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Labor is scarce and the cost is mounting. So with materials and supplies. Car and locomotive builders are largely engaged in producing equipment needed abroad, both by our allies and by our own forces in the conduct of the war. The steel and other materials needed for such construction, as well as the labor, are also needed in other phases of the conflict. Under such conditions, and pending the acquisition of such additional facilities and equipment, it is indispensable that those now in existence should be used to their fullest capacity, primarily for the uses which are most vital to the country's defense and welfare, but without unnecessary hindrance to the industry and commerce of our people, upon which their ability to contribute toward the success of the war so largely depends.

The act to regulate commerce was not enacted to meet such a situation. The carriers have the right to demand at our hands, and it is our duty to approve, just and reasonable rates sufficient to yield fair returns upon the value of the property devoted to public use after necessary expenditures for wages, fuel, and supplies, reasonable expenditures for maintenance, renewals and betterments properly chargeable to operating expenses, and appropriate depreciation. Measured in dollars, the gross revenues of the carriers during the past and current fiscal years exceed any in their history. But what the dollar will buy in labor, material, and supplies is substantially less. We are sensible of the vital and imperative need of the hour that our railroads shall not be permitted to become less efficient or less sufficient. We realize the gravity of a serious breakdown of our transportation facilities. It is unthinkable that this breakdown. would be permitted if it could be prevented. Increased charges for carriage, if found necessary to take care of unavoidable increases in operating expenses, would not at this time bring new capital on reasonable terms in important sums.

In our opinion the situation does not permit of temporizing. All energies must be devoted to bringing the war to a successful conclusion, and to that end it is necessary that our transportation systems be placed and kept on the plane of highest efficiency. This can only be secured through unification of their operation during the period of the war.

If the unification is to be effected by the carriers they should be enabled to effect it in a lawful way. To that end, in our judgment, the operation of the antitrust laws, except in respect of consolidations or mergers of parallel and competing lines, as applied to rail and water carriers subject to the act to regulate commerce, and of the antipooling provision of section 5 of that act, should be suspended during the period of the war and until further action by the Congress. In addition they should be provided from the Government Treasury with financial assistance in the form of loans or advances for capital purposes in such amounts, on such conditions, and under such supervision of expenditure as may be determined by appropriate authority. As a necessary concomitant the regulation of security issues of common carriers engaged in interstate commerce should be vested in some appropriate body, as has been recommended in our annual reports. The rights of shippers for reasonable rates and nondiscriminatory service under the present jurisdiction of the commission need not be seriously interfered with by such unified

control. Some elastic provisions for establishment of new routes would probably be needed.

If the other alternative be adopted and the President operates the railroads as a unit during the period of the war there should be, in our opinion, suitable guaranty to each carrier of an adequate annual return for use of the property, as well as of its upkeep and maintenance during operation, with provision for fair terms on which improvements and betterments made by the President during the period of his operation could be paid for by the carrier upon return to it of the property after expiration of that period.

Attest:

GEORGE B. MCGINTY, Secretary.

HENRY C. HALL, Chairman.

WASHINGTON, D. C., December 1, 1917.

To the Senate and House of Representatives:

The special report of the majority of the commission leaves unsaid some things which should be plainly stated if prompt and sure relief is to be brought to the present transportation situation. That the lack of adequate railroad service, particularly in eastern territory, is serious at the present time, and is a cause of grave concern for the coming winter months needs no demonstration. Everyone knows it who knows anything about present business conditions. That the industries of the country engaged in making war materials, as well as those not so occupied, requires the very best service which can be given by the railroads is also clear. I fully concur in the statement of the majority report that "it is necessary that our transportation systems be placed and kept on the plane of highest efficiency," and also that "this can only be secured through unification of their operation during the period of war." But the majority report takes the position, at least by implication, that this unification may "be effected by the carriers" themselves. With that judgment I wholly dis

agree.

