The Railways and the 
 Government 
 
 ADDRESS BY 
 HOWARD ELLIOTT 
 
 At the Annual Dinner of the 
 Railway Business Association 
 
 December 11, 1913 
 
REQUESTS FOR COPIES 
 of this pamphlet will be welcome from all 
 those desiring to place it in the hands of 
 their representatives or friends. Copies fur¬ 
 nished or sent direct to lists upon application 
 to Frank W. Noxon, Sec’y, Railway Business 
 Association, 30 Church Street, New York. 
 
 Form B 
 
 2 
 
/ 
 
 Q K 
 
 0 
 
 The Railways and the Government 
 
 Address by 
 Howard Elliott 
 
 Chairman of the New England Lines 
 
 Delivered at the Fifth Annual Dinner of the Railway Business 
 Association, the national association of manufacturers of 
 railway materials, equipment and supplies, at the Waldorf- 
 Astoria Hotel, New York, December 11, 1913 
 
 This is a gathering of representative 
 men who contribute much to the in¬ 
 dustrial activity and prosperity of the 
 nation. The opportunity of speaking 
 to you was accepted with hesitation, 
 and only because it gives me a chance 
 to meet many old friends and make, I 
 hope, some new ones, and also because 
 gatherings like this help us to appre¬ 
 ciate our mutual interests. It is well 
 to talk over those problems which the 
 remarkable social and industrial evo¬ 
 lution of the nation has placed upon 
 the business men, who are anxious 
 that this country shall progress, and 
 ^“^who believe that the social and intel¬ 
 lectual advancement of the people de¬ 
 pends upon reasonable success in all 
 1 forms of industry—a class of men 
 also who are as high-minded and 
 patriotic, and as great believers in the 
 United States and its future as any 
 class of men in the country. 
 
 ° INDUSTRIAL INTERDEPENDENCE 
 
 The rapid increase in the country’s 
 population, accompanied, as it has 
 been, by a racial mingling unprece- 
 * dented in history, has produced new 
 economic conditions and has brought 
 
 to the fore new problems and new 
 theories of the relation of the govern¬ 
 ment and the citizen in his business. 
 The application of the principle of 
 increasing government supervision of 
 business emphasized more than ever 
 before the interdependence of all 
 industry. 
 
 The industries which you and I 
 represent are very closely related. 
 Lack of sustenance and stagnation in 
 one affects the others. If the railways 
 of this country are to be maintained 
 and operated as they should be, in¬ 
 creasing their facilities to meet the 
 increased demand of the growing 
 business of the nation, then they must 
 be supplied with materials, and this 
 benefits the many industries which 
 you represent. These purchases of 
 the railway stimulate the activities 
 of the whole country (applause). On 
 the other hand, any curtailment in the 
 purchasing power of the railway will 
 have a withering effect on many in¬ 
 dustries and retard the prosperity of 
 some which have been leading factors 
 in the commercial growth and expan¬ 
 sion of the nation. 
 
 3 
 
RAILWAY GROWTH 
 
 The growth of the railways in the 
 United States is without a parallel in 
 any other nation. In their present 
 form these railways have been con¬ 
 structed practically within the last 
 fifty years. The total operating rev¬ 
 enues of railways earning $1,000,000 
 or more for the fiscal year ending June 
 30th, 1913, were $3,057,089,811, of 
 which $2,134,563,789 came from 
 transportation of freight and $678,- 
 440,089 from carrying passengers. In 
 the same year these railways paid out 
 for expenses $2,118,529,173, of which 
 $407,156,008 was for maintenance of 
 way and structures, $501,663,582 for 
 maintenance of equipment, $1,074,- 
 914,428 for the actual expenses of 
 transportation, and $134,795,155 for 
 administration and traffic expenses. 
 The net operating revenues of the rail¬ 
 ways of the country in the last fiscal 
 year amounted to $938,560,638, out of 
 which was paid in taxes $123,682,118. 
 
 The railways east of the Mississippi, 
 and north of the Ohio and Potomac 
 Rivers in the same year did a business 
 of $1,386,073,429, of which $992,- 
 403,390 was from freight, and $293,- 
 234,927 from passengers carried. For 
 the three items which make up be¬ 
 tween 90 and 95% of the expense of 
 operation, maintenance of equipment, 
 maintenance of roadbed, bridges, etc., 
 and transportation, these roads spent 
 in 1913 $246,727,105 for maintenance 
 of equipment; $180,273,335 for main¬ 
 tenance of tracks, bridges, etc., and 
 $502,734,000 for transportation. 
 
 THE RAILWAY PAYROLL 
 
 Everyone admits now that the 
 transportation question in this country 
 is a very vital one, and these few 
 figures are given to emphasize its im¬ 
 portance. And the importance to the 
 general welfare is not alone in the 
 service rendered by transporting man 
 and his property, but also because the 
 
 railway is a great paymaster. The 
 railway payroll is one of the greatest 
 payrolls in the country; more than 
 1,700,000 employees, receiving in 
 wages and salaries last year nearly 
 $1,250,000,000. Adding the families 
 of those employees, there are nearly 
 7,000.000 people, about 7%% of the 
 total population, supported by this 
 payroll. Think of what this means 
 to the communities in which these 
 railway employees live, to the trades¬ 
 men to whom their earnings go for 
 food and clothing! Think of the effect 
 upon the business interests of this 
 country generally of the distribution 
 of this sum of money, passing through 
 the hands of this multitude of pur¬ 
 chasers into the channels of trade. 
 It would be difficult to find a person 
 in this country who is not, in one way 
 or another, benefited by this employ¬ 
 ment of labor. The railway employee 
 is an important factor in his com¬ 
 munity, and there is no better proof 
 of the theory that the prosperity of 
 a railroad and the section it covers 
 are interdependent than that fur¬ 
 nished by the part the railway em¬ 
 ployees’ purchases play in helping 
 business. 
 
