ager and purchasing agent, with headquarters at Texarkana, Ark. During the period of government administration of the railroads, he served as general freight and passenger agent for the L. & A. at Texarkana, and in 1920 he was re-appointed traffic manager. In 1928, Mr. Atkinson was elected senior vice-president in charge of all departments of the L. & A. Herbert W. Bondurant, freight traffic manager of the Southern, with headquarters at Cincinnati, Ohio, has been appointed assistant vice-president, with head Herbert W. Bondurant quarters at Washington, D. C., effective February 1. He will have charge of system freight sales and traffic service matters. Mr. Bondurant, a native of Tennessee, entered the service of the Southern at Nashville, Tenn., in 1912, and advanced through various capacities at Philadelphia, Pa.; Memphis and Nashville, Tenn.; Little Rock, Ark., and Dallas, Tex. Eventually he was appointed division freight agent at Charlotte, N. C., and still later he became assistant freight traffic manager at the same point. For three years he served as assistant freight traffic manager at Atlanta, Ga. In February, 1938, Mr. Bondurant was appointed freight traffic manager, with headquarters at Cincinnati. OPERATING N. A. Link, assistant superintendent on the Canadian Pacific, with headquarters at Wilkie, Sask., has been transferred to Ravelstoke, B. C., relieving A. A. Smith, who has retired. A. J. Lomas, assistant superintendent, Capreol division, Canadian National, has been appointed superintendent of same division with headquarters as before at Capreol, Ont. John P. Kiley, engineering assistant in the office of the chief financial officer of the Chicago, Milwaukee, St. Paul & Pacific, has been appointed special representative of the chief operating officer, with headquarters as before at Chicago. T. K. Williams, assistant superintendent on the Illinois Central, with headquarters at Water Valley, Miss., has been promoted to superintendent at that point, succeeding Albert D. Caulfield, whose death on January 14 was announced in the Railway Age of January 20. J. A. Quick, superintendent of the Pacific Great Eastern, with headquarters at Squamish, B. C., has been appointed acting general manager, with headquarters at Vancouver, B. C., succeeding Robert Wilson, deceased. TRAFFIC Ralph H. Morris, assistant freight traffic manager of the Southern, with headquarters at Louisville, Ky., will retire, effective February 1. Goodrich K. Murphy, assistant to the passenger traffic manager of the New York, New Haven and Hartford, has been appointed assistant passenger traffic manager in charge of passenger sales and development, with headquarters at New York City. J. G. Morrison, freight traffic manager of the Northern Pacific, has been appointed, effective February 1, general freight traffic manager in charge of rates and divisions, a newly created position, with headquarters as before at St. Paul, Minn., and W. H. Millard, eastern freight traffic manager, with headquarters at New York, has been promoted to freight traffic manager in charge of solicitation east of the Pacific coast territory, with headquarters in St. Paul. W. C. Stotler, assistant general passenger agent on the Baltimore & Ohio and the Alton at Chicago, has been promoted, effective February 1, to general passenger agent, with headquarters at Pittsburgh, Pa., replacing J. P. DeVaughn, whose death on December 26 was announced in the Railway Age of January 6. William E. Meuse, assistant general passenger agent on the B. & O. and the Alton at Chicago, will succeed Mr. Stotler as assistant general passenger agent in charge of solicitation at that point. OBITUARY Parker C. Newbegin, chief engineer of the Bangor & Aroostook, with headquarters at Houlton, Me., died on January 22, at the age of 70 years. Emil L. Mackenroth, assistant superintendent of telegraph for the Northern Pacific, died in a Tacoma, Wash., hospital on January 16 at the age of 65. A. W. Blume, general storekeeper of the St. Louis-San Francisco, with headquarters at Springfield, Mo., died of injuries received in an automobile accident near Joplin, Mo., on January 19. W. S. Reeder, trainmaster on the Chicago & Eastern Illinois, with headquarters at Salem, Ill., died on January 21, from injuries received that day in an automobile accident a few miles west of Salem. James T. Colbert, general superintendent of the Pittsburg & Shawmut, at Kittanning, Pa., died at Pittsburgh, Pa., on January 17, at the age of 69. Mr. Colbert was born in Hornell, N. Y., March 4, 1870. He entered the service of the Erie in 1885, and was employed in various capacities in station, train and yard services until 1903, when he entered the service of the Pittsburg, Shawmut & Northern as assistant yardmaster. He served successively with that road as yardmaster, assistant trainmaster, chief clerk to superintendent, chief clerk to general superintendent, and superintendent car service. He entered the service of the Pittsburg & Shawmut on August 1, 1916 as superintendent, with