ownership and operation. The Alaskan railway will finally cost no less than $56,000,000, and will not likely earn, at the very outside, more than $1,000,000 each year. The eventual cost of the road will be about $80,000 per mile, and the income on the investment will be less than 2 per cent. While it may be true that the road will pay "in ultimate benefits," the figures presented o dnot arouse enthusiasm for government ownership. Since the end of the war, we went through two shipping boom years, and yet the operating loss on $3,000,000,000 worth of ships controlled and operated by the Government was $185,125,037. During the same period, privately owned shipping companies in Great Britain made profits of from 20 to 40 per cent. State

nearly 74,000,000 fewer people traveled on our railroads than were carried by the roads during the same period of 1920. This year each traveler paid an average af 3.13 cents a mile, as against 2.60 cents in 1920. The higher freight charges also acted to curtail shipment. The tonnage during the first half of 1921 as compared with the first six months of the preceding year showed a decrease of nearly a quarter of a billion tons. The revenue per ton mile increased from 0.976 cents in 1920 to 1.278 cents in 1921. All the facts indicate that it is far better to handle a heavy traffic at a reasonably low rate than a highly curtailed traffic at a high rate.

THE SCHEME OF CONSOLIDATIONS

revolution, has turned a

profit of 700,000,000 gold marks into a deficit of 4,000,000,000 marks. A recent German report says, "Only private enterprise can avert complete ruin.'

The National Association of Utility Commissioners in session recently presented a report containing the following conclusions: Wherever government operation has been tried it has proved a practical failure, with either a resultant increase in rates beyond the reasonable value of the service rendered or the breaking down of the utility in question, with a large proportion of its operation costs borne by the taxpayers.

While private control of an industry seems to tend to economy in management, it is true that, in the case of the railroads, great savings are possible, as already stated, through the adoption of improved practices, and not alone through increased rates and reduced wages. The country's carriers consume nearly 30 per cent. of the nation's total bituminous coal productions, and waste at least one-half of the available energy in the fuel they buy. This unfortunate condition can be bettered, but such improvement will only come at a later date, when the transportation systems have again become attractive to capital through showing ability to earn a fair income on invested money. Electrification, the chief solution of the problem, means a large initial outlay, which is not now possible.

Increased fares and rates are not a solution of the transportation problem, as recent figures indicate. During the first six months of this year, under the higher passenger fares,

getting the railroads out of their present dilemma is the scheme that proposes the consolidation of all of our American railroads into about nineteen great systems. An examination has shown that the country's carriers may be divided into two classes, based on their credit rating. The first class of roads are the strong roads, financially sound, and handling about 60 per cent. of all the traffic. The other class comprises the "weak" roads, which differ essentially from the strong roads only in their financial structure. In the character and quantity of freight and the methods of handling traffic, the "weak" roads differ but little from the others, and therefore it is proposed that by making over the financial organizations of the "weak" roads, they could be put in sound condition, and would be enabled to operate with efficiency equal to that of the "strong" carriers, under a uniform scale of rates, provided each road were assured of a credit position clearly recognized as satisfactory by the general investing public. It is, of course, plain that if capital is to be obtained upon advantageous terms by the socalled "weak" roads, their securities must be made available for investment on the part of savings banks, insurance companies, and other semi-public institutions.

One authority advocating this consolidation scheme found on investigation that not only do the "strong" and the "weak" roads handle similar traffic, but that the proportion of the income from different classes of service is about the same. It was further disclosed that rates are substantially uniform, and that revenues on both types of road are expended

in similar proportions for operating expenses, maintenance, and disbursements to security holders. The principal difference is that the "strong" roads divide their payments to security holders about equally between fixed charges and dividends, while the "weak" roads pay it all to the bondholders.

He

IS CONSOLIDATION NECESSARY?

the country's railroads is absolutely essential, and that the transportation problem cannot be solved until such consolidation is effected. Emory Johnson, Dean of the Wharton School of Finance, of the University of Pennsylvania, predicts that if consolidation is not voluntarily accomplished, as provided for in the EschCummins bill, it must be brought about by the Government. Supporting this contention he points out that during the five year period from 1916 to the end of 1920 railroad revenues increased nearly 72 per cent., while total expenses rose 141 per cent.

Much of the opposition to this proposed consolidation of the country's carriers into a dozen or more systems is based on the theory that combinations of this kind would strengthen the "weak" by weakening the "strong" roads, and that the credit of the latter will thereby be impaired. This belief is not based on sound reasoning, for it is founded on the assumption that the "weak" roads generally are less favorably situated. As already pointed out, the truth is that approximately 25 per cent. of the country's traffic is handled by systems which are weak only in their capitalization. In operating conditions and in favorableness of location, the carriers classed as weak are similar to the strong roads, and if they were similarly capitalized, they would have the same financial strength. Summed up, the advocates of consolidation believe that if property value and not simply the amount of existing capitalization is made the controlling factor in determining the basis of all consolidations, the credit of the strong roads will not be impaired by merging with other lines not so favorably situated financially.

