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EVER before in the history of this or any other country has the public been so well served with railway transportation. The great volume of traffic which has been handled in the last few years has been handled so smoothly, so efficiently and so promptly that business has been immensely benefited, and business men have not been slow to express their gratification.

The one danger in this situation, as I see it, is that the continued performance of such satisfactory service may lull the public into a sense of complacency about the railroads. That would be just about the worst thing that could happen. I am not an alarmist, and I do not intend to be alarming about the railway situation, but I think the situation is one that every business man ought to know about and be concerned about.

Adequate Service-Inadequate Earnings Ours is a growing country and the continued growth of the country makes it necessary for the railroads to keep growing. The railroads are able to give good service at present because their facilities have been enormously improved and expanded during the period of the country's recent growth. By the same token, if they are to give just as good or better service five or ten years from now, they must keep on growing, making improvements where needed, adding to their equipment, their trackage and their incidental facilities. The railroads of 1918 could not possibly give adequate service under the requirements of 1928, and it would be just as impossible for the railroads of 1928, unless they are kept abreast of the country's growth, to meet satisfactorily the requirements of 1938.

Good railway service, therefore, while it has the appearance of stability and is stable for present needs, is ever hanging by a slender thread. Railway men must be alert to keep their plants up-to-date, ready to meet whatever need may conceivably arise, and the public must be no less alert to make sure that conditions are such as will allow the railroads to grow. In the vegetable kingdom a growing plant requires sunlight and water, and in the realm of industry adequate earnings are the sunlight and water which make for growth. For the railroads to grow and keep on providing the kind of service to which the public has become accustomed and which it has found so convenient and profitable, they must be allowed to realize earnings that will enable them to make large investments in the improvement and extension of their facilities. That may seem elemental, and it is, but because it is ele-, mental it is important.

The adequate service which the railroads have been performing in recent years is in sharp contrast with the inadequacy of their earnings. In only one year since the

From an address delivered at the annual dinner of the New Orleans Association of Commerce at New Orleans, La., on January 9.

termination of federal control, eight years ago, have the railroads as a whole fully realized the so-called "fair return" called for by the law under which they have been operated. That one year was 1926, and then they barely earned it. In 1927, with an increased investment in their property and consequently a greater valuation, their net return was substantially reduced and again it fell below the level of the so-called "fair return.'

The cause of this condition is not hard to find. We know, for example, that it does not lie in any lack of efficiency and economy in railway operation. The railroads of the country have never been so efficiently and so economically operated as they have been during this period of inadequate earnings. Neither does the cause lie in a diminished volume of traffic. The railroads have sustained certain traffic losses, mainly in their passenger traffic, but on the whole their traffic during this period. has been greater than it ever was before. Neither does the cause lie in the quality of service performed. I have already referred to the quality of service performed by the railroads in recent years, and it is well known to you all. The main cause of inadequate earnings is the lowering of rate levels that has been constantly going on. The revenues of the railroads in 1926 were 857 million dollars less than they would have been if the rate level had been the same as in 1921.

The whittling away of rates is going on all the time. Some reductions that have been made in recent years have affected large volumes of traffic and large areas of the country, but for the most part they have been slight reductions on small items of traffic. Taken by itself, any one of these reductions would be insignificant, but put them together, and they amount to an astounding total. The 857-million-dollar loss of revenue in one year is an example.

Valuation and Rates

I appreciate the desire which every shipper has to obtain the lowest rates possible on the movement of his traffic, but I also appreciate the great stake which every shipper has in the maintenance of an adequate system of national transportation. Low rates are desirable, and American railway rates today are low, measured either by rate levels in other countries or by what rate levels have been in this country in times past, general price levels considered. The American dollar today buys more and better transportation than it ever did and more than its equivalent will buy in any other country of the world. But low rates are not desirable to the extent of impoverishing the railroads, of making it impossible for them to keep abreast of the growth of the country, of making it impossible for them to perform the kind of service which aids and enriches business of all kinds.

Whenever rates are mentioned nowadays, the matter

of railway valuation comes to mind, for the two things have been frequently associated in recent discussions of railway questions. A good many persons have a grossly exaggerated idea of the effect that an increase or decrease in valuation may have upon rates.

Before any attempt is made to earn any return upon any sort of valuation, there must first be paid the wages of railway employees, the cost of fuel and other railway supplies, taxes and rents-and these items constitute the bulk of railway expense. In 1926, for example, more than 80 cents out of each dollar received by the railroads went to pay their expenses, leaving less than 20 cents out of each dollar of rates to be applied as a return upon valuation. An increase or a decrease in valuation would not affect the 80 cents out of each rate dollar; its only conceivable effect would be upon the 20 cents.