headquarters at Kittanning, Pa., and was promoted to general superintendent, May 1, 1917, the position he held at the time of his death. C. E. Olp, superintendent of the Syracuse division of the New York Central System, died on January 14. Mr. Olp was born at Mt. Morris, N. Y., on April 5, 1875, and entered the service of the New York Central on July 28, 1893, as a signal inspector on the Western division. On October 1, 1904, he was appointed chief signalman on the Buffalo division, being transferred in the same capacity to the Syracuse division on December 1, 1908. On March 18, 1912, he was appointed acting trainmaster of the Syracuse division and was promoted to trainmaster of the same division on October 1, 1912, the position he held until April 22, 1922, when he was appointed superintendent of the Syracuse division. From January 1, 1927, to February 1, 1930, he was superintendent of the Ontario division, and from February 1, 1930, to November 1, 1939, he was again superintendent of the Syracuse division. On November 1, 1939, he was granted a leave of absence because of illness. William C. Cushing, formerly engineer of standards of the Pennsylvania, whose death on January 12, at his home at Germantown, Pa., was announced in the Railway Age of January 20, was born on March 18, 1863, at St. John, N. B., and was educated at the University of New Brunswick and at Massachusetts Institute of Technology. He first entered railway service in 1887, as a rodman on the engineering corps of the Jeffersonville, Madison & Indianapolis (now part of the Pennsylvania). Two years later he became engineer maintenance of way on the Cincinnati & Muskingum Valley (now also part of the Pennsylvania), being appointed division engineer on the Pennsylvania in 1890. In January, 1901, he was promoted to superintendent, serving successively in this capacity on the Panhandle and Eastern divisions. In 1903, he was promoted to chief engineer maintenance of way of the Southwest System, which position he held until 1918, when he took over the same position on the Lines West of Pittsburgh. His appointment as engineer of standards came in 1920. In this position, which he held at the time of his retirement, he was attached to the staff of the chief engineer, with jurisdiction over the standardization of practices and methods in the maintenance of track and roadway structures. Mr. Cushing was a charter member of the American Railway Engineering Association and for many years was active in the affairs of this association, serving as president in 1911-12. RAILWAY AGE The I. C. C.'s Discerning It was not Earl Browder or Norman Thomas who conceived the proposed 240-million-dollar Lake ErieOhio River canal; nor even such "liberals" as, say, Senators Norris and LaFollette-i.e., liberal in their ideas as to the propriety of the government's intervening in economic enterprise. The project, involving as it does a large expansion of socialism in the field of transportation, was conceived and has been enthusiastically advanced by business interests that would loudly resent any such intrusion of socialism into their industries. The most important of these business interests are large manufacturers belonging to the National Association of Manufacturers which not long since in its pamphlet "A Study of Depressions" demanded "recognition that private business cannot compete on equal terms with government-subsidized industry, and that the undertaking of such competition by government discourages private industry, diminishes employment and thus tends to prevent sustained prosperity." Waterways Merely a Device for Preferential Rates Hitherto the army engineers, to whom all such projects for waterway expansion are referred for investigation and report, have usually calculated prospective "savings" from an improved waterway by contrasting existing railway rates on the traffic in prospect with the estimated costs to shippers of barging the traffic if the taxpayers of the entire country provide a waterway. But waterways have not turned out according to predictions, because railway rates prior to the construction of a waterway have been proved to be no measure of actual costs of railway transportation. Such costs, indeed, when compared with those by inland waterway are often so low that the railroads can better afford, rather than lose the traffic, to make rates that will hold it, despite the fact that the user of the waterways pays only the costs of operating his barges. The result of inland waterway construction, therefore, has often been, not the movement of any considerable part of the competitive traffic by water, but merely the reduction of the railroad rates on it for the few shippers who happen to be fortunate enough to be situated upon the waterway. Chairman Eastman said in his dissenting opinion in the recent Tennessee River Petroleum Rates case, "It would be more economical for the government not to construct and maintain the waterways, but instead to use an equivalent amount of money as a subsidy to the railroads