |   68   |   374
  Freight and freight              |     34     |   47   |    91
                                   +------------+--------+--------
      Total                        |     60     |  145   |   690
  ---------------------------------+------------+--------+--------

Here it will be observed freight trains were involved in 86.6% of the
prominent collisions of the year and shared in responsibility for
79.3% of the fatalities. The proportion of injured in accidents to
freight trains is not so great for the obvious reason that the number
of persons exposed in collisions involving only freight trains is
generally limited to train crews.


CAUSES OF TRAIN ACCIDENTS.

An examination of the causes given for the prominent collisions and
derailments in the Accident Bulletins of the Commission since the
passage of the Act of March 3, 1901, requiring the railway companies
to make full monthly reports of all accidents affords the following
general statement:


  =========================================================+==========
                              Cause                        | Number of
                                                           | Accidents
  ---------------------------------------------------------+----------
  Negligence, error or forgetfulness of some member of     |     241
    train crew                                             |
  Recklessness, carelessness, overlooking or disregarding  |     233
    orders or taking chances                               |
  Disobedience                                             |      53
  Incompetence or inexperience                             |      20
  Defect of equipment, tires, wheels, etc.                 |      64
  Defect of roadway                                        |      24
  Malicious acts                                           |      27
  Misadventure, washouts, landslides, cyclones, etc.       |      91
  Undiscovered                                             |      41
                                                           +----------
        Total                                              |     794
  ---------------------------------------------------------+----------

Among the prominent derailments charged against the railways in the
Bulletin for April, May and June, 1909, is the following, resulting
in one killed and three injured.

    "Automobile running on track, derailed by running over a dog,
    one guest killed."

Through the inclusion in these Bulletins of accidents on trolley
lines, their value as records of railway accidents is being greatly
impaired. Without any information as to the number of passengers
carried by the electric cars it is impossible to arrive at an
accurate idea of the relation of accidents to traffic, and without
this the mere record of accidents has little information value.


ACCIDENTS ON BRITISH RAILWAYS.

For a second time in their history, in the year ending December 31,
1908, British railways went through a twelvemonth without killing a
single passenger in a train accident, thus paralleling their record
of 1901 in this respect. In the matter of passengers injured, the
year 1908 showed a remarkable improvement, not only over 1901 but
over any other year in the history of British railways. When it comes
to the totals of casualties, however, 1908 shows little variation
from the average record.

The following table shows the total number of persons killed and
injured in the working of British railways, as reported to the Board
of Trade for the calendar year 1908 as compared with 1901:


  ======================================+================+===============
                                        |     1908       |     1901
    Class                               +-------+--------+-------+-------
                                        |Killed |Injured |Killed |Injured
  --------------------------------------+-------+--------+-------+-------
  Passengers:                           |       |        |       |
    In accidents to trains              |    -- |    283 |    -- |    476
    By accidents from other causes      |   107 |  3,105 |   135 |  2,269
                                        +-------+--------+-------+--------
        Total passengers                |   107 |  3,388 |   135 |  2,745
                                        |       |        |       |
  Employes:                             |       |        |       |
    In accidents to trains              |     6 |    164 |     8 |    156
    By accidents from other causes      |   426 | 24,017 |   568 | 14,522
                                        +-------+--------+-------+--------
        Total employes                  |   432 | 24,181 |   576 | 14,678
                                        |       |        |       |
  Other persons:                        |       |        |       |
    Accidents to trains                 |    -- |      7 |     3 |      5
    While passing over railways at      |       |        |       |
      level crossings                   |    51 |     44 |    55 |     26
    While trespassing on line           |       |        |       |
      (including suicides)              |   479 |    118 |   426 |    171
    Not coming under above              |       |        |       |
      classification                    |    59 |    747 |   82  |    750
                                        +-------+--------+-------+--------
        Total other persons             |   589 |    916 |   566 |    952
                                        |       |        |       |
  Grand total all classes, 1908         | 1,128 | 28,485 | 1,277 | 18,375
    "     "    "     "     1907         | 1,211 | 25,975 |       |
    "     "    "     "     1906         | 1,252 | 20,444 |       |
    "     "    "     "     1905         | 1,180 | 18,236 |       |
    "     "    "     "     1904         | 1,158 | 18,802 |       |
    "     "    "     "     1903         | 1,262 | 18,557 |       |
    "     "    "     "     1902         | 1,171 | 17,814 |       |
    "     "    "     "     1901         | 1,277 | 18,375 |       |
    "     "    "     "     1900         | 1,325 | 19,572 |       |
    "     "    "     "     1899         | 1,340 | 19,155 |       |
                                        +-------+--------+-------+--------
        Total, ten years                |12,294 |205,415 |       |
  --------------------------------------+-------+--------+-------+--------

As one year of traffic on American railways approximates ten years on
British railways, the above totals for ten years on the latter may be
compared with 8769 killed and 73,052 injured on the former last year,
or with 11,839 killed and 111,016 injured in 1907, the darkest year
in the annals of American railway accidents.

Attention is asked to the apparently startling increase in injuries
on British railways since 1905. The increase is absolutely
fictitious, having resulted from "a change in the definition of a
reportable accident," and not from any greater hazard in the working
of British roads. This confirms the objection, expressed in the
report of the British Board of Trade in 1903, to any changes in the
form of tables extending over a long series of years that "admit
of comparisons, which any change of form would invalidate if not
destroy."

It will be perceived that the mere change in the definition of what
constitutes a reportable accident increased the number of injuries
reported against British railways fully 50%. This justifies the
writer's view that comparisons of injuries in railway accidents are
of little value. Even the same injury does not affect two persons in
the same degree. One "hollers" and cries for a doctor where the other
whistles and goes on with his work.

The inquiries of the Board of Trade into the causes of British
railway accidents in 1908 confirm former findings that, exclusive of
train accidents, in the case of passengers "they mostly arise from
carelessness of the passengers themselves," and the same is true of
the vast majority of accidents to employes.


OVERWORK AND RAILWAY ACCIDENTS.

At last the statistics of the British Board of Trade furnish what
well nigh amounts to demonstration that long hours play very little
part as an actual cause of railway accidents. Under the statute the
Board requires reports of all instances of periods of duty in excess
of twelve hours worked on British railways. For the month of October,
1908, the returns show 31,052 excess hours worked out of 2,773,891;
and for October, 1909, 24,486 out of 2,695,036, or an excess of 1.12%
in 1908 and .92%, in 1909.

Now, out of 861 accidents investigated in 1908, only 16, or 1.85%,
occurred to men working in excess of 12 hours; and out of 804
investigated in 1909 only 9, or 1.12%. This bears out the opinion of
a high English official, that experience "does not show any close
connection between long hours and accidents."

The following statement shows the relation of accidents to the hours
the persons involved have been on duty on British railways for a
period of five years:


HOURS WHEN BRITISH ACCIDENTS OCCUR.

  ======================================================================
                 |    |     Hours on Duty when Accidents Occurred
  Three months   |Off +----+----+----+----+----+----+----+----+----+----
        to       |duty| 1st| 2d | 3d | 4th| 5th| 6th| 7th| 8th| 9th|10th
  ---------------|----+----+----+----+----+----+----+----+----+----+----
  Sept. 30, 1908 |  1 | 20 | 18 | 19 | 17 | 15 | 23 | 19 | 11 | 11 | 17
  Dec. 31, 1908  |  5 | 12 | 22 | 34 | 14 | 23 | 23 | 16 | 14 | 19 | 13
  March 31, 1909 |  4 | 14 | 16 | 29 | 28 | 16 | 17 | 18 | 19 | 11 | 12
  June 30, 1909  |  1 | 15 | 16 | 10 | 19 | 15 | 14 | 15 | 16 | 24 | 12
  ---------------+----+----+----+----+----+----+----+----+----+----+----
  Year 1909      | 11 | 61 | 72 | 92 | 78 | 69 | 77 | 68 | 60 | 65 | 54
  Year 1908      |  6 | 60 |103 | 83 | 85 | 77 | 81 | 72 | 70 | 63 | 57
  Year 1907      |  1 | 70 | 86 | 78 | 78 | 71 | 64 | 59 | 48 | 68 | 62
  Year 1906      |  6 | 52 | 64 | 70 | 86 | 63 | 81 | 68 | 70 | 71 | 61
  Year 1905      |  3 | 52 | 74 | 65 | 54 | 71 | 66 | 59 | 48 | 53 | 56
  ---------------+----+----+----+----+----+----+----+----+----+----+----
  Five years     | 27 |295 |399 |388 |381 |351 |369 |326 |296 |320 |290
  ---------------+----+----+----+----+----+----+----+----+----+----+----

