ECONOMICS
FOR EXECUTIVES
A SERIES OF STUDY-UNITS AND
AN ACCOMPANYING SERVICE
WHICH TOGETHER CONSTI¬
TUTE AN INTERPRETATION OF
THE UNDERLYING PRINCIPLES
OF ECONOMICS AND BUSINESS
FOR MEN AND WOMEN IN
PRACTICAL LIFE
EDITED BY
GEORGE E. ROBERTS
AMERICAN CHAMBER OF ECONOMICS
INCORPORATED
NEW YORK.
STUDY-UNIT V—ECONOMICS FOR EXECUTIVES
RAILROAD
REGULATION
EDITED BY
GEORGE E. ROBERTS
AMERICAN CHAMBER OF ECONOMICS
INCORPORATED
NEW YORK
Copyright, 1921, by
Benjamin Franklin Institute
INCORPORATED
Copyrighted in Great Britain, 1921, by
Benjamin Franklin Institute
INCORPORATED
AU Rights Reserved
THE DE VINNE PRESS
NEW YORK
CONTENTS
PAGE
i The Railroads a Public Service . . 7
11 Early Regulation 8
m Federal Operation during the War 22
iv The Transportation Act of 1920 . 29
v Restoration of the Roads to Their
Owners 45
vi The Labor Problem 49
vu Summary 53
Railroad Regulation
I
The Railroads a Public Service
~ was suggested in the preceding study-
jnit, any one who would clearly under¬
stand the problems of railroad regula¬
tion and control should recognize at the very
outset that he is dealing with a public service.
In other words, the interest of the public in
the results of railroad operation is paramount
to every other interest, and should be so con¬
sidered. With this fundamental fact fully
realized, such current questions as that of
the future management of the railroads be¬
come somewhat incidental. Shall we of this
country continue, for example, our policy of
government regulation under private opera¬
tion, or shall we adopt the policy of govern¬
ment ownership and operation? The an¬
swer to such questions becomes simply one
of expediency, if we recognize that the rail¬
road service is a public service. Whether we
Note.—Events in the field of railroad transportation
are shifting so rapidly that it was decided to include in
the present study-unit only those events that had transpired
to January i, 1921. Succeeding developments are covered
in a supplement.
7
ECONOMICS FOR EXECUTIVES
shall have private or public ownership de¬
pends upon which system will better promote
the public welfare.
Because of the vital relationship which
efficient operation and control bears to busi¬
ness and social life generally, there is wide
public interest in the fundamentals of this
whole subject. It is occupying the attention
of legislatures and of the Congress. It forms
the subject of serious discussion among busi¬
ness and political leaders. There is much
misunderstanding of the need and purpose of
regulation and control. These misunder¬
standings serve to obstruct and make more
difficult wise consideration and solution. For
this reason a treatment which sets forth
clearly and concretely some of the funda¬
mentals of the matter should prove practical
and helpful.
II
Early Regulation
We have already seen that provisions look¬
ing toward public regulation and control in
the modern sense were not contained in the
early charters of the railroads. People
naturally had only a faint conception of the
part which the railroads were to play in the
economic life of the nation. Many of the
8
RAILROAD REGULATION
clauses of the early charters, which looked
toward interference by the state, such as the
purchase clauses, were often purely formal
and were dead letters from the very begin¬
ning. Yet the fact that the railroads took
on a corporate form and that private lands
had to be taken over by them, made a certain
amount of control necessary and imposed
upon the corporations certain obligations to
the public. The early period up to the mid¬
dle of the nineteenth century was one of
crude, ineffective, and oftentimes unintelligent
attempts at regulation, accompanied by a
fairly general reliance upon competition as
a public safeguard.
The First Railroad Commission
During the early history of the railroads
and until nearly 1890, all the activities of
regulation were confined to the separate
states. Their character was as varied as
were the economic conditions out of which
legislation sprang. Thus the state of Mas¬
sachusetts, which was relatively thickly settled
with a conservative and intelligent popula¬
tion, a community which had built its own
railroads as local enterprises, in 1869
adopted a policy which became the model for
one type of regulatory legislation. A com¬
mission was created with power to investi¬
gate railroad management and to report its
9
ECONOMICS FOR EXECUTIVES
findings. Publicity and the power of public
opinion were relied upon to secure obedience
to its orders.
In the Middle West the situation was
radically different. This country had been
opened up rapidly to settlement after the
Civil War, through the aid furnished by the
construction of railroads and the passage of
the Homestead Act. The result was that by
the beginning of the seventies, farmers were
settled in these agricultural regions, and were
dependent absolutely upon the railroads for
the disposal of their grain and for the bring¬
ing in of their supplies. The roads were
largely financed by eastern and foreign
capital, and even to this day the amount of
capital invested in railroads by the Middle
West is comparatively small. It is always
unfortunate for the people of one section of
a country to have to pay "tribute" to another
section, and this the inhabitants of the Mid¬
dle West felt that they were doing for the
railroad service they were getting. Mis¬
understandings and antagonism naturally
developed in the West between the railroads
and the public.
The "Granger Movement"
This was first manifested in the early
seventies in the "Granger Movement," which
took the form of regulating statutes in several
10
RAILROAD REGULATION
of the Middle Western States,—Illinois,
Iowa, Wisconsin, and Minnesota particularly.
These statutes not only attempted to do
away with the evils of discrimination, rebat¬
ing, and other injurious practices, but they
went farther and actually prescribed max¬
imum rates for the transportation of pas¬
sengers and property. The laws were crude
and unworkable, but they embodied a prin¬
ciple that was promptly sustained by the Su¬
preme Court of the United States. In the
Granger cases in 1877, the Court held that
the legislature of a state had the right to
prescribe the rates at which railroads should
carry passengers and freight. It was an un¬
equivocal recognition of the public nature of
the industry.
State Railroad Commissions
The legislatures were obviously inexpert
for the complex task of fixing rates, and their
attempts to do so were unsatisfactory. So
we find this method of control being super¬
seded in the latter part of the seventies by
laws creating state railroad commissions.