in exchange for lower rates." In many instances waterway construction-at the public expense, of course-has been promoted by shippers, not because they really wanted water transportation, but solely to beat down railway rates. Observation of the fact that inland waterways are primarily only a device by which favored shippers secure a reduction of their railroad rates led the army engineers to raise some questions about the proposed Lake Erie-Ohio River canal. The cost to the shipper on the proposed canal, it is estimated, would be 72 cents less per ton than existing railway rates. But, it is estimated that, in order to save the shipper this 72 cents per ton, the taxpayers of the entire country would have to pay 43 cents per ton in waterway costs. (In considering this estimate of 43 cents, the fact should not be disregarded that the actual expenditures made on waterways usually have been at least twice as large as the army engineers' original estimates, and that therefore, to make the saving of 72 cents per ton for the shipper, the cost imposed on the taxpayers would much more likely be 86 cents than 43 cents.) So, the army engineers ask, why wouldn't it be better for the railroads (if they can) to reduce their rates 29 cents a ton before the canal is built, rather than be forced to compete with a 72-cents saving to waterway shippers after the waterway is built? The inference is that, if the railroads will make this reduction of 29 cents, then the waterway should not be built. "Mene, Mene, Tekel. Upharsin" The President (for the first time in the history of such projects) asked the Interstate Commerce Commission to report to him, first, on the feasibility of reducing railroad rates in this area by 29 cents per ton, and, second, on the effect that the canal, if built, might have on railroads and motor carriers. The report made by the commission to the President three months ago was made public only last week; and it is reviewed on another page herein. This report of the commission is a remarkable, and possibly even historic, document. It leaves several important questions unanswered, because the terms of reference which hedged around the President's submission to the commission limited the scope of its replies. Despite these limitations, the report gives evi dence of the most comprehensive viewpoint of the fundamental questions involved in rational solution of the nation's transportation problem which has ever been given formal expression by an official government body. The commission concluded that railway rate reductions such as those proposed by the army engineers could not in justice, and probably not even legally, be made prior to the actual construction of the canal; that the reduction of rates necessary to enable the railways to hold the traffic after its construction would be well above. the 29 cents per ton previously considered; and that the construction of the canal would entail a loss of $35,000,000 or more a year to the railroads and some additional losses to motor carriers. But the commission went beyond this bald statement to make the following observations (which we have numbered for convenience in reference): (1) The services of each such carrier [i. e., those railroads serving the Lake Erie-Ohio River area] are required in the public interest . . . Each of these carriers has ample . . . capacity to meet satisfactorily any traffic demand . . No one has urged that the proposed waterway is required to relieve the railroads of a load they cannot carry. (2) The railroads must provide facilities for year-round service, whereas the waterway will be open throughout its entire length for not more than 8 months The provision of competing water service will not materially reduce the supply of facilities the railroads must maintain to meet the public's needs. . . The unit costs of the rail service that remains would increase, causing an effort to increase the rates on the remaining traffic. ... (3) Sight may not be lost of the effect of loss of traffic on employment and on the scale of wages the railroads will be willing to pay. (4) The public also is interested in the railroads, both as a great service agency and as an agency which contributes materially to the support of the general functions of government. Plans for the proposed waterway relieve its users of the burden of supporting it. Under these plans the saving to the shipper of 72 cents per ton, as estimated by the Board [i. e., of Army Engineers], is made possible through the placing on taxpayers generally a cost of 43 cents per ton. would be a toll-free and tax-exempt facility. It would also take a considerable area of land and its appurtenances off the tax rolls. This condition, which goes back far in the relations of rail and water transportation, cannot, in the public interest, be overlooked in appraising the worthwhileness of the project. It (5) Use of the waterway would be confined to a relatively small number of larger shippers, many of whom would operate their own equipment over it, whereas the