  {table continued}
  ==============================================================
                 |    | Hours on Duty when Accidents Occurred
  Three months   |Off +-----+-----+-----+-----+-----+-----+-----
        to       |duty| 11th| 12th| 13th| 14th| 15th| 16th| 17th
  ---------------|----+-----+-----+-----+-----+-----+-----+-----
  Sept. 30, 1908 |  1 |  14 |  17 |   3 |   0 |   0 |   1 |   0
  Dec. 31, 1908  |  5 |  11 |   8 |   5 |   0 |   0 |   0 |   0
  March 31, 1909 |  4 |  15 |   7 |   0 |   0 |   0 |   0 |   0
  June 30, 1909  |  1 |  11 |   5 |   0 |   0 |   0 |   0 |   0
  ---------------+----+-----+-----+-----+-----+-----+-----+-----
  Year 1909      | 11 |  51 |  37 |   8 |   0 |   0 |   1 |   0
  Year 1908      |  6 |  53 |  35 |   8 |   8 |   0 |   0 |   0
  Year 1907      |  1 |  43 |  35 |  14 |  12 |   5 |   3 |   1
  Year 1906      |  6 |  42 |  39 |   7 |   4 |   3 |   0 |   2
  Year 1905      |  3 |  41 |  37 |   7 |   3 |   3 |   0 |   1
  ---------------+----+-----+-----+-----+-----+-----+-----+-----
  Five years     | 27 | 230 | 183 |  44 |   7 |  11 |   4 |   4
  ---------------+----+-----+-----+-----+-----+-----+-----+-----

It will be observed that out of these 3,945 accidents investigated
and reported on by British inspectors during the years 1905 to 1909,
inclusive, a majority happened during the first half of the twelve
hours for which the men were booked and 2.28% when they were working
overtime. In no instance was the accident attributed to long hours.


RAILWAY ACCIDENTS IN EUROPE.

Excluding the returns of injured, for the reason that no two
countries have a common definition of a reportable injury, the
accidents on European railways, according to the latest reports,
resulted in the following fatalities:


KILLED IN EUROPEAN RAILWAY ACCIDENTS.

(Total mileage represented 182,459.)

  -----------------+--------+----------+--------+-------+-------+---------
    Country        |  Year  |Passengers|Employes| Other | Total |Preceding
                   |        |          |        |Persons|       |  Year
  -----------------+--------+----------+--------+-------+-------+---------
  United Kingdom   |  1908  |    107   |   432  |   587 | 1,128 |  1,211
  Germany          |  1908  |    105   |   604  |   644 | 1,353 |  1,558
  Russia in Europe |  1905  |    231   |   478  | 1,149 | 1,858 |  1,632
  France           |  1907  |  (a)36   |   322  |(b)301 |   659 |    627
  Austria          |  1907  |     11   |   147  |   145 |   303 |    213
  Hungary          |  1907  |     32   |   138  |   172 |   343 |    319
  Italy            | 1907-8 |  (c)42   |   105  |   115 |   262 |    277
  Spain            |  1907  |     25   |    64  |   213 |   302 |    219
  Portugal         |  1904  |          |        |       |    55 |
  Sweden           |  1906  |     10   |    45  |    57 |   112 |    105
  Norway           |  1908  |      1   |     4  |     6 |    11 |      9
  Denmark          | 1907-8 |   (c)1   |    20  |     9 |    30 |     22
  Belgium          |  1907  |      4   |    72  |    70 |   146 |    125
  Holland          |  1907  |      3   |    18  |    25 |    46 |     60
  Switzerland      |  1907  |     14   |    45  |    36 |    95 |     78
  Roumania         | 1907-8 |      8   |    42  |    50 |   100 |    103
                   +--------+----------+--------+-------+-------+--------
      Totals       |        |    630   | 2,536  | 3,580 | 6,803 |  6,595
  -----------------+--------+----------+--------+-------+-------+--------

  (a) Train accidents only; other accidents to passengers included under
      "Other Persons."

  (b) Excluding suicides.

  (c) Statistics cover State railways only.

These figures, representing a European mileage of 182,459, may
be compared with those of the United States in 1897 when it had
183,284 miles of line and an accident record of 222 fatalities to
passengers, 1,693 to employes and 4,522 to other persons; or even
with the American record for 1909, when with a mileage 27% greater
the record stood 335 fatalities to passengers, 2,456 to employes and
5,978 to other persons. The excess of fatalities to other persons
in this country is due to the notorious indifference to danger and
law of all classes of citizens in using railway right of way as a
common thoroughfare for adults and playground for children. Despite
the elevation of the tracks in Chicago, the writer has seen scores of
youngsters scarcely able to walk playing on those raised tracks and
laughing at the locomotives as they went shrieking by.

In all comparisons of accidents on American railways with those on
foreign roads, it should be remembered that our excess of mileage and
freight traffic more than balance their density of passenger traffic
and that nowhere else on earth is railway right of way common to
foolhardy pedestrians and creeping children.

The Railroad Commission of Indiana is to be commended for its efforts
to enlist public sentiment against trespassing on railway tracks.




XIII

RAILWAY RECEIVERSHIPS IN 1909


Only five railway companies, operating 859 miles of line, went into
the hands of receivers during the calendar year 1909, as compared
with 24 companies, operating 8,009 miles, for the preceding year.
The capitalization of these five roads was $78,095,000, against
$596,359,000 for those financially involved in 1908. The following
statement gives the names, mileage, funded debt and capital stock of
the roads for which receivers were appointed in 1909:


  ===============================+=========+=============+============
                                 | Mileage | Funded Debt |     Stock
  -------------------------------+---------+-------------+------------
  Atlanta, Birmingham & Atlantic |    572  | $18,533,000 | $35,000,000
  Alabama Terminal               |     --  |   2,445,000 |   3,000,000
  Georgia Terminal               |     --  |   3,000,000 |   1,500,000
  Yellowstone Park               |     32  |     696,000 |     696,000
  Chicago, Peoria & St. Louis    |    255  |   5,875,000 |   7,350,000
  -------------------------------+---------+-------------+------------
        Total                    |    859  | $30,549,000 | $47,546,000
  -------------------------------+---------+-------------+------------

The number, mileage and capitalization of the railways that have
failed since 1875 are as follows, the figures being from the
_Railroad Age Gazette_:


RECEIVERSHIPS SINCE 1876.

  =====+=======+=========+===========
       |       |         | Bonds and
       | Roads |  Miles  |   Stock
  -----+-------+---------+-----------
  1876 |   42  |  6,662  |   $467,000
  1877 |   38  |  3,637  |    220,294
  1878 |   27  |  2,320  |     92,385
  1879 |   12  |  1,102  |     39,367
  1880 |   13  |    885  |    140,265
  1881 |    5  |    110  |      3,742
  1882 |   12  |    912  |     39,074
  1883 |   11  |  1,990  |    108,470
  1884 |   37  | 11,038  |    714,755
  1885 |   44  |  8,836  |    385,460
  1886 |   13  |  1,799  |     70,346
  1887 |    9  |  1,046  |     90,318
  1888 |   22  |  3,270  |    186,814
  1889 |   22  |  3,803  |     99,664
  1890 |   26  |  2,963  |    105,007
  1891 |   26  |  2,159  |     84,479
  1892 |   36  | 10,508  |    357,692
  1893 |   74  | 29,340  |  1,781,046
  1894 |   38  |  7,025  |    395,791
  1895 |   31  |  4,089  |    369,075
  1896 |   34  |  5,441  |    275,597
  1897 |   18  |  1,537  |     92,909
  1898 |   18  |  2,069  |    138,701
  1899 |   10  |  1,019  |     52,285
  1900 |   16  |  1,165  |     78,234
  1901 |    4  |     73  |      1,627
  1902 |    5  |    278  |      5,835
  1903 |    9  |    229  |     18,823
  1904 |    8  |    744  |     36,069
  1905 |   10  |  3,593  |    176,321
  1906 |    6  |    204  |     55,042
  1907 |    7  |    317  |     13,585
  1908 |   24  |  8,009  |    596,359
  1909 |    5  |    859  |     78,095
  -----+-------+---------+-----------
    Total, 34 years      |
       |  712  | 128,498 | $7,370,526
  -----+-------+---------+-----------

  [Three figures omitted in bonds and stock column.]




XIV

COST OF RAILWAY REGULATION


Nothing in the record of railway development in the United States
has increased with the rapidity of the cost of their regulation
under the act creating the Interstate Commerce Commission. Since the
first Commission, composed of Judge Thomas M. Cooley, of Michigan,
chairman, William R. Morrison, of Illinois, Augustus Schoonmaker,
of New York, Aldace F. Walker of Vermont, and Walter L. Bragg, of
Alabama, Commissioners, and Edward E. Moseley, Secretary, and Prof.
Henry C. Adams, Statistician, to date the yearly expenditures on its
account have been as follows:


  ============================+========
  1888   Five Commissioners   | $97,867
  1889    "         "         | 149,453
  1890    "         "         | 180,440
  1891    "         "         | 214,844
  1892    "         "         | 221,745
  1893    "         "         | 217,792
  1894    "         "         | 209,250
  1895    "         "         | 216,206
  1896    "         "         | 234,941
  1897    "         "         | 234,909
  1898    "         "         | 237,358
  1899    "         "         | 238,125
  1900    "         "         | 243,624
  1901    "         "         | 255,979
  1902    "         "         | 271,728
  1903    "         "         | 298,842
  1904    "         "         | 321,533
  1905    "         "         | 330,739
  1906    "         "         | 382,141
  1907   Seven Commissioners  | 538,827
  1908    "         "         | 736,530
  1909    "         "         | 988,936
  ----------------------------+--------

From this it appears that the cost of regulating American railways
has increased tenfold in twenty years. Of this only $34,000 is
chargeable to the increase in number and compensation for the
Commission under the Hepburn Act. Of the balance it was charged by
Representative Adair of Indiana in a speech in Congress last January
that $450,000 annually was for "Interstate Commerce Detectives."