The theory was that a small, continuous body
of men could become expert in the problems
of railroad management and operation, and
hence could perform its duties much more
advantageously from the public standpoint
than could a legislature unfamiliar with
11
ECONOMICS FOR EXECUTIVES
railroad technique and sitting for only a
few months. The powers of these commis¬
sions varied from those that were' merely
recommendations enforceable through public
opinion to those which comprised the issuance
of orders enforceable by a court, including
the prescribing of maximum rates. These
early commissions met with more or less suc¬
cess, depending upon their personnel, the ex¬
tent of their power, and the conditions under
which the power was exercised. Their ex¬
perience, however, furnished a valuable
foundation upon which to build the modern
public utility commission that appeared soon
after 1900, and they may be regarded as the
direct forerunners of the Interstate Com¬
merce Commission as it exists to-day.
Administrative Regulation
Regulation by a commission comprises
what is generally known as the administra¬
tive type of regulation in contradistinction to
the legislative and the judicial types. Reg¬
ulation by a legislature through the passing
of statutes has proved unsatisfactory because
it results in spasmodic, arbitrary, and unin¬
formed interference with the railroad indus¬
try, and offers no opportunity for coopera¬
tion between the public and the corporations
or for any scientific study of the problems in¬
volved. As a corollary of legislative regula-
12
RAILROAD REGULATION
tion, there is judicial control, which steps in
only upon violation of the law by the corpora¬
tion, or as the result of some controversy be¬
tween public and carrier. The judiciary can
only interpret existing law, restrain unlawful
acts, or protect the investment against confis¬
catory regulation; it has no power of initia¬
tive; it cannot assume legislative authority.
It is of no positive aid whatever in the solu¬
tion of the railroad problem.
Under the administrative form of regula¬
tion, a specialized body or commission is
created with limited powers conferred by the
legislature. It can thus become expert in its
particular field. It is supposed to hold the
balance between public and carrier. It should
protect the rights of the railroad and see
that the road is adequately rewarded for its
services. On the other hand, it should com¬
pel the carrier to render the service to the
public that the law requires. The success of
any particular commission has been largely
due to the skill with which it has performed
these two somewhat conflicting obligations.
Controlling Interstate Traffic
The serious weakness of the state commis¬
sion in its early forms lay in the fact that its
power was confined to the limits of the state
creating it, whereas a majority of the traffic
was interstate in character. By a decision of
13
ECONOMICS FOR EXECUTIVES
the Supreme Court in 18 8 6,1 the states were
limited in their authority to traffic which be¬
gan and ended within the state. Traffic that
was interstate in character was, by virtue of
the interstate commerce clause of the Con¬
stitution, under the exclusive control of the
federal government. Hence the situation
facing the public was that existing regulating
bodies were powerless to interfere with the
charges or the practices of the railroads con¬
cerning the greater proportion of the traffic
that they handled; there was no federal body
in existence to fill the gap. It was the
realization of this fact that was the prime
motive for the passage of the Interstate
Commerce Act.
The railroads almost invariably became
involved in politics, as was inevitable, and
this fact also emphasized the need for
sounder regulation. The agitation against
the roads, during the periods of early regu¬
lation, was frequently led by men of extreme
views, and the companies naturally were fear¬
ful about their fate under such authority. In
many states they sought to control the ma¬
chinery of politics. This, of course, increased
the resentment against them, and made it
more difficult to deal with the problem in the
judicial and scientific manner that was de¬
sirable.
1 Wabash vs. Illinois, 118 U. S., 557.
14
RAILROAD REGULATION
The Interstate Commerce Act
The Interstate Commerce Act, destined to
be one of the most significant and far-reach¬
ing that has ever passed the Congress of the
United States, was enacted in 1887. Based
to a considerable extent upon English stat¬
utes, and influenced by previous state legisla¬
tion, it bore little resemblance, as passed, to
the powerful law which is now in operation.
As originally created, the Interstate Com¬
merce Commission was essentially an inves¬
tigating body with little authority to enforce
its findings. The Cullom Committee, which
reported the bill after extended hearings
throughout the country, was mainly im¬
pressed with the prevalence of discrimina¬
tion and rebating, and the Act concerned it¬
self almost exclusively with the elimination
of these evils in one form or another.
The history of federal regulation from
1887, when the Act was passed, until 1906,
when it was first radically amended, can only
be understood and fairly interpreted if we
bear in mind that this Act was our first real
experiment in the field of governmental regu¬
lation. We had little helpful experience upon
which to build, either from England or from
the individual states of this country. It was
only by feeling our way that we could make
any progress.
15
ECONOMICS FOR EXECUTIVES
Early Weaknesses of the Act
The Act as originally passed was wholly
inadequate; it failed to meet the various
necessities rapidly thrust upon the Commis¬
sion. Those who criticize the Commission for
its inefficiency during these early years of its
life, and who call attention to the constant
reversals of its decisions by the Supreme
Court, fail to appreciate that the sole reliance
of the Commission was upon a weak and in¬
effective statute, and that the wisest course
which the Commission could pursue was the
one that it did persistently follow, namely: it
forced by judicial decree an exposure of the
weaknesses of the law, and thus crystallized
sentiment in favor of its amendment.
It is not necessary for our purpose to
analyze the Act in any detail, but it will be
helpful to call attention to those powers, or
lack of powers, which shaped the policy of
the Commission during the first two decades
of its history. Its jurisdiction was practically
confined to steam railroads engaged in inter¬
state commerce; other forms of transporta¬
tion escaped regulation for the time being.
In addition to conducting general investiga¬
tions, it had power to hear complaints and
make findings, but it had no power of en¬
forcement. It had to seek the aid of the
courts, where its report could be used as
16
RAILROAD REGULATION
prima facie evidence of the facts found; but
until 1906 the courts maintained the right to
open each case from the very beginning.
This gave the railroads an opportunity to
delay final settlement, and to bring the Com¬
mission into disrepute by withholding much
of their evidence until the case reached the
courts. Procedure was further obstructed
for several years by lack of power to compel
witnesses to testify.
Discrimination under the Act
In the matter of discrimination, with
which the Act was supposed to be primarily
concerned, the law was inadequate to accom¬
plish its purpose. Not until the passage of
the Elkins Act in 1903, which forbade rebat¬
ing (and which was enacted at the solicita¬
tion of the railways themselves), was the de¬
parture from a published rate held to be a
misdemeanor. Theretofore discrimination
could only be proved by showing that some
one had paid the scheduled rate.
