bonds. The government recently, in order to raise money to carry on the war, had to pay as high as 434 per cent on its bonds. Does anybody believe that it could issue billions of dollars in bonds to buy the railroads, at a lower rate of interest than it could issue them to carry on a war to protect the people of this country and the world from the greatest menace to their liberty and welfare with which we were ever confronted? The very suggestion is absurd.

It is only reasonable to conclude therefore that if the government should acquire the railroads it would have to pay at least their present book cost of road and equipment, which probably is about $18,500,000,000, and at least 5 per cent interest on the bonds issued, which would make its annual railroad interest charge about $925,000,000. If it should allow the railroad companies to earn a return of 6 per cent on this same basis, the net return to the companies would be about $1,110,000,000, or approximately $185,000,000 more. We are willing to concede for the purpose of this discussion that under government ownership a saving in the annual cost of capital of perhaps $200,000,000 might be made. But that is an extreme estimate. All the talk of the advocates of the Plumb plan about a saving of a half billion dollars or more a year in return upon capital is founded upon the "baseless fabric of a vision."

The government having acquired the railroads is, under the Plumb plan, to turn them over for operation to a board of directors two-thirds of whose members are to be elected by the officers and employes. At this point we really reach the most important part of the discussion of the Plumb plan, because the effect which any system of ownership and management will have upon operating expenses is vastly more important than the effect which it will have upon the return upon capital. As we have shown, it would take a little over $1,100,000,000 a year to pay 6 per cent upon the

present book cost of road and equipment. The operating expenses of the railroads are now running at the rate of at least $1,300,000,000 a year, which is about four times as much as would be required to pay 6 per cent upon the present book cost. Therefore, from the standpoint of the public it is relatively at least four times as important to have the railways efficiently and economically operated as it is to have the return upon capital held down. The advocates of the Plumb plan claim that under their plan. vast reductions would be made in operating expenses. What is there in their plan which would tend to cause an increase in the efficiency of operation and consequent reductions of expenses?

Supreme authority would be vested in the board of directors two-thirds of whose members would be elected by the officers and employes. The Sims bill, which was introduced in Congress by Representative Sims at the request of the Plumb Plan League, provides also that the board of directors shall divide the railways of the country into districts. In each of these districts it shall constitute a "district railway council." It is important to note how these councils are to be chosen. One-third of their members are to be appointed by the board of directors; and as two-thirds of the members of this board will be employes-for the officers will be merely employes-the board is pretty sure to appoint employes to the district councils. Another one-third of the members of the district councils will be elected by the "classified employes within their district," and the remaining one-third will be elected by the "official employes within said district." The result probably will be that all the members of the district. councils will be employes. The board of directors may delegate to the district councis any powers it may choose to, “and the district railway council shall, upon such delegation, have and exercise within its district all of the powers and duties of the board of directors as may be delegated to

it." Thus, the actual management of the roads in each district could be and probably would be delegated to the district council, and upon this council the public, although the owner of the railroads, would have little or no representation at all.

The largest item of railroad expenses is wages. Of the annual operating expenses of about $4,300,000,000 now being incurred, about $2,750,000,000 is being paid out in salaries and wages, and of course salaries are an extremely small fraction of this total. The Plumb plan provides that all salaries and wages shall be fixed by a central board of wages and working conditions, one-half of whose members shall be chosen by the "official employes" and onehalf by the "classified employes." Its decisions are to be final, unless a majority decision cannot be reached, in which case there is to be appeal to the board of direc

tors.

Now, there is nothing in human experience, and certainly nothing in recent experience in the railway field in the United States, to indicate that the time ever will come when any class of persons will be satisfied with its income, whether derived from wages or any other source. In the years 1916 and 1917 the railway employes of the United States received advances in wages amounting to $350,000,000. In 1918 they received advances amounting to $1,000,000,000 a year. And now they are asking for advances amounting to $800,000,000 a year. Of course, they give what to them appear perfectly valid reasons why all these advances in their wages should be made. And they could convince themselves just as completely under the Plumb plan that their income ought to be still further and further increased as they can now. That is merely human. So we may be sure that under the "Plumb Plan" the "classified employes" would continue their perennial movements for higher wages. And why should not the "official employes" want their incomes increased, too? And if they did, why should not the representatives of both

classes on the central wage board agree to raise salaries and wages again and again until only the sky was the limit of railway wages and salaries? If the railway salary and wage bill was too big to be paid from earnings derived from freight and passenger rates, it would have to be paid from taxes, for the Sims bill expressly says (Article 2, Section 5), that "all costs upon operation and charges upon the capital employed *** shall be guaranteed by the Federal Government."

But, say the advocates of the Plumb plan, the "official employes" would have a strong incentive not to permit salaries and wages to be raised unduly. One of the features of the plan is that any surplus earned in excess of the amount required to pay operating expenses and interest on the bonds issued by the government to buy the roads is to be divided equally between the public and the employes. The half of the surplus going to the employes is to be distributed among them in proportion to their salaries and wages, except that the "official employes" are to receive twice as much of it in proportion to their salaries as the "classified employes" are to receive in proportion to their wages.