 Out of $2,750,667,435 which the 
 railways earned in 1910, $1,143,725,- 
 306, or 41.58% were distributed in 
 wages and salaries; in 1911, out of 
 $2,789,761,669, $1,208,466,470, or 
 
 43.32%, and in 1912, out of $2,826,- 
 917,967, $1,243,113,172, or 43 - 97 %. 
 And each year this wage distribution 
 has been taking a larger proportion 
 of the railway dollar. Between 1910 
 and 1911 there was an increase of 
 5.66% in the payroll and only 1.42% 
 in the operating revenues. Between 
 1911 and 1912, the increase in the 
 payroll was 2.87%, and in operating 
 revenues 1.33%. There are no very 
 complete statistics of the amount of 
 material purchased by the railways, 
 but it is very large, many hundreds 
 of millions of dollars. 
 
 4 
 
Obviously, as an abstract proposi¬ 
 tion, because of its effect on general 
 business activities and upon the wel¬ 
 fare and happiness of so many people, 
 everybody must want this great pay¬ 
 roll maintained, and want the rail¬ 
 ways to go on spending money. Cur¬ 
 tailment of the railway purchasing 
 power, or a diminution of its payroll, 
 % would be felt in millions of homes. 
 A continued improvement of the rail¬ 
 way will stimulate trade, give a gen¬ 
 eral steadiness to business, and 
 minimize depression. The money the 
 railways would spend in expanding 
 their facilities as they should be ex¬ 
 panded, to keep pace with the growth 
 of business in the country, would 
 percolate into every conceivable artery 
 of trade. Can it be doubted that this 
 would impart that wholesome stimulus 
 to business that is so anxiously 
 awaited at the present time? 
 
 To a large extent the railway is 
 simply a collecting and distributing 
 agency of the sums, small in units but 
 large in the aggregate, that the public 
 pays for the service it performs. The 
 railway owner retains for himself 
 what, compared with many forms of 
 other business, is a relatively small re¬ 
 turn on the value of the railway plant. 
 If there is to be a halt in railway ac¬ 
 tivity, if the railways of the country 
 are to be forced, by the conditions im¬ 
 posed upon them, to abandon all new 
 construction and restrict their outlay 
 to the absolute necessities of mainte¬ 
 nance and operation, what will be the 
 result ? Will there not follow a corre¬ 
 sponding contraction, especially in 
 those industries, many of them very 
 large, which the railroad helps to sup¬ 
 port, and be imparted by them, in turn, 
 through still other trade channels until 
 an adverse influence is felt throughout 
 , the entire business life of the country. 
 For example: The railways purchase 
 a very large proportion of all the iron 
 and steel made in this country. Thus 
 ♦ their prosperity is very closely inter¬ 
 woven with the prosperity of the 
 
 great metal industry of the country, 
 and upon this industry enforced econ¬ 
 omies and the suspension of con¬ 
 struction by the railways will have a 
 most serious effect. 
 
 RAILWAY EARNINGS 
 
 There is indisputable evidence that 
 that expansion of our railways which 
 has contributed so much to the coun¬ 
 try’s prosperity has, by reason of the 
 conditions now imposed upon them, 
 reached a point of practical suspen¬ 
 sion. There is hardly any new con¬ 
 struction being undertaken, and im¬ 
 provements are being postponed 
 wherever practicable, because of lack 
 of funds. This is due, in part, to the 
 great increase in the cost of labor and 
 materials, in part to the elaborate and 
 luxurious facilities which the people 
 demand, and in part to the rise in the 
 rates of interest, all of which is re¬ 
 flected in the loss in net earnings 
 shown by recent statements of the 
 railways; and this despite an increase 
 in gross earnings maintained until 
 very recently, though there are signs 
 today of a falling off even in gross. 
 In the case of the Eastern roads, the 
 gross earnings increased $187,000,000 
 from 1910 to 1913, while operating 
 expenses and taxes increased $201,- 
 000,000, the increase in tax payments 
 alone amounting, in those three years, 
 to $11,590,000. There was an actual 
 decrease in the net operating income 
 of these roads of $16,311,000. In 
 1913, these railways earned in gross 
 $1,424,000,000. Their net operating 
 income was $336,754,000, and after 
 payment of interest on funded debt 
 and other obligatory charges, there 
 was left $206,600,000. The dividends 
 paid out of this amounted to $130,- 
 000,000, which was 5.10% on the 
 capital stock outstanding. This was 
 $19,000,000 less than the dividends 
 paid in 1912 and $7,000,000 less than 
 the dividends paid in 1910. 
 