The evils of place-discrimination were to
be disposed of by Section 4, known as "the
long and short haul clause," under which it
was designed that no greater charge should
be made for the short than for the long haul
unless differing circumstances warranted it,
and the Commission was to be the judge of
the circumstances. But the Supreme Court
17
ECONOMICS FOR EXECUTIVES
in 1897 decided that competition between
railroads was a sufficient difference in cir¬
cumstances to warrant a lower rate at the
long-distance competitive point, and that the
permission of the Commission for such de¬
parture from the distance principle was un¬
necessary. This decision, which Justice Har¬
lan in his dissent said "goes far to make that
Commission a useless body," emasculated
Section 4, and its vitality was not restored
until 1910, when the power of suspending
the long and short haul clause was absolutely
entrusted to the Commission.
Strengthening the Commission
Another fundamental weakness in the early
Act was revealed by the Supreme Court, when
it declared in 1897 that the Commission's
power over rates was limited to determining
whether existing rates were reasonable or
unreasonable, and that it could not prescribe
a rate for the future. It was this decision that
took the heart out of the statute, and which
more than anything else led to its thorough
amendment in 1906. The rate section of
the so-called Hepburn Act of 1906 provided
that upon complaint and after hearing, the
Commission might determine what is a rea¬
sonable maximum rate for the future. This
rate was to take effect any time after thirty
days, as might be fixed by the Commission,
18
RAILROAD REGULATION
and to continue in force for not less than
two years, unless suspended by the Commis¬
sion. It should be noted that under this
amendment the Commission was no longer
compelled to seek the aid of the court in
enforcing its orders, but that the initiative
rests with the carrier to petition the court
for an injunction setting aside the order of
the Commission; and this injunction process
is carefully guarded.
This amendment was a long step in the
development of administrative power, the be¬
ginnings of which have already been dis¬
cussed in connection with state commissions.
A method of procedure under which the law
declares that rates must be reasonable and
then gives to the courts, or to an adminis¬
trative body aided by the courts, merely the
power to decide that an existing rate is un¬
reasonable, accomplishes little in the solution
of the rate problem. It prescribes no stand¬
ard of reasonableness for the future. More¬
over, it compels the shipper to employ the
costly and slow-moving judicial processes in
a matter that demands prompt settlement, if
it is to serve the business interests effectively.
Hence the advantage of conferring this rate-
making power upon an administrative body,
freed from the shackles of legal procedure
and equipped to act promptly and informally.
19
ECONOMICS FOR EXECUTIVES
The Final Step in Powers over Rates
But it was necessary to take one more step
before the public would be adequately pro¬
tected against unreasonable rates. The
amendment of 1906 confined the Commis¬
sion's power to the prescribing of rates upon
complaint and after hearing. In other
words, not until the rate had been put into
effect and the unreasonableness of it actually
felt, could action be taken. By that time it
had probably found its way into the price of
goods sold, and even if the decision of the
Commission allowed reparation to the com¬
plaining shipper, the consumer, who had paid
the rate in the price of his goods, but who
had no standing before the Commission,
could obtain no relief. Protection to the con¬
sumer could only be obtained if the Com¬
mission had power to pass upon proposed in¬
creases in rates before they were actually in
effect. This power to suspend proposed rates
was granted in 1910, thus greatly increasing
the authority of the Commission, because it
now had the authority to prevent new and
increased rates from even being tried out.
The Commission and the Court
A further step in the development of the
administrative power of the Commission was
taken as a result of the many amendments of
20
RAILROAD REGULATION
1906 altering the legal procedure. The Su¬
preme Court now holds that the only inquiry
that the courts may make concerning the or¬
ders of the Commission is as to whether they
are constitutional, and whether they exceed
the authority granted to the Commission by
the Act of its creation. Otherwise its orders
are final and are not reviewable. This in¬
creases enormously the range of final author¬
ity of this body, for the great mass of con¬
troversies coming before the Commission in¬
volve no constitutional principle whatever.
For example, in connection with relatively
few of the Commission's decisions could the
Fourteenth Amendment be invoked, which
forbids the depriving of a person of property
without due process of law. The great bulk
of the decisions have to do with individual
rates or with questions of operation and ser¬
vice, and with these the Supreme Court will
not interfere.
Uniform Accounting Prescribed
In connection with the discussion of the
administrative powers of the Commission,
attention should be called to a section which
gave the Commission power to prescribe a
uniform accounting system, and made pro¬
vision for a board of examiners to inspect the
accounts of the railroads. This is the highest
type of administrative supervision. It rec-
21
ECONOMICS FOR EXECUTIVES
ognizes that the agencies with which the law
deals are public businesses and that they have
no transactions which are not open to the
light of day. The uniform accounting system
adopted by the Commission has been of
enormous value to the carriers, to regulat¬
ing bodies, to investors, and to the shipping
and consuming public. It has standardized
railroad accounts and made them intelligible
to the layman.
As a result of successive amendments to
the Act, there are now no important trans¬
portation or communication agencies engaged
in interstate commerce that are not subject
to the jurisdiction of the Commission except
those engaged in water transportation, and
even these in many relationships are reached
by the long arm of the Commission. The
power of this body has steadily grown during
the last fifteen years until it now stands as
the most powerful administrative body ever
created in the United States.
Ill
Federal Operation during the War
The foregoing paragraphs outline the situ¬
ation so far as regulation of the railroads was
concerned down to the war period. Upon
22
RAILROAD REGULATION
our entrance into the war, the railroads were
faced with unprecedented traffic at a time
when their properties were not well equipped
to take care of it. Money was needed for
betterments and extensions, as well as for
generous maintenance, and prices of all mate¬
rials were rapidly increasing. Labor's de¬
mands were becoming more and more insis¬
tent. It was a time when the proceeds of rate
increases were needed at once, but the pro¬
cesses of rate increase were slow moving.
Yet even rate increases would not have met
the difficulty. Capital in large quantities was
demanded, and capital was not to be obtained
upon the showing of railroad income accounts
and in competition with government war
loans. And even if capital had been avail¬
able, there was doubt whether the facilities
could have been obtained in face of the de¬
mand for materials for war purposes.
The Railroads' IVar Board
Immediately upon this country's entrance
into the war, the Railroads' War Board had
been created by the railroad executives, with
authority to coordinate the roads into a con¬
tinental system and to manage them in the
larger national interest. Whether if let alone
this War Board could have successfully ac¬
complished its purpose, and whether under
its jurisdiction greater efficiency would have
23
ECONOMICS FOR EXECUTIVES
resulted than was actually experienced dur¬
ing the next two years, are questions that are
the subject of much controversy. These ques¬
tions are purely speculative and no satisfac¬
tory answer can possibly be forthcoming.
