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the extent of eight billion dollars, which is | of them have been grossly overcapitalized. the minimum figure which Mr. Plumb uses, But others, because they have made large then, up to 1907 the total investment in the investments from earnings, have sold their railroads of the United States had been stocks at premiums and so on, have beonly $5,030,000,000. The total mileage on | come largely undercapitalized. The Pennwhich the book cost was based at that time sylvania Railroad System alone represents was 210,793. Therefore, after squeezing an investment which exceeds its capitalout all the alleged "water," the railroads | ization by $430,000,000. There is not the in 1907. on Mr. Plumb's theory, represent- i slightest doubt in my mind that the valued an investment of only $24,000 a mile. ation being made by the Interstate Com

merce Commission, for the railways as a Does anybody in his senses believe that

whole, will exceed their combined net capup to 1907 the investment in our railroads

italization and their book cost. was only $24.000 per mile? 'In that year the railways of New South Wales, Au But the advocates of the Plumb plan say stralia, which always have been owned and that when the railroads are bought by the operated by the government, reported a cost government there should be paid for them of construction of $60,000 a mile ; the Inter not their present value, but merely their colonial of Canada, which has been owned actual cost. That, however, is contrary to and operated throughout its entire life by all the decisions of the courts upon the subthe Provincial or Dominion governments, ject, and Mr. Plumb knows it as well as reported a cost of construction of $60,163 anybody. Furthermore, all the investigaa mile; the railways of Germany, most of tions which have been made by the state which were owned and operated by the gov commissions and the Interstate Commerce ernment, in the same year reported a cost Commission in making valuations demonof construction of $107,000 a mile. Our strates that it is impossible to ascertain railroads at that time had a book cost of what the actual cost to date of all the rail$61.816 a mile. Either that book cost did roads has been. Many railroads have not include a vast amount of water as is changed hands several times by going alleged, or our railways up to that time had through receivership or in other ways, and been constructed with at least twice as great records have been lost or destroyed. How efficiency and economy as any other rail could the government buy the railroads for road system on earth.

their actual cost when everybody who In 1916, when the Interstate Commerce

knows anything about the subject knows

that their actual cost cannot be ascertained ? Commission made its last report upon the subject, the net capitalization of our rail If it should acquire them in accordance

as $66,356 a mile and their book with the provisions of the Constitution as cost of road and equipment was $73,209 a interpreted in all the past decisions of the mile. Their capitalization and book cost Supreme Court of the United States, it of construction were the smallest reported would have to pay for them on the basis for any important railroad system in the of their present value, and if it did not acworld. The State Railways of New South quire them on the basis of their present Wales, Australia, now report a cost of con- value, it would acquire them on terms which struction of $80,000 a mile, and the gov would involve confiscation, and once you ernment-owned Intercolonial Railway of begin confiscating property of one kind, Canada a cost of $76,000 a mile.

property of all kinds will be in peril. It is not the intention of the writer to If the government did buy the railroads, contend that none of the railways of the how would it pay for them? The advocountry have been overcapitalized. Some | cates of the Plumb plan say in 4 per cent bonds. The government recently, in order present book cost of road and equipment. to raise money to carry on the war, had to The operating expenses of the railroads are pay as high as 434 per cent on its bonds. now running at the rate of at least $1,300,Does anybody believe that it could issue 000,000 a year, which is about four times billions of dollars in bonds to buy the rail- as much as would be required to pay 6 roads, at a lower rate of interest than it | per cent upon the present book cost. Therecould issue them to carry on a war to pro fore, from the standpoint of the public it tect the people of this country and the is relatively at least four times as important world from the greatest menace to their to have the railways efficiently and economliberty and welfare with which we were | ically operated as it is to have the return ever confronted? The very suggestion is upon capital held down. The advocates of absurd.

the Plumb plan claim that under their plan

vast reductions would be made in operating It is only reasonable to conclude there

expenses. What is there in their plan which fore that if the government should acquire

would tend to cause an increase in the efthe railroads it would have to pay at least

ficiency of operation and consequent reductheir present book cost of road and equip

tions of expenses? ment, which probably is about $18,500,000,000, and at least 5 per cent interest on the bonds issued, which would make its annual

Supreme authority would be vested in railroad interest charge about $925,000,000.