XV

STATISTICS OF FOREIGN RAILWAYS


In the following review of the mileage and traffic statistics of the
principal divisions of Europe and other countries, the information
has been derived from the latest official sources wherever available,
and where estimates have been resorted to as noted they have been
computed from ascertained facts.


  ======================================================================
                   |      |    Miles     |                 |
                   |      |   Covered    |  Capitalization |  Passenger
      Country      | Year |     by       |    or Cost of   |  Revenues
                   |      |Capitalization|   Construction  |
  -----------------+------+--------------+-----------------+------------
  United Kingdom   | 1908 |     23,205   |  $ 6,382,296,742|$207,539,004
  German Empire    | 1908 |     35,558   |    3,903,848,400| 178,100,400
  France           | 1907 |     24,817   |    3,455,436,000| 145,355,448
  Russia in Europe | 1905 |     31,545   | (b)3,170,876,360|  58,813,500
  Austria          | 1907 |     13,427   |    1,515,576,800|  41,716,800
  Hungary          | 1907 |     11,769   |      741,586,200|  20,836,800
  Italy(a)         |1907-8|      8,762   | (c)1,091,608,000|  31,149,886
  Spain            | 1905 |      8,432   |      649,919,610|  16,215,866
  Portugal         | 1905 |      1,425   |      162,385,280|   4,014,196
  Sweden           | 1906 |      7,938   |      267,408,450|  10,665,270
  Norway           | 1908 |      1,608   |       61,841,610|   2,253,420
  Denmark(a)       |1907-8|      1,191   |       59,806,620|   5,111,910
  Belgium          | 1907 |      2,871   |   (d)451,592,980|  18,340,790
  Holland          | 1907 |      2,225   |      191,821,000|  10,978,400
  Switzerland      | 1907 |      2,740   |      303,426,747|  16,222,422
  Roumania         |1907-8|      1,979   |      183,492,074|   5,089,191
  Canada           | 1909 |     24,104   |    1,608,963,337|  39,073,488
  Argentine        | 1907 |     13,690   |      820,433,280|  19,853,760
  Japan(a)         | 1908 |      3,982   |      190,173,728|  18,786,895
  British India    | 1908 |     30,809   |    1,336,005,760|  55,132,160
  New South Wales  | 1909 |      3,623   |      231,870,440|   8,380,744
                   |------+--------------+-----------------+------------
          Total    |      |    255,700   | $ 26,780,369,418|$913,630,350
                   |      |              |                 |
  United States    | 1908 |    230,494   |(e)12,840,091,462| 566,832,746
                   |      |              |                 |
  -----------------+------+--------------+-----------------+------------

  (a) State only.

  (b) Including Siberian.

  (c) 1906-7.

  (d) State only. 2,543 miles.

  (e) Exclusive of switching and terminal companies (1,626 miles).

  {table continued; part 2}
  ===================================================================
                   |      |              |            |
                   |      |    Freight   |    Other   |     Total
      Country      | Year |   Revenues   |  Revenues  |    Earnings
                   |      |              |            |
  -----------------+------+--------------+------------+--------------
  United Kingdom   | 1908 | $ 286,786,249|$ 89,560,115| $ 583,885,371
  German Empire    | 1908 |   412,635,760|  56,715,200|   647,451,360
  France           | 1907 |   176,664,215|   6,421,010|   323,440,673
  Russia in Europe | 1905 |   221,967,500|  39,678,500|   320,459,500
  Austria          | 1907 |   122,214,200|   5,692,800|   169,628,800
  Hungary          | 1907 |    54,650,400|   3,327,000|    78,814,200
  Italy(a)         |1907-8|    51,266,976|   6,929,979|    89,346,841
  Spain            | 1905 |    34,694,555|   6,190,271|    57,100,692
  Portugal         | 1905 |     5,322,875|     423,936|     9,761,000
  Sweden           | 1906 |    21,051,360|     815,670|    32,572,300
  Norway           | 1908 |     3,029,920|     108,810|     5,392,150
  Denmark(a)       |1907-8|     5,266,350|     680,400|    11,058,660
  Belgium          | 1907 |    38,532,450|     858,271|    89,731,511
  Holland          | 1907 |    10,664,400|   1,300,000|    22,942,800
  Switzerland      | 1907 |    21,204,331|   1,677,556|    39,114,310
  Roumania         |1907-8|    10,269,530|     629,373|    15,988,094
  Canada           | 1909 |    95,714,783|  10,268,065|   145,056,336
  Argentine        | 1907 |    56,597,760|   7,578,240|    83,029,760
  Japan(a)         | 1908 |    14,651,808|   1,448,881|    34,887,584
  British India    | 1908 |    84,225,280|   4,088,640|   143,446,080
  New South Wales  | 1909 |    14,437,981|   1,669,826|    24,488,551
                   |------+--------------+------------+--------------
          Total    |      |$1,741,848,683|$246,062,543|$2,927,596,573
                   |      |              |            |
  United States    | 1908 | 1,665,419,108| 171,554,135| 2,393,805,989
                   |      |              |            |
  -----------------+------+--------------+------------+--------------

  (a) State only.

  {table continued; part 3}
  ========================================================================
                   |      |              |        |             |        |
                   |      |              |Per Cent|             |        |
      Country      | Year |   Operating  |Expense |             |Average |
                   |      |    Expenses  |  to    |   Passengers|Journey |
                   |      |              |Revenue |   Carried   | Miles  |
                   |      |              |        |             |        |
  -----------------+------+--------------+--------+-------------+--------+
  United Kingdom   | 1908 |  $372,103,990|  63.7  |1,725,631,620|  7.8   |
  German Empire    | 1908 |   476,290,080|  73.6  |1,361,655,150| 14.1   |
  France           | 1907 |   183,444,503|  55.9  |  474,335,306| 19.9   |
  Russia in Europe | 1905 |   216,987,500|  67.8  |  116,441,000| 73.2   |
  Austria          | 1907 |   120,103,800|  70.8  |  223,717,302| 19.1   |
  Hungary          | 1907 |    53,309,000|  67.6  |  107,171,000| 21.4   |
  Italy(a)         |1907-8|    73,735,071|  82.6  |   64,276,501| 25.0(f)|
  Spain            | 1905 |    27,750,936|  48.6  |   41,846,249| 26.0(f)|
  Portugal         | 1905 |     4,426,236|  45.3  |   13,446,043| 20.0(f)|
  Sweden           | 1906 |    21,624,840|  66.3  |   46,452,445| 16.8   |
  Norway           | 1908 |     3,727,620|  69.1  |   10,679,732| 15.5   |
  Denmark(a)       |1907-8|     9,344,430|  84.5  |   20,818,639| 21.7   |
  Belgium          | 1907 |    38,428,809|  64.4  |  181,216,314| 14.0   |
  Holland          | 1907 |    19,174,400|  83.6  |   42,319,000| 18.4   |
  Switzerland      | 1907 |    26,311,883|  67.3  |   97,752,465| 12.8   |
  Roumania         |1907-8|     9,587,468|  60.0  |    8,193,037| 42.2   |
  Canada           | 1909 |   104,600,082|  72.1  |   32,683,309| 62.0   |
  Argentine        | 1907 |    56,198,080|  67.7  |   41,911,512| 25.2   |
  Japan(a)         | 1908 |    17,875,971|  51.2  |  101,115,739| 23.3   |
  British India    | 1908 |    86,408,000|  60.2  |  321,169,000| 37.7   |
  New South Wales  | 1909 |    14,380,252|  58.7  |   52,051,556| 11.1   |
                   |------+--------------+--------|-------------+--------+
          Total    |      |$1,935,812,951|  66.1  |5,084,882,919| 16.52  |
                   |      |              |        |             |        |
  United States    | 1908 | 1,669,547,876|  69.75 |  890,009,574| 32.66  |
                   |      |              |        |             |        |
  -----------------+------+--------------+--------+-------------+--------+

  (a) State only.

  (f) Estimated.


