Railroad and the People

Edward Rosewater, Republican editor, argues that the railroads charge "tax" on a part of nearly every commodity in the United States. He welcomes the consolidation of railroad management and the professionalization of the managers as a sign of future government regulation and fairer, more predicatable business practices.

RAILROAD AND THE PEOPLE

Terse Presentation of Stubborn Facts by a Railroad Man.

WHO PAYS THE FREIGHT BILLS?

Henry C. Frink of New York Throws a Search Light Upon the Dark Recesses of Mercantile and Political Railroading

Every person in the United States native, naturalized, alien, sojourner or traveler— pays tribute, directly or indirectly, to our railroads, every day. We do not ride on a railroad every day, but everything we eat and everything we use has helped in some way to swell the earnings of some railroad.

The infant at its mother's breast is by the very act of absorbing food, contributing its mite to the earnings of railroads. The clothing that covers it has contributed. The house that shelters it, and the fuel that warms it have contributed. The bed it sleeps in, the cradle it rocks in, and the chair it sits in have contributed. The table it sits at, and the plates it eats from have contributed. The book, slate, pencil, paper and pen that help it to learn have contributed. The school house it recites in has contributed. The light it uses at night to study by has contributed. The implements it uses in tilling the farm and garden, and in harvesting the crops have contributed. The shop it works in, and the tools it handles have contributed. The church it attends, and the show it goes to have contributed. The book, letters and newspapers it reads have contributed. The jewelry, musical instruments, paintings and statuary that adorn its home have contributed. The carriage it drives in, and the horse it rides, and the boat it manages have contributed. The rum it drinks, and the tobacco it chews and smokes, and the snuff it takes have contributed. Its medicines and its surgical appliances have contributed. The coffin it is buried in, the crematory it is burned in, the tombstone set over its grave, the urn that contains its ashes, all have contributed. From birth to death, the children of God in this civilized country are continually contributing to the earning capacity of its network of railroads.

Very few of us, however, seem to be aware of the fact. The commuters and the commercial travelers realize that they are doing considerable business with the railroads. So do the merchants who are receiving large shipments of goods on which they must primarily pay the freight. The majority of us think very little about our servants, the railroads, because we do not often come indirect contact with them. Our annual vacations, our occasional excursions and our flying holiday trips bring us to the ticket window, and when we must attend court or the funeral of a relative in another town or state we know that we must pay our servant directly; but how many of us pay a freight bill? Or think that we are paying for anything that we use or consume? Those who have seen a freight bill are in very small minority. ***

Let us first inquire whether something could not be saved out of the operating expenses of our railroads. The high salaries paid to officers should be cut down unsparingly. Legitimate railroad business is very simple, and it does not warrant the paying of extraordinary salaries. The railroads, as common carriers, have only two sources of revenue, namely, freight and passengers. The passengers pay before they get on the cards, and they load and unload themselves. Freight on perishable property the freight is paid at destination before delivery to consignee, indeed, before a delivery order will be issued. Any claim for overcharge, or for loss or damage, must be made afterward. Now, what is there to be done in such an easy business, by even the highest officer, to earn more than $5,000 or $6,000 a year? The simple duties required by the people of their servants do not call for very high remuneration. But, when the servants are expected to bamboozle and hoodwink the people, to bribe their legislators, to subsidize their newspapers, to make special rates and to pay secret rebates, to organize fast freight lines and to pay them commissions for doing work that could be done just as well by the railroads themselves, to place tickets in the hands or speculators at reduced rates, to form car trusts and construction companies, to "water" and otherwise manipulate stocks and to do all kinds of dirty work for the directors, they naturally look for large figures opposite their names on the pay rolls. * * *

The mismanagement of railroad officers and agents for a long time past has brought the business into great disrepute. They seem to act contrary to all good business principles When business is dull they grind down their subordinates to the verge of starvation. When business is lively, they work their men extra hours, but do not restore or advance their pay, thus creating just dissatisfaction and causing strikes to discommode the public. * * *

Commissions and mileages paid to fast freight lines make a big hole in the gross earnings of our railroads. There are dozens of these parasites—sometimes a half-dozen or more on a single railroad or "system."

