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getic effort on the part of the Government creased earning capacity and to pocket the investigators brings these things to light.
proceeds. These charges are not to be taken as applying to every railroad line or every railroad financier. But it is unquestionably true that a great part of the recent total increase of the capitalization of American railroads does not represent actual expenditure for improving the roads and their equipment, but rather represents the great game of private financiering, by means of which a set of men have rapidly become multi-millionaires. They have got control of the American railroad system, have bled it unmercifully for their own benefit, and the result is that it no longer serves the practical purposes for which railroads exist.
The ordinary stockholder in the railroad is just as helpless as the unfavored shipper of freight. A great game of railroad strategy has been going on in Wall Street for years past, and one of its principal objects has been to freeze the small investor out, and to concentrate the actual ownership as well as the control of the railroads in a few hands. Thus the most conspicuous achievement of our boasted railroad system within the past few years has been the making of a group of multi-millionaires who have rendered little, if any, return to the stockholders or to the country for their vast acquisitions of wealth and power. They have juggled with securities, have played the stock market up and down, have played tricks with their dividend policies, have so falsified their bookkeeping as to conceal surpluses, and have virtually confiscated the property of the confiding stockholders by the use they have made of the proxies which they themselves have solicited through the mails, at the stockholders' expense.
Plight of the Small Investor.
While the railroad magnates have been thus engaged, this great country has been maturing in its agricultural and industrial life, and its domestic commerce has been increasing in volume and in value every day. If good railroad men, drawing their salaries, letting the stock market alone, and serving the interests of the general public and the honest investors in railroad securities,—had been running the railroads and attending to their business in a proper way, there is not much reason to suppose that the railroads would not also have been developed and improved at an equal pace with the development and progress of the general business of the country. Our great prosperity has not come upon us unawares, and the failure of the railroads to respond efficiently to it is due to the fact that the railroad system has been used for making a set of individuals enormously rich at the expense of the country's prosperity. The "magnates" have been engaged in getting control of railroad properties through the devious methods of corporation finance, and in unloading inflated securities upon the investing public. The country was prospering, railroad earnings were therefore improving, and the masters of railroad finance managed in one way or another to capitalize this in
The Country Ahead of the Roads.
It is true that a great deal of railroad improvement has been accomplished, in spite of all this looting and mismanagement. Heavier cars and locomotives have compelled the use of heavier rails as old tracks have from time to time worn out. But, generally speaking, American railroads, with all their rich traffic, have not been kept up to date. Passenger cars have become shabby and obsolete, and old locomotives have been kept in use which cught to have gone to the junk heap. German railroads under government ownership have been kept up to a far better state of efficiency, circumstances being brought into fair comparison, than our American roads. It does not follow that government ownership is everywhere a remedy. Russia's Transiberian road was a rotten affair through the looting of government officials, just as many of our lines are rotten through the looting of our private railroad financiers.
We have had a long series of The Facts as years of vast prosperity. The They Are. general business of the country has been able and willing to pay for the making of good railroads, for ample, modern equipment, and for prompt, rapid service. Furthermore, the shipping public and the investing public together certainly have paid over to the men in railroad control an amount of money quite sufficient to have given us a series of trunk lines like those of England and Germany, with well-graded roadbeds, heavy double tracks, permanent bridges, decent stations, ample terminal facilities, and good rolling stock and general equipment. For all these things our prosperous American public has not only been willing and able to pay, but has actually
Less attention to this
planked down the money. What is the result? We have a small and select population of plutocrats who control our railroads and have somehow managed to put into their private pockets some hundreds or thousands of millions of dollars through their ability to skim the cream off the country's prosperity, while at least a hundred thousand miles of our railroad system has become unfit for the ordinary needs of current traffic, with rotting cross-ties, light rails, wooden trestles instead of permanent bridges, sharp curves and bad grades surviving from the early period of railroad engineering, shabby and miserable stations, and a general incompetency in equipment and operation that has fallen to a stage of hopelessness and despondency, where it has ceased either to apologize or to be ashamed.