  {table continued; part 4}
  ==========================================================
                   |      |             |         |        |
                   |      |             |         |Per Cent|
      Country      | Year |Freight Tons | Average |  Net   |
                   |      |  Carried    |   Haul  |Revenues|
                   |      |             | (Miles) |   to   |
                   |      |             |         |Capital |
  -----------------+------+-------------+---------+--------+
  United Kingdom   | 1908 |  491,595,056|  25.0   |  3.32  |
  German Empire    | 1908 |  461,296,759|  61.6   |  4.51  |
  France           | 1907 |  156,504,353|  78.8   |  4.18  |
  Russia in Europe | 1905 |  156,129,875| 151.1   |  3.73  |
  Austria          | 1907 |  151,941,132|  53.7   |  3.27  |
  Hungary          | 1907 |   61,483,000|  69.5   |  3.6   |
  Italy(a)         |1907-8|   32,635,763|  66.0(f)|  1.4   |
  Spain            | 1905 |   22,662,548|  69.4   |  4.5   |
  Portugal         | 1905 |    3,775,559|  54.0(f)|  3.3   |
  Sweden           | 1906 |   31,961,244|  43.4   |  4.24  |
  Norway           | 1908 |    4,501,455|  35.4   |  2.55  |
  Denmark(a)       |1907-8|    4,726,757|  55.1   |  2.92  |
  Belgium          | 1907 |   72,494,073|  43.5   |  4.72  |
  Holland          | 1907 |   15,924,600|  53.8   |  1.93  |
  Switzerland      | 1907 |   17,411,711|  69.5   |  3.7   |
  Roumania         |1907-8|    6,796,315|  55.9   |  3.54  |
  Canada           | 1909 |   66,842,258| 197.0   |  2.51  |
  Argentine        | 1907 |   27,933,828| 115.9   |  3.95  |
  Japan(a)         | 1908 |   18,312,223|  78.7   |  8.9   |
  British India    | 1908 |   62,398,000| 159.1   |  4.33  |
  New South Wales  | 1909 |    9,298,929|  68.4   |  4.36  |
                   |------+-------------+---------+--------+
          Total    |      |1,876,625,438|  66.7   |  3.71  |
                   |      |             |         |        |
  United States    | 1908 |1,532,981,790| 142.5   |  4.17  |
                   |      |             |         |        |
  -----------------+------+-------------+---------+--------+

  (a) State only.

  (f) Estimated.


From the data here furnished it is possible to arrive at a close
approximation of the passenger and freight rates in the countries
named. The average passenger journey and freight haul in the United
States is nearly twice as long as the average for the rest of the
world. In comparing net results it should be remembered that rentals
and taxes should be deducted from the American figures.

For further details of the railways of Canada, the United Kingdom and
the German Empire, for which complete statistics are available, the
reader is referred to succeeding pages.


Here the writer would acknowledge the courtesy of the Railway
Department of Canada for advance copies of the Dominion railway
statistics for 1909.


RAILWAYS OF CANADA.

STATISTICS OF THE RAILWAYS OF THE DOMINION FOR THE YEARS ENDING JUNE
30, 1907, 1908 AND 1909.

  =========================+===============+===============+==============
                           |      1907     |      1908     |    1909
  -------------------------+---------------+---------------+--------------
  Miles of line operated   |        22,608 |        22,966 |        24,104
  Second track             |         1,096 |         1,211 |         1,464
  Yard track and sidings   |         4,092 |         4,546 |         4,761
                           +---------------+---------------+--------------
          All tracks       |        27,796 |        28,723 |        30,329
  Capital cost:            |               |               |
    Stock                  |  $588,563,591 |  $607,425,349 |  $647,534,647
    Funded debt            |   583,369,217 |   631,869,664 |   660,946,769
    Government railways    |   100,958,402 |   109,423,104 |   111,545,903
  Subsidies                |   162,017,157 |   166,291,482 |   188,963,337
                           +---------------+---------------+--------------
      Total capital cost   |$1,434,908,367 |$1,515,009,599 |$1,608,990,656
      Per mile of line     |        63,910 |        65,968 |        66,752
  Passenger traffic:       |               |               |
    Passengers carried     |    32,137,319 |    34,044,992 |    32,683,309
    Pass. carried 1 mile   | 2,049,549,813 | 2,081,960,864 | 2,033,001,225
    Average journey (miles)|            64 |            61 |            62
    Average pass. per train|            56 |            54 |            51
    Mileage of pass. trains|    30,220,461 |    31,950,349 |    32,295,730
    Mileage of mixed trains|     5,971,414 |     6,210,807 |     7,061,580
    Receipts from pass.    |   $39,184,437 |   $39,992,503 |   $39,073,488
    Receipts per pass. mile|               |               |
         (cents)           |         1.911 |         1.920 |         1.921
  Freight traffic:         |               |               |
    Tons carried           |    56,497,885 |    63,019,900 |    66,842,258
    Tons carried 1 mile    |11,687,711,830 |12,961,512,519 |12,961,512,519
    Average haul (miles)   |           183 |           206 |           197
    Freight train mileage  |    38,923,890 |    40,476,370 |    40,304,906
    Average tons per train |           260 |           278 |           278
    Receipts from freight  |   $94,995,087 |   $93,746,655 |   $95,714,783
    Receipts per ton mile  |               |               |
         (mills)           |          8.12 |          7.23 |          7.27
  Miscellaneous receipts   |   $12,558,689 |   $13,179,155 |   $10,268,065
      Total receipts       |   146,738,214 |   146,918,313 |   145,056,336
                           |               |               |
  Expenses of operation:   |               |               |
    Way and structures     |    20,887,092 |    20,778,610 |   $21,153,274
    Maintenance of         |               |               |
          equipment        |    21,666,373 |    20,273,626 |    21,510,303
    Conducting             |               |               |
          transportation   |    57,325,543 |    62,486,270 |    54,284,587
    General expenses       |     3,869,664 |     3,765,636 |     3,853,094
    Traffic expenses       |        --     |       --      |     3,798,824
                           +---------------+---------------+--------------
      Total expenses       |  $103,748,672 |  $107,304,142 |  $104,600,082
      Ratio to earnings    |        70.72% |        73.04% |        72.11%
                           |               |               |
  Net receipts             |   $42,989,552 |   $39,614,171 |   $40,456,251
    Percentage to          |               |               |
           capital cost    |         3.00% |         2.61% |         2.51%
  Gross receipts per mile  |        $6,535 |        $6,398 |        $6,018
  Gross expenses per mile  |         4,621 |         4,672 |         4,339
  Number of employes       |       124,012 |       106,404 |       125,195
  Compensation             |   $58,719,493 |   $60,376,607 |   $63,216,662
  Prop. of gross earnings  |        40.02% |        41.10% |        43.58%
  Prop. of operating       |               |               |
           expenses        |        56.61% |        56.27% |        60.43%
  Average per employe      |               |               |
           per year        |          $473 |          $569 |          $505
  -------------------------+---------------+---------------+--------------


RAILWAYS OF THE UNITED KINGDOM.

STATISTICS OF MILEAGE, CAPITALIZATION, AND TRAFFIC FOR THE YEARS 1907
AND 1908.

  ========================================+===============+===============
                                          |      1907     |      1908
  ----------------------------------------+---------------+---------------
  Length of railways:                     |               |
    Double track or more (miles)          |         12,845|         12,926
    Single track                          |         10,263|         10,279
                                          |---------------|---------------
      Total length of line                |         23,108|         23,205
      Total length, all tracks,           |               |
                 sidings, etc.            |         53,158|         53,669
                                          |               |
  Total capitalization (paid up)          | $6,302,099,773| $6,382,296,742
    Capitalization per mile of line       |        272,723|        275,040
                                          |               |
  Passenger traffic:                      |               |
    Passengers carried                    |  1,259,481,000|  1,278,115,000
    Season ticket journeys                |    445,101,956|    447,516,620
    Passengers carried one mile           | 13,295,747,058| 13,459,926,636
    Average journey (miles)               |            7.8|            7.8
    Receipts from passengers              |   $205,036,740|   $207,539,004
    Average receipts per passenger        |               |
       per mile (cents)                   |           1.54|          1.542
    Mail and other passenger train        |               |
       receipts                           |    $43,213,632|    $44,067,043
                                          |               |
  Freight traffic:                        |               |
    Minerals, tons carried                |    407,602,177|    388,424,541
    General merchandise                   |    108,284,939|    103,170,515
    Total freight, tons                   |    515,887,116|    491,595,056
    Tons carried one mile                 | 12,897,177,900| 12,289,876,400
    Average haul (miles)                  |             25|             25
    Receipts from freight                 |   $298,058,610|   $286,786,249
    Average receipts per ton mile (cents) |           2.31|          2.333
                                          |               |
  Miscellaneous receipts                  |    $45,634,648|    $45,493,075
                                          |---------------|---------------
      Total receipts                      |   $591,943,630|   $583,885,371
                                          |               |
  Expenses of operation                   |    373,085,840|    372,103,990
    Ratio of expenses to earnings         |          63.0 |          63.75
                                          |               |
  Net receipts                            |   $218,857,790|
    Percentage to total paid-up capital   |           3.47|
                                          |               |
  Gross receipts per mile                 |        $25,616|        $25,162
  Gross expenses per mile                 |         16,165|         16,035
                                          |               |
  Number of employes                      |        621,341|     (a)621,341
  Total compensation                      |   $158,116,560|   $156,348,915
  Proportion of gross earnings            |           26.7|          26.78
  Proportion of operating expenses        |           42.4|          42.02
  Average per employe per year            |        $254.47|        $251.78
  ----------------------------------------+---------------+---------------

  (a) No enumeration of employes has been made since 1907, the last
      preceding, in 1904, gave a total of 581,664.