10.000. , the board of directors two-thirds of whose If it should allow the railroad companies

members would be elected by the officers to earn a return of 6 per cent on this same

and employes. The Sims bill, which was basis, the net return to the companies would

introduced in Congress by Representative be about $1,110,000,000, or approximately

Sims at the request of the Plumb Plan $185,000,000 more. We are willing to con

League, provides also that the board of dicede for the purpose of this discussion that

rectors shall divide the railways of the under government ownership a saving in the

country into districts. In each of these disannual cost of capital of perhaps $200,000,

tricts it shall constitute a "district railway 000 might be made. But that is an extreme

council.” It is important to note how these estimate. All the talk of the advocates of

councils are to be chosen. One-third of their the Plumb plan about a saving of a half

members are to be appointed by the board billion dollars or more a year in return

of directors; and as two-thirds of the memupon capital is founded upon the “baseless

bers of this board will be employes—for fabric of a vision."

the officers will be merely employes—the

board is pretty sure to appoint employes to The government having acquired the the district councils. Another one-third of railroads is, under the Plumb plan, to turn the members of the district councils will be them over for operation to a board of direc elected by the “classified employes within tors two-thirds of whose members are to their district," and the remaining one-third be elected by the officers and employes. will be elected by the “official employes At this point we really reach the most im- within said district.” The result probably portant part of the discussion of the Plumb will be that all the members of the district plan, because the effect which any system councils will be employes. The board of of ownership and management will have directors may delegate to the district counupon operating expenses is vastly more im ciis any powers it may choose to, "and the portant than the effect which it will have district railway council shall, upon such upon the return upon capital. As we have delegation, have and exercise within its disshown, it would take a little over $1,100,- trict all of the powers and duties of the 000,000 a year to pay 6 per cent upon the board of directors as may be delegated to

it.” Thus, the actual management of the , classes on the central wage board agree to roads in each district could be and probably raise salaries and wages again and again would be delegated to the district council, until only the sky was the limit of railway and upon this council the public, although wages and salaries? If the railway salary the owner of the railroads, would have little and wage bill was too big to be paid from or no representation at all.

earnings derived from freight and passenThe largest item of railroad expenses is

ger rates, it would have to be paid from wages. Of the annual operating expenses

taxes, for the Sims bill expressly says (Arof about $4,300,000,000 now being in

ticle 2, Section 5), that "all costs upon opcurred, about $2,750,000,000 is being paid

eration and charges upon the capital emout in salaries and wages, and of course

ployed * * * shall be guaranteed by the salaries are an extremely small fraction of

Federal Government." this total. The Plumb plan provides that

But, say the advocates of the Plumb all salaries and wages shall be fixed by a | plan, the "official employes” would have a central board of wages and working condi

strong incentive not to permit salaries and tions, one-half of whose members shall be wages to be raised unduly. One of the feachosen by the "official employes” and one

tures of the plan is that any surplus earned half by the "classified employes.” Its deci

in excess of the amount required to pay sions are to be final, unless a majority de

operating expenses and interest on the cision cannot be reached, in which case

bonds issued by the government to buy the there is to be appeal to the board of direc

roads is to be divided equally between the tors.

public and the employes. The half of the Now, there is nothing in human experi

surplus going to the employes is to be disence, and certainly nothing in recent experi

tributed among them in proportion to their ence in the railway field in the United

salaries and wages, except that the “official States, to indicate that the time ever will

employes” are to receive twice as much of come when any class of persons will be

it in proportion to their salaries as the-classatisfied with its income, whether derived

sified employes” are to receive in proporfrom wages or any other source. In the

tion to their wages. years 1916 and 1917 the railway employes

Now, say the advocates of the Plumb of the United States received advances in

plan, the "official employes" will necessarwages amounting to $350,000,000. In 1918

ily refuse to consent to any unreasonable they received advances amounting to $1,

advances in wages and salaries, because the 000,000,000 a year. And now they are ask

result would be to deprive them of part or ing for advances amounting to $800,000,- |

all of their large “dividends” from the sur000 a year. Of course, they give what to

plus. And this is absolutely the only form them appear perfectly valid reasons why

of protection which, under the Sims-Plumb all these advances in their wages should be

Plan bill, the public would have from excesmade. And they could convince themselves

| sive advances in railway salaries and wages. just as completely under the Plumb plan i

Of what value would this protection be? that their income ought to be still further L’nder private ownership and operation and further increased as they can now. That of railways the president of a railway repis merely human. So we may be sure that

resents the owners and operates the under the “Plumb Plan" the "classified i property for them, subject to governemployes” would continue their perennial i ment regulation. The other officers work movements for higher wages. And why | under the direction of the president, an should not the official employes” want their supervise the work of the employes. Unincomes increased, too? And if they did, der government operation the officers ocwhy should not the representatives of both | cupy much the same position, except that they represent the government in- showing independence and fearlessly exstead of private corporations. Under the ercising authority over the employes Plumb plan the officers would work un- probably would be rapidly weeded out, der the general direction of a board, one- and soon the entire official personnel third of whose members represented would consist of men who owed their themselves (the officers), one-third the positions, not to their ability and experiemployes and one-third the public. Sup- ence as railroad operatives, but to their pose that the officers did hold out against success in the game of labor politics. an unreasonable advance in salaries and

