IX WHAT IS TO BE DONE WITH OUR A PLAN OF REORGANIZATION SUGGESTED, UNDER WHICH THE BEST FEATURES OF COMPETITION AND GOVERNMENT CONTROL CAN BE RETAINED In a recent speech before the General Assembly of Iowa, Senator Cummins very truly said that, with the exception of the League of Nations, the most important and the most difficult reconstruction problem confronting the country is the adjustment of the relation between the government and the railroads. Railroad managers, holders of railroad securities, bankers, labor leaders, shippers, state railroad commissions, and others have proposed plans for the reorganization of the national railroad system. But in most of these plans the authors have failed sufficiently to heed the admonition of Senator Cummins that "transportation by railway" must be regarded "as a governmental function." Yet it is undoubtedly that consideration which will be most potent with Congress when it comes to deal with the subject. While the experience of the country since the government took over the railroads has inclined public opinion against government operation, that is because such operation cannot be made economical or efficient,-it is not because the people have ceased to believe that the ownership of railroads is affected by a public trust. Indeed, if the public had not become convinced that their interests would not be best subserved by govern1 Reprinted from articles published in the New York Times of May 6-7, 1919. ment operation, it is probable that the roads would never be returned to private operation; and it is quite certain that when they are returned they will be under much closer regulation than ever before, especially if they are to enjoy a government guarantee in any form. The idea is now quite prevalent that the railroads of the country should be consolidated into a comparatively few large systems, and it is also generally conceded that in some definite way their credit must be established, so as to enable them in the future to procure necessary capital requirements. If this is accomplished through a government guarantee, ordinary business considerations will lead to a much closer association between the government and the railroads for the protection of the government's obligation. Indeed, with a more direct responsibility resting upon the government with reference to both rates and wages, the arrangement will be but one step from government ownership and operation, and its success will largely depend on government responsibility. An adequate plan can probably be worked out before the expiration of the period within which under the railroad control act the roads must be returned to the companies. If the government had decided to shorten this period, as Mr. McAdoo proposed, the result might have been a return to pre-war conditions, modified only by amendments of the anti-trust law and other similar statutes, permitting pooling agreements among competing lines. Such a result would have been extremely unsatisfactory. The war made it necessary to take over the roads from the companies. The transfer was made without undue disturbance, many problems were thereby automatically settled, which in normal times by the slow process of evolution would probably have occupied years in discussion, and an opportunity unexpectedly developed for a permanent solution of the entire railroad problem. But a mere restoration of pre-war conditions, even if combinations and pooling agreements are permitted, would probably not go far in the direction of settling the relations between the government and the companies, of stabilizing rates and wages or of improving the service; and unless we succeed in making a permanent improvement in such things as these, we shall not have made the best of the opportunity which the war has fortuitously opened up. For, however unsatisfactory some features of government operation have been, there has been a convincing demonstration of many important advantages due to unified control, and the lesson would be largely lost if the roads were turned back without at the same time embodying these advantages permanently in the transportation system of the country. Fortunately, there is a fair prospect that this may be accomplished; but it will not be unless the railroad owners become reconciled to a much closer relationship to the government than has heretofore existed. A PLAN OUTLINED Having in view the foregoing considerations, I suggest for consideration a plan of reorganization upon the basis of the following general lines, viz: 1. Let some governmental agency divide the country into regions with reference to existing currents of trunk-line traffic, and in such a manner that competition shall exist between groups of roads in one region and those in each contiguous region. 2. Create in each region a federal corporation with one class of stock, and one class of bonds, and under contract with the government to acquire, by the issue |