There is ground for believing that the conten¬
tion of the railroads is correct and that volun¬
tary cooperative action might have resulted
in more efficient operation, but on the other
hand there are equally good reasons for be¬
lieving that the financial situation would have
proved an insurmountable obstacle. It is
now generally conceded that the government
saved most of the roads from bankruptcy.
One policy that seemed to the government
under the difficult circumstances at all likely
to be successful was the utilization of exist¬
ing facilities to their utmost capacity regard¬
less of ownership. Existing laws that had
been passed for the purpose of preventing
cooperation in railroad operations presented
a serious obstacle to the attainment of this
object. So in December, 1917, control and
operation of the roads was assumed by the
government for the period of the war.
Federal Compensation
The Federal Control Act of March, 1918,
which ratified the President's proclamation,
and arranged the terms under which contracts
should be executed between the federal rail-
24
RAILROAD REGULATION
road administration and the individual roads,
provided that the compensation paid as rental
should be an annual sum equivalent to the
average of the net operating income for the
three years ending June 30, 1917. The
agreements were to provide adequately for
maintenance, and for the return of the roads
in substantially as good condition as when
taken over. They were to provide for re¬
imbursement to the United States for ex¬
penditures for additions and betterments
properly chargeable to the property. A re¬
volving fund of $500,000,000 was created,
out of which the expenses of federal con¬
trol, compensation to carriers, and provision
for terminals and equipment might be met.
So far as the matter of compensation was
concerned, the bargain was probably as fair
a one as could have been negotiated. Of the
three years upon which the compensation was
based, 1915 was a year of light earnings and
1917 was one of heavy earnings, and the av¬
erage approximated a just return. Some of
the other provisions of the contract, such as
the interpretation of what constituted ade¬
quate maintenance and the return of the
property "in substantially as good repair
... as it was in the beginning," were the sub¬
ject of long controversy before the standard
contract was finally agreed to, and are still
25
ECONOMICS FOR EXECUTIVES
being argued now that the properties are
again in the hands of their owners.
Governmental Operations
The period of federal operation may be
briefly summarized. It extended from Jan¬
uary i, 1918, to March 1, 1920. Mr. Mc-
Adoo, the first director-general, wisely left
the railroads, so far as operation was con¬
cerned, in the hands of railroad men. The
immediate executives were almost wholly op¬
erating men chosen from the staff of the road
which theyweretomanage. Regional directors
and members of the director-general's per¬
sonal staff were nearly all railroad executives
of large experience. They gave themselves
whole-heartedly to their tasks. Whatever
shortcomings federal railroad operation dis¬
closed must be charged to the inevitableness
of the situation rather than to the quality of
the administrative personnel.
The most obvious economy attempted by
the federal administration was the curtail¬
ment of passenger service, both for the pur¬
pose of freeing the rails for freight traffic
and to release passenger equipment for troop
movement. A very considerable saving in
passenger train miles was effected, estimated
by the director-general at 10 per cent, and
the handling of the troop movements was in-
26
RAILROAD REGULATION
disputably one of the achievements of the
railroad administration.
In the unification of terminal movements
and the elimination of unnecessary switching
a beginning at least was made. Very con¬
siderable study and attention was given to
the proper distribution of traffic over various
lines to expedite movement and avoid con¬
gestion. This was under the direction of a
Car Service Bureau in Washington, composed
of practical operating men. It is impossible
to appraise in statistical terms the results of
these efforts under the unprecedented condi¬
tions that prevailed, yet it can be definitely
asserted that, except under unified direction,
the job could not have been accomplished at
all. It should be noted, however, that many
of the plans for cooperation had been insti¬
tuted under the auspices of the Railroads'
War Board, and were continued under the
direction of the same car-service officials by
the government administration.
Economies and Management
Great economies were predicted as a re¬
sult of a reduction of the salaries of railroad
officials, and of the greater degree of co¬
operation in operations, but they did not
materialize. The salary reductions were
found to be impracticable, and even if car¬
ried into effect would have been insignificant
27
ECONOMICS FOR EXECUTIVES
in the total of expenditures. Disillusionment
as to the idea that very great economies
might be accomplished by centralized man¬
agement of all the roads was certainly a re¬
sult of government administration. But this
does not, of course, demonstrate that
economies may not spring from cooperation
under normal peace conditions.
Many of the criticisms of governmental
management have been unfair, because the
conditions in war time were very trying.
Under any management the public would
have had to put up with many inconveniences.
The experienced railroad men who were in
charge of the individual lines were hampered
very much by the fact that they no longer
possessed their former disciplinary authority.
Other important policies inaugurated bythe
administration, of greater interest, perhaps,
to railroad men than to the public, were the
consolidated ticket office and the standardiza¬
tion of the manufacture of locomotives and
cars. The former has been in part retained
with return to private operation. The latter
was the subject of vigorous opposition by rail¬
road mechanical men at the time, and is likely
to go by the board. It is claimed that too
much standardization makes it impossible for
roads to secure the equipment adapted to
their peculiar needs, that efficiency in opera¬
tion is sacrificed to efficiency in production.
28
RAILROAD REGULATION
IV
The Transportation Act of 1920
Having determined, after the war, in ac¬
cord with the recommendation of the Presi¬
dent, to return the railroads from govern¬
mental management to the owners, the Con¬
gress was confronted by the necessity for ad¬
ditional legislation, having for its most im¬
portant object the strengthening of railroad
credit, so that the companies would be able
to enter the public markets and obtain the
capital necessary to provide the enlarged
facilities constantly required to serve the
growing needs of the country.
A Congressional Mandate
Of course it had always been nominally
agreed that the capital actually invested in
railroad property was entitled to a "fair re¬
turn," but there were so many opinions as
to what was a fair return that the apparent
agreement really signified but little. 1 he
Interstate Commerce Commission, divided in
its views as to its own powers, had failed to
take effective action to sustain the necessary
revenues. Members of the Commission ad¬
vised the Congress that in their opinion that
body should assume the responsibility of say-
29
ECONOMICS FOR EXECUTIVES
ing what was a "fair return" for capital in¬
vested in railroad property. In the Act of
1920, Congress gave the Commission a man¬
date to provide the country with adequate
transportation facilities and to secure to the
railroads for the accomplishment of this a
fair return upon the value of their property.