railroads, as public carriers, serve all who apply, large and small. Railroads weakened by public provision of facilities for their competitors cannot respond as fully as they should to the needs of the public for efficient and safe transportation. Why Not Ask the I. C. C.'s Views on Other Waterways, Mr. President? For all its guarded language, does not the above constitute a deep and sweeping indictment of the general policy (if such it can be called) of government (state as well as federal) toward transportation in this country? That is to say, if the statement in paragraph (1) above as to the adequacy of existing transportation plant is true, as it undeniably is, then does not that statement call into question not only the Lake Erie Ohio River canal, but practically every other inland waterway heretofore constructed or now proposed? Since, as paragraph (2) indicates, the construction of an inland waterway enforces the maintenance of a great stand-by railroad plant, the question is raised by implication as to why other users of transportation or railroad-owners should have to assume such a burden, when they are not going to receive any of the "benefits" of the proposed waterway. The federal government-both the New Deal and prior administrations-has shown, as far as the record is concerned at least, a great concern for the welfare of workingmen in general, and railroad labor in particular. As the commission, by implication, points out in (3) above, there is not much practical benefit in having "paper" wages and "paper" working conditions on the railroads which are favorable to employees, if the same alleged "friends" of labor who help establish these conditions "on paper" are going to prevent the movement of traffic at such favorable wages and under such favorable working conditions. The quotations given in (4) and (5), if their logic is carried only one step forward, become as damning an indictment of existing so-called government "policy" toward transportation as any responsible person has yet uttered. Carrying the argument of these paragraphs the one step forward we arrive at the following: Isn't the Following a Fair Statement of the I. C. C. Position? Railroad service is necessary to the public welfare, because such service, on the average, is the most economical service available to all citizens without discrimination. The railroads are also an indispensable source of tax revenue for the support of the general functions of government. It is, therefore, contrary to the public interest to use general tax funds in a manner calculated to destroy a source from which such tax funds are derived. It is equally contrary to the public interest to build, out of tax money, transportation facilities available only to the favored few, when the inevitable result must be an increase in cost and a deterioration in the service of carriers who serve all alike. We conclude, therefore, that neither the Lake ErieOhio River canal, nor any other public transportation facilities should be built except those which will, by fees paid by the users, compensate fully for the cost of the facilities provided, and yield, moreover, a return equivalent to the tax revenues which would be levied upon the proposed facilities if they were in private ownership-this caveat being particularly applicable where the proposed new transportation is to be of direct benefit to only a small area or segment of the population. If the above statement is not a fair interpretation, in terms of broad general policy, of the commission's views as disclosed in its report upon this specific pro ject, then we shall be glad to be corrected. Moreover, if anyone can offer any objection to such a policy from the standpoint of the protection of the public interest, we should like to hear it. The commission (or an influential part of it at least) is plainly growing in intellectual stature and in its sense of public responsibility. We wish we could say as much for all the individual commissioners. The dissenting opinions of four of them in the Naval Stores case (No. 27571), reviewed elsewhere in this issue, betray the same poverty of outlook and understanding which we have frequently in the past felt obliged to criticize. In this Naval Stores case there were five dissenters, four of whom gave their reasons. In general, the effect of their notions, had they prevailed, would have been to have forced the railroads to maintain rates far higher than their costs require, merely to enable high-cost and inefficient truck competitors to stay in business. Such a decision could only have the effect of saddling on the nation indefinitely the costs of supporting an enormous duplication of transportation plant, thus reducing the national income and the standard of living of the American people. Competition, when it is natural, is usually a constructive force, making for increased wealth and well-being-but when it continues solely as a result of a political umbrella held over high-cost producers, as the dissenters attempt to do in the Naval