STOP! LOOK!! LISTEN!!!
The Railroad and Its Relation to the Farmer,
the Financier and the Every-day Citizen
By Frederick L. Chapman, Editor of Better Farming.
(From Better Farming.)
On a recent cross-country journey 1
attended the daily sessions of the
school of political science, which is
held in the men s end of the sleeping
car. This smoking room now vies with
the country store as the repository for
cracker-box philosophy and political
wisdom. If there is anything wrong
with the country, or the universe in
general, you will learn it here. You
will learn its cause and learn its cure.
Twenty years ago, yes, even ten, if
you listened to the conversation at
the cracker-box, or in Pullman com
partments, you learned that the Ana
conda grip, which was strangling the
very life out of American commerce,
was that of the great American Kail
road Trust. This monster in popular
imagination appeared also to be the
sire of that brood of monopolistic evils
which have multiplied and flourished
in the last decade.
But the cracker-box philosophy did
not prevail. A sounder wisdom dls
i cerned that the mother of trusts was
, a Tariff System which enabled big
. business to fortify itself against world
• competition and levy its tribute on
• every consumer. The sire of this sys
• tem was Uncle Samuel himself. In
the November elections of 1912 he was
‘ given orders to amend his ways,
which meant to amend his tariff. He
did so, and as a proof of penitence
, he has given us the currency bill be
sides, which still further emancipates
us from commercial bondage. Now,
> according to the common verdict, from
cracker-box and counting room and
street corner conversation, there is
( but one thing needed to accomplish
complete restoration of good old
times. And this is what I heard on
my transcontinental journey,
i "Give the railroads the required
revenue to put themselves in condition
to carry the country's traffic and we
will have a period of business pros
perity such as the world has never
seen.”
• I wondered if that was true, tor 3U
days 1 have been thinking and study
ing and collecting facts and figures
which might confirm or disprove this
assertion. I am going to give the
tacts and figures here and let the
reader make his own conclusion.
There is nobody more interested in
this subject than the American farm
er. He is not only interested as a
good citizen in the country's well
being. but interested the more since
the country's well-being measures its
ability to consume his produce at prof
itable prices. The farmer, besides,
comes into more intimate contact w ith
the railroads than any other business
man. They traverse his land, they
carry his freight to market and they
carry back his machinery, his cloth
ing, his furniture and much of what
he consumes. They get him coming
and going. Are they his natural ene
my, as soap-box orators have de
scribed them, or are they his good
allies?
i .- In the first place, let us put our
selves in the position of mind to ren
der a fair verdict without prejudice.
You are the jury, the railroad is the
supposed culprit, and I am summariz
ing the evidence, which you can easily
digest.
The railroads of the United States
extend over about 250,000 miles of
main line. They represent an invest
ment of approximately $20,000,000,000.
They are owned by approximately
500,000 shareholders. They employ
approximately 1,728,000 people, and
pay directly to these employes approx
imately $1,300,000,000 a year in wages.
This, of course, does not include em
ployes in collateral lines of industry
like steel mills, car shops, etc., which
supply the railroads with equipment
There are three facts which the
jury will note in this brief statement.
First, t,bat the railroad industry is by
far the biggest industry we have. Sec
ond, that it belongs to a lot of people.
Third, that it pays more wages to
more people than does any other busi
ness in the world. But these features
of the case have not been fully stated.
When we stop to consider that rail
road securities have been the favorite
form of investment with insurance
companies, both life and fire; with
savings banks, trust companies,
estates in which there may be a score
of heirs, some in their minorities; edu
cational and philanthropic endow
ments, etc., we begin to realize who
owns these traffic lines which are the
very arteries through which the blood
of bur commercial life must flow. If
their ownership were only in the
hands of the 500,000 shareholders,
whose names are registered on the
stock books, it would mean that the
average owner was the proprietor of
only one-third of a mile of track, but
when we reflect that large life, fire
and accident insurance companies
alone held in 1905 railroad stocks and
bonds amounting to approximately
$850,000,000, that the savings banks of
the country in 1909 held approximate
ly $835,000,000 of railroad securities,
and, according t^the Comptroller of
Currency, in 1910^he trust companies
and national and state banks held
$680,000,000 of these securities, and
when we reflect that there are over
10,000,000 depositors in American sav
ings banks alone, to say nothing of
the millions of policy-holders in insur
ance companies, we begin to realize
who, after all, are the owners of these
steel ribbons which run to the four
corners of the continent. I submit to
the jury that the prisoner in the dock
may be a neat* blood relation to all
of us.