The carriers' cooperative effort at the present time is in charge of the "executive committee of the special committee on national defense of the American Railway Association." This committee in its public announcements calls itself the Railroad War Board. It is the fifth committee that the railroads have had in Washington to deal with the transportation situation since November, 1916. The first two of those committes were given no real authority, although the commission was advised by the executives that they had been given full power, or as it was expressed in the case of the first committee, "all the power of the executives." These committees, therefore, were unable to cope with the situation, despite earnest and praisworthy efforts of their individual members who were hampered by the unwillingness of certain railroads, acting under the restraint of executive influence, to carry out their instructions. These facts have been reported by the commission (Car Supply Investigation, 42 I. C. C., 657). In that report both the majority and the minority expressed the view that the situation could be improved by a committee of railroad officers to act in cooperation with this commission.

if the committee were given plenary power by all the railroads. In apparent response to that suggestion a third committee was sent to Washington in January, 1917, but it also had not been given the promised power and was therefore not received. In February, a fourth committee was sent to Washington to enforce certain carservice rules. Not all of the railroads believed that these rules were workable and hence the agreement giving power to this committee was incomplete and inadequate. With this experience behind it the American Railway Association, on April 11, 1917, formed its special committee on national defense, and centered the chief authority in its executive committee. The resolution by which this committee was formed recites that the railroads of the United States pledged themselves, with the Government of the United States, with the governments of the several States, and with one another, that during the present war they would "coordinate their operations in a continental railway system, merging during such period all their merely individual and competitive activities in the effort to produce a miximum of national transportation efficiency."

It was understood that the coordination of railway operations in a continental railway system meant that cars would be used interchangeably and sent where they were most needed; that track and terminal facilities would be opened up to all railroads so as to relieve congestion; and that locomotives would be at once requisitioned from some of the strong and less burdened railroads for use on the important lines which have been unable to give efficient service largely because they were badly in need of motive power. Yet as late as November 24 the carriers' committee made an announcement from which the following is quoted:

The Railroads War Board to-day adopted revolutionary measures in order to relieve the congestion of traffic on the eastern railways. It directed "that all available facilities on all railroads east of Chicago be pooled to the extent necessary to furnish maximum freight movement." The effect will be that to the full extent that conditions render it desirable these railways will be operated as a unit, entirely regardless of their ownership and individual interests. The operating vice presidents of the eastern lines have been appointed a committee to operate as a unit all the lines involved, and have been given instructions and authority to adopt all measures which in their judgment may be necessary to relieve the present situation and assure the maximum amount of transportation. *

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An important part of the plan adopted for the operation of the eastern lines is that of placing at their disposal the facilities of railways in other territories to such extent as may be necessary.

These measures-the pooling of cars, the operation of railways as a unit, the placing of facilities at the disposal of railways in other territories as needed-are essential steps in the coordination of railway operations" in a continental railway system," using the phrase of the resolution of April 11, but were not taken until November 24. I do not wish to be understood as saying that the carriers' committee has not accomplished results; nor that the shippers have not cooperated with the carriers to get greater service from the available equipment, for the heavier carloading has been a very material factor of improvement. But our experience with railroad committees during the past year makes me believe that no voluntary committee can accomplish what the situation demands. One of the principal reasons is that the element of self-interest, the traffic influence, is a

persistent factor in postponing and resisting measures that seek to disregard individual rights in the effort to secure transportation results as a whole. The "merely individual and competitive activities " and the established operating practices have their effect, despite directions or recommendations that have no sanction to enforce them except a voluntary agreement which is very general in character. There runs also in the activities of these committees the self-evident purpose to do whatever appears to be necessary to prevent the governmental authority from acting. For these and other reasons which it is not necessary to state I can not concur in a report to the Congress which apparently acquiesces in a continuation of control over the transportation situation by a committee appointed by the carriers themselves. The suggestions with reference to the antitrust laws, the antipooling provision of section 5 of the act, the desirability of Government loans for capital purposes, and the regulation of security issues, undoubtedly have merit, but in my judgment their enactment into law will not make it possible for any committee appointed by the carriers to secure the full measure of transportation service which the present conditions demand.

