The Transportation Act of 1920, which provided for the return of the roads, permitted them to remain under the shelter of the government guarantee for an additional six months after March 1, to give opportunity for an adjustment of their affairs, and most of the roads took advantage of the offer. This added several hundred millions more to the government deficit. Meanwhile, in August, 1920, a substantial increase in rates was granted by the Interstate Commerce Commission, which is designed to spare the roads the deficit that their foster mother has been painfully enduring for nearly three years.

The Maintenance Question

The railroads entered the war underequipped and without the facilities needed for a rapid expansion of traffic. During the war, new investment was reduced to a minimum and the need for facilities for war purposes was so imperative that repairs of equipment were rushed or slighted, and cars and locomotives were often kept on the road when, in normal times, they would have been in the shop. Such plans as the administration had in 1919, for additions and betterments were only in part executed because of the decision of the administration to turn the railroads back to their owners.

The federal administration insists that it

has closely approximated its contract obligations to return the properties in substantially as good condition as when received, but estimates by private authorities place the undermaintenance all the way from $100,000,000 to $300,000,000. There is much controversy between the railroads and the government as to what maintenance means, and doubtless it will be many a day before the railroads receive satisfaction from a debtor who is notoriously slow pay.

The Maintenance Record

The cumulative results of all these factors may be expressed briefly in statistical terms. Whereas, in the ten years from 1905 to 1915, the average of new mileage constructed was 3,500, the miles built in 1918 were 722, and in 1919, 686. In 1920 only about 300 miles were built and over 700 were abandoned. Experts say that we should build 2,000 miles a year for many years to come.

Passenger equipment increased 35 per cent from 1905 to 1915. Since 1915 it has increased 22 per cent and during the last two years there have been no increases at all. Freight cars increased 36 per cent from 1905 to 1915, and from 1915 to 1918 they increased 1.6 per cent. There are terminal facilities to be supplied, and work must be resumed on signaling and electrification.

The railroad administration spent $1,200,000,000 for capital purposes during its two years of control, and what it did was of a makeshift character. The companies should be able to plan for the expenditure of at least a billion a year for capital investment and probably to use never less than that.

Obtaining New Capital

This capital must come from the savings of the people. There is no other sourceregardless of whether the roads are privately owned or operated by the government. Government ownership would make the problem no different except that the pressure for expenditures would probably increase and the same improvements cost more. But the government would have no way of providing the capital for this construction except by going to the public money market. The idea that governments can borrow at very much lower rates of interest than private parties is an exaggerated one. They could do so when they were borrowing but little; but when governments borrow by the billions, they have to compete with other borrowers, and are subject in a large degree to the same conditions.

Too many people have been disposed to treat the subject of compensation for the roads as related only to the capital already

invested in railroad property. It is true that this cannot be withdrawn and the owners will have to take whatever return is allowed upon it. But the real railroad problem is how to get the new capital constantly required to keep the railroads up to the expanding business of the country. The investment of private capital is a voluntary act on the part of the owners. The amount of capital annually required for railroad betterments and extensions is approximately equal to the annual return upon the total value of the railroad property as contemplated in the 1920 law.

VI

The Labor Problem

One of the most vital factors in the whole problem of future solvency is the labor question. It will be enlightening, therefore, to trace rapidly the railroad labor problem during and since the war. That the wages of railroad employees should have increased steadily during the war was inevitable and proper. In fact, it is generally conceded that the railroad labor as a whole did not enjoy the increases that were secured by labor of a similar grade outside. The size of the wage increase, which was estimated for 1919 to be

about $900,000,000, was not the significant thing. There had been developed in the director-general's organization not only a central board to investigate larger questions of policy, but also bi-partisan boards, with equal representation of employers and employees, to which controversies concerning wage schedules that could not be adjusted on the individual roads were to be referred. Two significant results have come from this centralized organization.

Results of Government Control

In the first place, there has been a very great increase in the standardization of rates, time, and regulations. The individual employee is to an almost complete degree receiving the same pay for the same type of work everywhere throughout the counrty, irrespective of local conditions and cost of living. Unionism has rapidly extended. The eight-hour day with time and a half for overtime has taken great strides, and bids fair to become universal. Piece-work was eliminated in railroad shops, and railroads now declare that efficiency can never be restored among their mechanical forces until this form of contract is restored.

The second outcome of this centralized policy has been a serious decline in the morale of the entire working force. It be