at that time, and there was an insistent demand that more coal should and must be moved to the Northwest and to New England in order, as it was alleged, to prevent a fuel famine. There was also an unprecedented demand to move lumber, road building material, grain, etc. I doubt if there was ever at any time a more urgent demand upon the railroads for transportation than during the summer months of 1920.

1920 THE GREATEST TONNAGE YEAR

OWEVER, the railroad managers, once more in control of their properties, responded earnestly and effectively to the situation. The Advisory Committee worked in full and complete understanding with the Interstate Commerce Commission, and that body issued such orders as in its opinion were necessary to support the carriers in their endeavor to deal with the situation, and what was accomplished is best indicated by the fact that during the year 1920 the railroads of the United States as a whole carried 409,000,000,000 ton miles, which was, indeed, 4,000,000,000 ton miles more than ever carried in any year before, either under private operation or any other kind of operation or control.

I think we may fairly say that the railroads have again demonstrated, if further demonstration be necessary, that the advantages of unified control and operation can be fully realized with private ownership and operation under the terms set forth in the new Transportation Act.

So much for the first outstanding feature of the act.

RATES UNDER THE ESCH-CUMMINS LAW

AND

ND now for the second: If we are to have private ownership and operation as an economic policy, we can afford to have it on only one basis, and that is on the basis of its complete success, and we have a very definite measure for testing its success. However extensive and complete the railroads may be at the present time, they must continue to grow, if they are to keep pace with the expanding commerce of the country, and it is estimated that with present prices and conditions, not less than $1,000,000,000 of new capital must be raised each year for an indefinite period to provide the new facilities necessary. Inasmuch as the rates which the

public is required to pay must be sufficient to provide, among other things, a fair return on the money invested in plant, it is to the advantage of the public that the railroads should obtain the necessary new money or capital on the best terms possible. Congress had this in mind when framing the act, and provided a definite rule for rate making, designed to sustain and stabilize the credit of the railroads.

It is thought by some that Congress, in fixing the rule, was not sufficiently liberal, and I know there is an honest doubt, perhaps I should say an honest belief, in the minds of many that rates fixed in accordance with the rule contained in the law will not sustain and stabilize the credit of the railroads. I do not know whether that is so or not, and only an actual test will determine it. In any event, I am confident that if the railway managers see to it that the public is given satisfactory service, the public in turn will be willing to have the railroads receive such rates as will properly sustain and stabilize their credit, and if the present rule for rate making does not authorize such rates, the public will consent to have the rule amended.

In accordance with the provision of the act, rates were fixed on a basis which, under normal conditions of traffic, it was believed would produce reasonable net revenues and afford a basis for financing necessary additions and betterments. It is true that from rates so fixed, the net earnings of the carriers at the present time are disappointing, but that is not due to any fault or failure of the act, but is due largely if not entirely to the recent decline in volume of business and the excessive cost of operation brought about by the war. The largest single item of cost in connection with railroad operation is wages paid to employees. The labor cost of operating the railroads was very greatly increased during the war, as was also the cost which the carriers were obliged to pay for the material which they used, but a general readjustment of labor and material costs is already under way and the present unsatisfactory condition of net earnings on the part of the carriers will be corrected, in my opinion, by means of lower operating costs rather then by further increases of transportation charges. The situation is not peculiar to the railroads; all other forms of industry are going through the same process of readjust

ment at the present time, and if we only use patience and good judgment, I am confident that the related problems, while complex and difficult, will be satisfactorily solved.