Congress indicated its views and furnished a
standard for the use of the Commission by
fixing the rate for two years at not exceed¬
ing 6 per cent interest, of which y2 per cent
must be for improvements chargeable to
capital account.
The language of the Act dealing with this
subject is as follows :
"In the exercise of its power to prescribe
just .and reasonable rates the Commission
shall initiate, modify, establish, or adjust such
rates so that carriers as a whole (or as a whole
in each of such rate groups or territories as the
Commission may from time to time designate)
will, under honest, efficient, and economical
management and reasonable expenditures for
maintenance of way, structures and equipment,
earn an aggregate annual net railway operating
income equal, as nearly as may be, to a fair
return upon the aggregate value of the railway
property of such carriers held for and used in
the service of transportation: Provided, That
the Commission shall have reasonable latitude
to modify or adjust any particular rate which it
may find to be unjust or unreasonable, and to
prescribe different rates for different sections
of the country.
30
RAILROAD REGULATION
"The Commission shall from time to time
determine and make public what percentage
of such aggregate property value constitutes a
fair return thereon, and such percentage shall
be uniform for all rate groups or territories
which may be designated by the Commission.
In making such determination it shall give due
consideration, among other things, to the trans¬
portation needs of the country and the necessity
(under honest, efficient, and economical man¬
agement of existing transportation facilities)
of enlarging such facilities in order to provide
the people of the United States with adequate
transportation: Provided, That during the two
years beginning March i, 1920, the Commis¬
sion shall take as such fair return a sum equal
t° 5/4 per centum of such aggregate value, but
may, in its discretion, add thereto a sum not
exceeding one half of one per centum of such
aggregate value to make provision in whole or
in part for improvements, betterments, or
equipment, which, according to the accounting
system prescribed by the Commission, are
chargeable to capital account."
In order to equalize this fair return as
between competitive roads, some of which
may be highly prosperous, and others of
which are weak but nevertheless indispens¬
able to the communities that they serve, it
is further provided that the excess over the
officially established fair return shall be held
by the railroads as trustees. One half of the
excess is to be paid over to the government
and deposited in a general railroad contin-
31
ECONOMICS FOR EXECUTIVES
gent fund to be used to make loans to car¬
riers and to purchase equipment. The other
half is to be carried to a reserve fund for
interest and dividends to the individual road
until it amounts to 5 per cent of the value
of its property. Thereafter, the railroad
may use its share of any further surplus for
any lawful purpose.
The Guaranty and Individual Roads
One or two points in the law, which are
frequently misunderstood, should be partic¬
ularly noted if a correct judgment is to be
reached as to its beneficial character. In the
first place, there is no guaranty by the gov¬
ernment, nor is there any instruction to pre¬
scribe rates which will yield a return of 6
per cent upon the property of each individual
road, but only upon the aggregate property
of roads of a rate group. The individual
road must stand or fall upon the results of
a regional policy, and upon its ability to get
its share of the traffic and to handle it
economically.
In the second place, the return of 5^ per
cent or 6 per cent prescribed in the statute
is not a return on outstanding securities, but
on the value of the property. This may yield
a handsome return as dividends on stock in
the case of some roads, but with others there
may be no dividends at all. It should be
32
RAILROAD REGULATION
noted that the law is confined strictly to rail¬
road income from railroad property and does
not cover outside income, which is enjoyed
in considerable measure by some roads. The
latter is solely at the disposition of the road
without interference by the Commission.
Protecting the Public
The act has been criticized in some quar¬
ters rather thoughtlessly, as favoring invest¬
ments in railroad property over other invest¬
ments, which it is said must take their chances
without the assurance of any fixed return. It
is pointed out above that there is no guaranty
to individual roads, simply an instruction to
the Commission to regulate charges with a
view to securing a given rate of return upon
the aggregate value of railroad property. It
should be emphasized again in this connec¬
tion that the primary purpose of railroad
regulation is to protect the interests of the
public. Owners of railroad property are not
given the free hand in the management of
their business which is accorded to investors
engaged in farming, trading, or manufactur¬
ing, for reasons which are well understood.
The railroads may not charge what they
please for their services. Their earnings are
limited and regulated by the Interstate Com¬
merce Commission, and the provision com¬
plained of amounts to nothing more than an
33
ECONOMICS FOR EXECUTIVES
instruction to the Commission that in the ex¬
ercise of its authority it shall not restrict
earnings to such an extent that the railroads
will be unable to earn a fair return. It is an
assurance to investors that the power to reg¬
ulate will not be exercised unjustly. It is
given for the purpose of reassuring investors
and encouraging them to supply the capital
required for railroad development—which,
as we saw in the preceding study-unit, is the
outstanding problem.
Authority over Rates and Service
In the matter of control over rates, a con¬
siderable extension of power was conferred
by giving the Commission the right to pre¬
scribe minimum as well as maximum rates.
This power, long sought by the Commission,
is in the interest of greater stability of rates
and earnings. It should work as a protection
both to the shipping public and to the treas¬
uries of the roads. It will put a stop to that
form of cutthroat competition which is in¬
augurated by the weak or roundabout road
for the sake of picking up some traffic from
its stronger and better located competitor.
This sort of competition results in unjusti¬
fiable and uneconomic reductions of rates on
certain commodities, and the consequent
burdening of other traffic to offset the loss.
The old theory that the only harmful rate
34
RAILROAD REGULATION
was one that was too high has now been of¬
ficially abandoned, and the result should be
distinctly beneficial to the business community
as a whole.
The beginnings made during the war in
the regulation of service under government
auspices have been made a part of the new
legislation. The Commission may now re¬
quire any road to provide itself with safe and
adequate facilities for the public service. It
may establish rules and rates of compensa¬
tion for car interchange. In times of
emergency and congestion, it may suspend all
car-service rules, may issue orders for prior¬
ities and embargoes, may divert equipment
to less congested routes and require its use
irrespective of ownership. Not only in time
of emergency but in normal times, if in the
public interest, it may require the joint use
of terminals.
Financial Provisions
On the financial side, the new law has em¬
bodied a policy long advocated by leading
thinkers in the field of financial regulation.
Hereafter, no securities except short-term
notes maturing in two years or less may be
issued, nor may a carrier assume any obli¬
gation as lessor, lessee, or guarantor with¬
out consent of the Commission, and the Com¬
mission grants permission only if the issue is
35
ECONOMICS FOR EXECUTIVES
compatible with the public interest and rea¬
sonably necessary for the purpose intended.
