Part 4

However, there is no evidence in all this that the express rates as actually levied may not strike a just and equitable average between the rates too low and the rates too high. Let us therefore compare for a moment the railroad costs of the express traffic with the railroad costs of the Postal System. It has been seen that in 1917 the express companies paid the railroads for transporting some 280,000,000 parcels the sum of $113,535,059. In the fiscal year ending June 30, 1917, the Post Office Department paid railroads and other transportation lines for services in transporting _all postal matter_, including almost 1,120,000,000 parcels, the sum of $63,358,997. (The basis for remuneration to the railroads for transporting postal matter is the size and the weight of the matter transported.) Of course, it must be remembered that for the postal service the railroads furnished the cars. It must be remembered also that the parcels of the express companies averaged heavier weights and travelled longer average distances than the parcels of the parcel-post. Nevertheless, the enormous discrepancy between the two figures cannot be thus entirely explained away. Some of the discrepancy, and obviously a considerable part of it, can be traced only to an unjustifiably high return paid the railroads by the express companies. (Note 4.)

Moreover, the amount thus obtained by the railroads in 1917 from its express traffic was equivalent to about 3-1/2% of the total railroad revenues, although it represented 50% of the total express revenue. Accordingly, even a radical slashing of express rates, with its resulting beneficial stimulation to the express service of the country, could hardly disturb the well-being of the railroads to any serious extent.

Again, the various functions performed by the express companies as subsidiary to the express business proper are on the whole paralleled by similar functions of the Government or other agencies. Money orders, both domestic and international, are issued by the Post Office Department, and in 1917 were issued to the extent of $854,963,806 as against $145,934,982 of the express companies. Telegraph and cable transfers are readily issuable by the telegraph companies themselves. Similarly, the travelers' cheques issued by the express companies could without difficulty and with no less convenience be issued by our large banking institutions performing that service.

* * * * *

It is therefore respectfully submitted that any comprehensive consideration of the express service field in the United States can point only in one direction--toward the consolidation of the express service of the United States with the Postal System of the United States, under the control and management of the Post Office Department.

_METHODS OF ESTABLISHING A GOVERNMENT POSTAL EXPRESS_

Many studies advocating Government ownership and management of public utilities find it necessary to hitch their program to one definite mode of procedure. In the case of the express service, however, no such necessity exists. Several modes of procedure are open, and if one of them seems preferable, none of them is impossible, inadequate or inefficient. The most desirable method now available of substituting a Government postal express for our express companies would seem to be a legal and constitutional confiscation of their property and rights, with adequate compensation. The adequacy of the compensation would naturally entail much discussion--on the one side would stand those insisting that the Government pay for only the contemporaneous value of the physical property taken over; and on the other side would stand those insisting that the contracts with the railroads, good will, and other intangible assets of the express companies possess true value despite their intangible nature and should accordingly be purchased. Supporting the first group would be the policy of the present Government which, as we shall see, has placed the capital of the express combination temporarily handling the express business of the country at $30,000,000, or approximately the value of the actual physical property represented by that combination. Supporting the second group is the Interstate Commerce Commission, through its representative, Franklin K. Lane, in its 1912 decision in the matter of the express rates.

A third method presents itself, but its adoption could be considered only as deplorable, even as reprehensible--namely, purchase of the express companies at their paper valuation. As we have seen, the capitalization of the express companies bears no relation to the value of their property, and chiefly represents, not money invested, but profits accumulated. As a matter of fact, the Supreme Court of the United States some years ago decided that capitalized excess profits may not be used as a basis of computing fair rates of dividends upon capital as against the state. Possibly Congress might find it wise to settle the whole problem in any bill providing for Government acquisition by abiding in the judgment of the Interstate Commerce Commission, leaving the Government or the express companies, or both, the right to appeal to the Supreme Court if dissatisfied.

The express service would represent too unimportant and too different an activity from railroad freight service to be efficiently handled now by the railroads. And mere regulation, as has been seen, affords no solution, for the profits and the equipment represent but an infinitesimal part of the operating expenses.