Parenthetically I pause to wonder if
i ^ -_
we have not talked so much of this
road being a Rockefeller road and of
that one as a Vanderbilt line, and
some other one as belonging to the
Gould system that we conclude off
hand that the whole railroad business
of the country is owned practically by
a dozen or two people or their fami
lies. If -we deceive ourselves by this
delusion and think that by laying bur
dens on the railroads we are laying
them on the backs of these financial
Colossi, we may find that we are not
only mistaken, but that we are really
chasing ourselves up a tree. If the
majority of the bulk of railroad se
curities is actually owned, as appears
to be the case, by the people at large,
and owned in comparatively small
units, and much of the balance is
owned by insurance companies, sav
ings banks, etc., in which nearly
everybody has a direct or indirect in
terest, we are much nearer to popular
ownership than most of us have
imagined. If we start to chase the
railroads around a stump, we may re
semble the dog that chases his own
tail. How foolish he looks when, aft
er rapid revolution in pursuit of that
caudal appendage, he gets it at last
and then identifies the owner.
Let us frankly admit right here that
there is a good deal of excuse for pop
ular hostility to past railway manage
ment. We cannot soon forget what
some financiers have done in the past
to certain railroads. Even at this very
moment the quivering form of the
proud old New Haven & Hartford lies
prostrate in the dust, bleeding from
the wounds where High Finance
stabbed her. But we will not forget
that more than half the stock of the
New Haven belongs to comparatively
small holders. There were 21,948 of
them in 1912, and many of the num
ber are women. We cannot forget
that, while piracy has attacked the
railroad world in some quarters, the
biggest part of the business has al
ways been in clean hands. Has any
serious imputation ever been laid upon
the Pennsylvania or New York Cen
tral lines, the Northwestern or the
Santa Fe? Does the business world
possess any names of which we are
more proud than those of Marvin
Hughitt, James J. Hill, W. C. Brown, j
Melville E. Ingalls, Stuyvesant Fish
or E. P. Ripley?
What is the situation of the railroad
industry today and what relation has
it to our national well-being? The
railroads are hard up! One big sys
tem is in tjie hands of receivers, an
other barely earned interest charges
on its indebtedness. The old Boston
& Maine hasn't enough money in its
treasury to buy a string of freight cars
and an engine to haul them. Perhaps
these roads have been mismanaged,
but the best companies have been re
duced almost to a bread and water
^VWWWWWWWWWVN^WVWw
European Sleeping Car Running Once a Week B etween Paris and Moscow; Twice a Week to St.
- -— and, Begittr.ing 1314, Tv.ice a Week in Trans* Ural.
American Dining Car for All Passengers.
diet. It is not for want of traffic. In
fact, the total of freight tonnage j
hauled each year during the last 20 j
years ,has steadily increased, with oc
( asional temporary shrinkage, so that
the volume is now two and one-half
times what it was 20 years ago. The j
passenger traffic has also increased to
almost the same degree, hut the ex
pense of operation has jumped faster
than the increase in business. This
has been due to causes over which the
railroads have had no control. The
American Passenger Locomotive. Weight 206 Tons.
wages of their employes have been in- ]
creased 170.8 per cent during the 20
year period. In 1892 they employed
560 people to each hundred miles of
track, while in 1912 they required 695
people. Even since 1902, when it was
officially reported that the pay roll on
American railroads amounted to $676,
028,590, there has been an increase of
wages more than double that figure,
while the number of employes has
only increased from 1,189,315 to
1.728.000, which means 100 per cent
increase in wages with only 43 per
cent increase in the number of em
ployes. During these 11 years the
average pay of employes has advanced
from $568 per year to an average of
nearly $800. In 1892 the wages paid
to employes amounted to 39.28 per
cent of the gross revenue; today it is
44.20 per cent. This increase of 5 per
cent in wages means 5 per cent on
$3,000,000,000 of gross income, or
$150,000,000 a year in wages above the
rate that was paid in 1892. There has
also been an increase in the cost of
materials, equipment, etc. Ties used
to cost 50 cents or 60 cents apiece;
now even poor ones cost 75 cents. The
railroads of the country use about
150.000. 000 ties a year. This differ
ence in cost amounts to about
$30,000,000. As late as 10 years ago
coal cost the roads 87 cents a ton at
the mine; it now costs $1.12. Taxes
dtiHug^ t.he 20 y *ar period have.Jq;.,
creased 254.9 per cent, while the net
capitalization has increased during
the same period only 76.7 per cent.
Twenty years ago the railroads paid
taxes of $34,053,495; in 1912 they paid
$120,873,472. In other words, the rail
roads pay in the form of taxes approx
imately one-quarter as much as they
pay to the owners, their stockholders.
Another increased charge upon the
railroads has been the larger terminal
facilities which they have had to pro
vide. The New York Central and
Pennsylvania systems recently spent
upward of $200,000,000 on new termi
nals, mostly in New York City. The
Chicago & Northwestern has just late
ly spent about $20,000,000 on a new
passenger terminal in Chicago. The
roads entering Chicago have spent
$7f»>000,000 in the last 10 years for the
elevation of their tracks. This vast
outlay does not produce a single pen
ny in actual revenue, or in savings, ex
cept to dispense with a lew hundred
street crossing guards.