What good are these fast freight lines to the people? What good are they to the railroads? What evil can be worked through them in the way of absorbing surplus earnings, paying rebates, conducting rate wars and practicing discrimination? What profits do they make, and to whom are the profits paid?

If you want to go from New York to Chicago or St. Louis or San Francisco, you can buy a through ticket at the office of any of the trunk railroads. When you want to ship a car load of merchandise to either of these points, why should you be referred to a fast freight line for a through rate and a through bill of lading? Is it because the railroad company is afraid of having too great an amount of gross earnings to report? The fast freight line is a great absorber of earnings. It must have a general manager and some general agents and some contracting agents, and some accountants and clerks, and some offices and some printed matter and some stationery. When it is known that a man in this city has a few car loads of goods to ship, he is likely to be waited upon by forty or fifty representatives of fast freight lines, all bidding against each other to secure the shipment. The result is pretty sure to be a cut in the rate and a discrimination against other shippers, who have not so large a shipment to go forward. If a rebate is agreed upon between the shipper and the successful bidder, the fast freight line must pay the rebate out of its commission, or arrange to pro-rate the amount of the cut with the railroads over which the fast freight line operates, according to their respective mileages or earnings. The goods are received by the railroads, and loaded by the railroads, and the freight is collect by the railroads, and the freight is collected by the railroads. All the fast freight lines can do is to solicit the shipments, in this country and other countries (some of the fast freight lines are bonded, under the immediate transportation act; but that arrangement falls with the custom house) and to pay promptly any claims for overcharge or loss and damage, and reclaim the amounts, along with their commissions, monthly, from the railroads, according to the mileage per centages. The commissions allowed to the fast freight lines may be 10 or 15 per cent of the gross earnings of the railroads, depending upon the classification of the goods. If the officers of the railroads covered by a particular fast freight line own the capital stock of the line, or a majority of the capital stock, they will have a personal interest in pushing the shipments through to destination in the fastest possible time, thus keeping their line popular with shippers and consignees.

Some of the fast freight lines own cars, but the shipments secured by those lines need not necessarily be carried in their own cars. Any available car of any line of railroad may be loaded. (It must be understood that the property loaded in a car destined from the east to the west, or from the north to the south, or vice versa, is not to be transferred or unloaded until it arrives at destination, unless some accident occurs on the way by which the car becomes disabled.) Therefore you can see trains composed of all kinds of cars, belonging to various railroads and fast freight lines and car trusts, and frequently there will be cars of one system of railroads or fast freight lines running over rival systems and lines. The cars may be full or empty, for the balance of trade sometimes in the interior and sometimes at the seaboard. A car may be loaded from New York to Chicago and then be sent empty to Minneapolis. From Minneapolis it may be loaded back to Chicago and then be sent empty to Council Bluffs. From Council Bluffs it may be loaded back to Chicago again and thence reloaded to Albany. From Albany it may be sent empty to Boston, where it may be loaded to Buffalo and then be sent empty to New York, where it may be loaded to St. Louis or some other southwestern point. So the cars of all roads and lines are kept on the move in all directions. Just now there is a strong demand for cars in the far west, and it may be profitable or expedient to sent them there empty as fast as they are unloaded at the seaboard or intermediate points, without waiting to reload them.

How is a railroad or a fast freight line compensated when another railroad or another fast freight line is using its cars? That is very simply arranged by the different railroads agreeing to pay mileage on all the cars they haul, excepting, of course, their own. Car accountants or reporters are stationed at all initial, junction and terminal points, and their business is to keep records of all cars starting, passing or arriving, and to send daily reports of them to the head offices of the various railroads and fast freight lines. The accounts are adjusted and settled monthly. If a car is carded "New York to Chicago—Blue Line," and if it gets through without accident, the records and reports will show that it has run a number of miles on the Central-Hudson road and a number of miles on the Michigan Central road. A car carded "Boston to Cleveland—While Line," will earn mileage from the Boston & Albany road, the Central-Hudson road and the Lake Shore road. If a loaded car is delayed or if an empty car is side-tracked too long, the car accountant of the railroad or fast freight line that owns or leases the car will telegraph to the superintendent of the railroad that the car was last delivered to hurry it along or to chase it out. If the superintendent does not heed the request his railroad may receive a bill for demurrage at the rate of, say $6 a day.