The jurisdiction conferred upon the Com¬
mission is exclusive, and the only consolation
in the law for the state authorities, who have
heretofore had this matter in their own
hands, is that the Interstate Commerce Com¬
mission is obliged to invite the state commis¬
sions to the hearings held in connection with
the applications of the railroads, and these
commissions may make such representations
as they desire for the purpose of conserving
their rights. Reports are to be required from
carriers showing in detail the disposition of
authorized securities and the application of
the proceeds.
In this connection it should also be noted
that before extensions of existing roads or
new construction can be undertaken, it is now
necessary to secure a "certificate of public
convenience" from the Commission, which
may attach to the certificate such conditions
as its judgment dictates.
Control of Capitalization
Federal control of capitalization should
prove an effective curb upon reckless finance
and at the same time should dispose of the
bogy of over-capitalization. As is noted
elsewhere, the marked tendency in courts and
commissions is to measure the reasonableness
36
RAILROAD REGULATION
of earnings not upon capital securities but
upon property investment. Hence from the
standpoint of a fair return, the amount of
stock or bonds is becoming of declining im¬
portance. But from the standpoint of in¬
vestment, the assumption of control by the
federal government should be of value to
both the corporation and the purchaser of
the corporation's securities.
One has only to look into the experience
of corporations whose security issues have
been passed upon by state commissions like
those of New York and Wisconsin, to ap¬
preciate the influence of this official certifica¬
tion. As in the case of general "blue sky"
laws, salesmen use the act of official approval
as a selling argument, and there is always
some danger that the public will accept this
approval as of more significance than it prop¬
erly carries. For while official certification
that security issues are limited to the actual
investment is good as far as it goes, it can¬
not be taken as a guaranty of the safety of
the investment.
Physical Valuation Provided For
In accordance with an earlier act and in
order that the physical value of the railroads
may be accurately known, a physical valua¬
tion is now being made under the supervision
of the Interstate Commerce Commission.
37
ECONOMICS FOR EXECUTIVES
This will include every piece of property
owned or used by a common carrier, the
original cost, cost of reproduction new and
less depreciation, and any other values or
elements of value. Hearings are to be held
upon the tentative results, and the final valua¬
tion, when it has been completed and pub¬
lished, is to be prima facie evidence of the
value of the property.
This task of the Commission is enormous
and expensive. Although the work began
in 1914, hearings on tentative valuations
have thus far been held in but half a dozen
cases pertaining to small roads of relatively
little significance, and no final valuation has
been reached. This undertaking has been
criticized as a waste of time and money, but
this seems to be too severe an indictment.
There are obvious difficulties and limits to
the findings of such an investigation, but
there is surely a considerable advantage to
the public and to the corporations in having
railroad capital accounts overhauled, actual
values ascertained, investment related to
capitalization, and a figure of property in¬
vestment officially established, which will be
accepted as accurate, and upon which valid
calculations can be made. We may pay what
appears to be a large price for our results,
but we should nevertheless get results that
should prove of genuine worth.
38
RAILROAD REGULATION
Other Important Provisions
The new act introduces one significant re¬
quirement on the accounting side. It is now
made obligatory upon the Commission to pre¬
scribe the classes of property for which de¬
preciation charges shall be set up, and the
rates of depreciation to be charged. Up to
the present, there has been no compulsion
upon the railroads and hence no uniformity
in practice. As a rule, the railroads have set
up depreciation accounts only with respect to
equipment, and the rates employed have been
at their own option and widely varying in
amount.
The problem of the relation of competing
carriers to each other, which has been con¬
stantly under discussion for the last two dec¬
ades, has received a large amount of atten¬
tion in the new law. Not without the per¬
mission of the Commission may a person
hereafter be an officer or director of more
than one railroad, but the Commission may
grant the permission when neither public nor
private interests will be adversely affected.
Agreements for the pooling of earnings
and traffic by competing railroads had been
forbidden by the original act in 1887. They
are now permitted upon specific approval of
the Commission. What this will amount to
remains to be seen. Action will doubtless be
39
ECONOMICS FOR EXECUTIVES
influenced to a considerable degree by the
rapidity with which the movement for con¬
solidation, which is authorized by the same
act, gathers headway.
Provisions for Consolidation
The plan for consolidating the railroads
into a comparatively few systems was advo¬
cated before Congress by many organizations
in connection with the framing of the 1920
law, and was at the beginning a feature of the
Cummins Bill in the Senate. The purpose
of its author was to solve the difficulty that
arises when a prosperous and well located
road competes with a weak rival. A rate
that will keep the weaker road in business
leaves the stronger one with a handsome
surplus. A rate no more than reasonable for
the stronger road drives the weaker into
bankruptcy. It was a plan for the equaliza¬
tion of earnings through an amalgamation of
competing lines.
While the Cummins proposal did not be¬
come law, the way has been opened for
gradual consolidation of railroad properties.
In the first place, acquisition by one carrier
of the control of any other under any plan
not involving consolidation may be approved
by the Commission, if in the public interest.
In the second place, the Commission is to pre¬
pare a plan for the consolidation of the rail-
40
RAILROAD REGULATION
roads of the continental United States into
a limited number of systems. These con¬
solidations are to be so arranged that com¬
petition shall be preserved as fully as pos¬
sible and the existing channels of trade main¬
tained. This part of the Commission's duty
is relatively simple, but this is only the be¬
ginning of the Commission's troubles.
The separate systems must be so arranged
that the relative costs of transportation,
based upon the values of the properties, shall
be so far as practicable the same, so that
these competitive systems can employ uniform
rates and "in the movement of competitive
traffic and under efficient management earn
substantially the same rate of return upon
the value of their respective railroad proper¬
ties." Surely Congress has imposed upon
the federal regulating body a task of no
mean proportions. When the plan has been
completed, hearings are to be given and the
final plan for consolidation published.
State Authority Passing
Upon the application of carriers to con¬
solidate into single corporations, hearings
are to be instituted to which the governor of
each state concerned is to be invited. If the
Commission finds that the consolidation is in
harmony with its comprehensive plan for the
country as a whole, and is in the public in-
41
ECONOMICS FOR EXECUTIVES
terest, it may authorize the step with such
conditions as it chooses to impose, without
regard to the law of any state or the decision
of any state authority. This abrupt assump¬
tion of exclusive federal power over con¬
solidation procedure takes away from the
states the authority that they have exercised
exclusively since the founding of the govern¬
ment, and they are left with no rights in the
matter except that of protest at a public
hearing. State regulation has been in large
measure hampering, conflicting, and disas¬
trous so far as it has been applied to this all-
embracing industry of transportation. Yet
it is doubtful whether the states will give up
their prerogatives without a struggle. Cer¬
tainly they will insist upon a ruling by the
United States Supreme Court.