The "unification" needed if our transportation systems are to be "placed and kept on the plane of highest efficiency," is the unification of the present diversified governmental control. At the present time there are several Federal agencies authorized by law to issue orders or directions with respect to transportation. This commission, by the car-service act, approved May 29, 1917, was given very broad powers to issue summary directions with respect to the movement, distribution, exchange, interchange, and return of cars. The priority director, designated by the President for that purpose under the act approved August 10, 1917, is authorized to direct that traffic essential to the national defense shall be given priority in transportation, and he has made certain orders of that character. The transportation of troops and material of war, under the amendment to the act to regulate commerce, approved August 29, 1916, is required upon the demand of the President to be given preference over all other traffic in time of war, and by direction of the Army and Navy Departments and the United States Shipping Board preference orders have been given for the transportation of a very large tonnage of war materials and supplies of all kinds. The administrations controlling fuel and food, to which adequate transportation is of course vital, have taken an active interest in the movement of those commodities through their appointed agents. Under this diversified control the carriers are not able to meet the requirements of the increasingly heavy tonnage which must be moved. In consequence the industries devoted to war purposes and those engaged in their normal business are suffering. There is no institution in which regularity of operation is more requisite than in transportation, but railroad operation is approaching a chaotic condition. A coherent plan must be worked out which shall provide for both the needs of the Government in the energetic prosecution of the war and the needs of general commerce. It is imperative that war material be given preference in transportation, but the financial sinews of war depend in large measure upon the successful operation of our manufacturing plants and business establishments.

I concur in the view that "the situation does not permit of temporizing," but I am convinced that the strong arm of governmental authority is essential if the transportation situation is to be radically improved. That authority must be unified to make possible action that is both vigorous and consistent. If the President elects to exercise the power given him, under the act approved August 29, 1916, to take possession and assume control of the transportation systems, I believe that vastly improved transportation conditions can be promptly secured. For this course legislation assuring the carriers a fair return may be appropriate. If the President does not so elect, it is my judgment that the authority over the regulation of railroad operations now vested in the several agencies referred to, with such amplification as may be necessary, should be promptly centralized by act of Congress. All of the forces now at work upon the problem, including the carriers' executive committee and its numerous subcommittees, could be at once utilized under a single governmental administrative control.

C. C. MCCHORD, Commissioner.

INTERSTATE COMMERCE COMMISSION,
Washington, December 26. 1917.

To the ACTING CHAIRMAN,

Committee on Interstate Commerce,

United States Senate.

SIR: In compliance with the request made in a communication addressed by the chairman of your committee to this commission under date of December 21, I transmit herewith such response to the questions there contained as it has been possible to prepare within the limited time allotted.

Very respectfully,

HENRY C. HALL, Chairman.

QUESTIONNAIRE SUBMITTED TO COMMISSIONERS.

ITEM I.

Information called for.-Table showing the gross and net operating income of all operating railways, stating each separately for the years 1912, 1913, 1914, 1913. 1916. and 1917.

Modification.—That aggregates for all Class I roads1 be given for each of the years 1912 to 1917, and that the detail by roads be given for the latest annual report; that is, December 31, 1916.

NOTE-Owing to consolidations, etc., since 1912. comparisons by years and by roads would be valueless unless figures of constituent companies were compiled to compare with present company. (The N. Y. C. R. R., a consolidated company after Jan. 1, 1915, is an illustration.) To combine these figures for the constitutent companies would entail a volume of study and work, making it impossible to obtain figures within the time limit set.

1 Class I roads are roads having annual operating revenues over $1,000,000. They comprise about 97 per cent of the total operating revenues and 92 per cent of the total operated mileage of the United States. Class II roads are those having annual operating revenues between $100,000 and $1,000,000. They constitute about 21 per cent of the total operating revenues and about 6 per cent of the total operated mileage. Class III roads are those having annual operating revenues below $100,000.

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