RAILWAYS OF GERMANY.

STATISTICS OF MILEAGE, COST OF CONSTRUCTION, AND TRAFFIC FOR THE
YEARS 1906, 1907 AND 1908.

  ===========================+==============+==============+==============
                             |     1906     |     1907     |     1908
  ---------------------------+--------------+--------------+--------------
  Length of State railways   |              |              |
    (miles)                  |        32,050|        32,367|        32,922
  Length of private railways |         2,513|         2,613|         2,636
                             |--------------|--------------|--------------
        Total                |        34,563|        34,980|        35,558
                             |              |              |
  Cost of construction       |$3,613,493,706|$3,767,220,777|$3,903,848,400
  Cost per mile              |       104,548|       107,694|       109,788
                             |              |              |
  Passenger traffic:         |              |              |
    Passengers carried       | 1,209,224,072| 1,294,881,923| 1,361,655,150
    Passengers carried (one  |              |              |
      mile)                  |17,189,336,940|18,372,644,327|19,202,935,120
    Average journey (miles)  |         14.21|         14.18|         14.10
    Receipts from passengers |  $170,165,002|  $172,339,593|  $178,100,400
    Receipts per passenger   |              |              |
      per mile (cents)       |          0.99|          0.94|          0.93
                             |              |              |
  Freight traffic:           |              |              |
    Fast freight and express:|              |              |
      Tons carried           |     3,791,769|     3,935,538|     4,013,970
      Tons carried 1 mile    |   265,115,720|   272,898,271|   269,726,040
      Average haul (miles)   |         69.91|         69.34|         66.96
      Receipts from same     |   $16,924,080|   $17,295,969|   $17,015,040
      Receipts per ton mile  |              |              |
        (cents)              |          6.38|          6.34|          6.32
                             |              |              |
  All freight:               |              |              |
    Tons carried             |   455,144,382|   484,147,325|   461,296,759
    Tons carried one mile    |28,118,620,680|29,702,981,149|29,420,680,340
    Average haul (miles)     |         61.78|         61.35|         61.60
    Receipts from freight    |  $397,580,738|  $418,021,052|  $412,635,760
    Receipts per ton mile    |              |              |
      (cents)                |          1.41|          1.41|          1.42
                             |              |              |
  Miscellaneous receipts     |   $63,151,060|   $68,413,909|   $56,715,200
                             |--------------|--------------|--------------
      Total receipts         |  $630,796,800|  $658,774,554|  $647,451,503
                             |              |              |
  Expenses of operation      |   407,174,400|   454,610,032|   476,290,080
   Ratio expenses to earnings|          64.5|          69.1|          73.6
                             |              |              |
  Net receipts               |  $223,622,400|  $204,645,522|  $171,261,040
    Percentage on cost of    |              |              |
      construction           |          6.18|          5.42|          4.51
                             |              |              |
  Gross receipts per mile    |       $18,251|       $18,833|       $28,173
  Gross expenses per mile    |        11,780|        12,996|        13,489
                             |              |              |
  Number of employes         |       648,437|       695,557|       699,155
  Total compensation         |  $219,390,932|  $245,389,859|  $259,606,560
  Prop. of gross earnings    |         34.78|         37.25|         40.10
  Prop. of operating expenses|         53.88|         53.98|         54.50
  Average per employe        |              |              |
      per year               |       $338.35|       $352.82|       $371.00
  ---------------------------+--------------+--------------+--------------

Mark the increased capital cost per mile and in proportion of wages
to earnings, and the increased ratio of net earnings to cost of
construction. Then figure how long it will take at this rate before
the German people are taxed to support their railways or by increased
rates because the railways have been run for politics and not for the
people.




XVI

GROWTH OF RAILWAYS


In three-quarters of a century American railways, from small
beginnings in Pennsylvania in 1827, Maryland in 1828, South Carolina
in 1830, and New York and Massachusetts in 1831, show the following
remarkable growth by decades:

PROGRESS OF RAILWAYS IN THE UNITED STATES SINCE 1835.

  --------------+-----+-----+-----+------+------+------+------+------+------
                |     |     |     |      |      |      |      |      | 1909
     States     | 1835| 1840| 1850| 1860 | 1870 | 1880 | 1890 | 1900 |Incom-
                |     |     |     |      |      |      |      |      |plete
  --------------+-----+-----+-----+------+------+------+------+------+------
  Alabama       |   46|   46|   75|   743| 1,429| 1,851| 3,148| 4,219| 5,037
  Arkansas      |     |     |     |    38|   256|   896| 2,113| 3,341| 4,883
  California    |     |     |     |    23|   925| 2,220| 4,148| 5,744| 6,835
  Colorado      |     |     |     |      |   157| 1,531| 4,154| 4,587| 5,295
  Connecticut   |     |  102|  402|   601|   742|   954| 1,007| 1,023| 1,015
  Delaware      |   16|   39|   39|   127|   224|   280|   328|   346|   342
  Florida       |     |     |   21|   402|   446|   530| 2,390| 3,272| 4,010
  Georgia       |     |  185|  643| 1,420| 1,845| 2,535| 4,105| 5,639| 6,868
  Idaho         |     |     |     |      |      |   220|   941| 1,261| 1,763
  Illinois      |     |     |  111| 2,799| 4,823| 7,955| 9,843|10,997|13,216
  Indiana       |     |     |  228| 2,163| 3,177| 5,454| 5,891| 6,469| 7,774
  Iowa          |     |     |     |   655| 2,683| 5,235| 8,347| 9,180| 9,923
  Kansas        |     |     |     |      | 1,501| 3,439| 8,806| 8,719| 9,125
  Kentucky      |   15|   28|   78|   534| 1,017| 1,598| 2,694| 3,059| 3,484
  Louisiana     |   40|   40|   80|   335|   479|   633| 1,658| 2,824| 4,737
  Maine         |     |   11|  245|   472|   786| 1,013| 1,313| 1,915| 2,150
  Maryland and  |     |     |     |      |      |      |      |      |
       D.C.     |  117|  213|  259|   386|   671| 1,012| 1,168| 1,407| 1,468
  Massachusetts |  113|  301|1,035| 1,264| 1,480| 1,893| 2,094| 2,118| 2,126
  Michigan      |     |   50|  342|   779| 1,638| 3,931| 6,789| 8,193| 8,976
  Minnesota     |     |     |     |      | 1,072| 3,108| 5,466| 6,942| 8,285
  Mississippi   |     |     |   75|   862|   990| 1,183| 2,292| 2,919| 4,169
  Missouri      |     |     |     |   817| 2,000| 4,011| 5,897| 6,867| 8,200
  Montana       |     |     |     |      |      |    48| 2,181| 3,010| 3,537
  Nebraska      |     |     |     |      | 1,812| 2,000| 5,274| 5,684| 6,099
  Nevada        |     |     |     |      |   593|   769|   925|   909| 1,699
  New Hampshire |     |   53|  467|   661|   736| 1,015| 1,133| 1,239| 1,248
  New Jersey    |   99|  186|  206|   560| 1,125| 1,701| 2,034| 2,237| 2,302
  New York      |  104|  374|1,361| 2,682| 3,928| 6,019| 7,462| 8,121| 8,504
  North Carolina|     |   53|  154|   937| 1,178| 1,499| 2,904| 3,808| 4,476
  North Dakota  |     |     |     |      |    35|   635| 1,940| 2,731| 4,026
  Ohio          |     |   30|  575| 2,946| 3,538| 5,912| 7,719| 8,774| 9,274
  Oklahoma      |     |     |     |      |      |   275| 1,213| 2,150| 5,572
  Oregon        |     |     |     |      |   159|   582| 1,269| 1,723| 1,939
  Pennsylvania  |  318|  754|1,240| 2,598| 4,656| 6,243| 8,307|10,277|11,357
  Rhode Island  |     |   50|   68|   108|   136|   210|   212|   212|   212
  South Carolina|  137|  137|  289|   973| 1,139| 1,429| 2,096| 2,795| 3,324
  South Dakota  |     |     |     |      |    30|   630| 2,485| 2,850| 3,703
  Tennessee     |     |     |     | 1,253| 1,492| 1,824| 2,710| 3,124| 3,761
  Texas         |     |     |     |   307|   711| 3,293| 7,911| 9,873|12,987
  Utah          |     |     |     |      |   257|   770| 1,090| 1,547| 1,986
  Vermont       |     |     |  290|   554|   614|   912|   913| 1,012| 1,094
  Virginia      |   93|  147|  384| 1,379| 1,486| 1,826| 3,142| 3,729| 4,187
  Washington    |     |     |     |      |      |   274| 1,699| 2,890| 3,806
  West Virginia |     |     |     |      |   387|   694| 1,306| 2,198| 3,355
  Wisconsin     |     |     |   20|   905| 1,525| 3,130| 5,468| 6,496| 7,626
  Wyoming       |     |     |     |      |      |   472|   941| 1,228| 1,526
  Arizona       |     |     |     |      |      |   384| 1,061| 1,511| 1,930
  New Mexico    |     |     |     |      |      |   643| 1,284| 1,752| 2,967
  --------------+-----+-----+-----+------+------+------+------+------+------
      Total     |1,098|2,818|9,021|30,635|52,922|93,671|159,271 192,940   --
  --------------+-----+-----+-----+------+------+------+------+------+------

The most striking feature of this statement is the number of states
devoid of railway mileage previous to 1870, which since then the
railways have converted into mighty commonwealths whose resources
have been multiplied "some thirty fold, some sixty and some an
hundred". And those to which the railways have made the greatest
prosperity possible are the states whose politicians today are trying
the hardest to muzzle the ox that treads out the corn for their
people.