At this point, the Socialist or the socialist or the person who falls loosely into the category of "radical" or perhaps even the merely "liberal" advocate of the public ownership of public utilities will doubtless exclaim: "But why compensate at all? Isn't it bad enough to have so long permitted a group of entrepreneurs to grow rich by exploiting for their own gain a field which all experience outside the confines of North America proves a field of public endeavor? Why add insult to injury by actually paying them for rendering unto the people the things which belong to the people? Why shall not the Government establish its own express service, as it established the parcel-post, and leave the express companies, so long unchallenged in their activities, to meet Government competition as best they may? If they can meet it, well and good--if they can't, the essentially parasitic nature of their business is proved beyond cavil."

Very good, gentlemen; and if he may be permitted a personal reference, the writer of these lines is in perfect accord with you. The rates of the private express companies under your plan would still be under the control of the Interstate Commerce Commission, and accordingly these private agencies would be unable to compete unfairly with the new Government service by establishing along any of the more popular routes rates far below the cost of the service, in order to cripple the Government service along these routes and hence in its entirety. Moreover, there is every probability that the legislative grant to the Government of a monopoly of the express service of the United States would be upheld by the courts, for a good case could be made out for the essential nature of the express business as a part of the mail business in which the Government has been granted a monopoly. Indeed, monopoly was originally granted the Government mail service to prevent the competition which the Wells-Fargo Company soon after its organization was conducting in the business of carrying letters.

But, gentlemen, what are the chances that a sufficient number of your fellow-countrymen can be brought into accord with you--not merely in their intellectual convictions, but in convictions, intellectual and emotional, so strong that they can be transmuted into a sufficient number of votes in the ballot box to make our lawmakers at Washington give heed--at least in the immediate future? For the problem of the express companies will come up for adjudication, temporary or long-enduring, within some months, or at least within a year or two. Obviously, the present status of the express companies, as described below, will end soon after the war. And Government ownership of the express service, as has been indicated, is so infinitely more advantageous than private ownership, that if Government ownership can be obtained only by your (and my) method, and if we divide our ranks by refusing to support any other method short of one vicious in both principle and practice, the country may return once more to the private express company method. As has been indicated, the whole problem concerns scarcely ten or twenty millions of dollars in a business whose operations amount to more than two hundred millions; and whatever method be adopted, it can hardly effect a difference of 5% one way or another in express rates. If the question were one similar to the Government ownership of railroads, it would indeed be worth delay to obtain a comprehensively adequate method of taking them over by the Government, for marked differences in rates would then result. But the differences in express rates involved in different methods of purchasing the companies would hardly recompense for the delay involved in the postal service's mastery of a new technique, in its assimilation of details which can be mastered only through experience, in tedious litigation, in political wirepulling and manipulation, and in determination of constitutionality, all of which features will accompany the establishment of a new Government postal express independent of the present express companies.

For, by the time that the dissolution of the American Railway Express Company (see below) will come up for final decision, new equipment and the materials for new equipment will still be scarce, very scarce, and very costly in the United States. It would be unfairly prejudicial to an infant Government postal express service if it were hampered by scarcity or high cost of equipment. Indeed, in the long run, in an industrial situation which for many months after peace will be unsettled as a result of the war, it might even be more economical to purchase the express companies outright. And if once the express service is released to its former owners, the difficulty of prying it loose again will involve far greater loss than the loss in adopting even the least justifiable method of consolidating it in the Postal Service.

_THE PRESENT STATUS OF EXPRESS COMPANIES_

As the United States more and more radically altered its industrial processes to correlate them with the needs impressed upon the national life by the Great War, the express companies more and more plainly gave evidence of membership in that group of public utilities which could not unaided weather the storm. Not so soon as in the case of the railways, but not any considerable length of time afterwards, Government intervention became the _sine qua non_ of a continuation of the express business of the United States on an efficient plane. On May 28, 1918, the United States Railroad Administration made public an arrangement with the express companies by which the express service of the country has since been conducted up to the time of writing. Of that arrangement, the salient features follow:

1. A new express company, known as the American Railway Express Company, was organized by the Adams, American, Southern and Wells-Fargo Express Companies.

2. The new company is capitalized only to the extent of the actual property and cash represented in its formation and activities--namely, $30,000,000, and capital stock has been issued for that amount and further stock will be sold at par.

3. With the American Railway Express Company the Railroad Administration made a contract for conducting the express business on all carriers included in the Railroad Administration.