 In the Central Freight Association 
 territory, a group of twenty-eight 
 
 5 
 
roads, having 23,167 miles of road, or 
 51.5% of the entire mileage in the 
 territory, roads like the Big Four, 
 Vandalia, Wabash, Chicago and 
 Alton, and Illinois Central, in the 
 year ending June 30, 1913, earned 
 $63,000,000 more than in the panic 
 year of 1908, but their operating ex¬ 
 penses and taxes were $62,000,000 
 more, and after paying expenses and 
 taxes, their net operating revenues 
 were only $811,000 more than in 1908, 
 and their net corporate income was 
 actually $8,000,000 less, although in 
 these five years $180,000,000 of new 
 capital had been invested in these 
 properties. 
 
 The reduction in net is shown very 
 strikingly in the statements of the 
 New York Central, the Pennsylvania, 
 and the New Haven for the first four 
 months of the present fiscal year. In 
 this period, the New York Central 
 Lines showed an increase in gross 
 earnings of $4,339,442, as compared 
 with the same period of 1912, but as a 
 result of increased expenses there was 
 a decrease in the net earnings of 
 $7,614,542. The Pennsylvania, for 
 the same period, showed an increase 
 in gross earnings of $5,100,192, but 
 a decrease in net earnings of $4,367,- 
 795, while the New Haven, including 
 all transportation lines in which it is 
 interested, showed a decrease of 
 $79°>379- 12 i n the gross, and $4,020,- 
 311.51 in net operating revenue, and 
 of $4,934,725.01 in net corporate in¬ 
 come, after allowing for all fixed 
 charges of every kind. 
 
 THE RAILWAY PROBLEM 
 
 I think that all candid and thought¬ 
 ful persons will admit that the situa¬ 
 tion as reflected here is a serious one, 
 not only as affecting the railways 
 themselves, but the entire business of 
 this country. Indeed, with railway 
 credit impaired, it would seem difficult 
 for the railways to extricate them¬ 
 selves from the present situation unless 
 a change occurs in public sentiment 
 
 and in the treatment they receive 
 from the people, as expressed through 
 their various governmental agencies. 
 Undoubtedly, various causes have 
 contributed to bring this situation 
 'about. Some of these have been « 
 economic and some social, and the 
 railway has suffered from both, per¬ 
 haps, more than any other industry 
 in that the price of its service is no ^ 
 longer within its own control, and 
 the same may be said of its great 
 payroll. 
 
 Is it not incumbent upon all 
 thoughtful men who wish to see this 
 country continue to prosper to stop 
 and ask themselves what can be done 
 in this emergency? Is this trouble 
 a socialistic one, due to new currents 
 of thought and feeling in the minds of 
 a majority of our citizens, fostered 
 possibly by ideas of government 
 brought here by many of our new 
 citizens from the Old World, who 
 influence many others with whom 
 they come in contact? And if the 
 trouble is socialistic, does it not be¬ 
 hoove every citizen who does not 
 believe in this kind of doctrine ap¬ 
 plied to business to speak out? 
 
 PRESENT TENDENCIES 
 
 Many of us have hazy ideas about 
 socialism, but the principle under¬ 
 lying the proposed socialistic state, 
 as expressed by many socialists, is 
 that from every one shall be expected 
 according to his ability, and that to 
 every one shall be given in accord¬ 
 ance with his needs. The socialistic 
 ideal thus expressed, is that every 
 man shall do his utmost, but that he 
 is not to be paid in proportion to the 
 amount of work that he does, or in 
 proportion to its value, but, on the 
 contrary, he is to be paid in accord¬ 
 ance with his needs. The tendency 1 
 of the people of the United States, 
 however, seems to be not to extend 
 to the railways even that treatment . 
 which is expressed by this socialistic 
 ideal (applause). Under that ideal, 
 
 6 
 
the railways would be expected to do 
 all that they can, and would be al¬ 
 lowed to receive all that they need, 
 but is it not true today that the rail¬ 
 ways are expected to do more than 
 I they can, and, at the same time, are 
 not permitted to receive what they 
 need? 
 
 • THE HUMAN FACTOR 
 
 For example, first and foremost, the 
 railways are expected to run their 
 trains without causing injuries or 
 deaths that would be avoidable by all 
 ordinary human precaution. Yet dis¬ 
 tinction is seldom made between the 
 need for care and caution on the part 
 of the public and the need for care 
 and caution on the part of those en¬ 
 trusted with railway operation (ap¬ 
 plause). A very large number of 
 the injuries and half the deaths 
 charged against the railways are of 
 trespassers on railway property. If 
 people will not keep off railway prop¬ 
 erty the law should compel them to 
 do so (applause). Yet, although the 
 railway companies have time and 
 again urged legislatures to pass laws 
 against trespassing, only two or 
 three state legislatures have re¬ 
 sponded. In other words, more is 
 expected of the railways in diminish¬ 
 ing the number of casualties and fa¬ 
 talities than they can do, and there is 
 not given them that protection which 
 they need and which the people need 
 (applause). Wrecksi and accidents 
 are sometimes due to the delinquency 
 of those charged with the management 
 and operation of a railway, and it is 
 only right that the managing officers 
 of a railway shotild be held directly 
 to account for defects in administra¬ 
 tion and carelessness in directing 
 operation. But there is another side, 
 