GROWTH OF RAILWAYS OF THE WORLD.

In the following table is given the mileage of the principal
countries in the world from the earliest date available to the latest:


  ============+==============================================================
              |           Miles of Road Completed
   Country    +------+-----+-----+------+------+------+-------+------+-------
              |Opened| 1840| 1850| 1860 | 1870 | 1880 |  1889 | 1899 |1909(b)
  ------------+------+-----+-----+------+------+------+-------+------+-------
  Great       | 1825 |1,857|6,621|10,433|15,537|17,933| 19,943|21,666| 23,205
    Britain   |      |     |     |      |      |      |       |      |
  United      | 1827 |2,818|9,021|30,626|52,922|93,296|160,544|      |234,182
    States    |      |     |     |      |      |      |       |      |
  Canada      | 1836 |   16|   66| 2,065| 2,617| 7,194| 12,585|17,250| 24,104
  France      | 1828 |     |1,714| 5,700|11,142|16,275| 21,899|26,229| 29,364
  Germany     | 1835 |  341|3,637| 6,979|11,729|20,693| 24,845|31,386| 35,558
  Belgium     | 1835 |  207|  554| 1,074| 1,799| 2,399|  2,776| 2,833|  2,871
  Austria     | 1837 |     |  817| 1,813| 3,790| 7,083|  9,345|11,921| 13,427
    (proper)  |      |     |     |      |      |      |       |      |
  Russia in   | 1838 |     |  310|   988| 7,098|14,026| 17,534|26,889| 31,545
    Europe    |      |     |     |      |      |      |       |      |
  Italy       | 1839 |   13|  265| 1,117| 3,825| 5,340|  7,830| 9,770| 10,312
  Holland     | 1839 |   10|  110|   208|   874| 1,143|  1,632| 1,966|  2,225
  Switzerland | 1844 |     |   15|   653|   885| 1,596|  1,869| 2,342|  2,740
  Hungary     | 1846 |     |  137| 1,004| 2,157| 4,421|  6,751|10,619| 11,769
  Denmark     | 1847 |     |   20|    69|   470|   975|  1,217| 1,764|  2,141
  Spain       | 1848 |     |   17| 1,190| 3,400| 4,550|  5,951| 8,252|  8,432
  Chili       | 1851 |     |     |   120|   452| 1,100|  1,801| 2,791|  2,939
  Brazil      | 1851 |     |     |   134|   504| 2,174|  5,546| 9,195| 10,713
  Norway      | 1854 |     |     |    42|   692|   970|    970| 1,231|  1,608
  Sweden      | 1858 |     |     |   375| 1,089| 3,654|  4,899| 6,663|  8,321
  Argentine   | 1857 |     |     |      |   637| 1,536|  4,506|10,013| 13,690
    Republic  |      |     |     |      |      |      |       |      |
  Turkey in   |      |     |     |    41|   392|   727|  1,024| 1,900|  1,967
    Europe    |      |     |     |      |      |      |       |      |
  Peru        |      |     |     |    47|   247| 1,179|    993| 1,035|  1,332
  Portugal    |      |     |     |    42|   444|   710|  1,188| 1,475|  1,689
  Greece      | 1869 |     |     |      |     6|     7|    416|   604|    771
  Uruguay     | 1869 |     |     |      |    61|   268|    399|   997|  1,210
  Mexico      | 1868 |     |     |      |   215|   655|  5,012| 8,503| 13,612
  Roumania    |      |     |     |      |   152|   859|  1,537| 1,920| 19,942
  Australia(a)|      |     |     |      |      |   789|  4,850|11,111| 16,502
  Japan       | 1874 |     |     |      |      |    75|    542| 3,632|  5,755
  British     | 1853 |     |     |   838| 4,771| 9,162| 15,887|23,523| 30,576
    India     |      |     |     |      |      |      |       |      |
  China       | 1883 |     |     |      |      |      |    124|   401|  4,162
  Africa      |      |     |     |      |      |   583|  2,873| 5,353| 18,516
  ------------+------+-----+-----+------+------+------+-------+------+-------

  (a) Including New Zealand.

  (b) Or latest figures.




RECOMMENDATIONS


In conclusion I would reiterate the following recommendations:


RAILWAY STATISTICS.

That the Bureau of Railway Statistics and Accounts, now a division of
the Interstate Commerce Commission, be transferred to the Department
of Commerce and Labor.

That its statistics be confined to the affairs of operating railway
companies, the only carrier companies engaged in Interstate Commerce.

That its inquiries be confined to the data necessary to furnish the
public with a comprehensive knowledge of railway conditions and
operations in the United States from year to year.

That these statistics be devoted to publicity and not to the
promotion of personal or official theories.


ACCIDENTS.

That Congress provide for an official investigation of all railway
accidents in the United States along the lines so successfully
adopted in the United Kingdom, and not in a spirit of hostility to
the railways, as proposed in pending legislation.

This investigation should be through a Bureau of the Department of
Commerce and Labor, composed as follows:

One Chief Inspector.

Ten District Inspectors, one for each Interstate Commerce group,
appointed from Engineer service of the United States Army, with the
rank of Major. This would insure fitness and impartiality for the
work and valuable experience in regard to railway operations to the
Army Engineers.

Three Deputy Inspectors for each group.

Three Assistant Inspectors for each group.

Several groups might require four inspectors of each class, and as
many could get along with two.

Enough money could be deducted from the Interstate Commerce
Commission appropriation to pay these officials liberally, so as to
secure competent service, without crippling the legitimate work of
the Commission.

  Respectfully submitted,

  SLASON THOMPSON.