OPPORTUNITY FOR ECONOMIES

ORMER Director General Hines expresses the opinion that the public as a whole has failed to appreciate the full importance of the unifications which were put into effect

months will have increased to approximately $1,500,000,000 or about one-twelfth of the total estimated value of the railroads of the country.

Practically no one has come forward with any objection to the proposed plan of consolidation, where the objection or criticism is based on any belief that such a merging of systems of strong and weak roads would fail to effect economies. On the other hand few railroad executives believe that any such scheme can be actually put into operation. They say that money holds the key, and that the financial obstacles in the way of such a plan are insurmountable at the present time. They also assert that if Congress should enact a law compelling such a consolidation, the early result would be government ownership.

Financiers are generally agreed that further railroad consolidation is not only desirable but is necessary. However, they insist that it must be brought about naturally and in the free exercise of sound business judgment, and not under coercive public regulation. "Any plan of consolidation founded upon any communal scheme of redistribution, whether of earnings, brains, or reputation, will do far more harm than good," say the bankers.

In view of the facts stated, it is quite plain that any early improvement in the railroad situation must come as a result of a multitude of small economies effected in present practices, rather than as an outcome of revolutionary changes, which could only be brought about through a large expenditure of money. Great savings will come from the introduction of economical methods of handling traffic in large city terminals. Generally speaking, a ton of freight travels for less than a cent a mile on the railroad, but this same ton runs up a bill of a dollar if the goods must be carried from one station to another, or even moved from one car to another under the same station roof.

Looking only at the mechanical side of rail transportation, it is a fact that the future of the industry is dependent upon the future of airbrakes. The limiting factor in hauling heavy trains over grades is not so much pulling power as stopping power. It is also a fact that the brakes determine the number of trains a railroad can accommodate. As to the actual service rendered by modern braking equipment, let us take for instance the Twentieth Century Limited, traveling between New York and Chicago. Assume that this train is running on a level track at the rate of a mile a minute. If there were no airbrakes and track friction had to do it all, this fast-traveling conveyance would run for approximately six miles before coming to a stop after the engineer had closed the throttle. Almost fifteen minutes would elapse after the power had been shut off before the train would stop.

Airbrakes are more powerful than the modern locomotive itself. For a train of two locomotives and ten passenger cars to attain a speed of 60 miles an hour, it is necessary for the locomotives to accelerate for 1,200 seconds and travel eight miles. The airbrakes will stop this train in 21 seconds and within a distance of 1,000 feet. In years to come, when the airbrake has been developed far beyond what it is to-day, we will likely travel over our railroads twice as fast in trains that are twice as long.

The railroads need $6,000,000,000 in new capital for new equipment, ships, terminals, and other facilities. Either this money must be obtained from the bankers and financiers or the public will have to carry the heavy burden of increased operating costs arising out of inefficient operation. However, it is certain that so-called capital will not advance money to the railroads unless the outlook for a fair return of the investment is brighter than is the case to-day. Looking back as far as 1903 one finds that 72 per cent. of the two million railroad employees in that period earned less than $600 yearly. In June, 1921, the average pay of employees on our American railroads was running at the rate of $2,085 a year. This is quite different from twenty years ago, but at the same time we must not forget that $2,500 annually was recently declared by

competent economists to be the absolute minimum return necessary for a family of five people to maintain itself in a state of respectability. Such facts indicate that although wages are high compared with times past, there is a limit beyond which the pay of workers simply cannot be reduced.

The railroads will be greatly benefited if there should come an end to political railroad-baiting. Restrictive and punitive railroad legislation has done much to hamper the efficient operation of practically all of the country's transportation systems. It was this state and local interference that first compelled the roads to join in a concerted movement for a scheme of Federal railroad control. That this is true may be judged from the fact that, between 1912 and 1915, upward of 4,000 bills affecting railroads were introduced into the National and State legislatures, and of these bills 440 became laws. Whatever the purpose of the measures enacted, there was nearly always one certain result, which was an increase in operating costs. One law alone in the little state of New Jersey added an operating cost of $400,000 annually to the expenses of the roads traversing that state. And the end is not yet, for the conflict between Federal and state authority still continues.

