AN ADDRESS
BY
I
MR. DANIEL WILLARD
President of The Baltimore & Ohio Railroad Company
AT A DINNER GIVEN
BY THE
CITIZENS OF BALTIMORE
TO THE
VISITING GOVERNORS OF SOUTHERN AND WESTERN
STATES AND RAILROAD OFFICIALS AT HOTEL
BELVEDERE. FRIDAY EVENING.
DECEMBER 8. 1911.
ADDRESS'BY MR. DANIEL WILLARD
Prennent t£ The Baltmnire & Ohio Railnod Company
At a Diiîiceb given bt the Citizbns of Badtiihobb to the
Visiting Govebnobs of Southebn and Westebn
States and Raileoad Officials at Hotel
Belvedbhe, Fbiday Evening,
Decembeb 8, 1911.
Mr. Chairman—DisttnguBMied and Honored Gimts-Gerdk-
pien:
I appreciate very much the privilege of being permitted to
join -with others in ^ving voice at thi® time to the feelmga of
•welcome which we all entertain for the many distinguished
guests who have honored us with their company this evenii^.
The -well kno'wn hospitality, however, for which Baltimore is so
justly famous, needs no endorsement by me, but I cannot refrain
from telling you how much we enjoy having you with us, and
that we hope this is not the kst time vre may be so favored.
The opportunity of addrœsing such a distinguished gatheri^
as has assembled here this evening comes but rarely to the
average individual, and I am not unmindful of the honor and
the responsibility attaddng to that privilege. The subject to
which I shall devote myself is one which, in my opinion, has a
very important bearing at this time upon the general qu^tion
of industrial development—a question uppermost in the minds
of many, if not all.
We are greatly honored in having as our chief gu^ts thk
evening the chosen Governors of fifteen American states.
The duti^ with which th^ are charged, and the great re¬
sponsibilities which thoy must carry, together with the fact
that they have been chosen by the free citizens of sovereign
stat^ to act for a period as their chief executive, entitle
them to the distinguished consideration -^hich it is our privilege
as wdl as our pleasure to extemi. But I take it they would
wish us to understand that they are here primarily—^not
because they happen to hold high office, but rather because
they axe, firet of aU, citizeM of our common country, and, as
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such, intensely interested in its future growth and develop¬
ment, and the oiTice which they have the honor to fill, affords
them certain great and fortunate opportiinitios for usefulness
in that connection,
I also, whatever else I may happen to be, am, first of all, a
citizen of our country, and I am also deeply interested in its
future, and what I shall say at this time, wth your permission,
will be said from that particular point of view.
It is my understanding that today's conference grows out
of a ividcsprcad feeling that more can and should be done to
encourage immigration, and promote industrial development
in the United States, As a citizen, and as a railroad execu¬
tive, I am heartily in accord with that desire.
It has come about in recent years that the railroad is no
longer considered a private enterprise as was once the case,
but is generally recognized as a quasi-public undertaking,
charged wth the performance of very important public dutieis,
but at the same time indebted to private capital for its very
e.xistence. Its officers and employes are also looked upon as
semi-public servants, and are held to a dual accountability.
This arrangement may or may not be desirable; we may or may
not like it; I have simply stated the facts. In the twofold
position of public servant and also trustee of private interests,
in which I, as a railroad executive, find myself, this thought
naturally occurs to me. In what way and to what extent will
the railroad be required or expected to contribute towards
this greater development which you are seeldng to promote?
With your permission, I shall quote what some others have
said in that connection. Lord Bacon, writing more than 300
years ago, said:
"There be three things which make a country
great and prosperous—a fertile soil, busy work
shops and easy conveyance for men and things
from place to place."
The venerable Charles Carroll of Carrollton, who, in this
city, on the 4th of July, 1828, cast the first spadeful of earth
which marked the begining of the fiirst American railroad
chartered to do a general freight and passenger business, used
these words:
"I consider this among the most important
acts of my life, second only to that of signing the
3
Dedaration of Independence, if indeed second to
that."