Now, say the advocates of the Plumb plan, the "official employes" will necessarily refuse to consent to any unreasonable advances in wages and salaries, because the result would be to deprive them of part or all of their large "dividends" from the surplus. And this is absolutely the only form of protection which, under the Sims-Plumb Plan bill, the public would have from excessive advances in railway salaries and wages. Of what value would this protection be?

Under private ownership and operation of railways the president of a railway represents the owners and operates the property for them, subject to government regulation. The other officers work under the direction of the president, and supervise the work of the employes. Under government operation the officers occupy much the same position, except

that they represent the government instead of private corporations. Under the Plumb plan the officers would work under the general direction of a board, onethird of whose members represented themselves (the officers), one-third the employes and one-third the public. Suppose that the officers did hold out against. an unreasonable advance in salaries and wages. There would be appeal to the board of directors, and as one-third of the directors would be politicians and onethird representatives of the classified employes with their large voting power, there would be a strong chance that the politicians and labor men on the board would agree to make the advance in wages. Suppose, on the other hand, that the politicians sided with the officers against the advance. The result probably would be a strike by the employes, for it is a notable feature of the Plumb plan that although it practically provides for employes' management of the railroads. it does not in any way provide against the employes striking against their own management.

As a matter of fact, however, there would be little chance of the "official employes" ever holding out strongly against an attempt by the "classified employes" to raise salaries and wages. The officers would depend for their appointments and promotions upon, and have to work under, a board of directors and district councils on which the "classified employes" would be as largely represented as the officers. Therefore, no officer would long be able to hold his place, much less secure promotion, unless he was able to find favor in the eyes of the employes, and the surest way to lose their favor would be to vigorously oppose their wage demands. The officers who have been trained and developed under corporate management and who have been used to

showing independence and fearlessly exercising authority over the employes probably would be rapidly weeded out, and soon the entire official personnel would consist of men who owed their positions, not to their ability and experience as railroad operatives, but to their success in the game of labor politics.

Furthermore, their prospective shares in the possible surplus would afford the officers no real incentive to oppose advances in wages, provided these were going to be accompanied by advances in their own salaries. There are very

few men who would not take a raise in salary in preference to a chance to share in a surplus which might not, and probably would not, be earned. It is not to be assumed, therefore, that there would be any reductions in operating expenses due to reductions in wages. On the contrary, it is safe to assume that there would be large increases in wages.

Nor is there any good reason for hoping that important economies of any other kind would be effected. If any men of real ability remained in important positions in the business, which seems highly improbable, they would be sure, if past experience is any criterion, to encounter insurmountable opposition to the introduction of methods which would largely increase efficiency and reduce expenses. The largest economies which have been effected in the operation of our railroads in the past have been accomplished by increasing the average freight train load. But the larger is the average train load the smaller is the number of trains run, and the smaller is the number of trains run the fewer men it is necessary to employ, which is the main reason why increases in train load reduce expenses. In the past the organizations of railroad employes constantly have resisted efforts to effect economies

by increasing train loads. They first secured legislation throughout the country requiring the railways to increase the number of men employed on all long trains. Later they tried throughout the country to get laws passed to reduce and limit the length of trains.

There is no good reason for doubting that if they were given control of the management of the railroads they would make the reductions in the length of trains which under private management they have tried to secure by legislation. But if the average train load were reduced there would be a substantial increase in the number of men that would have to be employed and in the amount of fuel that would have to be consumed in handling a given amount of traffic. Wages and the cost of fuel now constitute about 80 per cent of all railroad ex· penses. And if wages are not to be rcduced, but rather increased; if the number of men employed to handle a given amount of business is not to be reduced but increased; and if the amount of fuel consumed is not to be reduced, in what way are the vast economies promised to be effected?

Mr. Plumb and the other advocates of the Plumb plan leave us entirely in the dark on this point. They talk a great deal about the huge savings that will be made, but they never specify a single way in which a single dollar of operating expenses is to be saved. On the other hand, it is very easy to tell how vast economies in operation have been effected under private management in the past and therefore how they would probably be effected under private management in future. As a matter of fact, it is a perfectly safe assumption that under the Plumb plan there would be a vast increase of operating expenses instead of a decrease;

and an increase of even 10 per cent in operating expenses would amount to over $400,000,000 a year, which would far exceed the largest saving that could possibly be made under government ownership in the return paid upon railroad capital.

It was one of the curious features of the hearings on the Plumb plan at Washington that the advocates of that plan refused to recognize the fact that, under their scheme, a deficit might be incurred in the operation of the railways and talked glibly throughout about what would be done with the "surplus." If the employes are so sure there will be no deficits, why do they not offer to share in any deficits which may be incurred, as well as in any surplus that may be earned?

The most cursory examination of the statistics showing the results of current railway operations is all that is necessary to convince any rational person that, 11 the absence of a large advance in passenger and freight rates, there would not be the remotest chance of a surplus being earned under the Plumb plan, but that there almost certainly would be huge deficits.

Railway earnings are now running at the rate of $5,000,000,000 a year. Operating expenses are running at the rate of about $4,300,000,000 a year. This leaves net earnings of only about $700,000,000 a year. As we have shown, the government would have to pay interest on bonds issued by it to buy the railroads. at the rate of at least $925,000,000 a year. The way things are now going, therefore, the interest from the start, in the absence of an advance in rates, would exceed the net earnings by at least $225,000,000 a year.