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HIS volume, while intended as a review of

railroad events during the years 1917 to

1922, deals primarily with the period of federal control, January 1, 1918, to March 1, 1920. During the greater part of that time the author, while on leave of absence from Harvard University, was officially connected with the United States Railroad Administration and served on the staff of the Director General of Railroads, first as manager of the operating statistics section and later as assistant director of operation. Throughout the book the policies and results of federal control and the problems of the reconstruction period are discussed from the viewpoint of operating administration.

The chapters which relate to the organization and achievements of the United States Railroad Administration are based in part upon two articles published in the Quarterly Journal of Economics of February and November, 1921. The concluding chapters, which deal with railroad affairs in 1920 and 1921, contain portions of articles written in 1921 for the weekly financial edition of the New York Evening Post. Included as an appendix is an article which appeared in the November, 1919, number of the Annals of the American Academy of Political and Social Science.

For kind permission to use the material in this form, the author is indebted to Professor Frank W. Taussig, editor, Quarterly Journal of Economics; Mr. Edwin F. Gay, president, New York Evening Post; and Mr. Clyde L. King, editor, The Annals of the American Academy of Political and Social Science.

W. J. C.
Cambridge, Mass., July 31, 1922.




ITHIN the next six years the United

States will probably celebrate with ap

propriate ceremony the centennial of the beginning of steam railroads in this country. It was on July 4, 1828, that Charles Carroll, the last surviving signer of the Declaration of Independence, laid the first rail of the Baltimore & Ohio Railroad. “One man's life formed the connecting link between the political revolution of the last century and the industrial revolution of the


American railroads, then, have existed for three generations. Broadly speaking it may be said that these three generations coincide with three fairly well-defined periods in the development of public policy toward railroads. From 1830 to the Civil War period, which we will designate as the first generation, was an era of unrestrained railroad development. The general public was not only willing, but was eager to see expansion in the growing network of railroad lines. “Indeed, the community manifested so marked an eagerness to secure railroad transportation that the states' attitude toward the carriers was one of liberality and encouragement."** The carriers were almost entirely free from governmental interference. Extensive land grants and financial aid were freely given, and railroad securities found a ready market on favorable terms.

*Railroad Transportation, A. T. Hadley, 1885. ** The American Railroad Problem, I. L. Sharfman, 1921.

The next period, from the end of the Civil War until 1887, may be designated as the second generation. It ushered in the era of railroad regulation by individual states. Speculative building, with many cases of financial maladministration, unfair discrimination in rates and service, and ruinous competition, caused a reversal of public opinion. Open antagonism took the place of friendly cooperation. There was intense resentment against abuse of power exercised by railroad executives, and bitter criticism of rates which were regarded as excessively high. This spirit of antagonism was greatest in the central agricultural states and was crystallized early in the 70's in the drastic legislation known as the Granger Laws.

These laws, however, were ineffectual as permanent remedies. In most cases they were overturned on appeal to the Supreme Court of the United States. Yet the Granger Movement, while not solving the problems of discrimination in rates and service or of financial manipulation, acted as a check upon the abuse of power, and served to make clear the need of more effective public regulation on a national scale. It served also as a brake upon speculative railroad building.

The following period, or the third generation, embracing the years 1887 to 1917, may be designated as the first stage of federal railroad regulation. It began with the passage of the original (1887) Act to Regulate Commerce. This Act created the Interstate Commerce Commission and clothed it with powers intended, among other things, to insure just and reasonable rates, to prevent unfair discrimination in rates and service, and to check financial mismanagement. As it became apparent that the Commission, under the original law, could not effectively bring about all that was sought, successive amendments were enacted, each strengthening the Commission's authority.

With the passage of the amendments of 1906 and 1910, the powers of the Commission over rates and service were fairly complete. It could also exercise substantial control over accounting and financial organization.

Up to the middle of the decade 1900 to 1910, the steady growth in traffic and the economies from improved operating methods, enabled the railroads to absorb the burden of higher wages and other costs, and to move the traffic at lower rates per ton-mile. The net income was sufficient to pay a reasonable rate of return on securities and to attract new capital when needed. New lines, additional trackage and enlarged or improved facilities could be provided where justified by traffic demands. The long-time policy of the typical conservatively managed road was to “plough in” a part of its net income. The aim was to keep the capacity of the railroad properties well ahead of traffic demands, and to insure an ample factor of safety so that the larger business of next year

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