Part 32
======================+================+================+=============== | 1907 | 1908 | 1909 ----------------------+----------------+----------------+--------------- January | $199,000,000 | $173,611,809 | $183,139,419 February | 178,300,000 | 161,085,493 | 174,425,832 March | 211,700,000 | 183,509,935 | 205,700,012 April | 214,800,000 | 175,071,604 | 196,993,104 May | 224,800,000 | 174,527,138 | 201,572,072 June | 223,000,000 | 184,047,216 | 210,356,965 +----------------+----------------+--------------- Half year | $1,251,600,000 | $1,051,853,195 | $1,172,185,404 +----------------+----------------+--------------- July | $228,672,250 | $195,245,655 | $219,964,739 August | 241,303,469 | 206,877,014 | 236,559,877 September | 234,386,899 | 219,013,703 | 246,065,955 October | 250,575,757 | 233,105,042 | 260,613,053 November | 220,445,465 | 211,281,504 | 247,370,954 December | 194,304,969 | 205,455,170 | 222,006,183 +----------------+----------------+--------------- Half year | $1,369,688,809 | $1,270,978,038 | $1,432,580,761 Total | 2,621,288,809 | 2,322,831,233 | 2,604,766,165 Average mileage | 227,000 | 231,584 | 234,950 Earnings per mile | $11,548 | $10,030 | $11,086 | | | ----------------------+----------------+----------------+---------------
SUMMARY OF OPERATING EXPENSES OF THE RAILWAYS DURING THE CALENDAR YEARS 1907, 1908 AND 1909, BY MONTHS AND HALF-YEARLY PERIODS, WITH RATIOS TO GROSS EARNINGS.
======================+================+================+=============== | 1907 | 1908 | 1909 ----------------------+----------------+----------------+--------------- January | $134,225,000 | $132,502,830 | $132,659,037 February | 121,500,000 | 123,773,906 | 125,229,071 March | 142,425,000 | 128,200,065 | 136,086,299 April | 144,990,000 | 124,284,164 | 134,612,576 May | 151,740,000 | 123,932,568 | 135,846,301 June | 150,525,000 | 124,208,561 | 136,160,775 +----------------+----------------+--------------- Half year | $845,405,000 | $756,902,094 | $800,594,059 Ratio | 67.7% | 72% | 68.3% +----------------+----------------+--------------- July | $152,992,445 | $127,978,304 | $141,613,967 August | 156,837,914 | 131,557,475 | 146,175,338 September | 156,631,780 | 137,155,143 | 150,621,999 October | 166,999,266 | 144,195,330 | 156,628,513 November | 154,150,468 | 136,809,421 | 153,043,599 December | 142,631,008 | 136,867,622 | 153,699,578 +----------------+----------------+--------------- Half year | $930,242,881 | $814,563,295 | $901,782,994 Ratio | 68% | 64.1% | 62.9% +----------------+----------------+--------------- Total | $1,775,647,881 | $1,571,465,389 | $1,702,377,053 Ratio | 67.8% | 67.7% | 65.4% +----------------+----------------+--------------- Net operating revenue | $845,640,928 | $751,365,844 | $902,389,113 Taxes | 83,156,188 | 86,872,885 | 92,964,510 +----------------+----------------+--------------- Net operating income | $762,484,740 | $664,492,959 | $809,424,603 ----------------------+----------------+----------------+---------------
Through these tables the reader is able to trace the upward course of railway receipts in 1907 to their culmination in October of that year; their rapid drop to February, 1908; through the hard summer following to the gradual recovery of 1909, until in October last they reached the highest monthly total on record.
Concurrently with this story of the depression of 1908, the tale of railway distress and of the drastic measures adopted to meet the emergency can be read in the half-yearly ratios. The ratio for the fiscal year 1906-'07 was 67.53%, and the shadow of approaching trouble was shown in an increase of this ratio to 67.7% for the first six months in the table. By December this ratio had risen to 73.40%. The enormous receipts of the autumn months held the ratio for the six months down to 68%. In February, 1908, it marked the high and ruinous figure of 76.84, and from that point the trend, due to severe retrenchments, was steadily downward until it touched 60.10% in October, 1909.
The ratio of 64.1% for the second half of 1908 is the true measure of the ability of the railways to cut their expenditures to fit the times. But they were on bed rock, as the succeeding months of small receipts proved, when the ratio went up to 72.43% in January, and averaged the high figure of 68.3% for the first six months of 1909. The heavy receipts of October and November without a corresponding expansion of expenditures resulted in the phenomenally low ratios of these months. But the severity and necessities of operating conditions in December, 1909, ran the ratio of expenses up to 69.23%.