LABOR UNDER THE ESCH-CUMMINS LAW

Ο

NE other important feature of the act, and the last to which I shall specifically refer, is worthy of consideration at this time, and that is the provision which deals with the labor problem and has to do directly with the wages and working conditions of upward of 2,000,000 employees. We ought not to minimize the importance of the labor problem in its relation to the railroad question as a whole. In no country in the world do the people make such great use of the steam railroads as do the people in the United States. This is clearly indicated by the official records which show that in the United States the steam railroads move upon the average more than 4,000 tons one mile per annum for each man, woman, and child in our entire country, while the latest figures available show that the railroads in Europe average something less than 600 ton miles per capita per annum. The greater use made of the railroads by the people in this country is of course influenced largely by the fact that our country is of great extent and is rich in natural resources-mineral, agricultural, and marine -and it has come about that in the City of New York, as an example, the flour used, I take it, is made largely from wheat grown in Minnesota and North Dakota. The beef which is eaten here was perhaps bred in Texas, developed in Wyoming, fattened in Iowa, and slaughtered in Chicago. Not only do we find upon the tables in New York and Boston salmon caught in the waters on the Pacific Coast and shipped from Seattle, but there will also be found on the tables in Seattle the cod caught in the North Atlantic waters and shipped from Boston. Many similar instances might be cited. In short, it has generally been found advantageous, because more economical, to procure our flour, meats, minerals, forest products, etc., where they can be produced or obtained at the lowest initial cost and then transport them, largely by rail, to the point of ultimate consumption, the entire transportation cost being much less than the difference in initial cost of production in different parts of the country. With this in mind it is manifestly important that there

should be continuity of service by the railroads in a country such as ours, and one of the important problems before Congress was to insure, if possible, continuity of service, by guarding against the interruption of the service, by any misunderstandings and disputes which might possibly arise between the railroad managers and their employees.

It was urged by some that the law should be written so as to prohibit strikes upon the railroads, but it was not possible to enact legislation of that character, nor do I think it would have been wise to enact such legislation at that time. While I am as much opposed as any one to strikes upon the railroads, I believe it would be a mistake for Congress to pass a law prohibiting strikes unless we are quite certain that we shall be able to enforce such a law once it has been enacted. Personally I did not believe that we had reached a stage where we could feel confident that such a law would or could be effectively enforced, consequently I was opposed to its passage. Congress dealt with the matter, I think, in the wisest way possible under the circumstances. They created machinery or set up agencies by which the employees could be assured of obtaining just as fair wages and working conditions without striking as they could reasonably expect to obtain even if they did strike. Congress provided, first, that

It shall be the duty of all carriers and their officers, employees, and agents to exert every reasonable effort and adopt every available means to avoid any interruption to the operation of any carrier growing out of any dispute between the carrier and the employees or subordinate officials thereof. All such disputes shall be considered and, if possible, decided in conference between representatives designated and authorized so to confer by the carriers, or by the employees or subordinate officials thereof, directly interested in the dispute. If any dispute is not decided in such conference, it shall be referred by the parties thereto to the board, which, under the provisions of this title, is authorized to hear and decide such dispute.

Section 304 of the Transportation Act provides for the creation of the board above referred to, and reads as follows:

There is hereby established a board to be known as the Railroad Labor Board and to be composed of nine members.

The members of the board are appointed by the President, but three of his appointees

are from men nominated by the railroad employees, three are from men nominated by the railroad companies, and three are selected by the President himself, as representing in a larger way the general public, but all nine must be confirmed by the Senate. In fact, Congress has created for this particular purpose a special Labor Court consisting of the same number as the Supreme Court of the United States, appointed in the same way, that is to say, by the President and confirmed by the Senate, and has given the board or court a status and dignity in keeping with its importance. The law says that it shall be the duty of the board to establish rates of pay and standards of working conditions which, in the opinion of the board, shall be just and reasonable, and in determining the justness and reasonableness of such rates the board shall take into consideration among other things:

work in order to obtain just and reasonable treatment. In short, Congress provided or aimed to provide by law so that the railroad workers would at all times be assured of just as good wages and just as good working conditions without striking as they could reasonably expect to secure if they did strike, for it is clear that no one could justify or expect to win a strike for wages or working conditions that would be unjust or unreasonable.

It may also be that in some respects this portion of the law is incomplete and inadequate, and time may develop that changes are necessary. If so, they will undoubtedly be made. In the meantime it is certainly in the interest of all that the law, or especially this particular feature of the law, should be given a fair and thorough trial, and I firmly believe that as the law comes to be better understood by the railroad workers they will realize that they have, indeed, been made a preferred class. In which event I venture to predict that we shall be largely, if not wholly, immune from railroad strikes in the future, not, however, because the men have been forbidden to strike, for I repeat, there is nothing in the law which limits the right of the railroad workers to strike if they still want to do so, but simply because the law provides a way by which they can obtain without striking everything that they could reasonably expect to obtain if they did strike.

