During the whole of the years 1918-1919 the railroads were operated by the government. From the standpoint of profit-making, government operation did not prove a success. The cost of labor and materials rose enormously during the war and continued to rise after the fighting ended. But passenger and freight rates were not proportionally increased, hence there was a large deficit which had to be paid out of the government treasury. The service given to the public by the railroads while they were operated by the government, moreover, was not very satisfactory; although in partial explanation of this it must be remembered that the carrying of troops and supplies during 1918 placed a great strain upon the whole transportation system.
The Plumb Plan.
But if government operation was not altogether satisfactory to passengers and shippers, it was popular with the railroad employees. They were much more generously treated under government operation than they had been when the roads were in private hands. Some of their leaders accordingly brought forward a plan which proposed that the roads should not be handed back to private operation but should be purchased by the government and managed by joint boards representing the government, the employees, and the public. This proposal was commonly known as the Plumb Plan. It had the support not only of the railroad brotherhoods, or organizations of railroad employees, but of other labor bodies as well. Congress, however, did not fall in with this scheme and decided to deal with the railroads in an altogether different way.
The return of the railroads to private operation.
The Transportation Act of 1920.—The railroads were returned to private operation in the spring of 1920 under the provisions of the Transportation Act. This legislation gave the Interstate Commerce Commission complete authority over the fixing of railroad rates but stipulated that they should be high enough to enable the railroads in each section of the country to earn a net income of five and one-half per cent on their valuation and a further amount, not to exceed one-half of one per cent for improvements at the discretion of the commission for two years from March 1, 1921.[[162]] The act contained two new and very important provisions. |The Railway Labor Board.| It stipulated that a Railway Labor Board should be established, consisting of nine members appointed by the President. This board has the function of adjusting disputes between the railroads and their employees concerning wages or conditions of labor.[[163]] It also contained provisions allowing the consolidation of railroads in each section of the country with the consent of the Interstate Commerce Commission.
The importance of the railroads to industry.
The Future of the Railroads.—The railroads are the commercial arteries of the nation. Some idea of their importance may be gained from the fact that the railroads of the United States carry a billion passengers each year and nearly two billion tons of freight. Their mileage is greater than that of the railroads in the whole of Europe. If all the tracks of American railroads were placed end to end, they would girdle the earth eight or ten times. They represent a huge investment of capital—nearly twenty billions—or nearly as much as the entire national debt. It is true that a good deal of our commerce is now carried on by steamships, canal boats, motor trucks, and electric railways, but we still place greater dependence upon the railroads than upon all these other carriers put together. Reasonable freight rates and good service are essential to the progress of industry. This being the case, it is imperative that there should be governmental control in the interests of passengers and shippers. On the other hand the railroads, to perform their service adequately, must be assured a sufficient revenue and given due scope for the exercise of private initiative.
Motor competition.
The railroads have been compelled, in recent years, to face a new form of competition, that of motor cars and motor trucks. These have a great advantage in that they use highways which have been built entirely at the public expense, whereas the railroads have to buy the land on which their tracks are laid and pay the cost of maintaining their roadbed. The use of the public highways for freight-carrying by heavy motor trucks imposes a heavy cost upon the taxpayer for the repair of roads.[[164]]