 » and if the officers are to be held 
 
 responsible for the administration and 
 discipline the employees of a railway 
 should be held responsible for sub- 
 ) mission to proper discipline and 
 
 should not consider their allegiance to 
 
 their brotherhoods above their allegi¬ 
 ance to the company which employs 
 them (great applause), or their duty 
 to the public who supply the money 
 for their wages. The Interstate Com¬ 
 merce Commission has pointed out 
 that one of the most disturbing causes 
 of accidents is the carelessness of the 
 railway employees. Under these con¬ 
 ditions, quite generally acquiesced in 
 by the public and the press, the people 
 make it difficult for the railway 
 managers to preserve the discipline 
 that the hazardous business of train 
 operation demands, and are asking 
 almost more than the railways can 
 do (applause). If the railways are 
 quasi-public servants, their employees 
 are also quasi-public servants, and the 
 people should hold the man as well as 
 the master to his responsibility (ap¬ 
 plause). By not demanding this 
 responsibility, the people are not ac¬ 
 cording to the railways that which 
 they need and that which the people 
 need. 
 
 IMPROVEMENTS 
 
 While the railways should be held 
 directly to account for maintaining 
 roadbed, track, and other facilities in 
 proper condition, the fact should not 
 be lost sight of that safety in opera¬ 
 tion, as the people look upon it to¬ 
 day, means equipment of steel or 
 steel underframe in the passenger 
 service, and other heavy expenditures 
 in consequence. To demand that such 
 improvements be made within any 
 short period of time, in advance of 
 the ability of the railways to pay for 
 them, is to demand of the railways 
 more than they can accomplish. And 
 to hold them down, and so to impair 
 their credit that they cannot obtain 
 funds for such improvements is cer¬ 
 tainly not to accord to them that which 
 they need (applause). Again, in 
 insisting that they serve the end of 
 efficiency from the standpoint of eco¬ 
 nomical operation, and, at the same 
 
 7 
 
time, meet the requirements for fast 
 and frequent service, the people de¬ 
 mand of the railways more than they 
 can do. If they desire such service 
 without allowing the railways the 
 compensation that justifies it, they are 
 not according the railways what they 
 need. 
 
 In this respect, the railways of 
 Europe are treated better than ours, 
 because there the justice of charging 
 a higher rate for a fast freight service 
 has been recognized. In Europe, as 
 in this country, there are generally 
 three kinds of service, express freight 
 on passenger trains, expedited or fast 
 freight, and ordinary, or low-speed 
 freight. But, while in this country no 
 distinction is made between the fast 
 and slow freight in the matter of 
 compensation, in Europe a higher 
 rate is permitted in the case of “ac¬ 
 celerated freight.” Such a charge, 
 if permitted here, would increase 
 earnings and help the railroads to 
 make improvements now badly 
 needed and yet would not impose an 
 undue burden upon the public (ap¬ 
 plause). 
 
 COMPETITION VERSUS 
 COMBINATION 
 
 There is another respect in which 
 the people of this country are deal¬ 
 ing at cross purposes with the rail¬ 
 ways, and this is a question of 
 transcendent importance, not only in 
 the field of transportation, but 
 throughout industry and commerce. 
 This is a question of competition 
 versus combination. The New Haven 
 road is a consolidation of 189 com¬ 
 panies—the Boston and Maine and 
 Maine Central of 200 companies. 
 Before the consolidation of these lines, 
 when it was desired to move a car¬ 
 load of freight from one end of New 
 England to another, separate ar¬ 
 rangements had to be made and vary¬ 
 ing instructions issued for each rail¬ 
 way and endless bargaining and 
 
 higgling over rates and schedules, as 
 well as the expense of many separate 
 organizations. In this combination of 
 separate railways in one organic 
 whole, there is the possibility of effi¬ 
 ciency, under proper management, 
 both from the standpoint of economi- * 
 cal operation of the railways and from 
 the public’s standpoint of improved 
 service. Because of practices incident 
 to the great construction period of 
 American development and not con¬ 
 fined to railways, the people created 
 the Interstate Commerce Commission, 
 which has pretty effectually not only 
 restrained competition, but stifled it 
 so far as rates are concerned. As the 
 Commission has the power to prevent 
 the railroads from charging unreason¬ 
 able rates and to prevent unjust dis¬ 
 crimination, it is a grave question 
 whether it is not an economical error 
 to object to combinations of railways 
 which, under suitable management, 
 can be made to serve the ends of effi¬ 
 ciency by more economical operation 
 and better service (applause). Here 
 again we find an inconsistency on the 
 part of the people, who insist that 
 the railways shall practise the greatest 
 economy and efficiency in operation, 
 but who, at the same time, object to 
 principles that will further such 
 economy. If the railways are not 
 supported by the people they cannot 
 render service to the people. The 
 very expression “The Railroads and 
 the People” indicates a distinction, a 
 separation of interests, that the pros¬ 
 perity or the adversity of the rail¬ 
 ways is a matter of indifference to the 
 people, and vice versa. Such a feel¬ 
 ing occasionally finds expression in 
 such an utterance as was made re¬ 
 cently in the New Orleans Picayune, 
 which editorially called upon the 
 voters to oppose any candidate w r ho 
 was not “fully competent and willing 1 
 to place the peoples’ interests above 
 those of the railroads and trans¬ 
 portation lines under all circum¬ 
 stances,” when, as a matter of fact. 
 