A wholesome financial restriction upon too
great freedom in consolidation is found in
the requirement that the securities of the new
corporation at par shall not exceed the value
of the properties consolidated. This value
is to be ascertained by the Commission
through its valuation division, and in accord
with the procedure now being followed in
the general valuation of the railroads.
Restrictions of State Power
With the growth in federal regulation of
the railroads, the powers of the states have
42
RAILROAD REGULATION
naturally been increasingly restricted. This
action is in line with a general tendency that
began to be manifest some years back, and
which was greatly accelerated by the assump¬
tion of authority by the federal government
as a war measure. The conflict of jurisdic¬
tion between state and federal governments
in the matter of rate regulation first appeared
in serious form in the Supreme Court of the
United States in the Minnesota Rate Case
of 1913, and again in the Shreveport Case in
1914. The Supreme Court's decision in the
latter case, which sustained the federal au¬
thority and was a severe check to the rate-
making power of the state commissions, has
now been incorporated into the Transporta¬
tion Act of 1920. If the Interstate Com¬
merce Commission finds, after hearing, that
the rate or practice, as established by state
authority, causes unreasonable preference or
discrimination against interstate commerce,
it shall prescribe the rate that will remove
the discrimination. And this rate is to be
observed by the carriers affected, the law of
any state or the order of any state authority
to the contrary notwithstanding.
Federal Supremacy the Intent
It is perfectly evident that Congress in¬
tended to establish once and for all the su-
43
ECONOMICS FOR EXECUTIVES
premacy of the federal authority in matters
of interstate commerce, and that this author¬
ity was not to be hampered by the order of
any state commission, even though that or¬
der might ostensibly have validity only with¬
in the confines of the state in which it was
issued. It is now the Interstate Commerce
Commission that decides whether the state
commission has gone beyond its powers.
It is optional with the federal commission
whether it consults with the state authorities
or not. All it is required to do is to give the
states interested notice of the proceeding.
This fundamental issue upon which the
success of railroad regulation so largely
depends is now undergoing further dis¬
cussion and test. The new and increased
rates promulgated by the Interstate Com¬
merce Commission in August, 1920, have
been adopted by many of the state author¬
ities and applied to interstate traffic. But
many of the states have insisted upon the
restoration in varying degree of the pre-war
rates, notably the state of New York with
reference to passenger business on the New
York Central. In several cases the Inter¬
state Commerce Commission has already
rendered decisions sustaining the federal
power, and the question is now on appeal to
the Supreme Court.
44
RAILROAD REGULATION
V
Restoration of the Roads to
Their Owners
The return of the railroads to their owners,
following the period of government war op¬
eration, was in response to an unmistakable
mandate from the American people, who for
the time at least had no desire for any fur¬
ther demonstration of government operation.
Probably impatience with governmental in¬
terference in many other lines of business had
an influence upon their attitude upon the
subject of railroad control, but it is likely
that the financial showing was the most im¬
portant consideration.
The government ended its stewardship
with a deficit of nearly $1,000,000,000. It
had made one rate increase in 1918, both in
freight and passenger service, but this in¬
crease was utterly inadequate to meet the
steadily increasing wages and costs of mate¬
rials, particularly coal. Unwilling to load
the burden of additional rates upon the pub¬
lic, and displaying an amazing optimism as
to the savings to be accomplished under
unified operation, the administration pro¬
ceeded without any further increases in rates
and paid the bill out of the general treasury.
45
ECONOMICS FOR EXECUTIVES
The Transportation Act of 1920, which pro¬
vided for the return of the roads, permitted
them to remain under the shelter of the gov¬
ernment guarantee for an additional six
months after March 1, to give opportunity
for an adjustment of their affairs, and most
of the roads took advantage of the offer.
This added several hundred millions more to
the government deficit. Meanwhile, in Au¬
gust, 1920, a substantial increase in rates was
granted by the Interstate Commerce Com¬
mission, which is designed to spare the roads
the deficits that their foster mother has been
painfully enduring for nearly three years.
The Maintenance Question
The railroads entered the war under-
equipped and without the facilities needed
for a rapid expansion of traffic. During the
war, new investment was reduced to a
minimum and the need for facilities for war
purposes was so imperative that repairs of
equipment were rushed or slighted, and cars
and locomotives were often kept on the road
when, in normal times, they would have been
in the shop. Such plans as the administra¬
tion had in 1919 for additions and better¬
ments were only in part executed because of
the decision of the administration to turn the
railroads back to their owners.
The federal administration insists that it
46
RAILROAD REGULATION
has closely approximated its contract obli¬
gations to return the properties in substan¬
tially as good condition as when received, but
estimates by private authorities place the un-
dermaintenance all the way from $100,-
000,000 to $300,000,000. There is much
controversy between the railroads and the
government as to what maintenance means,
and doubtless it will be many a day before
the railroads receive satisfaction from a
debtor who is notoriously slow pay.
The Maintenance Record
The cumulative results of all these factors
may be expressed briefly in statistical terms.
Whereas, in the ten years from 1905 to 1915,
the average of new mileage constructed was
3500, the miles built in 1918 were 722, and
in 1919, 686. In 1920 only about 300 miles
were built and over 700 were abandoned.
Experts say that we should build 2000 miles
a year for many years to come.
Passenger equipment increased 35 per cent
from 1905 to 1915. Since 1915 it has in¬
creased 2 y2 per cent and during the last
two years there have been no increases at
all. Freight cars increased 36 per cent from
1905 to 1915, and from 1915 to 1918 they
increased 1.6 per cent. There are terminal
facilities to be supplied, and work must be
resumed on signaling and electrification.
47
ECONOMICS FOR EXECUTIVES
The railroad administration spent $1,200,-
000,000 for capital purposes during its two
years of control, and what it did was of a
makeshift character. The companies should
be able to plan for the expenditure of at least
a billion a year for capital investment and
probably to use never less than that.
Obtaining New Capital
This capital must come from the savings
of the people. There is no other source—
regardless of whether the roads are privately
owned or operated by the government.