The net earnings for the three years under consideration are apt to lead to erroneous conclusions as to the effect of the depression. Neither the loss in 1908 nor the recovery in 1909 reflects the true swing of the pendulum. The one minimizes the loss, because it conceals the cessation of all constructive work, the curtailment of betterments and improvements, and the postponement of all purchases for replacements except of the most immediate and imperative nature; the other exaggerates the recovery because of heavy receipts without the resumption of the concurrent expenditures that should attend them. The railways in the fall of 1909 were simply doing business on the margin of facilities provided during the fat months of 1907 in anticipation of a continuation of prosperous times. Some idea of the extent of this margin may be gained from the parking of 400,000 freight cars in the yards with 200,000 in the shops in April, 1908. At no time since has this margin been wholly exhausted.
But a continuation of traffic on the scale of the past six months will necessitate an immediate expenditure of $100,000,000 to $150,000,000 for the replacement of freight cars alone.
INCOME ACCOUNT FOR THE CALENDAR YEAR 1909.
The monthly summaries issued by the Interstate Commerce Commission from time to time afford the details for the construction of the following statement of the transportation revenues and expenses of the railways for the calendar year 1909, from which the averages per mile and the ratios have been computed on the basis of 234,950 miles of operated line.
STATEMENT OF OPERATING RECEIPTS AND EXPENSES OF THE RAILWAYS OF THE UNITED STATES FOR THE CALENDAR YEAR ENDING DECEMBER 31, 1909, WITH AMOUNTS PER MILE AND RATIOS.
(Average miles of line operated, 234,950.) (a)
====================================+================+=========+======== | | |Ratio to | Amount |Per Mile | Gross | | |Earnings ------------------------------------+----------------+---------+-------- Receipts from: | | | Freight | $1,796,258,314 | $ 7,645 | 68.96 Passengers | 601,722,959 | 2,561 | 23.10 Other transportation revenues | 182,706,090 | 777 | 7.01 Non-transportation sources | 24,080,802 | 103 | .93 +----------------+---------+-------- Total revenues | $2,604,766,165 | $11,086 | 100.00 | | | Expenses: | | | Maintenance of way and structures | $ 339,167,666 | $ 1,448 | 13.06 Maintenance of equipment | 387,155,080 | 1,644 | 14.83 Traffic expenses | 53,257,408 | 223 | 2.01 Transportation | 857,339,037 | 3,650 | 32.92 General expenses | 65,441,053 | 280 | 2.52 Unclassified | 16,809 | -- | -- +----------------+---------+-------- Total expenses | $1,702,377,052 | $ 7,245 | 65.35 Net operating revenues | 902,389,112 | 3,841 | 34.65 Profit from outside operations | 3,367,713 | 14 | +----------------+---------+-------- Net revenues | $ 905,756,825 | -- | -- Taxes | 92,964,510 | 395 | 3.56 +----------------+ | Net income | $ 812,792,315 | $ 3,460 | ------------------------------------+----------------+---------+--------
(a) At the close of the year the reports covered 236,166 miles of operated line.
Unfortunately there are no similar figures for the calendar year 1907 with which comparisons may be made, but the official returns for the year ending June 30, 1907, when railway earnings reached their maximum before the panic of that year, afford the following instructive comparisons:
===============================+=====================+================ | Year to | Year to | June 30, 1907 | Dec. 31, 1909 -------------------------------+---------------------+---------------- Gross earnings | $2,589,105,578 | $2,604,766,165 Per mile | 11,383 | 11,086 Operating expenses | 1,748,515,814 | 1,702,377,053 Per mile | 7,687 | 7,245 Ratio | 67.53 | 65.35 Net revenues | 840,589,764 | 902,389,112 Per mile | 3,696 | 3,841 Taxes | 80,108,006 | 92,964,510 Per mile | 367 | 395 -------------------------------+---------------------+----------------
It will be perceived that while the earnings in 1909 exceeded those of 1907 by over 15½ millions they were almost $300 less per mile, while the operating expenses were actually $442 less per mile. The decreased operating ratio in 1909 bears unmistakable testimony as to where the increase in net revenues came from.
With an increase of nearly 9,000 miles of line only $339,167,665 was spent on maintenance of way and structures in 1909 against $343,544,907 in 1907, and the urgent demands of returning activity made the expenditures on this account liberal in comparison with those for the year ending June 30, 1909, i. e. $311,368,083, or $1,336 per mile. It will be years before the railways recover from the economies forced on them by the loss of $300,000,000 in revenues in 1908.
