effort to pay dividends on watered stock and interest on bonds improperly issued.

17. That railroad corporations have improperly engaged in lines of business entirely distinct from that of transportation, and that undue advantages have been afforded to business enterprises in which railroad officials were interested.

18. That the management of the railroad business is extravagant and extravand wasteful, and that a needless tax is imposed upon the shipping agance. and traveling public by the unnecessary expenditure of large sums in the maintenance of a costly force of agents engaged in a reckless strife for competitive business.

ment

167. Government administration of the railroads,

1917–1920 1 The persistence of the evils referred to in the preceding selection Legislation led, after 1880, to a good deal of legislation designed to curb the proving

ineffective, unfair practices of the railroads. But this earlier legislation was Federal conunable effectively to control the railroad situation, and accordingly trol of the

in the advocates of government ownership rejoiced when on Decem- war-time is ber 26, 1917, the President proclaimed the railroads under Federal welcomed

by some as control. A large number of factors prevents us from drawing any a prelude satisfactory conclusion from the war-time record of the roads, but

to governo it is interesting to note that one of the obvious benefits of gov- ownership. ernment ownership was attained, i.e. numerous economies of management. These are briefly outlined in the following extract from the report of the Director-General of Railroads to the President, September 3, 1918: The reorganization of the operating force has been made without Economies

of governany impairment of efficiency and with a reduction in the number

ment adof officers required, and in the aggregate of the salaries paid them ministra

tion: chargeable to operating expenses. . . . Under private control, salaries as high as $100,000 per annum were paid officers of railroad corporations. Under government control the highest salaries paid are to Regional Directors (of whom there are but seven), and these salaries reduction of range from $40,000 to $50,000 per annum.

dated. ...

simplifica- Hitherto there have been some three different freight classification of

tions applying to interstate traffic, while many states had their freight classifica- own particular classifications applying to interstate traffic. . It tions,

often happened that a shipment moving through two or more classification territories was subjected to different rules in the course of its journey. . . . Great confusion in rating and classification and many overcharges and claims were the result. To simplify this situa

tion a consolidated classification has been prepared. . consolida

Inasmuch as there is no longer any competition for freight and tion of

passenger traffic between the various divisions of the government ticket offices, railroad system, I have ordered that solicitation of traffic and special

exploitation of passenger routes shall be discontinued. In pursuance of this policy the soliciting forces of the various railroads have been either relieved from duty or assigned to employment in connection with the operating departments, and the separate ticket offices formerly maintained in most of the larger cities have been consoli

The saving that will be effected as a result of this policy is estimated at $23,566,633. . . elimination After careful study a number of unnecessary passenger trains of unneces

have been eliminated. Between many of the larger cities of the

country served by competing railroads there was formerly a surtrains,

plusage of elaborately equipped passenger trains. In many cases they started and arrived at the same time. Some of them were but half filled. ... Many of these unnecessary trains have been eliminated. In the territory west of Chicago and the Mississippi River passenger trains traversing an aggregate of 21,000,000 miles a year have been done away with. In the Eastern District unessential passenger trains that used to travel 26,420,000 miles per annum have

also been eliminated. better use Other reforms that are being worked out in the passenger service of passenger include the common use of the same terminals by railroads formerly

in competition and using separate terminals. The most conspicuous example of the latter innovation is the use of the Pennsylvania Terminal in New York for through trains via the Baltimore & Ohio between Washington and New York. . . . In this case, as in many others, it has been arranged that trains shall leave at successive hours instead of at the same time, as they often did in the past.

sary passenger

The same principle is being applied as rapidly as possible in the and freight

terminals, consolidation of freight terminals. The saving of switching costs that will result and the greater rapidity with which cars can be loaded and unloaded are obvious. ... Recogr ng the fact that a straight line is the shortest distance and the

shortening between two points, extensive studies have been made with the pur

of freight pose of developing well-graded routes for the transportation of freight routes. that will be shorter than those previously in use.

Great progress has been made in this direction, especially in the West, and many new through lines are being developed. One of them from Los Angeles to Dallas and Fort Worth is over 500 miles shorter than the routing via the Southern Pacific lines formerly much used. ...

1

1920.

SEC. 401

.

168. The Transportation Act of 1920 1 Federal administration of the nation's railroads proved to be short. The rail

roads relived, the roads being returned to private control in the spring of

turned to 1920. However, government administration had emphasized the private con

trol. The desirability of certain changes in the legislation regulating railroads.