 8 
 
their interests are identical. One 
 reason, I believe, for this attitude, is 
 that our people do not realize that 
 railroading is business just as much 
 as rail making or producing paint is 
 business, and that railways are as 
 
 1 much a part of every-day life as any 
 other business. 
 
 ^ MULTIPLICITY OF LAWS 
 
 There are state legislatures which 
 pass laws concerning the railways 
 within their state and the laws of one 
 state sometimes conflict with those of 
 another, and sometimes with those of 
 the national government. The effect 
 of this multiform and heterogeneous 
 regulation is to compel the railroads 
 to serve forty-nine masters, although 
 the impossibility of serving even two 
 masters has been crystalized in a 
 proverb (applause). The effect of 
 this multiplicity of laws also has been 
 to undermine the confidence of in¬ 
 vestors, whose money is needed for 
 the extension and the improvement of 
 the railroads. It has been estimated 
 that nearly one billion dollars will be 
 required within the next year to im¬ 
 prove the railways so that they may 
 meet the demands of growing business 
 and safer and more luxurious service. 
 How can this money be raised ? How 
 can this condition be remedied ? Must 
 it not come from co-operation of the 
 people with the railways and from the 
 conviction in the public mind that rail¬ 
 ways are rendering to the people not 
 only an essential but a vital service? 
 
 GOVERNMENTAL EFFICIENCY 
 
 If the people, by reason of new ten¬ 
 dencies of thought, are exacting more 
 of the railways and allowing them less 
 in return for service rendered, are the 
 people following the same rule with 
 respect to the great machine of gov¬ 
 ernment which they themselves have 
 created, and in whose management 
 they have a potent voice? There has 
 been criticism of lack of efficiency in 
 railway administration, and some of 
 
 it is just, because railway officers and 
 men are human and imperfect, but as 
 a class they are doing better year by 
 year. As a class they are high- 
 minded, patriotic gentlemen, dealing 
 with a problem that at times is very 
 discouraging. They believe in frank 
 and honorable business methods. 
 They are doing the very best they can 
 and they should receive help and com¬ 
 mendation from the public instead of 
 hindrance and hostile criticism (great 
 applause). Does the Government set 
 any better example to the business 
 men or to the youth of this country 
 of the necessity of hard, efficient and 
 high-minded work? (applause). In 
 1896 there were in the Executive Civil 
 Service, excluding employees in the 
 Congress, the Judiciary and enlisted 
 men and officers of the Army and 
 Navy, 178,717 persons, and in 1910, 
 355,635, an increase of 100 per cent, 
 in 14 years. While the population of 
 the country has increased, it has not 
 increased 100 per cent., and is the 
 Government doing the careful, efficient 
 work the taxpayer has a right to de¬ 
 mand? (great applause.) If the Gov¬ 
 ernment, with all its power, has been 
 unable to resist the demands for 
 greater elaborateness and more em¬ 
 ployees, can it be expected that the 
 railways can escape these same forces ? 
 (Applause, and cries of “No, no.”) 
 Again, does the Government exem¬ 
 plify in its own dealings with others 
 the principles of justice and business 
 morality which the people, through 
 this same agency, exact from those 
 subservient to it? 
 
 STANDARDS OF CONDUCT 
 
 There has been a gradual and de¬ 
 sirable change in the standards of 
 business in the past twenty years, and 
 particularly in the past ten. Prac¬ 
 tices that a few years ago were con¬ 
 sidered proper in financial, commer¬ 
 cial, manufacturing, and transporta¬ 
 tion business are contrary to the 
 ideas of the public today. 
 
 9 
 
In this business uplift, I think the 
 great railway systems of the country, 
 taken as a whole, are in the front 
 rank in trying to do their work on a 
 high plane and in trying to observe 
 the complicated laws of the land 
 (applause). And the larger and more 
 complicated the business, the more 
 rigid is the carrying out of the maxim 
 that “Honesty is the best policy” 
 ( applause). 
 
 Some people are still ready to ask 
 for the rebate, the pass, and the 
 special privilege. Because of some 
 glaring failures here and there the 
 press and the public sometimes are too 
 prone to condemn all. But every man 
 in modern industrial business life 
 knows how insistent the majority of 
 men charged with the responsibility 
 of management is for honesty, good 
 morals, industry, and avoidance of 
 sharp practice, and of trying to get 
 something for nothing (applause). 
 
 The moral effect of this policy on 
 the young man in business must be 
 good, because whether he likes it or 
 not, he must behave or be thrown into 
 the discard. What kind of an exam¬ 
 ple does the United States Govern¬ 
 ment set before the youth of the land 
 in its treatment of the great trans¬ 
 portation lines ? The Government 
 should surely be as scrupulously hon¬ 
 est and high-minded in dealing with 
 the railways as it expects the railways 
 to be in dealing with the people, but is 
 it? (Applause.) 
 