UNREGULATED REGULATION OF AMERICAN RAILWAYS.
Today the railways of the United States are "cribb'd, cabin'd and confined" in their services to the American people, not so much by the laws for their regulation as by the spirit in which those laws are administered. To the general tenor and purposes of statutory regulation the railways have become largely reconciled; but from the spirit in which the laws are sought to be enforced, there has to be continuous appeal to the courts and to the public sense of justice.
Regulation of railways has been persistently interpreted by political Commissions to spell reduction of rates and exacting conditions that would drain the purse of Fortunatus. Between 1889, when the Interstate Commerce Commission's statistics first became a valuable index of railway operation, and 1909, the average rate per ton mile has fallen from 9.22 to 7.55 mills. On the freight tonnage of 1909 this meant a reduction of over $372,000,000 in the yearly revenues of the railways. The railways suffered that loss from their income when they needed every cent of it to maintain the people's highway in a condition to transport the people's ever-growing traffic.
The railways lost it, but who got it? The people? Search the market reports of the land, from Eastport to San Diego, and you will find incontestable proof that not one cent of these millions reached the pockets of the people, in whose name all regulation of railways is demanded and for whose benefit all reductions are claimed. The average rate on all commodities has gone down, the price of every commodity transported by the railways has gone up. Who has pocketed the difference?
There can be only one answer--the producers, the shippers and the traders. Today nine-tenths of the increased cost of living in the United States is chargeable to this ever vigilant and aggressive coalition. For everything the railways must buy--labor, supplies, money--they have to pay the advanced prices of the day. But the protests of the shippers and the rulings of the Commission forbid their raising a rate or adopting a money-saving economy. They attempted to readjust freight rates in 1900 one-fiftieth of a cent per ton mile above a ruinously low average and the outraged shippers secured the passage of the Hepburn Act!
How the federal Commission and shippers work together for the so-called regulation of the railways is evidenced in the unbroken tenor of the decisions handed down by the Commission. Out of 357 decisions printed during the year 1908-09, no less than 219, or 61.3%, were orders granting reductions of rates or reparation for charges found comparatively excessive or unreasonable. In not one case in a score was the rate found excessive or unreasonable per se. In only one case out of the 357 was an increased rate ordered, and this was done reluctantly and as unavoidable.
Although the decisions are for the most part the unanimous finding of the Commission, the following table distributes the opinions of the year among its members into dismissals and reductions or reparations among the Commissioners writing them:
=================================+============+============== | | Granting Opinion by | Dismissing | Reductions or | Complaints | Reparation ---------------------------------+------------+-------------- Chairman Knapp | 21 | 20 Commissioner Clement | 16 | 29 " Prouty | 13 | 40 " Cockerill | 20 | 20 " Lane | 20 | 42 " Clark | 29 | 28 " Harlan | 19 | 40 +------------+-------------- Total | 138 | 219 Per cent | 39.7 | 61.3 ---------------------------------+------------+--------------
Some of the cases upon which the Commission is called on to pass are so trivial as to be beneath the notice of a justice's court, while others involve issues so momentous as to threaten the whole structure of railway rates by which the unparalleled prosperity of the country has been made possible.
But the number of cases reaching the Commission for adjudication is insignificant compared with the grist of informal reparation orders that runs an endless stream through its regulating rollers. In the twelve months from December 1, 1908, to November 30, 1909, these aggregated no less than 2,223 separate orders involving amounts all the way from 47 cents to $14,717.64, as seen in the following orders:
7100. _Larabee Flour Mills Company_ v. _Atchison, Topeka & Santa Fe Railway Company_. September 11, 1909. Refund of $0.47 on shipment of cotton bags from Kansas City, Mo., to Hutchinson, Kas., on account of excessive rate.
3629. _Lackawanna Steel Company_ v. _Central Railroad Company of New Jersey_. June 26, 1909. Refund of $14,717.64 on shipments of spiegeleisen from Newark, N. J., and Hazard, Pa., to Buffalo, N. Y., on account of excessive rates.
Multiplying these awards by the number of orders enables the reader to imagine the range of their respective pettiness or portentous possibilities.
It is doubtful if the American people, or even the Interstate Commerce Commissioners themselves, realize how the formal decisions and informal orders of the Commission are slowly but surely whittling away the safe margin of American railway profits. At the rate of two decisions every three days and forty informal orders per week, the work of incipient confiscation proceeds with remorseless enthusiasm.