Government ownership would make the prob¬
lem no different except that the pressure for
expenditures would probably increase and
the same improvements cost more. But the
government would have no way of providing
the capital for this construction except by go¬
ing to the public money market. The idea
that governments can borrow at very much
lower rates of interest than private parties
is an exaggerated one. They could do so
when they were borrowing but little; but
when governments borrow by the billions,
they have to compete with other borrowers,
and are subject in a large degree to the same
conditions.
Too many people have been disposed to
treat the subject of compensation for the
roads as related only to the capital already
48
RAILROAD REGULATION
invested in railroad property. It is true that
this cannot be withdrawn, and the owners will
have to take whatever return is allowed upon
it. But the real railroad problem is how to
get the new capital constantly required to
keep the railroads up to the expanding busi¬
ness of the country. The investment of pri¬
vate capital is a voluntary act on the part of
the owners. The amount of capital annually
required for railroad betterments and exten¬
sions is approximately equal to the annual re¬
turn upon the total value of the railroad
property as contemplated in the 1920 law.
VI
The Labor Problem
One of the most vital factors in the whole
problem of future solvency is the labor ques¬
tion. It will be enlightening, therefore, to
trace rapidly the railroad labor problem dur¬
ing and since the war. That the wages of
railroad employees should have increased
steadily during the war was inevitable and
proper. In fact, it is generally conceded that
the railroad labor as a whole did not enjoy
the increases that were secured by labor of a
similar grade outside. The size of the wage
increase, which was estimated for 1919 to be
49
ECONOMICS FOR EXECUTIVES
about $900,000,000, was not the significant
thing. There had been developed in the
director-general's organization not only a
central board to investigate larger questions
of policy, but also bi-partisan boards, with
equal representation of employers and em¬
ployees, to which controversies concerning
wage schedules that could not be adjusted on
the individual roads were to be referred.
Two significant results have come from this
centralized organization.
Results of Government Control
In the first place, there has been a very
great increase in the standardization of rates,
time, and regulations. The individual em¬
ployee is to an almost complete degree re¬
ceiving the same pay for the same type of
work everywhere throughout the country, ir¬
respective of local conditions and cost of liv¬
ing. Unionism has rapidly extended. The
eight-hour day with time and a half for over¬
time has taken great strides, and bids fair to
become universal. Piece-work was elimi¬
nated in railroad shops, and railroads now
declare that efficiency can never be restored
among their mechanical forces until this form
of contract is restored.
The second outcome of this centralized
policy has been a serious decline in the
morale of tne entire working force. It be-
50
RAILROAD REGULATION
came a habit during the war to disregard
local machinery for the settlement of dis¬
putes, and to run to Washington. This has
weakened the disciplinary power of the local
managers, and the situation has become acute
with the restoration of the roads to their
owners. Executives are now bending their
efforts to a restoration of local morale, with
the leaders of the employee organizations
fighting for the supremacy of national, cen¬
tralized adjustment boards and the continua¬
tion of the national agreements.
Labor under the New Law
This struggle made itself manifest in the
passage of the Transportation Act. The em¬
ployees vigorously opposed efforts to localize
adjustments of labor disputes and made an
attempt to preserve the agencies of the war
period. The outcome was in a sense a com¬
promise. The law encourages settlement of
all controversies by the individual road and
its employees. In matters not involving
wages, provision is made for local and
regional or national adjustment boards
created by the parties concerned, and only in
case of a disagreement do such controversies
go to the Railroad Labor Board, an official
body with national jurisdiction. In case of
wages, disputes are to be considered in con¬
ference of the individual road and its em-
5i
ECONOMICS FOR EXECUTIVES
»
ployees, and in case of disagreement, are to
go direct to the national body. In the mat¬
ter of wages, this national board has already
taken jurisdiction. In August, 1920, it gave
material increases to all classes of railroad
labor, these increases dating back to May 1.
This action was taken after a long period of
restlessness and discontent, in which the great
body of employees patiently waited for a fall
in prices through government aid and then
for the creation by Congress of the machin¬
ery of wage adjustment. This period was
characterized by outlaw strikes, led by those
who were skeptical of government aid, and
impatient with the conservatism of brother¬
hood leaders.
Compulsory Arbitration
The serious danger of entire suspension of
transportation, which was actually experi¬
enced for a time in some of the important
centers, has brought prominently to the fore
the question whether employees in public
service industries should not be compelled to
settle their grievances by other means than
by the strike. The original Cummins Bill
(of 1920) contained such a provision, and
forbade employees to enter into a combina¬
tion with intent to hinder or prevent the
operation of trains or the movement of com¬
modities. There is much force in the argu-
52
RAILROAD REGULATION
ment that a public service should not be in¬
terrupted, and that labor as well as capital
should accept service in this type of industry
subject to this limitation. But the proposition
came too suddenly. Neither the body of
railroad employees nor the public was men¬
tally prepared for it. Compulsory arbitra¬
tion in public service industries should be
reached with sufficient deliberation to have
the underlying principle fully understood.
There is no power vested in the present
Railroad Labor Board to enforce its find¬
ings, except the power that arises through
the creation of a public opinion. The per¬
sonnel of the board is guarded to secure
just and reasonable decisions, and the board
is instructed by law, in determining the rea¬
sonableness of wages, to take into account
certain specific factors that bear upon the
wage problem. Further than this Congress
was not at the time prepared to go.
VII
Summary
One who reads this rapid survey of the
problems of railroad control will probably
reach the perfectly accurate conclusion that
they will never be wholly solved. The
53
ECONOMICS FOR EXECUTIVES
disposal of one difficulty only makes way for
still another. What the American people
have before them to-day is a railroad system
of 260,000 miles, which is absolutely essential
to our very existence, below the standard
of proper maintenance, under-equipped in
cars and locomotives, calling for enormous
amounts of capital for extensions and better¬
ments, and without the credit to secure the
needed funds. However, it is living now
under a new conception of regulation em¬
bodied in the Transportation Act of 1920,
which makes the Interstate Commerce Com¬
mission a constructive force in the provision
of transportation service, instead of a mere
defender of the shipper against unfair rates.
While there is much misgiving over the
financial outlook, there is much ground for
optimism and for the belief that the rail¬
roads by vigorous and economical manage¬
ment will raise their properties to the stand¬
ard which the public has a right to expect and
that public opinion will recognize the neces¬
sity for just treatment of the capital em¬
ployed.
54
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