 RAILWAY MAIL PAY 
 
 Look at the mail and parcels post 
 situation for a moment. The Gov¬ 
 ernment pays the railways for trans¬ 
 porting the mail on the basis of 
 weights obtained in the autumn of 
 1912 for four years beginning July 1, 
 1913, although there is always some 
 increase in weight each year. In Jan¬ 
 uary, 1913, the Parcels Post began 
 with a weight limit of n pounds, 
 then increased it to 20, and it is now, 
 in some cases, to be 50 pounds. The 
 
 Parcels Post takes business away 
 from the express business of the rail¬ 
 way and reduces earnings in that way, 
 but the Government pays nothing for 
 the extra weight carried, as the test 
 weighing was before the Parcels Post 
 began. So for four years the railways 4 
 must carry the increasing weight of 
 the ordinary mail and the rapidly 
 growing Parcels Post freight for 
 nothing, unless the Government takes * 
 steps to pay for service already per¬ 
 formed and to be performed, which, 
 so far, it seems disinclined to do 
 (applause). 
 
 On the New Haven Road, which 
 right now needs all the help it can 
 get (laughter and applause), a care¬ 
 ful computation made by chartered 
 accountants showed that the company 
 was performing service costing 
 $743,000 a year more than it received; 
 and what is true of the New Haven 
 is true of many other roads. Yet 
 there is little criticism of the action of 
 the Government, although it is taking 
 large sums of money away from the 
 railroads (applause). Do you re¬ 
 member all the outcry there was, and 
 justly so, when it was found some 
 years ago that an importer in Brook¬ 
 lyn was defrauding the Government 
 through false weights? (Laughter 
 and applause.) 
 
 The New York Times, in an edi¬ 
 torial in October, 1913, said: 
 
 “Every receiver of a postal parcel 
 carried at the cost of the railways 
 whose services are not paid for is a 
 receiver of stolen goods.” (Laughter 
 and applause.) 
 
 The Chicago Inter-Ocean, in com¬ 
 menting on this, said: 
 
 “Any man who, merely because he 
 has the power, compels another to 
 give him unpaid service, is a robber 
 (great applause). He has taken 
 from the other his time, his strength, 
 or his property in some form, without 
 making due compensation. If ten 
 men thus combine to rob eight, the im- r 
 morality remains. Because several 
 
 10 
 
millions have combined ‘through Gov¬ 
 ernment’ thus to rob their fellow citi¬ 
 zens who happen to own railroads, 
 the wrong of it is not made right.” 
 
 SERVICE WITHOUT PAY 
 
 This is strong language, but is it not 
 ^ true ? 
 
 Here are the railways, struggling to 
 make both ends meet, and the Gov¬ 
 ernment takes service from them 
 worth, exclusive of the parcels post, 
 at least $15,000,000 per year, and no 
 pay. What kind of an example is this 
 for the great United States Govern¬ 
 ment to set to the younger men of 
 the country? (Laughter and ap¬ 
 plause.) 
 
 The whole theory of modern rail¬ 
 way regulation is to secure honesty 
 of operation and fairness of treat¬ 
 ment on the part of the railway 
 toward all classes of the public. Does 
 it not, therefore, behoove the Govern¬ 
 ment in all of its relations with the 
 transportation companies, to treat 
 them with most scrupulous regard to 
 the dictates of honesty and fairness? 
 Treatment by the Government, how¬ 
 ever, of the question of compensating 
 the railways for carrying the people’s 
 mails suggests a lack of full apprecia¬ 
 tion of this converse proposition by 
 some of our highest governmental 
 authorities. While not a single defi¬ 
 nite and practical step has been taken 
 with a view of compensating the rail¬ 
 ways for carrying the additional 
 weight of the mail for the period of 
 the first six months of the parcels 
 post, the Postmaster General was em¬ 
 powered, after July first, to add not 
 exceeding five per cent, to the pay of 
 the railways. But on August 15th, 
 the Postmaster General increased the 
 weight limit from eleven to twenty 
 pounds, and the Interstate Commerce 
 Commision, only last week, gave its 
 approval to his recommendation of a 
 further increase to 50 pounds. No 
 arrangements were made, however, 
 
 and no arrangements have as yet been 
 made, to compensate the roads for this 
 additional weight. Is it any wonder 
 that the Parcels Post, under such con¬ 
 ditions, has been eminently success¬ 
 ful? (Laughter and applause.) And 
 is it any wonder that some advocates 
 of Government ownership have seized 
 upon its success as an argument for 
 other theories, particularly with re¬ 
 spect to its efficiency and economy? 
 (Laughter and applause.) 
 
 The Supreme Court has ruled that 
 the railways are not compelled to 
 carry the mails, but that if they do 
 carry them it must be under the rules 
 laid down by the Postmaster General. 
 Any thinking man will realize that 
 they could not seriously consider re¬ 
 fusing to carry the mails. If the law 
 compelled them to carry the mails 
 under rates fixed by Congress which 
 were not compensatory, they would 
 have some standing before the courts, 
 but under the law as it stands they 
 must make now a contract with the 
 Post Office Department upon terms 
 dictated by that Department, and can 
 only appeal to Public Opinion for a 
 redress. 
 