Furthermore, their prospective shares wages. There would be appeal to the in

in the possible surplus would afford the board of directors, and as one-third of the

officers no real incentive to oppose addirectors would be politicians and one

vances in wages, provided these were third representatives of the classified em

going to be accompanied by advances ployes with their large voting power,

in their own salaries. There are very there would be a strong chance that the

few men who would not take a raise in politicians and labor men on the board

salary in preference to a chance to share would agree to make the advance in

in a surplus which might not, and probwages. Suppose, on the other hand, that

ably would not, be earned. It is not to the politicians sided with the officers

be assumed, therefore, that there would against the advance. The result probably

be any reductions in operating expenses would be a strike by the employes, for

due to reductions in wages. On the conit is a notable feature of the Plumb plan

trary, it is safe to assume that there that although it practically provides for

would be large increases in wages. employes' management of the railroads it does not in any way provide against the

Nor is there any good reason for hopemployes striking against their own man

ing that important economies of any agement.

other kind would be effected. If any

men of real ability remained in important As a matter of fact, however, there positions in the business, which seems would be little chance of the "official em- | highly improbable, they would be sure, ployes” ever holding out strongly against if past experience is any criterion, to enan attempt by the “classified employes” | counter insurmountable opposition to the to raise salaries and wages. The officers introduction of methods which would would depend for their appointments and largely increase efficiency and reduce expromotions upon, and have to work un penses. The largest economies which der, a board of directors and district coun have been effected in the operation of cils on which the "classified employes" our railroads in the past have been acwould be as largely represented as the complished by increasing the average officers. Therefore, no officer would long freight train load. But the larger is the be able to hold his place, much less se average train load the smaller is the cure promotion, unless he was able to number of trains run, and the smaller is find favor in the eyes of the employes, the number of trains run the fewer men and the surest way to lose their favor it is necessary to employ, which is the would be to vigorously oppose their wage main reason why increases in train load demands. The officers who have been reduce expenses. In the past the organtrained and developed under corporate izations of railroad employes constantly management and who have been used to I have resisted efforts to effect economies by increasing train loads. They first se- and an increase of even 10 per cent in cured legislation throughout the country operating expenses would amount to over requiring the railways to increase the $400,000,000 a year, which would far exnumber of men employed on all long ceed the largest saving that could possitrains. Later they tried throughout the bly be made under government ownercountry to get laws passed to reduce and ship in the return paid upon railroad limit the length of trains.

capital.

There is no good reason for doubting It was one of the curious features of that if they were given control of the the hearings on the Plumb plan at Washmanagement of the railroads they would ington that the advocates of that plan make the reductions in the length of refused to recognize the fact that, under trains which under private management their scheme, a deficit might be incurred they have tried to secure by legislation. in the operation of the railways and talkBut if the average train load were re ed glibly throughout about what would duced there would be a substantial in be done with the "surplus.” If the emcrease in the number of men that would ployes are so sure there will be no defihave to be employed and in the amount cits, why do they not offer to share in of fuel that would have to be consumed any deficits which may be incurred, as in handling a given amount of traffic. well as in any surplus that may be Wages and the cost of fuel now consti earned ? tute about 80 per cent of all railroad ex. penses. And if wages are not to be rc The most cursory examination of the duced, but rather increased; if the num- statistics showing the results of current ber of men employed to handle a given railway operations is all that is necessary amount of business is not to be reduced to convince any rational person that, 11 but increased; and if the amount of fuel the absence of a large advance in pasconsumed is not to be reduced, in what senger and freight rates, there would not way are the vast economies promised to be the remotest chance of a surplus bebe effected?

ing earned under the Plumb plan, but

that there almost certainly would be huge Mr. Plumb and the other advocates of

deficits. the Plumb plan leave us entirely in the dark on this point. They talk a great | Railway earnings are now running at deal about the huge savings that will be the rate of $5,000,000,000 a year. Opermade, but they never specify a single way ating expenses are running at the rate in which a single dollar of operating ex- of about $4,300,000,000 a year. This penses is to be saved. On the other hand, leaves net earnings of only about $700,it is very easy to tell how vast economies 000,000 a year. As we have shown, the in operation have been effected under government would have to pay interest private management in the past and on bonds issued by it to buy the railroads therefore how they would probably be | at the rate of at least $925,000,000 a year. effected under private management in fu The way things are now going, therefore, ture. As a matter of fact, it is a perfectly the interest from the start, in the absafe assumption that under the Plumb sence of an advance in rates, would explan there would be a vast increase of ceed the net earnings by at least $225,operating expenses instead of a decrease; 1 000,000 a year.

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