Chapter IV: Introduction (3)

"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.