 THE RAILWAY FACTOR 
 
 The more men of fair and unbiased 
 minds study the economic situation in 
 this country, affected as it un¬ 
 doubtedly is, by some of these experi¬ 
 ments of Government, the more are 
 they impressed with the importance 
 of the railway situation as a factor. 
 Sir George Paish, eminent in the field 
 of finance and economics, commenting 
 on the country’s condition, after a long 
 trip of observation, said recently: 
 
 “In considering the economic out¬ 
 look of the United States in the im¬ 
 mediate future, it is evident that the 
 factor of most immediate importance 
 is the application of the railways of 
 the Eastern States to the Interstate 
 Commerce Commission for an ad¬ 
 vance in rates. The difficulty experi- 
 
 ll 
 
enced by the railways in raising capi¬ 
 tal has already caused many of them 
 to reduce their new capital expendi¬ 
 tures, and this reduction in a large 
 measure accounts for the reaction in 
 the iron and equipment trades that is 
 now observable. If the difficulties of 
 raising new capital become still 
 greater, then it is obvious that the 
 railway companies would practically 
 stop improvement works and a se¬ 
 rious setback in trade would result. 
 If, however, the railways succeed in 
 funding the large amount of notes 
 which fall due in the current year, 
 and in raising the new capital they re¬ 
 quire to expend on works of improve¬ 
 ment and on new equipment, then the 
 reaction in trade, due to international 
 conditions and other influences would, 
 in my judgment, be comparatively 
 small. Thus the action of the Inter¬ 
 state Commerce Commission in alter¬ 
 ing or disallowing the railways of the 
 East to advance their rates by five 
 per cent, will have important econo¬ 
 mic consequences. ,, 
 
 RAILWAY IMPROVEMENT 
 NECESSARY 
 
 With all our troubles, however, I 
 still feel that we will come out all 
 right, but—and this a great big but — 
 care must be taken in working out 
 these problems, and the public must 
 be told the truth, or harm will be done 
 that will take years to cure, and the 
 best results will be delayed. It is 
 foolish, in this country, to admit that 
 all railway improvement must be given 
 up. These things must go on; public 
 opinion will not tolerate a deteriora¬ 
 tion of the railways. It will insist 
 upon their being able to furnish the 
 service required by growing business 
 and by the very logic of the situation 
 the public will provide the means for 
 them so to do. But it is most im¬ 
 portant not to delay too long. 
 
 HOPEFUL SIGNS 
 
 There are some rifts in the clouds. 
 Signs indeed are multiplying of a re¬ 
 adjustment of ideas in the public 
 mind, which ought to find a reflection 
 in the attitude of governmental agen- 4 
 cies. The miasma which has arisen 
 from the misrepresentation of the past 
 is disappearing, and the public mind is 
 clearing in consequence. That a con- 9 
 structive rather than a destructive 
 sentiment is growing is apparent. 
 
 This drift in public sentiment is 
 clearly beginning to make itself felt, 
 as shown in some recent expressions 
 of a friendly nature coming from 
 those in Government offices. Such, 
 for example, was the statement inade 
 only a short time before his death by 
 Interstate Commerce Commissioner 
 Marble: “We are seeking to bring 
 about a condition that will be fair 
 and equitable and that will make the 
 railroads successful under present 
 ownership.” (Applause.) In the 
 newspapers this drift is finding ex¬ 
 pression in a rebuke of continued criti¬ 
 cism and intemperate denunciation of 
 former practices, and a general reali¬ 
 zation that such a course can only 
 produce widespread business atrophy. 
 
 CURING THE PATIENT 
 
 National need of terminal and other 
 railway facilities having been thor¬ 
 oughly impressed upon the public 
 mind, shippers and editors generally 
 convinced that larger net railway re¬ 
 turns should be permitted, what are 
 the reasons and perplexities which 
 prevent the people from giving effect 
 to a policy that will cure the trouble, 
 making it unanimous? Even if there 
 is only a vigorous minority opposed to 
 such policy, candid consideration of 
 their objections is due them. , 
 
 It is claimed that the management 
 of some roads has not been honest— 
 that insiders have profited when they 
 should not. The morals cf all kinds 
 of business have improved year by 
 
 12 
 
year, and things have been done in 
 railway and other business in the de¬ 
 velopment of the country that were 
 probably not right then and that cer¬ 
 tainly are frowned upon now by law 
 4 and public opinion. Such things 
 ought never to have been done. 
 Owners of railways should root out 
 dishonesty if it exists, and if they will 
 
 * not, public authority will do it. But 
 is there anything in the situation that 
 warrants calling a halt on the develop¬ 
 ment of the continent? (Applause.) 
 Every time a clergyman, a doctor, a 
 senator, or a cashier is punished, are 
 we forthwith to abolish all clergymen, 
 all doctors, all senators, and all cash¬ 
 iers, while we unfrock that particular 
 clergyman, convict that particular 
 doctor, expel that particular senator, 
 or jail that particular cashier? 
 
 RAILWAY SECURITIES 
 
 Others say that some railways are 
 over-capitalized. Whether they are or 
 not, and certainly American roads 
 have led the world in refraining from 
 it, no more capitalization ought to be 
 created than is necessary in order to 
 serve the public. If too much was 
 issued by some roads in the past, this 
 is to be regretted, but no workable 
 method has been suggested by which 
 securities issued legally and bought in 
 good faith can be taken from their 
 owners without failures and receiver¬ 
 ships that harm many more people 
 than the owners of the securities. 
 (Applause.) As for the future, ever}’’ 
 railway of importance runs through 
 one or more states which regulate 
 security issues. And apart from that, 
 those responsible for railway manage¬ 
 ment realize, as they never did before, 
 the absolute necessity of sound busi¬ 
 ness principles in issuing securities, 
 
 * law or no law. The present problem 
 is not to restrict the issues of securi¬ 
 ties but to find people willing to buy 
 
 ^ them. (Laughter and applause.) 
 