MAKING STRIKES UNNECESSARY

T MAY indeed be said that Congress by this act has made a preferred class of the railroad workers, because, so far as I know, this is the first and only time that Congress has ever definitely said that any particular class of the people should be given at all times and under all circumstances just and reasonable wages and working conditions. Of course Congress did not do this primarily in the interest of the workers. Congress acted only as it had a right to act in the interests of the nation as a whole. Congress acted with a full realization of the importance of an uninterrupted transportation system in a country such as ours, but being unwilling to deprive the workers of their right to strike (and nothing in this bill does deprive the workers of their ultimate right to strike), it sought to provide machinery which would make it unnecessary under any circumstances for the men to stop

While some criticism has been voiced against the labor provision of the act, not only by the employees, but by the employers as well, I am still hopeful that this feature of the act will eventually prove to be wise and satisfactory, and if the three features of the new legislation to which I have specifically referred work out as it was the intention and belief of Congress that they would work out, then I think Congress has made private ownership and operation of the railroads in this country possible, but whether private ownership and operation of the railroads endures-having been made possible depends largely if not wholly upon whether the railroads under private ownership and operation are able to give and do give the public satisfactory service. At the present time it would seem that there is a majority, in fact a large majority, of public opinion in favor of private ownership and operation, but we have seen public opinion change suddenly, and I have no doubt that it would change again just as quickly, and

react just as strongly against private ownership, if the public felt that upon the whole they would be likely to get more satisfactory service some other way. As I view the matter, private ownership and operation of the railroads is still on trial in this country, but it has everything in its favor and it ought to win and I believe it will win if the managers, measured by the service which they give the public, deserve to win.

Since the termination of Federal control we have actually seen the railroads, operated by private management under the provisions of the Esch-Cummins Act, move, in 1920, 9,000,000,000 ton miles more than in 1918, employing substantially the same facilities. We have seen the Interstate Commerce Commission, under the terms of the same act, promptly authorize such rate increases as would, in its opinion, fulfill the requirements of the act, and we have also seen one of the most complex labor situations ever developed dealt with in orderly fashion by the agencies created by the act, without interruption of the transportation service. The very fact of the controversy in Chicago speaks volumes for the act. Questions involving wages and working conditions affecting nearly 2,000,000 human beings are certain to bring out points of difference, and if the contestants should sometimes raise their voices above the conventional pitch of polite society, it would not follow that the law had failed-on the contrary it would indicate that the problem was being worked out just as Congress intended it should be, and without interruption of the service. I am inclined to think that under the present law, wages of railway workers as a whole may be somewhat higher in the future than would be the case were there no such law, but even so, if the public is thereby assured freedom from interruptions of service, the immunity so purchased will be well worth the price.

I am glad of this opportunity to say a word concerning the relations which have existed since the termination of Federal control between the railroads, as represented by their Advisory Committee, and the Interstate Commerce Commission under the able and constructive Chairmanship of Mr. Clark. The new law makes it clear that while Congress still expects the Commission to look after the interests of the public just as carefully as it ever did in the past, Congress also recognizes by definite expression that in looking after the interests of the public the Commission should keep in mind that the public's interests will be best promoted by an efficient transportation service, and will not be promoted by a poor, badly developed, and inadequate transportation service. Opportunity has been afforded me to view the situation and I have been convinced that the Commission has taken hold of the difficult problems confronting it under the new act with the desire only of carrying out the clear intent of Congress. Chairman Clark and his associates with whom I have had occasion to come in contact, have always been most helpful. They have always been anxious to know all of the facts concerning any particular case, and have not hesitated to use their power and authority in such way as seemed to them most likely to promote the public welfare. The relationship which has developed between the Federal Commission and the railroads under the new Transportation Act, to my mind, is most encouraging, and if the relationship already established continues and if the railway managers appreciate that they themselves, as well as the institution of private ownership, are on trial and if they meet the fair and reasonable requirements of the public for transportation, I feel confident that the success of private ownership under the terms of the new act is assured, and that the railroads will presently find themselves on a sound basis.