INDEX


                         Page

  Abuses, old, reformed, 214

  Accidents, decrease in 1909, 371

  Accidents, effect of freight traffic on, 378

  Accidents, fatalities in, since 1888, 375

  Accidents on British railways, 379

  Accidents on European railways, 382

  Accidents, overwork seldom cause of, 381

  Accidents, train, causes of, 379

  Acworth, W. M., on relations of railroads to the state, 220

  Acworth, W. M., testimony before Senate committee, 283

  Additional lines, little room for, 47

  Advances in railway rates, concerning, 261

  African Cape government railroads, 231

  Agricultural implements, freight rates on, 108

  Agricultural products and freight rates, 183

  Air brakes, introduction of, 119

  Allegheny Mountains, elevations, 31

  American railways by states, 1835 to 1909, 391

  Area, number of miles to, in 1869, 134

  Australian railways under government ownership, 221, 232

  Automatic couplers, 120

  Automatic mechanical stop, 320

  Automatic signaling, 124


  Bacon, Lord, on the necessity of easy transportation, 5

  Bananas, relation of freight rate to price, 97

  Beaulieu, Leroy, on American railways, 79

  Belgian railroads owned by the state, 220

  Bills, multitude of, affecting railways, 68

  Block signaling, evolution of, 123

  Block signals, miles protected by, 1908, 1909, 320

  Brewer, Judge, on the right to change rates, 266

  British railway commission discussed, 248

  British railways, slow growth of, 243

  British railways, statistics of, 389

  Brown, W. C., on the freight rate situation, 107

  Business suit, freight rates on a, 110

  Butter, freight rates on, 111

  Butter, price of, little affected by freight charge, 91

  Canada railways, statistics of, 388

  Canals, beginnings of American, 10

  Canal construction, revival of, 17

  Canals, scarcity of capital for, 18

  Capital expenditure of British, German and American railways, 251

  Capital for improvements the railway problem of to-day, 211

  Capital, increased cost of, 176

  Capital needed for Southern railways, 61

  Capital, private, develops river traffic, 12

  Capitalization, 1909, 337

  Capitalization, foreign railways, 344

  Capitalization, net, 1904-1909, 339

  Capitalization of turnpikes, 16

  Capitalization, Pres. Roosevelt rejects claims of over, 107

  Car construction, 128

  Car service operation, 356

  Cars, number and capacity, 1902 to 1909, 317

  Chicago, Burlington and Quincy R. R., condition of, 72

  Civil war, importance of railways during, 118

  Class rates, no change in certain, since 1897, 165

  Coastwise commerce first developed, 15

  Clothes we wear, freight rates on, 108

  Commission, Interstate Commerce, its creation and purpose, 208

  Commissions have advantages over legislatures, 208

  Commodities, proportions of various, moved, 355

  Comparison of American and English loads, 82

  Competition has ceased to regulate, 233

  Competition, public facilities increased by, 252

  Conflict between competitive and uniform rates, 83

  Congress, conditions confronting, in 1909, 288

  Construction, cost of, 342

  Control by democracy, 229

  Cooking utensils, freight rates on, 108

  Cooley, Judge, on superhuman task of fixing rates by Commission, 273

  Cost of American and foreign railways compared, 50

  Cost of living, 329

  Cost, original, of Penn R. R., Harrisburg to Pittsburg, 36

  Corporate entities necessary to railway construction, 206

  Cotton, effect of freight charge on, 95-99

  Cotton, freight rates on, 110

  Crackers, relation of freight charge to price, 99

  Cummins, Senator, on physical value of railways, 343


  Daily compensation of employes, average, 1892 to 1908, 324

  Damages and injuries to persons, 365

  Dead weight hauled in mail service excessive, 149

  Decisions of I. C. C. reducing rates, 301

  Depreciation of money, significance, 192

  Development of railways, 45

  Depression, 1908, effect of, 296

  Depression of 1908, effect on C. B. & Q. pay roll, 67-71

  Difficulties under the present law, 216

  Diminished purchasing power of railway earnings, 165

  Discriminations once the rule without objection, 201, 213

  Distribution of gross earnings, 1909, 361

  Dividends, 1908, exaggerated, 292, 340

  Dollar purchases less labor or commodities now than 1897, 166

  Dressed beef, freight rates on, 111


  Early history of railroads, 116

  Early methods of travel, 6

  Earnings and expenses, 1908-1909, 358

  Earnings, gross, calendar years 1907, 1908, 1909, 296

  Eggs, freight rates on, 111

  Eggs, price slightly affected by freight charge, 91

  Employes, average daily compensation, 1892-1909, 324

  Employes, number and compensation, 1909, 321

  Employes, pay of foreign, 326

  Enlightened public opinion the hope of the railways, 237

  Equipment cost, 1897-1907, 194

  Equipment of American railways, 1909, 314

  Equipment, output, 1899 to 1909, 314

  Equipment requirements for replacement, 315

  Erie railroad completed to Lake Erie, 117

  Ethics of railroad operation high and just, 202

  European wars, effect on American development, 11

  Expenses, calendar years 1907, 1908, 1909, 297

  Express, receipts from carrying, 350


  Farm animals and freight rates, 184

  Farms better investments than railways, 77

  Fatalities, proportion of, to traffic, 138

  Fink, Henry, on the right to increase rates, 281

  Flour, effect of freight charge on price, 96

  Flour, freight rates on a sack of, 110

  Food stuffs, relation of freight charge to price, 101

  Foreign railways, mileage of, 310

  Foreign railways, ratio to area and population, 310

  Foreign railways, statistics of, 386

  Freight car performance, 1908-1909, 319

  Freight car shortages and surplus, 1907-1910, 318

  Freight cars, number and capacity, 1902-1909, 317, 318

  Freight moved ten miles for three cents, 49

  Freight rate primer, 107

  Freight rates decrease in 1897-1907, 180

  Freight rates, low, encourage production, 90

  Freight service compared with mail service, 151

  Freight traffic, 1908-1909, 352

  Freight traffic, statistics of, 1888 to 1909, 354

  French railway employes, number of, 329

  French system vicious, 235

  Fuel, cost of, 1899 to 1909, 367

  Fuel, cost of, in several states, 170

  Fuel for locomotives, cost of, 168


  German railway employes, number and pay of, 328

  German railways owned and operated by the state, 220

  Germany, railway statistics of, 390

  Gibb, Sir George S., on Railway Nationalization, 238

  Government assistance sought, 12

  Government may not usurp management of railways, 207

  Government ownership must assume all risks, 259

  Gradients on first Pennsylvania railroad, 22-26

  Grade crossings, elimination of, 133

  Growth of the railways, 137-391


  Harbors insignificant compared to railroad yards, 52

  Harrisburg to Pittsburg, location of road from, 21

  Hazard, decreased, to train crews, 377

  Heating cars, 129

  Heurteau, Emile, on American railway system, 282

  Hides, relation of freight rates to price, 98

  High grade tonnage, increase in, 190

  Highways in the 18th century, 9

  Hill, James J., speeches at Seattle and Tacoma, 45

  Home markets, Americans turn to, 11

  Hostility to railroads, reasons therefor, 241

  Household furniture, freight rates on, 109

  Human element in operation, 135


  Improvements, demand for, imperative, 203

  Improvements, postponement of, 68

  Income account, 1908, 292

  Income account, calendar year 1909, 298

  Income account of leased roads, 360

  Increasing cost of railway maintenance and operation, 67

  Injuries to persons and damages, 365

  Interrelation of rates, 275

  Interlocking signals, 125

  Interstate Commerce Law contradictory, 201

  Iron ore, relation of freight charge on, to industry, 100

  Isolation of interior settlements, 7

  Italian railways owned by the state, 221


  Knapp, Chairman I. C. C., letter to Senate committee, 285

  Knapp, Chairman I. C. C., analysis of same, 286

  Knapp, Chairman I. C. C., on fair returns for railway investments, 113

  Kruttschnitt, Julius, on railway mail pay, 142


  Land grants unremunerative to railways, 76

  Lane, Commissioner I. C. C., on relation of capitalization to
        rates, 84

  Leather belting, freight rates on, 112

  Legislation adds to expense of railways, 74

  Lighting cars, 130

  Lincoln, Abraham, in Mississippi bridge case, 131

  Living, cost of, 329

  Living, cost of, for normal families, 1901, 330

  Locomotives, cost, 1897-1907, 194

  Locomotives, cost to build in Australia, 316

  Locomotives, development, 129

  Locomotives, hauling power measured by weight, not revenues, 149

  Locomotives, number and capacity, 1902 to 1909, 315

  Low freight rates, how made possible, 104

  Lumber, relation of freight charge to price, 100


  Mail carrying made unremunerative, 143

  Mail cars stronger and cost more, 146

  Mail pay, railway, 142

  Mail, receipts for carrying, 350

  Mail, receipts from, compared with other receipts, 144

  Mail routes, effect of heavy traffic on, 155

  Management, railway, a learned profession, 210

  Manufactures earn more than railways, 77

  Margin between earnings and expenses narrow, 114

  Massachusetts railroad commission commended, 236

  Meat, effect of freight charge on price, 92

  Mexican railway situation, 226

  Mileage by states, 1907, 1908 and 1909, 307

  Mileage of American railways, 1909, 306

  Mileage, ratio to area and population, 307

  Mileage, 1890 to 1909, 308

  Miles built in 1890-1909, by states, 308

  Mississippi river, first bridge across, 131

  Money for improvements must be earned or borrowed, 50

  Municipal bodies unfitted for business enterprises, 256

  McCain, C. C., on diminished purchasing power of railway earnings, 165

  McPherson, Logan G., on transportation charge and prices, 90


  National aid for internal improvements, 19

  National Board of Trade opposes changes in I. C. Law, 290

  National development and the railways, 112

  Nationalization, arguments for, 246

  Nationalization, arguments against, 247

  Nationalization of the railways, 238

  Nationalized railways a field for social experiments, 257