However, it is not at all likely, in my estimation, that an increase or decrease in valuation would have much effect upon even the 20 cents of the rate dollar that represents return on valuation. Suppose, for example, that the valuation of the railroads should be doubled. I don't know of anyone who expects anything like that, but it will do for the purpose of illustration. The percentage of valuation which shall be considered a so-called "fair return" to the railroads is not a settled thing. The Interstate Commerce Commission is required to determine it "from time to time." It can be changed whenever the majority of the commission desires, and it can be changed as often as it desires. One change has in fact been made. In 1922 the commission changed the rate from 6 to 534 per cent. The commission is no more bound to keep it at 534 per cent, where it is now, than to put it at 10 per cent or 2 per cent or any other percentage, large or small. Indeed, it seems to me the likely thing that if the valuation of railway property should be doubled, the commission would probably cut the rate of return on that valuation in half-or, if the valuation were to be cut in half, the commission would probably double the rate of return thereon.

In the final analysis, the rate of return on valuation is not the end of rate making. The end is the provision of rates that will allow the railroads to realize sufficient revenue to pay expenses, taxes and rents with enough left over to insure the provision of an adequate system of transportation now and in the future. We know how much money it takes to pay the expenses, taxes and rents of the railroads, and we know how much the railroads should have left over to insure their continued growth. The relation of the latter sum to the valuation is merely a matter of mathematical calculation.

The little effect which valuation has upon rates can be readily illustrated by what has occurred in recent years. Between 1921 and 1926 there was a net addition of something like four billion dollars to the investment in railway property existing at that time. This amount was actually put into the property for the improvement of old facilities and the addition of new ones, and there is little question that it represents that much increased property value. In the face of this impressive increase in valuation, however, what actually took place in the level of rates? I answered that question when I pointed out that the railroads in 1926 received 857 million dollars less than they would have received if the 1921 rates had been in effect. The decline in the average rate from 1921 to 1926, in the face of an increased valuation, was more than 15 per cent. Railways and Inland Waterways

There are some persons who accord inland waterways much greater importance in the national transportation system than they have now or have had since the development of railroads got well under way. I feel no hostility

toward the development of inland waterways. If their development will enrich and prosper the Mississippi Valley, I am in favor of their development, because our interests are here, and their gain is ours.

However, I cannot believe that any business man would want to have inland waterways developed to the detriment of the one agency which is and must continue to be his main reliance for transportation. Some of you are in a position to take advantage of inland waterway transportation. Others of you are not. But all of your are users of railway transportation, even to complete the service that is partly performed by inland waterways. An inland waterway is rarely able to perform a complete transportation service. It must usually be supplemented by railway transportation at one end or the other, and not infrequently at both ends. Inland waterways cannot stand alone. They can be effective only if there are good railroads in connection with them, and upon the railroads must the majority of New Orleans and all other business men rely as their main dependence for transportation.

The experiment which the United States government has been making for the last ten years with barge-line transportation on the Mississippi river has had the active co-operation of the Illinois Central System. I believe that shows our good faith in the statements that have been made over and over again that the federal barge line is an experiment only. If the government is able to demonstrate that the operation of barges on inland waterways is a commercial success, I am in favor of having it carry out its announced intention of turning its barges and towboats over to private ownership, and it seems to me there could be no surer proof of the barge line's success than for practical men with business experience to seek to buy it. However, it is not within my knowledge that even a single offer has been made to buy the federal barge line. Until the government finds a buyer, there are only two courses open for it to pursue without a complete reversal of policy. One is to continue the experiment until its success is demonstrated by the test of its salability. The other is to give up the effort and abandon the experiment. The experiment is now in its tenth year, but I am not pressing for an announcement of the result. I am willing for it to be continued to the end. However, while it is continued, I am opposed to any move to put the United States Government permanently in the business of barge-line operation. It seems to me that the proposal to authorize a tenfold increase in its so-called capitalization is such a move.

Waybills covering practically all the westbound freight handled at Manchester arrive by passenger train ahead of the cars containing the shipments. They reach Manchester early in the morning, before the platform gangs have reported for work and are classified in the general foreman's office. A form known as a checker's car report is attached to them and they are. "flagged" in accordance with a fixed lay-out, which is described later. The checker's car report contains information regarding the point of origin of the car, its number, initial and weight of contents.

It also provides blanks which the checker later fills in, giving the seal record, cubic capacity, and the general condition of the car. Space is also provided for inserting the time that unloading was started and finished, and whether the stowing was good or bad.

A sufficient supply of waybills is flagged before 8 a.m. to permit the gangs to start operations as soon as they report. The bills are passed out to the checkers on the platform through a ticket in the wall of the general foreman's office in the order in which cars are placed at the platform. In this manner, each checker is assured of an even distribution of light and heavy work.

Each trucking gang consists of a checker, a loader and three truckers. Prior to the installation of the tonnage plan, only three electric trucks were assigned to each gang but this allotment has been increased to four trucks at the request of the employees, so that one truck may always be in the process of loading while the truckers are delivering the freight to the cars and be ready to be taken out by the first trucker to return.