Messrs. Hoff and Schwabach, members of the German
Privy Council, in an official report on American railroad?,
Bulmiitted in 1904, said tiie foUowii^:
"If Germany, like the rest of the civilized
nations of the old world, has grown strong and
gained new life through construction of railroads,
the United Statra, at least what include m
this designation, has been actually created,
properly speaking, by the building of railroads,"
And Mr. MorreH W. Gain®, á well known student of eco¬
nomic questions, writing recently on the subject of railroads,
said:
"No other country is so dependent as ours on
the raihoads. The United States has 245,000
miles of line—40% of the entire mileage of the
world. Its tonnage of frd^t moAÔng by rail is
greater than that of any other two nations.
Freight transportation per capita in the United
States is thirty times the world's average and nine
times that of Europe. With inland «jal, iron and
grain, and land bound cities scattered across a
continent, w© live by means of railroads that we
have built. In our material development they
always have been and always will be, the prime
force. The redaimerB of waste places, the
builders of cities, the awakeners of opportunity—■
to our growth as a nation, thdr growth is stíU
essential."
Many others—impartial students of affairs—^have also
testified just as strongly to the important function which the
railroad has performed in the \TOnderful development of this
country, as well as to its intimate relation with our future
growth, and I beheve that that fact is generally understood
and admitted. You may then well ask—^why discuss it?
Because I am much afraid that the importance—I might
rather have said the nece®ity, of ample and efficient trans¬
portation facilities in a country of such great distances as ours
is in danger of being overlooked, if not altogether forgotten.
Because in my opinion, its discussion has a most important
4
bearing upon .the movement which this visit and conference
is intended to promote, and because, it is pomblo that the
next period of great industrial activity that comes to us may
find the railroads utterly unable to carry the greatly augmented
burden imposed upon them, and, their partial failure to meet
the situation in 1906 and 1907 has furnished a suffiront fore¬
taste of what that would mean.
To my mind, there is not at this time a more serious or
important quesrion bd'ore us, than the one just stated, and much
as I dislike to sound what may seem an alarming or disquieting
noto upon such an occasion this, I should feel (believing
as I do) that I had failed to properly meet the responsibilities
of my position if I neglect^I at such a time to speak the truth
as I see it. You may justly ask what are my reasons for
believii^, or perhaps I should say, for fearing that the railroads
ma^' fail to meet the requirements of the future—shall en¬
deavor to e^Iain: The steam railroad since its very first
development has been and still is the best and cheapest known
moans for inland transportation, and while its great advantages
were early recognized, it is a matter of history that shortly
following its inception, complaints began to be heard concerning
the manner in which the roads wore managed. It was claimed
that the roads, or those who managed them, did not treat all
fairly and alike, which under the common law they wore re¬
quired to do. It was said that some shippers were given
rebates and others were not; that free transportation was
improperly used; that charges collected and services rendered
were not alwajre upon an equitable basis; that the railroads
exerted too great an influence upon political questions, and
thus grew up what finally became known as "The Railroad
Question."
The feeling aroused by the practices already referred to
became very heated and led to much bitter discussian in the
halls of Congress, on the rostrum and in the columns of the
prras, and finally found expression in numeroifâ laws intended
to regulate the carriers and correct the complained of evils.
Notably among the laws pa^ed by the Federal Congre®
during the period referred to is the Interstate Commerce Act,
with succe®ive acts amendatory thereto, and I believe it may
be fairly said that the Interstate Commerce act as it stands
today, is sufficiently broad and comprehensive to cover sub¬
stantially aU of the practices originally complained of, and with
5
its administration resting in the hands of an able Commission,
as is the case at present, it would seem that the people might
now feel that their interests have been properly safeguarded,
and there is good reason for believeing that they do so feel.
This is perhaps best shown by the changed attitude of the
press. Five years ago, out of 100 articles, taken from as many
papers, having reference to the railroads, at least 65 would be
found to be .distinctly hostile to.the roads, and the remaining
35 indifferent or merely lukewarm in their support. Now a
similar investigation would show at least 90 distinctly favorable
to the roads, and practically none opposed. I doubt if record
of a more sudden or complete change of public opinion, as
indicated by the utterances of the press, can be found, and
as far as that goes, it ought to be very gratifying to the railroads
and their friends, and it is. Unfortunately the solution of a
question of such magnitude is not simple, and while under a
government such as ours all things must eventually adjust
themselves in harmony with public opinion, the period of
complete adjustment is frequently somewhat protracted.