There are vast networks of railSuffering roads in this country where it is Country. a needless expense to print timetables, because there is no longer any such thing as the operation of trains on schedule. There are sections of the country where the railroads are refusing to receive freight for shipment, either because they cannot supply the cars or cannot see any reasonable prospect of having them conveyed to the point of des
tination. It is true there has been rapid growth of population and traffic in the West, but this recent growth has been nothing like so rapid relatively as was that of the seventies and eighties. The railroads have had plenty of warning and abundance of opportunity to keep well abreast of the development of the country. No condemnation of their failure to do this is likely to be too drastic or to state the facts with serious exaggeration. Even the great Eastern trunk lines, serving a country that has been wealthy and prosperous for two generations, have come far short of showing reasonable foresight and due attention to the strict requirements of a legitimate transportation business. One or two fast trains to Chicago, at the expense of general demoralization of all the remaining volume of passenger business,have been about the only thing to which the managers of these roads could point as an example of enterprise. Their general service to the public has declined in efficiency, in a period that has been so prosperous as to have made it easy for a legitimate railroad management to improve all the conditions of service. It is not agreeable to find that the era of great systems has meant shabby equipment and poor service.
So indifferent has our railroad expensive than it would have been a few management been to the safety years ago,-which fact must impose a further of the public and of its own em- burden upon the long-suffering public that ployees, that nearly all its improved appli- the railroad managers continue to exploit. ances for the preservation of life and health We have much diffusion of prosperity to be have been forced upon it by national or State thankful for in this country, and we have action. It would appear that but for the also some rather heavy burdens to bear. Perenergy of the Government, on the one hand, haps the very heaviest of all of these, from and the firmness of organization of the a pecuniary standpoint, is the burden that groups of railroad employees on the other the country suffers in having the railroad syshand, we should have had our railroads oper- tem controlled in its own private interest by ated by underpaid men working 16 hours a plutocratic element incapable of undera day. Where railroad labor is not organ- standing the duties of trusteeship. ized, as illustrated by station agents and other men employed at country places along the lines, the hours of labor continue to be cruelly long, and the rates of payment as a rule are inadequate.
As to Railroad Labor.
The railroads are no longer able Termi, als. to get their freight cars in and out of the yards and terminals of the larger cities. They cannot get their cars loaded and unloaded or returned to the place where they belong. The business of the country has been to a great extent paralyzed for weeks past on account of what is called the "freight-car famine." Yet freight cars by the hundreds of thousands are standing on side tracks and packed into freight yards, all in one weltering chaos of hopeless mismanagement. We have simply reached the climax of a situation that has been coming on for years, and that could have been met without very serious difficulty. The situation cannot be justified by any honest answer from the business standpoint to the question why railroad facilities should not have kept pace with the growth of other business enterprises. Lack of terminals is hard to excuse.
Mr. James J. Hill, who speaks from the standpoint of a practical and capable railroad administrator, declares that in order to handle properly the existing volume of business without providing for natural increase, the railroad companies of the United States must within five years expend not less than $5,500,000,000. This must be used to rebuild old lines, provide double tracks, increase terminal facilities, provide more and better cars and locomotives, and, in general, to change outworn roads and bring them up to modern standards. It is something like saying that we have reached a point where we have no railroads except for temporary purposes, and must proceed to construct an entire new system on permanent principles. To obtain proper terminal areas in our large cities, the roads must now pay enormous prices for land that they could have bought cheaply a few years ago. Yet there seems nothing to do but to make the best of a bad situation, and
Now that the situation has be
for New come desperate, the railroad magCapital. nates are proposing to expend vast sums of fresh capital in making the im-2 provements that they should have been making with energy and foresight and undivided attention during the past 10 or 15 years. They are now with one accord appealing to the public to provide the capital. But the public has been so little in their confidence in years past that it has become frightened. It is not clearly informed as to what has become of the vast amounts of capital that the railroad magnates had already raised within a recent term of years. Furthermore, everything that the railroads must pay for in making the proposed improvements is vastly more
What Is to Be Done?
meanwhile to turn on as much light as possible. The public was rudely shocked last year by the exposures of abuse and mismanagement on the part of men entrusted with the control of the funds of great insurance companies. But after all, those abuses were not of a kind that endangered the solvency of the companies, or that seriously affected the pecuniary_rights of the individual policyholder. The mismanagement of insurance companies has been a mere passing trifle when compared with the mismanagement of American railroad interests.