Stores case, it is little more than a share-the-poverty scheme, such as that put forward by the lamented Huey Long. Be that as it may, the commission has done a splendid job (and, we hope, one of great historical importance) in coming as near as it has to calling a spade a spade in its report on this colossal Ohio canal grab. We'll not cavil, therefore, that some of its component. minds are disclosed to be as narrow as ever they were, but rather rejoice that, in dealing with some great questions, it has been possible to transcend the puny and provincial. Big Business With No Faith in Private Enterprise This Ohio canal case most forcibly emphasizes two extremely important points— (1) The determined and reckless effort continuing to be made by some Big Business interests to promote, for their own selfish purposes, government policies affecting the railroads exactly like those affecting their own industries that they constantly and loudly denounce as socialistic, un-American and tending to undermine and destroy private enterprise. (2) The need for legislation requiring that certificates of public necessity and convenience be secured from the Interstate Commerce Commission authorizing the construction of additional waterways and commercial highways, just as existing law requires the securing from the commission of certificates of public necessity and convenience authorizing the construction of additional railway lines. There is no form of hypocrisy manifested in this country equaling that of Big Business interests that pretend to oppose government subsidized competition with private business, and at the same time constantly promote government-subsidized competition with the railroads at the expense of all the taxpayers and to the detriment of all other business. And there is no more grotesque inconsistency in present government policy than its requirement that the railroads shall get certificates of public necessity and convenience before building new lines at their own expense, and its failure to require certificates of public necessity and convenience for the construction of inland waterways and commercial highways at the taxpayers' expense to be used in competition with the railways. Watering the Iron Horse Through the Drought The railways of the country have faced more severe and widespread drought conditions in recent months than have prevailed for many years. As pointed out in an article in the Railway Age of January 20, entitled "Water Service Men Fight Drought on Many Fronts," stream flow in many parts of the country diminished, and in many cases failed entirely, reservoirs were rapidly depleted, and even sub-surface supplies were affected in some areas. More striking still is the fact that, for the first time in history, the flow in the Mississippi river was so small that salt water from the Gulf of Mexico backed up into it for a distance of 200 miles, or far above New Orleans, La., presenting a serious problem to every road in this territory that relied upon river water for locomotive boiler use. Confronted with these conditions, it would not have. been surprising if train service had been interfered with seriously in many territories; yet, as the result of forehandedness on the part of water service and operating men in developing more dependable sources of supply and in adjusting operating methods where necessary, this condition did not prevail. In fact, at a number of points, the railways alone had water and were turned to by municipalities and industries to tide them over their shortages. In view of this situation, there may well be general satisfaction with the way the railways met the 1939 drought. However, the drought brought to light many cases of inadequate or undependable water supplies on the railways, and, not infrequently, the remedial measures adopted were costly or affected operation adversely. It would be a mistake, therefore, to assume. that the problems of water service men have been solved. In fact, confronted with many changes in operating conditions which are relocating the points of greatest water demand on many roads, combined with everincreasing demands for improved locomotive per formance and reduced locomotive maintenance costs which, in turn, demand water of the highest quality, the problems of many water service men have increased. Where these problems are complicated by periodic water shortages they become doubly important and difficult. In view of these facts, it is evident that until all of the possibilities for dependable, quality water supplies have been explored, water service men have not fulfilled their full responsibilities. That funds have not been available for many necessary improve ments during the long period of depressed earnings that has prevailed should be no excuse for these men to accept as final water conditions which they know to be unsatisfactory and costly. The increased earnings of the railways during the fall of 1939 and the better prospects for earnings in 1940 should provide them with an incentive to advocate