The American railroad as it is today is the result of private
enterprise. It has been built up with funds voluntarily ad¬
vanced by those who have invested their money in railroads,
for exactly the same reason that would have prompted them to
invest in any other commercial or industrial undertaking;
that is, the hope of private gain. There is no inherent difference
in principle between the selfishness of the Railroad Stockholder
and the selfishness or self interest of the Merchant or hlanu-
facturer; both seek to increase their profits and for exactly
the same rea.sons. There is this difference however—it is now
sought to establish a maximum return in the one case, and
there is no fixed limit in the other.
Mr. Louis D. Brandeis, in a recent article in the Engineering
Magazine, wrote as follows:
"To secure successful administration of any
railroad, the rewards should be proportioned to
the success. The establishment therefore of
any rule fixing a maximum return on capital
invested in railroads would tend to prevent
efficiency by placing a limit on achievement.
Today efficiency in management is in danger of
being punished whereas it should be rewarded."
6
He also says:
"Largo earnings arc frequently accepted as
evidence that rates are too high, and invite a
demand for reduction, whereas in fact the large
earnings may be due wholly to better judgment,
greater efficiency and economy in administra¬
tion. To take from railroads the natural fruits
of efficiency—that is, greater money rewards—
must create a sense of injustice suffered, which
paralyzes effort, invites inefficiency and pro¬
duces slipshod management."
While I find mj'solf unable to agree fully with IMr. Brandeis
in some things, I am heartily in accord with his views just
quoted. The danger he foresees is a very real one.
Today the presence of a surplus above interest and dividend
requirements as the result of a year's operation, is looked upon
in many quarters as evidence of such a degree of prosperity
as to justify a reduction of rates, or an increase of wages, or
both, and it has come about that the railroad is well nigh
unable to effectively resist eithér. That this condition exists,
every railroad officer present Avill, I believe, bear evidence.
Railroad development in the past has been, and in the future
will be, so long as the existing condition continues, largely a
matter of interest on money so invested. The capital require¬
ments for the next five years vill not be less than §500,000,000
per year, and we have most excellent authority for believing
that they may approach the enormous sum of $1,000,000,000
per annum. The Baltimore and Ohio Railroad Company,
during its last fiscal year, paid out more than $27,000,000
for additional facilities and equipment, or at the rate of over
$6,000 per mile of its entire system, and during that period
built no new lines whatever. This rate of expenditure, if
applied to the 245,000 miles of American railroads, would make
the enormous aggregate of $1,470,000,000, and if we assume
that the Baltimore and Ohio needs were perhaps greater than
the average—which may or may not be so—and reduce the
amoimt one half, we still have over $735,000,000—a sum well
above the minimum mentioned. In this connection we may
well consider the words of one of the able members of the
Interstate Commerce Commission, who said:
"We can provide by legislation the sort of cars
which a railroad shall use, and the rates which it
7.
shall impose; we cannot by legislation force one
single dollar of private capital into railroad
investment against its will."
The problem then, which confronts the railroads at the
present time is, where, and by what means, is to be obtained
the great amount of new capital needed to provide the addi¬
tional facilities and new mileage necessary to properly meet
the requirements of a growing country—and when finally
obtained, how will the additional obligations for interest or
dividends be met? We rather choose the ills we have than
fly to those we know not of. In the past the railroads have
generally been able to raise new capital when needed, because
such investments as they offered, were supposed to include a
reasonable promise of possible large reward. Today the situa¬
tion is changed. There is little, if any ground under existing
conditions for hope of large reward in connection with rail¬
road investments, and even the stability of moderate returns
is frequently questioned. When the people decided to exercise
their right to regulate,—by law provided, they took upon them¬
selves at the same time, the responsibilities attending the exercise of
that right. There can be no evasion of the responsibility accom¬
panying the exercise of power.