If one thing more than anything else is necessary, it is that the nation's carriers shall be freed of the major part of the restrictions that now hinder their operation. In addition, the various transportation systems must be permitted to remove the waste and inefficiency that has been fastened upon them by unfair rules and working conditions established by men who were indifferent to the future of the properties, and who did not consult nor consider the owners of the roads. If after a fair opportunity private enterprise has not succeeded in clearing up the transportation muddle, then it will be time for Federal authorities to again step in and dictate the policies and practices of our American railroads. But for the immediate present it would seem to be the better part of wisdom in the light of our recent experiences with government operation, to give the owners of the roads a chance to straighten out matters with a minimum of outside interference.

"As we entered Baranowicze a long train of freight cars came crawling in. As the train stopped, an old man thrust his head out of one of the cars and called to me, 'Where are we?' I answered 'Baranowicze'. 'What country is this?' called another. 'Poland,' I answered. 'What kind of government is this? Is there a king? Who is the king? What will they do to us?

Is there any food?' came the shouts in a jabbering of Russian and Polish and German. Then one of the A. R. A. (Hoover Relief) men came up and told them that they would get food at a kitchen a short distance up the road. 'When? When? When?' And after they had tasted the cocoa and beans'Where does it come from?' 'From America,' I answered. 'America? Where is America?' 'A place where there is much food,' answered one of his more erudite companions.

"I took a look into this freight car, typical of the whole train. It was the usual type of small box car and in it were 47 people of all sizes and ages, all in rags and all filthy, sitting, sprawling, huddled on top of innumerable ragged bundles. The questions asked principally were whether they would really get food here would they get warm food. Children with swollen stomachs, young men with wrinkled, yellow faces,

and women crying silently. No sound, just tears. They came from all parts of Russia. Some of them had been en route for months in the same car, others had trekked across the steppes, and had finally been thrust into freight cars when their horses died and they could drag their carts no farther. They had all been caught in the great Russian drag of 1915, and had been taken into central Russia; concerning what had happened in the world in the last six years they had no idea. All they knew were local conditions in the villages where they lived, and how difficult it was to get food during the journey back.

"From Baranowicze we went on to the border, over splendid military roads and then on curduroy roads through great stretches of pine and birch forests; and mile after mile without meeting a single person on the road or seeing a single house or barn. All these fine roads were military roads between military centres for military purposes only. That they served no economic purposes whatever is obvious since no signs of habitation of any kind are even in sight.

"Arrived at the border, we found a long line of prairie schooners coming in. 'Is this Poland? Are we out of Russia? God be praised,' came again and again in a jabbering of Russian, Polish, and German. It happened that in this crowd were German colonists from Russia. Though they had been in Russia for many generations, they had never mixed with the Russians but kept close together in their little farm colonies along the Volga. When the war came, the Russians would have nothing to do with them nor would Germans, since they had

I

been Russian citizens for generations. Arrived at the border they were more bewildered than ever, for now they had no place at all to go to; before they had at least the great desire of getting out of Russia, and the general direction of the border for which to steer their course. talked to one peasant who was under 27 although he looked over 40, and small wonder, for he had tramped over five thousand versts and during the last stretch had dragged the cart himself, as the Bolsheviks had taken away his horse.

"I examined the cart he had brought all this distance and with

so tremendous an effort; an old bed, bits of sacking, and a battered assortment of pots and pans, an old sheepskin, part of a wolfskin, rags, 9 potatoes, a handful of radishes, some pieces of tallow-nothing else. The complete inventory would not net a doilar; he explained that he had had a cow, but the Bolsheviks had taken it away from him at the border. Yet he was much better off than thousands, for having been out in the open air he was in comparatively good health although drawn and wasted, whereas the others who had come back

and supplying a few of the most urgent necessities of life. The Y. M. C. A. people are also doing useful work. They are trying to teach the children to play games. There is a big field in the centre of the camp, and in this the children are arranged in a great circle; the instructor begins with simple exercises and then

by train were feeble and diseased and bleeding from bites. The children, of course, were the most tragic sights. They are young only when they smile.

"The A. R. A. are doing a fine job up there among these refugees, for they are giving hot food to the starving, and, with the coöperation of the Red Cross and the Polish authorities, are doing a most effective work in delousing them

gives them a football to kick around, and so on. The signal to assemble for games is a long blast on the whistle, and this same whistle is used during the games when he wants to draw the attention of the children. Instinctively, when the whistle blows, the children grip their cups and form a long queue.

All their little lives they have been standing in queues waiting for food. The great events of life have been when their place in the line has arrived at the place where the food is and they instinctively form in queues no matter what they are doing. And even during a concert given there one evening the children automatically formed in queues and stood in line while listening to the music-each child grasping its cup or bowl with a grip that is not relaxed even in sleep.

At the frontier station I found a boy of eleven and his sister of ten, who had started from Samara with father, mother, and a sister, but all had died en route. find the way?' I asked. answered the girl, for they travelled along the main road, where many people were going, and once in a while they got a lift and anyhow everybody knew the way to the next town on the way to the frontier."