Meanwhile, railroad rateB have de
creased during the last 20 years; pas
senger traffic now pays 1.992 cents
per mile, and freight traffic pays only
.0741 per ton per mile, as against
.0898 per ton in 1892. This means that
lor the cost of a 2-cent stamp you can
ship a ton of freight nearly three
miles. There are other items which
have also increased the railroad's bur
den of expense. Safety appliances,
shorter hours and more crews, steel
cars, bigger locomotives, requiring
heavier rails and heavier bridges,
have added enormously to the rail
road's investment. These improve
ments have been made mostly by di
version of dividends which might have
otherwise been paid to t,he stockhold
; ers. As a consequence the per mile
capitalization of American roads
stands at only $61,508 per mile, while
that of Great Ilritain is $275,374, and
in all Europe, including Asiatic Rus
' sia, the per mile capitalization of the
railroads is $121,453, about two times
I that of the American roads. If it be
! urged that greater laud values there
! partly account for the greater capital
! ization, we might make comparison
with New Zealand and South Wales,
where land is worth less than here,
: and where no big cities make costly
terminal facilities necessary. In New
Zealand the capitalization is $55,574
•?/. r ni trs-wt/al^s wiiXti •ZT.'r'ir.mt?
narrow gauge, 3 feet 6 inches wide. In
South Wales the capitalization is $C8,
288 per mile. While we are consider
ing capitalization we hear it urged fre
quently that the stocks in American
roads carry a lot of water, but we
ought to reflect that while it is true
i that much Btock was originally given
us a bonus when pioneer roads were
i trying to sell their bonis, there have
v
been millions of dollars taken out of
the earnings in the last 20 years and
have gone into improvements which
have probably more than absorbed the
watered stock that was supposed to be
in these systems. We should not for
get, moreover, that since 1876 there
have been 734 roads in the United
States pass through receivers' hands,
with 135,567 miles of track and with
stocks and bonds of $7,812,697,000. In
reorganizations through which these
roads passed the stocks were scaled
down, often annihilated, and some
times the bondholders’ investments
were extinguished.
The situation today may be suc
cinctly stated thus: Owing to the in
creased cost of operation and the
stricter demands of shippers and trav
elers for modern service, and t,he re
quirements of the government in re
spect to safety appliances, etc., the
railroads are operating under a vastly
larger expense, while their revenue
from freight and passenger traffic has
been growing steadily less. According
to Charles A. Conant, author of “Prin
ciples of Money and Banking,” the
purchasing power of the railroads’ dol
lar has declined 37 per cent between
1896 and 1912. We can now under
stand why our railroads are bent al
most to the point of breaking. They
are facing a crisis. Their responsible
officers are .haunted with the fear of
deficit. A continued deficit means
ultimate foreclosure. That is why
upward of 100,000 men have been
taken from the payrolls in the
last four months. This is why
no rails, no cars, no supplies are
being bought, except for hand-to
mouth existence. When the railroad
lays off 100,000 men, 100,000 men go
on half rations. Merchants along the
line sell them just half as much to
eat and w ear. When railroads stop
buying, perhaps a half million other
men stop working at the mills which
make their rails and engines and cars
and other equipment. These men are
also on half rations. They buy less
and their bills are not paid. Every
tradesman feels it and finally the
farmer feels it. He feels it last, but
he feels it most.
But talk about feeling, he feels that
the railroads rob him every time he
ships a load of stuff to market and
ships another load home. I wonder if
lie often stops and ligures just how
much he pays the railroad for its
service. Suppose we ask the Inter
State Commerce Commission, whi<;h
now fixes the rates and keeps them
on file. The commission will tell you
that a farmer can ship an axe from
.New York to Chicago for 2V& cents.
If it costs him 75 cents he pays one
thirtieth of the selling price to the
railroad. He can ship live cattle and
hogs these thousand miles for 3-10
of a cent a pound. If they sell for
8 cents a pound he pays one-twenty
seventh of the selling price to the
railroad. He can ship coffee a thou
sand miles for 1-3 cent a pound. If
he pays 30 cents a pound for it he pays
one-ninetieth of the selling price to
jthe railroad. He can ship a set of
I harness a thousand miles for 43 Vi
! cents and if it sells for $35 he pays
1 the railroad one-eightieth of the sell
I ing price for freight. He can ship a
| harrow a thousand miles for $1.05. He
can ship a motorcycle for $3.83 a thou
sand miles. He can ship a piano a
1 thousand milee for $6. He can ship
I a mowing machine a thousand miles
j for $3.85, a plow for 46% cents, a rake
! tor 1% cents, a sewing machine for
$1.01, a pair of shoes for 2 2-6 cents
and a shotgun for 7 Vi cents, a shovel
i for 3 cents, a suit of clothes or over
i coat for 6 cents, and he can ship raw
! wool from Billings, Mont., to New
} York City, 2,262 miles, for 1.3 cents a
pound.
''rfie*ffcpurfmexit of agriculture has
called our attention to the fact that
when a farmer receives 50 per cent
of the consumers’ price on a pound of
butter the freight charge on that
pound of butter is about one-halt of
1 per cent of what the consumer pays
Another authority has estimated that
the railroads get only one-twentieth
of the retail price on farm products
for as average ban! of miles, or