TransportaAccordingly, the Transportation Act of 1920 was passed. This law tion Act of was designed to safeguard the roads during the readjustment period after the war, and to take advantage of some of the lessons of government administration. Some of the significant provisions of the Transportation Act of 1920 follow: (11) It shall be the duty of every carrier by rail- Duty to

furnish safe road subject to this Act to furnish safe and adequate car service,

and adeand to establish, observe, and enforce just and reasonable rules, quate car

service, regulations, and practices with respect to car service. . .

(12) It shall also be the duty of every carrier by railroad to make and to just and reasonable distribution of cars for transportation of coal supply coal among the coal mines served by it, whether located upon its line or lines or customarily dependent upon it for car supply. ...

(15) [In case of shortage of equipment, congestion or other emer- Increased gency, the Interstate Commerce Commission may] (a) suspend the powers of operation of any or all rules . . . for such time as may be determined state Comby the Commission; [and (6) may] make such just and reasonable merce Com

cars.

.

directions with respect to car service, without regard to the ownership as between carriers of locomotives, cars and other vehicles, during such emergency as in its opinion will best promote the service in the interest of the public. . . . [In pursuance of this power, the Commission may] require such joint or common use of terminals ... as in its opinion will best meet the emergency and serve the public interest. [The Commission may also, in such case,] give directions for preference or priority in transportation, embargoes, or movement of traffic under permits, at such time and for such periods as it may determine. .

(16) Whenever the Commission is of opinion that any carrier by railroad subject to this Act is for any reason unable to transport the traffic offered it so as properly to serve the public, [the Commission may] make such just and reasonable directions with respect to the handling, routing, and movement of the traffic of such carrier . . . as in the opinion of the Commission will best promote the service in

the interest of the public. ... The Com- (18) (Hereafter no railroad) shall undertake the extension of its mission

line of railroad, or the construction of a new line of railroad, or shall given power

acquire or operate any line of railroad, or extension thereof, the exten

less and until there shall first have been obtained from the Commission sion and abandon- a certificate that the present or future public convenience and neces

sity require or will require the construction, or operation ... of lines.

such additional or extended line of [railroad. And] no carrier by railroad . . . shall abandon all or any portion of a line of railroad, or the operation thereof, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity permit of such abandon

ment. ... Interchange

(3) All carriers ... shall, according to their reof facilities.

spective powers, afford all reasonable, proper, and equal facilities for the interchange of traffic between their respective lines, and for the receiving, forwarding, and delivering of passengers or property

to and from their several lines and those connecting therewith. ... Common use (4) If the Commission finds it to be in the public interest and to of terminals. be practicable, without substantially impairing the ability of a car

rier owning or entitled to the enjoyment of terminal facilities to handle

to control

un

ment of

SEC. 405 :

its own business, it shall have power to require the use of any such terminal facilities . . . by another carrier or other carriers. SEC. 407 . . . (4) The Commission shall as soon as practicable The Com

mission prepare and adopt a plan for the consolidation of the railway prop

empowered erties of the continental United States into a limited number of to plan the systems. In the division of such railways into such systems under

consolida

tion of the such plan, competition shall be preserved as fully as possible, and nation's

railroads. wherever practicable the existing routes and channels of trade and commerce shall be maintained.

Questions on the foregoing Readings 1. Into what two classes may public utilities be divided? 2. In what way does the railroad corporation differ from the ordinary

corporation? 3. What was Judge Russell's opinion in this regard? 4. What are the reciprocal obligations of the railroad and the state? 5. What two factors have stimulated the movement for the mu

nicipal ownership of local utilities? 6. What is the extent of municipal ownership with respect to water

works? 7. Why has the movement been relatively slow in the manufacture

of gas? 8. What is the extent of municipal ownership in the street railway

business? 9. What did the Commission on Public Ownership and Operation

conclude as to which industries should be operated by the public,

and which should not be so operated? 10. What, according to the Commission, are the chief factors which

will determine the future development of municipal ownership? II. Name some complaints against the railroads with respect to rates. 12. What charges were brought against the railroads with respect to

discriminations? 13. What is meant by saying that formerly the railroads avoided their

responsibility as carriers? 14. What charge was brought against the railroads with respect to

extravagance? 15. During what period of our history were the railroads placed under

governmental control?
16. What, according to the Director-General of the Railroads, were

the economies of governmental administration with respect to.
the elimination of unnecessary passenger trains?