4. Under that contract, the Railroad Administration receives 51-1/4% of the operating revenues.

5. The 49-3/4% remaining to the express companies must cover the operating expenses, taxes, profits and a dividend of 5% on the stock of the American Railway Express Company.

6. In any profits remaining, the first 2% is divided equally between the Railroad Administration and the American Railway Express Company; of the next 3%, the former receives two-thirds and the latter one-third; of all further profits, the former receives three-fourths and the latter one-fourth.

7. The amount of the express rates charged and control over the character of service supplied are vested in the Director-General of Railroads.

Subsequent changes in the arrangement of May 28, 1918, have been as follows:

8. In July, 1918, the Interstate Commerce Commission approved an increase of 10% in express rates, all of which was absorbed, however, according to both the Interstate Commerce Commission and the Director General of Railroads, in wage increases effective July 1, 1918.

9. On September 13, 1918, the Director General of Railroads requested of the Interstate Commerce Commission an opinion concerning a contemplated absolute increase in the express rates on each package, irrespective of weight and distance travelled. The proposed increase would be equivalent to possibly 9% on all traffic; but again, according to the Director General of Railroads, it would cover only increased wages. The Commission was asked only if the proposed increase would net the sum needed, and replied on October 22, 1918, in the affirmative. However, the Commission significantly called attention to the possibility of increasing express revenues by lowering the percentage on all express charges received by the railroads.

10. On November 18, 1918, President Wilson issued a proclamation specifically taking, through Secretary of War Baker, possession, control, operation and utilization of the American Railway Express Company, in order to make the Government's control over that agency indisputably clear. The powers assumed by the Government were delegated to the Director General of Railroads to be utilized according to the prior contract made between him and the American Railway Express Company.

11. On January 1, 1919, an increase of about 9% in express rates went into effect, making a total increase since the United States entered the European War of about 19%, this representing the only increase in express rates since the reduction of 16% ordered in 1912 and effective in 1914, and representing also a smaller increase in rates than was found necessary by the railroads in their freight traffic.

ADVANTAGES

The advantages of this arrangement over its predecessor are undeniable. The consolidation of effort, the reduction in the number of separate express agencies, the minimizing of accounting, the simplification of management, the pooling of equipment and facilities,--these administrative reforms should result in a marked decrease in relative operating expenses. The transfer of control from a moneyed group--or rather from three moneyed groups--interested primarily in private profits to a public official seeking only service to the public, this similarly is a definite achievement. The limitation of the capital stock to the actual cash value of the property and the fixing of the dividends on that stock at a nominal rate, these again are as notable gains in the realm of the express service as the profit-sharing arrangement between the Government and the private companies.

WAGE INCREASES

As has been seen, the increases in express rates since the birth of the American Railway Express have been absorbed in wage increases. Now, in a statistical study, the phrase "wage increases" will connote a mere item of expense, but to the wage-worker it will connote happiness. It means more nourishing food; it means more wholesome dwelling conditions; it means more schooling for the children; it means more recreation; it means more medical care and less illness; it means especially less gnawing fear of what the morrow may hold. The example of the Railroad Administration indicates the widespread services in lessening want or even in increasing comforts which Government control brings in its wake--the raising of all wages to that level below which a decent standard of living cannot be maintained and the abolition of artificial and undemocratic special wage privileges of sex or color in favor of equal pay for equal work. A country which hitches its wagon to a world made safe for democracy can ill afford in any of its industrial activities underpaid workers, and least of all in any of its public utilities. If a Government Postal Express should be compelled to devote all its savings over the private express system only to wage increases among the thousands of men and women express employees, instead of being able to devote some or most of them to lowering the rates, the inauguration of a Governmental Postal Express would be still more than justified.

INADEQUACIES

Nevertheless, the advantages of the present system over the old are not sufficient. A large majority of the 25,000,000 persons served by the rural postal delivery are still without express service. There is still little opportunity for the direct transmission of foodstuffs from the producer to the consumer which at the present time presents the most hopeful method of attacking the soaring cost of food. There is still much potential and helpful express business which has not been called into being, and there is accordingly a considerable lowering in the rates which has not yet been effected. There is still no possibility of coordinating postal facilities with express facilities. There is still no change in the method of remunerating the railroads, and hence in the unscientific and discriminating methods of fixing rates. In a word, if this study may be said to have proved anything, it has proved that the express service belongs to the Post Office Department, not to the Railroad Administration; indeed, one can hardly avoid the deduction that the present war-time express system could have been adopted only from considerations of either temporary political expediency or of transient personal efficiency; or else of inattention to the true nature of the problem presented.

