A bushel of wheat today is transported from the center of the great granary country of our Northwest or Southwest to tidewater—an average distance of 1,700 miles—for 27 cents. This is at the rate of .53 of a cent—a minute fraction over half a cent—per ton-mile. The average ton-mile rate in Great Britain, 2.30 cents, as applied to our average grain haul in the United States of 1,700 miles, would make the transportation cost of American wheat four and one-half times as much, or $1.21. The American farmer owes a far greater debt to the railroad than he sometimes may believe. He may have suffered under the oppressions and injustices of badly managed roads—may yet be smarting from these oppressions and injustices. But how much greater would be the oppression and injustice of a high grain rate such as I have just shown? And if such a rate were imposed upon him, would he be able in an average year to grow wheat at a profit, to say nothing of being able to compete with it in the broad markets of the entire world?
A minute ago and we were speaking of the abnormal prosperity of the railroads. The flood first descended in October, 1915. It rapidly mounted in volume. The railroads declared embargoes, first against this class of freight and then against that. Solicitation ceased. The bright young men of their traffic forces were set to work helping the overworked operating departments, tracing lost cars and the like. The backs of their operating departments were all but broken. I myself saw last winter on the railroads for a hundred miles out of Pittsburgh long lines of freight cars laden with war munitions and other freight making their slow and tedious ways toward tidewater. I saw Bridgeport a nightmare, the railroad yards of every other Connecticut town, congested almost overnight, it seemed. The New York terminals were even worse. For a long time it seemed as if relief might never reach them.
It seemed wonderful, but it was not. It seemed like millions in railroad earnings, but it was not. Translated into the unfeeling barometage of percentages it all represented but five and one-half per cent on the actual value of the railroads of the United States. And that, compared with the long season of lean years that had gone before, was as nothing.
Take the season of years from 1907 to 1914—a season for which the statistical records are now complete. Despite the great financial panic of 1907, these were, in some lines of business, mighty prosperous years. The output of automobiles was to be measured not in hours but in the very fractions of minutes. You might figure the earnings of the “movies” well into the millions each twelvemonth; they were building new theaters in all the cities and the bigger towns, almost overnight it seemed. Manufacturing and selling, nationally speaking, were up to the average. Yet in those very years, it was necessary for some of our very best railroads—the best operated and the best financed, if you please—to dip into their previously accumulated assets to pay the dividends which they had promised to their stockholders, in several cases to either lower or omit dividends. And some of the best of these were also compelled to pinch their maintenance expenses to a point that brought them close to the safety line in operation, or even beyond it.
And what of the weaker roads—the roads upon which whole communities, whole states, if you please, are frequently absolutely dependent? What did these roads do in such an emergency? The record speaks for itself. The best of these second-class railroads made no secret of the fact that they were cutting down on maintenance in order to pay their dividends or the interest upon their mortgage bonds. The worst of them simply marched down the highway to bankruptcy. At no time in the history of this country has as much of its railroad mileage been in the hands of receivers as today.
If you are in that glorious company of self-appointed patriots who violently proclaim themselves at every possible opportunity “anti-railroad,” you may be asking me now why so many of our roads have entered bankruptcy. You may be asking me if it is not due in some cases to bad location, and in others to inefficient or dishonest management. I shall reply to you by saying that perhaps fifty per cent of the railroads which are in bankruptcy today are there because they never should have been constructed in the first place and because of the financial management. The lack of judgment, ofttimes the sinister motives that brought them into being are now being paid for and paid for dearly. And in the second place, I will take no issue with you as to either carelessness or dishonesty in management of some of our railroads.
“Why is it that every investigation of a railroad nowadays shows such a rotten condition throughout its affairs?” asked a distinguished economist at a dinner in Chicago last winter.
E. P. Ripley, the veteran president of the Santa Fé, answered that question.
“It is because a road is never investigated until it is morally certain that its affairs are rotten,” said he, and then told how but one or two rotten apples would send their foul odors through an entire barrel and so seemingly contaminate its entire contents. Would you blacken a whole company because a few of its members have erred? Take another instance. A club for a while shelters a genuine blackleg. Are we to say that, because of this mere fact, its other members are not as good as any of us? So it is with the railroads. You cannot point even the finger of suspicion to such properties as the Santa Fé, the Burlington, the Pennsylvania, the North Western, or the Baltimore and Ohio railroads—to mention a few out of many, many instances. These are good roads; in some instances because they have been extraordinarily well located, but in most instances because of their continuous enlightened management. Yet some of them have been hard put to it of late to maintain their dividend obligations to their stockholders. And many roads have been compelled to lower or else suspend entirely the dividends paid in the years gone before.