A fixed lay-out is maintained for outbound cars; that is to say, daily cars for the same destination are always to be found in the same location. These locations are indicated by numbers and a lay-out sheet is provided, giving the destination of the car, the track on which it is situated, and its position on that track. The lay-out was designed so that the minimum of switching would be necessary in spotting or pulling the transfer tracks.

The Veri-Check System

As each package leaves a car, the checker chalks it with the location number of the car to which it is to be transferred. As an additional precaution against misloading, he also fills out a veri-check ticket for each shipment. These tickets show the spot number of the car, its destination, the number of the waybill covering the shipment, the number of pieces billed and carried and a record of any overage or shortage. They also carry the numbers of the checker and the trucker so that the responsibility for any misloading is apparent immediately.

After delivering the shipments on his truck to the car for stowing the trucker deposits the veri-check tickets in a box which is attached to each car for that purpose. Before the loaded car is permitted to move out, the verification clerk examines the veri-check tickets in the box. By means of the information contained on the tickets, he is able to determine in a short time whether the car contains only such shipments as properly belong to it. In addition, the overage and shortage record contained on the ticket serves as a guide for any exceptions that it may be necessary to note of the billing covering the car.

The success of this system is indicated by the following recapitulation of exceptions per ton at Manchester for four representative months:

years operations under this plan, an average of more than 75 per cent of the gangs make a bonus each day. The average frequently runs higher than this over a stretch of several days, largely dependent upon the character of the freight being handled, and it is showing a steady improvement from month to month. In this regard, on August 19, this year, 12 gangs handled 940 tons of freight from 134 cars, an average of 78.33 tons per gang, and every one of the 12 gangs made a bonus. On the high freight handling day previously mentioned, August 26, when the freight handled averaged 84.72 tons per gang, 10 of the 11 gangs employed made a bonus.

The Lehigh Valley has not overlooked one of the most important features of any tonnage plan, namely, the equitable distribution of the work. By means of the assignment of the work as previously described, each gang is assured of a fair proportion of the cars that are easily handled, as well as those that require more time in handling. To carry out this plan further, the gangs are rotated in turn in unloading certain cars which are received at Manchester daily and which invariably contain a large number of light packages for

The average amount of freight handled daily is about 1,000 tons, but during the autumn months, this is frequently exceeded. During October, 1926, for example the daily average was 1,153 tons; 1,415 tons were handled October 7, and 1,325 tons the following day, while more than 1,200 tons were handled on eight days during the month. On the peak day, 20 gangs handled 1,415 tons from 177 cars into 176 cars, an average of 70.76 tons per gang, which was the high average up to that time.

Instruction Book

A 40-page printed instruction book is provided for the convenience of the supervisory force. This contains complete general instructions governing the loading of less than carload freight. A list is given of all merchandise cars operated, showing originating point of cars received and distination of cars forwarded. This list occupies 14 pages and is complete to the smallest detail. A further list is given of merchandise cars received from and loaded to industries and steamship lines. book also contains an alphabetical list of stations on the Lehigh Valley, and a list of connections. Ten pages

The

scattered destinations, being particularly difficult to transfer for this reason.

The stevedoring force consists of approximately one stevedore for each trucking gang employed. They share in the tonnage system, dividing equally the total daily tonnage earnings of all loaders.

An unusual feature of the plan is the payment of bonuses to foremen, based on the amount of freight handled under their supervision. This has had the effect of reducing the number of gangs employed and maintains the differential between the earnings of the supervisory and the labor forces.

Freight Handling Performances

The number of tons handled per gang per day is rising steadily. In August, 1926 it was 68.05. This was increased to 68.39 in March, 1927, and to 71.28 in August, 1927. During August, 1926, the high figure for any one day was 75.34 tons, while in August, 1927, this tonnage was exceeded on five days and equaled on another day. The tonnage handled per day was over the 70 mark on 17 days, while during one period of five successive working days, the following tonnage was handled: 77.30; 73.72; 84.72; 72.08; 70.54; or a daily average for the five days of 75.67 tons per gang.

are devoted to a series of loading order charts, which enables the flag clerks to tell the proper loading point at a glance. The book is of value to the supervisory forces in that it provides a definite place for each piece of freight, so that their duties of checking the loading are much simplified.

Extensive records are maintained which facilitate the checking of any feature of the operation by transportation representatives or others interested. Complete cost figures are also maintained, showing the fixed cost, labor cost and mechanical cost, which supply a further check on the relative efficiency with which the station is being operated.

A consist report covering each car loaded is forwarded to the traffic representatives interested, thus giving them a passing record of all merchandise moving through Manchester.

The Class of Employees

A service train is operated between Manchester, N. Y., and Geneva with the result that a high type of freight handlers is available.

The number of men employed depends upon the amount of business to be handled. In this regard, particularly for the heavy fall and winter movement. Man