It is high time now for the railroad managers to get out of Wall Street, and to operate their roads. There is not a system in the country at the present moment that has any reason to be especially proud of its achievements. They are all in the market for enormous sums of money with which to make good the defects due to the negligences, the wastes, and the dubious financial transactions of the past. Even where a set of men have managed by strategem and spoliation to capture control of a railroad, and to own actually a majority of its shares of stock, they have not acquired any right to manage that railroad in their own private interest. Whatever may be the
objections to government ownership,—and those objections are very great,-it would be better than the indefinite continuance of an irresponsible and uncontrolled private management in the interest of a ring of plutocrats. But we are evidently at the beginning of a period of publicity in railroad affairs. Quite irrespective of the ultimate bearings of the facts, it has been of great importance to secure the information that has already come to light by virtue of the Interstate Commerce Commission's investigation of the control of the Southern Pacific by the Union Pacific.
Turning on the Light.
The inquisitorial energy of the general Government has of late caused a great deal of fluttering in the circles of corporation finance. And there has even been an attempt made to arouse the indignant sympathy of the public on behalf of its real benefactors as against a tyrannical and persecuting Administration. But the public is learning that its real prosperity will not suffer from the attempts of the Government to make the railroads serve the public interest. The activity of the federal Government has had its influence in stirring up the States to a like vigor, and the governors, legislatures, and railroad commissions of a number of States are just now giving atten
a great reduction in the market price of the Great Northern shares. Thus there are many shareholders and investors who might feel that if Mr. Hill had kept them informed as fully all along regarding their property as he has now informed them through his statements brought out by the action of the Attorney-General, they would have been in a better position to take care of their interThe investor has, of course, no
real grievance, inasmuch as he Standpoint. had not bought his stock with any pretense of really knowing in an intelligent way anything about his investment, and was taking his chances on general principles. As a general rule, following Mr. Hill has proved a good thing for the investor, and those who have stood by their leader faithfully from the beginning without watching the stock market have not been losers. Those who chose to pay $340 for $100 shares of stock that were regularly paying only 7 per cent. interest were showing a faith that even so great and so honorable a railroad administrator as Mr. Hill could hardly sustain. The Northern Pacific has followed the Great Northern and has announced a stock issue of $95,000,000, equal to 60 per cent. of its outstanding stock, also to be sold at par and paid for in installments extended over a period of two years. If this fresh capital is expended carefully in bettering the property and its equipment, the Northwest should regard it in the light of a real benefit, while
tion to various phases of the question, How to make the railroads efficient and how to bring them under the control of law. In many of the States the railroads have been actively in politics for a long period and have usually had their own way. It will be good for all interests to have the tables turned. It does not follow that the States will in all cases pursue wise methods; but their assertion of the right to know all the facts and to maintain the full authority of the State government is to be encouraged.
One Way to Raise
The Great Northern system, of which Mr. Hill is the head, some Money. weeks ago announced an issue of $60,000,000 of new stock to be sold at par and to be paid for on the installment plan during a period of two years. The Attorney-General of Minnesota has attempted to prevent this issue on the ground that it is in some way likely to add to the burdens of the people who patronize the railroad and from whom its earnings must be derived. From Mr. Hill's point of view it is a commendable method of bringing $60,000,000 of additional capital into the Northwest to be spent in improving railroad facilities for the benefit of a growing traffic that is now very imperfectly handled. If the money is to be used for such purposes, it will be beneficial to Minnesota and the other Northwestern States, and the Attorney-General's objection ought to be withdrawn. The need, however, of raising so much money came as a surprise to the outside investing public and caused