With the best intentions in the world the present Interstate Commerce Commission is so enmeshed in its own anti-railway traditions, so enamored of the administrative control theories of its statistician, so covetous of unbridled, irresponsible authority to tear down where it has no constructive capacity, that anything like co-operation between the Commission and the railway management for the public good seems out of the question.
To the writer it appears that only blind rejection of facts can find any conserving element in the regulation of railways as at present administered. Signs of a helpful disposition in official acts are entirely lacking. The Senate and House calendars groan under bills for the further regulation and restriction of the railways, but not one contains a promise of relief. For not one is there a genuine public demand.
And what is the situation as this is written? It can be stated in a few lines. As a consequence of the drop of $300,000,000 in gross earnings in 1908, the railways in 1908 and 1909 cut $277,000,000 out of their expenditures. This was done mainly at the expense of maintenance of way and structures and in a cessation in the purchase of equipment, but the so-called economies of postponed expenditures permeated every line of railway extension, operation and replacement. In 1908, with 6,000 more miles of track to maintain, $18,788,217 less was spent for maintenance than in 1907, and in 1909 with 12,000 more miles of track $32,176,824 less was expended.
Between 1897 and 1907 the expenditures for maintenance of way increased from $159,434,403 to $343,544,907, or over 115%. This means an increase of approximately 8% a year, or at least $25,000,000 on present plant. Therefore at least $43,000,000 was withheld from this essential line of railway maintenance in 1908 and fully $82,000,000 in 1909, a total of $125,000,000. The saving on equipment was nearly as great and is dealt with in the body of the report.
A comparison of the income accounts for the month of October, 1907 and 1908, corroborates the foregoing statement as to the economies forced on the railways by the adverse winds of regulation and business depression.
=================================+===============+============= Month of October | 1907 | 1909 ---------------------------------+---------------+------------- Earnings from operation | $250,575,757 | $260,613,053 Operating expenses | 166,999,266 | 156,628,513 +---------------+------------- Net earnings | $ 83,576,491 | $113,984,540 Operating ratio | 66.64 | 60.10 ---------------------------------+---------------+-------------
The canker worm in this, the most promising flower of returning prosperity, is revealed in the abnormal ratio of 60.10 for October, 1909, or nearly 7% below the American average. Now this 7% on the revenues of last October means that in some way over $16,000,000 less than normal was expended on American railways in that month alone. And October, 1909, was only a sample of how railways had cut expenses for 24 consecutive months.
That this should be so, with no reduction in the scale of wages or the price of supplies, is, in the view of the writer, a situation of serious national concern. Happily he is not charged with any commission to suggest how or where the deferred debt of nearly $300,000,000 to efficient railway road and equipment is to be met. But that it must be met, to place the railways in as good condition as they were before the panic of 1907, when the cry was for more, not less facilities, does not admit of question. If it, together with the advance in wages now being adjusted, is to be met out of income, only an advance in freight rates can take care of it. If out of fresh capital, it can only be coaxed from the pockets of shrewd investors by rates of interest that discount the risk attendant on the unregulated and irresponsible regulation of railway revenues, resources and responsibilities. And it is proposed to make an irresponsible Commission, unfamiliar with the necessities of the situation and unversed in the ways and means of raising capital arbiters of these necessities, ways and means.
All attempts to meet such a situation by legislation, unless it be directed to a reform of the instrumentalities of regulation, must prove ineffectual. In a broader, saner, more helpful administration of the laws already on the federal and state statute books lies the hope for the future of the great American transportation industry. "Whate'er is best administered is best."
THE BUREAU'S STATISTICS FOR 1909.
Thus far what has been written has related almost wholly to the financial aspect of the transportation industry as presented through the monthly reports of the railways. While these in their way serve as an admirable barometer in keeping the public informed as to general business conditions throughout the Union, they throw little light upon the railway operations behind the financial results. They are absolutely dumb on the main question upon which all railway legislation and regulation should hinge--adequate and efficient public service.
In the following pages the Bureau attempts to remedy this omission, in the essential particulars for the year ending June 30, 1909. The reports from which its summaries have been compiled were received almost a month earlier this year than last, but the publication of the Bureau's statistics has been delayed in order to make the usual comparisons with the Official Statistics for 1908. The writer is advised from Washington that the fault for this unusual delay rests with the Government printer--whose office is overwhelmed with Congressional and departmental work--and not with the Interstate Commerce Commission or its Bureau of Statistics and Accounts.