THE LARGER ISSUE

But material gains may not be the summum bonum of the express business. The express service is much more than an important business undertaking, and it is much more even than a valuable agent in quickening the industrial activities of the United States--it is, or rather it can be, one of the most serviceable media for the development of an American culture as that culture expresses itself in the economic processes of the nation. The future of the nation's express service is basically a problem of national morale. In the decades before April 6, 1917, there was no United States esprit, no United States national life, no United States unity. There were only separatist esprits; there was only class life; there was only geographical unity. The war found us an unintegrated miscellany, and our Government a creature strangely and even desirably aloof from the thoughts and aspirations of our daily lives. And now, almost overnight, sacrifice in France and at home has welded us into one people. Shall we remain one, or shall we revert to factions, to factions either at loggerheads with one another, or else indifferent one to the other? Assuredly we shall soon re-degenerate into warring factions unless our still largely inchoate strivings for national unity can discover vehicles to carry them forward. A Government which has become truly a people's Government will long continue in the United States only as it draws unto itself and maintains both the material and the immaterial agencies which dive down to the depths of our national daily existence and bind us together. More powerfully than any other of these forces, our vast public utilities can, as an integral part of the Government, retain our Government as the hub of our universe. And although of all the public utilities the railroads undoubtedly present the most hopeful source of this re-vitalization of our national life, yet a Government express service can also help in no small degree, both in itself and as a sharer in the entire general urge towards a democratically-socialized state, to preserve and even to invigorate the national morale.

And the future of the express service concerns not only national morale, but also individual morale. Aside from a few serviceable and hitherto usually unappreciated social servants, whether in private or in public bodies, success in America has lain along the lines of private enterprise for private gain. For the first time, a widespread summons for service to the people has been able during the nineteen months of war to supplant in the hearts of our most capable administrators the summons to exploitation of the people. For nineteen months they have subordinated self and enthroned society. Shall we send them back to the limbo of self-aggrandizement or shall we carve out new paths for the development of character in our American citizens? For obviously the decades immediately at hand are to witness also a direct growth of the control of the workers over their industry, whether it be private or public industry. Who can hope to measure the gain in individual morale when a man realizes that his own advancement depends upon the extent to which he can serve others, not upon the extent to which he can serve himself; when such a public utility as the express companies is in the hands of administrators who have turned their attention away from endeavors to derive as high rates as possible from the public to endeavors to charge the public as low a rate as possible? If we hope to keep unnarrowed, and even to broaden, the present fields in which opportunity is given our fellow-citizens to devote their lives primarily to their fellows' service rather than primarily to their own gain, any national activity as socially-necessary and as nationally-significant as the express companies must inevitably revert in ownership to the nation to whose needs it ministers, and the men and women within the machinery of its operation must serve owners who are not a handful of individuals, but the people, all the people who make up America.

APPENDIX

EXPRESS CONTRACTS

The contracts made by express companies with railroads usually provide that the railroad must:

1--Furnish facilities for the prompt transportation of express matter, accompanied by express messengers, on passenger and mail trains; in baggage and combination cars; or on special trains made up of express cars only.

2--Turn over to the express company, i. e., give it a monopoly of, all merchandise offered for transportation on passenger trains, except personal baggage, dogs, corpses, etc.

3--Refuse any other express company facilities for the transportation of express matter.

4--Grant the express company, wherever possible, space in railroad stations, without charge where such grant causes no extra expense to the railroad.

5--Grant free transportation to officers and employees of the express company, and for its personal property and supplies.

6--Permit its employees at stations, etc., wherever possible, to be agents also of the express company.

On its side, the express company must:

1--Pay the railroad an agreed percentage (usually about 50%) of the charges levied and collected by the express company for its service of sending matter by express.

2--Throw open its books and tariffs to the scrutiny of the railroad and furnish the railroad whatever additional documents and records may be necessary to determine the correctness of the sums assigned the railroad by the express company.

3--Carry free of charge money and other matter concerned with the business of the railroad.

4--Be responsible for any damage to the expressed goods.