Doubtless the railroads were guilty of many, if not all, of
the things with which they were charged. Their managers
were hinnan and subject to the usual human limitations, but
granting to be true all that was urged against them, the roads
are necessary and their development must go on if the country
is to grow as we hope and expect it will. It is a matter of
general belief, however, that during the last two or three
years railroad development has failed to keep pace with the
general growth of industrial capacity. ' What then, with
all this in mind, had best be done? What remedy, if any, is
there to suggest? I should feel that I had fallen far short of
what might properly be expected of me, if, after pointing out
the difficulties which I believe to exist, I failed to suggest a
possible solution. . While the situation, as I view it, is serious,
it is by no means hopeless.
Private capital in the past, plus the hope of large reward,
which hope, however, was frequently without foundation, has
given the American people the greatest and most effective
transportation system in the world. The American railroad
8
is the largest single industry in the United States next to
agriculture, and it has done what no other American industry
has done—it has manufactured and sold its output—that is,
transportation—cheaper than is done in any other country in
the world, and at the same time has paid to its employes wages
from two to three times as high as are paid for similar work
in any other country, and its capitalization, which is fre¬
quently criticized, is .less than 800,000 per mile as compared
with:
The figures I have used are all a matter of public record and
can be easily confirmed.
AVhat has been done, can be done again. The same spirit
and enterprise which produced the railroads as we have them
today, will, under favorable conditions, keep them abreast of
the requirements of the future. The men in charge of the
railroad properties at the present time have nearly all worked
their way up slowly from the ranks. They are not ignorant
of the changed conditions, nor are they unmindful of the
responsibilities resting upon them as quasi-public servants.
They appreciate fully the opportunities afforded them by their
position, to be useful to the people and communities served by
the properties with which they are connected. But Avho can
blame them—who can criticize, if in vieiv of all I have said,
they hesitate to recommend expenditures Avhich ivould add
largely to capital liabilities, Avhile feeling uncertain about their,
ability to meet the increased charges?—a different course
Avould properly mark them as umvorthy of their trust. The
remedy which I have in mind rests upon no other foundation
than the inherent fairness of the,American people.
As I have prexfiously shown, public opinion which was almost
wholly adverse to the railroads a few years ago, is now clearly
in favor of a more liberal treatment of the carriers. The people,
I believe, are beginning to recognize that a policy, based upon
ample and efficient transportation facilities, with such rates
and conditions as aaiII permit the roads to pursue a liberal, but
not extravagant, program of maintenance and expansion, is
England.
Belgium.
France...
Austria..
Germany
8275,010
169,800
139,390
112,879
109,788
9
much bette for the country as a whole than a policy wMch ia
bound to result eventually in a lack of facilities and all that the
term implies.
The situation is not unlike a quarrel between two frienda^—
each of whom is willing to make up but waits for the other to
speak first. Perhaps the above smile is not unhappily cshosen.
The carriers and the people are and should be friends. In the
past the railroad has not on^ ^ne shoulder to shoulder with
the pioneer, buthas frequent^ beckonedhim on. The prosperity
of the Railroad is indi^olubly bound to and connected with
the prosperity of the Publics—what injures one must injure the
other, and what helps one, benefits the other..
If my simile of the quarrel was aptly chosen, who better
could act the part of peace-makers than the distinguished
Governors who have honored us with their presence this even¬
ing? Who can esriinate the weight of influence exerc^d by
such a body of men and for such a purpose? Let them send
first, if thqy please, for those who caa.sp^ for the roads and
ask them if the statements I have made concerning the situation
lue true. If the answer is "Fo," then I have been mistaken,
and my fears are soundless. If the answer is "Ym," then I
submit there is no more important duty confronting a chosen
servant of the peopta than that of informing himself concerning
all the facts, and then using such influence as he may possess
to bring about such an underetmiding as will aUay the feeling
of doubt and imcertainty which rests upon the railroad man¬
agers today, and which serves to chill initiative and discourage
enterprise. The people, I believe, are wiUing that the roads
should be treated fairly. The carriers have accepted the
rituation, but cannot make bricks without straw. . ,
I trust I have at least made dear my reason for speaking
as I have upon such an occasion as this., I well understand
that my words, if considered at ah, wiU only have weight
insofar as they are found to be in accordance with the facts—
the truth will prevail.
I desire especially to extend my congratulations to the
honored Governor of.this State for his success in bringing about
this mnferenee. I hope it will be productive of much good.