  New England, early railways of, 8

  Nomenclature, changes in, 293


  Ores, relation of freight rates to values, 98

  Ownership of American railways, 345

  Ownership of the Great Northern, 98

  Owners of railways not opposed to nationalization, 238


  Pacific Northwest, railways of, 45

  Panic of 1837, effect on railways, 117

  Passenger cars, number, 1902-1909, 317

  Passenger service compared with mail service, 151

  Passenger traffic, 1909, 346

  Passenger traffic, relation of accidents to, 376

  Passenger traffic, statistics concerning, 1888 to 1909, 348

  Pay, increase in average daily compensation, 334

  Pay of British railway employes, 326

  Pay of foreign railway employes, 327

  Pay roll, proportion to gross earnings, 1899-1909, 325

  Pennsylvania R. R. Co., first report of engineer, 21

  Pennsylvania R. R. Co., how located, 24

  Pennsylvania R. R. Co. in 1848 and 1909, 44

  Pennsylvania R. R. Co. owned by 50,000 people, 218

  Petroleum, relation of freight charge to price of, 99

  Physical valuation and rate making, 83

  Physical valuation, Senator Cummins on, 343

  Policy of fairness and liberality needed, 62

  Popular hostility to the railroads, 212

  Postal cars, increasing cost of, 158

  Postal cars, pay for, 157

  Postal deficit, cause of, 160

  Potatoes, effect of freight charge on price, 92

  Poultry, freight rates on, 111

  Preference, undue, would increase under nationalization, 255

  Pre-railway era in America, 5

  Pre-railway era in England, 5

  Prices and actual rates, 191

  Prices, relative, wholesale, 182

  Prices, retail, London and New York, 336

  Prices, retail, of principal articles, 1890-1909, 382

  Priestley, Neville, on American railways, 78

  Private capital, dependence on, 87

  Private corporations, railway companies are, 207

  Private property, railways are, 75

  Problems confronting railways, Daniel Willard on, 66

  Problems of construction and operation essentially different, 244

  Problems, railroad, of to-day, J. B. Thayer on, 211

  Property rights involved in fixing rates, 266

  Proportion of pay roll to gross earnings, 1899-1909, 325

  Prosperity of the country depends on prosperous railways, 115

  Public and the railroads, John C. Spooner on, 205

  Public approval and the railroads, E. P. Ripley on, 199

  "Public be damned," origin of saying, 200

  Public control and private ownership, are they compatible?, 204

  Public sentiment rules in the United States, 200

  Public service of American railways, 346


  Rails, their evolution, 132

  Railway mail pay in 1899 reported not excessive, 132

  Railways, American, are private property, 75

  Railways essential to happiness of American people, 205

  Railways, situation of, to-day, Frank Trumbull on, 80

  Rates before the era of railways, 5

  Rates by I. C. C., groups, 1897-1908, 186

  Rates, discussion of how made, 272

  Rates in United States must be elastic, 277

  Rates made to get the business, 74

  Rates measured in money, 1897-1907, 184

  Rates must fluctuate to meet conditions, 278

  Rates, true principle of making, recognized from the first, 43

  Raw materials, how rates are adjusted on, 104

  Reasonable rates, right to make, fundamental, 265

  Rebates past, 202

  Receiverships, railway, since 1876, 384

  Reduction in railway mail pay not warranted in 1899, 146

  Reductions, no, without the right to advance, 280

  Relations of railways to the state, 220

  Relative cost of mail, freight and passenger service, 152

  Refrigerators, freight rates on, 109

  Regulate, how shall government, 233

  Regulation, cost of, 174

  Regulation, cost of, increase since 1888, 385

  Regulation of American railways, 300

  Regulation, just, welcomed by the railways, 215

  Results, comparative, 1889, 1899 and 1909, 295

  Retrospect of four years, 80

  Returns from mail, freight and passengers compared, 148

  Revolution, highways before and after, 8

  Right of railways to fix rates recognized, 262

  Ripley, E. P., on the railways and public approval, 199

  Risk in railway investments, 46

  Roosevelt, President, rejects over-capitalization theory, 107


  Safety appliances, 320

  Safety in railway operation progressive, 116

  Safety of American railways, 368

  Seattle, James J. Hill at, 45

  Senate committee concerning advance in railway rates, 261

  Shareholders, number of railway, 345

  Ship subsidy criticised, 51

  Shippers protected under existing law, 263

  Shoes, effect of freight charge on price of, 93

  Signaling, development of railway, 122

  Smith, A. H., on progressive safety in railway operation, 116

  Socialistic aspect of nationalization of railways, 239

  Southern products increase in 25 years, 60

  Southern railways and their needs, 58

  Southern railways crippled by the civil war, 58

  Southern railways, mileage of, 59

  Spooner, John C., on railroads and the public, 205

  Stage line, first, between New York and Philadelphia, 6

  State control or state ownership, 228

  State ownership by autocracy, 229

  State ownership not favored in America, 223

  State ownership widely extended, 222

  Standard time, adoption of, 136

  Statistics of American railways, 1909, 291

  Statistics of foreign railways, 386

  Steamboat, when first a commercial success, 13

  Sugar beets, relation of freight rate to industry, 97

  Sugar, effect of freight charge on price of, 97

  Supplies, cost of railway, 171-194

  Supreme court gives control of rates to carriers, 263

  Surplus of freight cars in 1908-1909, 318

  Swiss railway employes, number and pay of, 328


  Tacoma, James J. Hill at, 54

  Tacoma waking up, 48

  Taxes, 1889-1909, 363

  Taxes, increase, 1897-1907, 174

  Terminals, increased cost of, 47

  Thayer, J. B., on railroad problems of to-day, 211

  Tobacco, effect of freight charge on price of, 96

  Tolls on turnpikes, 17

  Tonnage, classified, 189

  Tonnage, water, at Duluth leads the world, 53

  Tracks, all, mileage of, in the United States, 312

  Tracks, all, mileage of, in the United Kingdom, 313

  Train despatching, 126

  Transportation charge and prices, Logan G. McPherson on, 90

  Transportation needs anticipated in America, 59

  Trespassers, fatalities to, 139

  Trumbull, Frank, on railroad situation of to-day, 80

  Turnpikes, capitalization of, 16

  Turnpikes, the early American, 10


  United Kingdom railways, statistics of, 389


  Valuation, physical, 343

  Vastness of railway industry, 118


  Wages, effect of increase on C. B. & Q., 69

  Wages, railway, in the United States and abroad, 76

  Wages, railway employes, 1897-1907, 166

  Wages, railway, per day, 1897-1907, 167

  Wages, railway, 1909, 322

  Wages, railway, per day, 1892-1909, 324

  Wagon roads into interior of America, 14

  Wallace, John F., on needs of Southern railroads, 58

  "Watered Stock" discussed by James J. Hill, 46

  Watermelons, relation of freight charge to the industry, 101

  Wearing apparel, effect of freight charge on price, 94

  "What the traffic will bear" misconstrued, 200

  Wheat margin between production and consumption, 55

  Wheat, the problem of, discussed by James J. Hill, 54

  Willard, Daniel, on American railway problems, 65

  World railways, mileage of, 1840 to 1909, 392




  TRANSCRIBER'S NOTE

  Italic text is denoted by _underscores_.

  Bold text is denoted by =equal signs=.

  Fractions have been left in the form a/b except for ¼ ½ ¾. A dozen
  or so occurrences of 'nn a-b' have been changed to 'nn-a/b', mainly on
  pages 27-40, for consistency.

  Footnote anchors in a table are of the form (a) and the corresponding
  Footnote is placed at the bottom of that table. Other Footnote anchors
  are of the form [A] with placement at the end of that Chapter.

  To save table space some column headings use the following
  abbreviations:
      Pass. for Passenger
      Mill. for Millions
      Prop. for Proportion

  Many wide tables have been split into two or more parts. Each part
  after the first is labelled at the top with {table continued}.

  Obvious typographical errors and punctuation errors have been
  corrected after careful comparison with other occurrences within
  the text and consultation of external sources.

  The Table of Contents has been expanded to include the seventeen
  sections under the 'Statistics' chapter at page 291.

  Except for those changes noted below, all misspellings in the text,
  and inconsistent or archaic usage, have been retained. For example:
  employes, employees; pay roll, pay-roll; reconnoissance; asperse.

  Pg 15, 'would built' replaced by 'would build'.
  Pg 19, 'incontestible' replaced by 'incontestable'.
  Pg 38, column headings, copied from the earlier similar table on pg 36,
         have been added to this table for clarity.
  Pg 42, 'transhipment' replaced by 'transshipment'.
  Pg 97, 'Oamha' replaced by 'Omaha'.
  Pg 97, 'remainding' replaced by 'remaining'.
  Pg 133, 'uniformily' replaced by 'uniformly'.
  Pg 150, 'R. P. O.' in the Table replaced by 'R.P.O.' to save space.
  Pg 153, some $ signs removed from the Table to save space.
  Pg 177, missing Table Footnote '(a) January to July, only.' added.
  Pg 181 Footnote [F], '89 and 95' replaced by '89 to 95'.
  Pg 200, 'correst' replaced by 'correct'.
  Pg 205, 'leachlike' replaced by 'leechlike'.
  Pg 210, 'inocuous' replaced by 'innocuous'.
  Pg 226, 'parlimentary' replaced by 'parliamentary'.
  Pg 272, 'is practical' replaced by 'its practical'.
  Pg 295, '(m = 1,000.)' replaced by '(m = 1,000;   d = decrease.)'.
  Pg 298, 'phenomenonally' replaced by 'phenomenally'.
  Pg 316, 'direct charges' replaced by 'Indirect charges'.
  Pg 316, '$250,635.34' replaced by '$240,635.34'.
  Pg 318, Table 11th row, 'XII' replaced by 'XI'.
  Pg 331, 'arbitraters' replaced by 'arbitrators'.
  Pg 335, 'desponding' replaced by 'despondent'.
  Pg 357, Table note (b), 'Bureau 99' replaced by 'Bureau in'.
  Pg 357, Table note (b), 'December, in 10' replaced by 'December, is'.
  Pg 359, to save space in the Table, the two columns with totals have
          been merged into the columns with their constituent data. No
          data has been omitted.