anew programs of investigations and improvements which, on the basis of recent experience, they know are essential to the efficiency, if not the dependability of train operation. "Out-of-Pocket" vs. "Cost" Rates The question of "out-of-pocket" vs. "full" costs as a criterion for establishing rates of competing methods of transportation is going to be debated for a long time before a generally-acceptable conclusion is reached. Meantime, whatever views one holds, the discussion will be productive to the degree that the issue is seen with complete clarity by all the disputants. We have in this space suggested greater reliance upon "full" costs, as opposed to "out-of-pocket” costs, as the measure of competitive rates. We put forward this suggestion - not as adherents to any rate-making dogma, but solely because, insofar as we have studied the situation, it looks to us that the "full" cost basis will give the railroads more traffic and revenue than the "out-of-pocket" basis will (and, at the same time, will protect the public interest in economical transportation better than the "out-of-pocket" basis would protect that interest). This suggestion is entirely tentative-and we are open to conviction by those who have evidence to support a contrary view. But let us make crystal clear precisely what we are suggesting. First, we are not finding fault with "out-of-pocket" rates per se-but only when they are used as a competitive weapon by an agency of transportation in capturing traffic to which it has no economic claim. Second, by "full" costs we mean only those costs which can be fairly assigned to a given movement. Such "full" costs, to our way of thinking, should not include profit or any element of return on the investment. Take lettuce movement across the continent, as an extreme example. Here is traffic which loads lightly in expensive equipment, with a high ratio of empty back-haul. It will be found that "full" costs (omitting a return on the investment) do not exceed the actual rates. In fact, we are not able to locate any appreciable volume of competitive traffic from which rates based on "full" costs (omitting return on investment) would compel the railroads to withdraw. On the contrary, such a rate basis will give the railroads a competitive advantage in thousands of instances, while hindering them in practically none. Costs, of course, should be computed for competing agencies of transportation on an exactly comparable basis. That is to say, if maintenance-ofway expense is left out of the computation of "full" costs of waterway transportation, because users of waterways do not defray such expenses, then maintenance-of-way expenses should be left out of railway costs also. The purpose of regulating the rates of competing agencies of transpor tation, should be to encourage the use of the more economical and discourage that of the less. That purpose cannot be achieved-and competitive regulation must fail in its primary function-if costs for rate-making purposes are not compiled in a strictly comparable manner. Likewise, in computing comparative costs, the relative balance of traffic in a given territory should be taken into account-assessing each agency with its full proportion of prevailing empty movement. Any agency trying to take traffic away from another on the basis of its costs, should be assessed with its proportionate share of the "cats and dogs" else its cost figures will not be comparable. Once truly comparative costs of competing agencies of transportation are determined, the question can then be decided whether there are considerations of public interest which would justify the regulatory authorities in permitting the highcost agency to depress its rates below "full" costs (with "out-of-pocket" costs, of course, as a "floor") in order to get a share of this business away from the low-cost agency. In some cases, possibly, justification could be found for such permission. Our suggestion, thus, does not exclude "out-ofpocket" rates: (1) in any case where competition between rival agencies of transport is not the issue: and (2) it would not exclude rates below "full" costs even in competitive situations, where sound reasons could be advanced for permitting them. But the burden of proof would be placed on the agency wishing to bid for the business of an undeniably more economical competitor. Under prevailing conditions the unlimited application of the "out-of-pocket" theory is bound to impoverish the whole transportation industry. But, as we said before, we are not pushing any rate-making dogma here. If anybody can demonstrate that the fair application of the "full cost" principle, strictly limited and circumscribed as set forth above, would fail to give the railroads a rate advantage over their rivals on the great bulk of competitive traffic, we shall cheerfully accord them the space in which to make their demonstration. We are not trying to win an argument-but to put back on the rails all traffic to which they have a valid claim in the public interest. |