 Another says that if securities were 
 sold over the counter the bankers’ 
 
 commission would be saved. Perhaps, 
 some day, if confidence can be re¬ 
 stored, part of such commissions 
 might be saved, but a railroad must 
 have financial experts, as well as en¬ 
 gineering experts, and pay a fair price 
 for services rendered. If the commis¬ 
 sions can be saved, they ought to be. 
 But not even city, state and federal 
 governments, whose credit is based on 
 the taxing power, have been able at all 
 times to float even moderately large 
 popular loans without the aid of 
 bankers. (Applause.) 
 
 Others object because they say the 
 new revenue would go to increased 
 dividends. So some of it would and 
 must. The dividend which a stock¬ 
 holder receives is not all that he would 
 like or that his managers want to pay, 
 but is an amount needed to induce him 
 and others to buy more stock or bonds 
 when an enlarged plant is necessary 
 in order to meet the desires and abso¬ 
 lute necessities of the public. 
 
 EFFECT OF ECONOMIES 
 
 It is said that the increased income 
 needed could be had by economies. It 
 is true that economies have been in¬ 
 troduced, and there is room for more 
 of them. Railroad managers, as a 
 whole, are pushing hard every day to 
 improve men, methods, and facilities. 
 Many economies, however, can only 
 be adopted by throwing away old 
 appliances and buying new ones, 
 which is the case in mills and fac¬ 
 tories as well as in railroads. And if 
 the railroads have no money with 
 which to get the new tools, they must 
 do the best they can with the old ones. 
 No effort in this direction should be 
 neglected, and no other industry is, or 
 in the nature of things can be, so 
 thoroughly organized nation-wide as 
 the railways to co-operate in studying, 
 experimenting, and standardizing their 
 progress. But, in view of the won¬ 
 derful savings already accomplished, 
 both major and minor, in the past few 
 
 13 
 
years, and in spite of the larger 
 percentages of gross earnings ab¬ 
 sorbed by expenses and taxes, it is 
 doubtful if the people should depend 
 on such measures to offset the ap¬ 
 parently irresistible rise in wages and 
 in the price of materials, the higher 
 cost of capital, and the demands for 
 more elaborate facilities and luxurious 
 service. 
 
 Are any of these obstacles sufficient¬ 
 ly important to delay such revision of 
 rate schedules as will meet this 
 anomalous situation of increasing 
 gross earnings, but declining net 
 earnings, and still more rapidly de¬ 
 clining net corporate income after pay¬ 
 ment of fixed charges? 
 
 The railway managers of the coun¬ 
 try want to know where to improve. 
 They welcome just criticism based on 
 a real knowledge of all the actual 
 facts. It is their purpose to profit by 
 it. To serve the public adequately, on 
 the other hand, is also their purpose, 
 and it is their duty to seek diligently 
 from the appropriate authorities the 
 sanction and help necessary if the 
 railway is to do what the people want 
 and must have if the country is to 
 grow. So it would seem as if it was 
 to the interest of the people to be 
 patient with a railway which has 
 practically no control over the price of 
 what it has to sell—transportation— 
 and very little control over the price 
 of labor needed to produce that trans¬ 
 portation. 
 
 New England is a great educational 
 and financial force. She has sent her 
 sons all over the country to help do 
 the work needed. In the last edition 
 of “Who’s Who in America” twenty 
 per cent, of the names are those of 
 men born in New England. Anything 
 that affects adversely the credit and 
 
 social welfare of New England will 
 in turn affect the whole country. Her 
 welfare and the welfare of her rail¬ 
 ways are important to the entire 
 country. These six New England 
 States have one-fourteenth of the 
 national population and have one- 
 twelfth of the national wealth. They 
 consume one-eighth of the materials 
 of manufacture and they have one- 
 sixth of the bank deposits. For the 
 New England Lines, that I represent, 
 I ask the patient good-will of her 
 people and of the nation, while her 
 peculiar and difficult transportation 
 problems are being solved. (Great 
 applause.) 
 
 I don’t think I ever sat in a Board 
 that felt so badly as the New Haven 
 Board did yesterday when the figures 
 forced them to make the decision that 
 took away a dividend, coming at 
 Christmas time, from thousands and 
 thousands of people. (Applause.) 
 But they had the courage to take that 
 position because they felt in the long 
 run it would be better for the proper¬ 
 ty, better for New England, and better 
 for the stockholders themselves. (A 
 VOICE: Good, good!) 
 
 The business men of the country 
 who benefit from the accumulated 
 savings of New England, from her 
 large purchases from other parts of 
 the country, from her great and con¬ 
 tinuous contributions to the national 
 welfare in sending out trained men 
 and women, should at this time of 
 storm and stress help the situation in 
 every reasonable way. It is to your 
 interest to do it and as patriotic 
 citizens interested in the welfare of 
 the whole country I ask you most 
 earnestly to help. (Great outburst of 
 applause and prolonged cheering, Mr. 
 Elliott rising and bowing.) 
 
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