The rate of mileage may be from ½ cent to 1½ cent per mile, according to the style of car, some cars being specially constructed to carry live stock, dressed meats, fruits and dairy products. It makes no difference whether the cars are loaded or empty they earn their mileage just the same for as previously stated, it may be highly necessary to run trains or empty cars occasionally in one direction or another, and it might bother the car accountants or reporters at times to determine whether the cars are loaded or empty. Car trusts are formed for the purpose of building cars to run either independently, on a mileage basis, or to be leased to railroads or fast freight lines who, of course, will pocket the difference between the mileage earnings and the rentals that are paid to the car trusts.

Let us select a fast freight line, calling it the "Happy Dispatch Transportation company" to prevent jealousies, and let us assume that Mr. Winderpelt owns all or nearly all of the capital stock. Suppose the capital to be $200,000, which is used to purchase a few cars and to organize the Happy Dispatch. Mr. Winderpelt confers with the managers of other railroads and distributes some of the stock among them. Then he confers with some of the principal shippers and receivers of goods, perhaps, and lets them in for a few shares of the stock, so that they will feel an interest in having their packages marked "Happy Dispatch."

So the business starts off, and because the Happy Dispatch is a pet of Mr. Winderpelt and other railroad owners and managers, and of certain large shippers and receivers of goods, and because fast time is made and all claims are paid promptly, the business naturally increases. A substantial dividend is declared, and a surplus fund is created to purchase more cars. Say, now, that the Happy Dispatch owns 10,000 cars, and that it agents are located here, there and abroad, soliciting shipments. The earnings are likely to be $100,000 a month for commissions and mileage, or $1,200,000 a year on a capital stock of only $200,000! After deducting expenses for salaries, office rents, printing and stationery, and repairing cars, think what a fat dividend Mr. Winderpelt will have to truck away in his inside pocket.

But where do the people come in on this deal? Mr. Winderpelt may have a fine conservatory or a fast yacht, but he wouldn't let you pluck a flower in one or take a ride on the other. He would rather blow up the conservatory with dynamite and sink the yacht to obstruct navigation on the high seas.

The stocks of the railroads covered by the Happy Dispatch, watered through they be, are considered pretty good paper on change because they pay dividends of 4 or 5 or 6 per cent, and are therefore above par; but the stock of the "Happy Dispatch Transportation company" is not on the market. Because why? It is beyond the market!

Well, now, after the Happy Dispatch has been running awhile, the general business of the railroads over which it runs increases form natural causes until it would seem to warrant dividends of 7, 8, 9 or 10 per cent on their stocks. But it would never do to pay such huge dividends; the people might think that their servants were getting too wealthy. So the managers of the railroads proceed to organize another fast freight line to absorb the surplus earnings and divert them to their own pockets, and so on, as long as the people will submit to it. The managers of other railroad systems see the point and are quick to follow Mr. Winderpelt's example (it would amount to the same thing if he followed their example so that

"They've got 'em.

Or if they haven't got 'em, they'll get 'em by and by."

Car trusts, construction companies and railway equipment companies are doubtless close corporations also, having the effect of absorbing and diverting gross earnings and increasing the total of the operating expenses.

Some political organizations are calling for governmental control of our railroads. The action of the railroad managers, themselves, in making extensive combinations for the avowed purpose of economizing expenses and reducing rates is one of the best arguments in favor of governmental control; for, if it is more economical to place a system of railroads extending across several states under the management of one man, why would it not be still more economical to place a system of railroads extending across several states under the management of one man, why would it not be still more economical to place all our railroads under the general management of a secretary of transportation in Washington, at a salary of $8,000 a year, the same as other members of the president's cabinet?

Our servants, the railroad managers, object to being controlled, saying that their business is of a private nature which does not admit of any interference. That is not true, for the people gave them their characters and their rights of way, and what the people gave they can take away again, unless their business is managed to their satisfaction. It is openly stated, on good authority, that the charters or many railroads in this country are already forfeitable, owing to the misdeeds of their managers.