AMERICA'S RAILWAY CRISIS

By PETER NEUMANN

cc AMAJOR cause of the present distressed condition of the railroads," the President's Committee on Transportation has reported, " is the low level to which their traffic volume has sunk and remained during the past seven years or more." Too-high charges for passengers and freight are behind this difficulty. American railways have taken unfair advantage of their vital position in the national economy. Most appalling of the results has been the re- duction in personnel from 2,002,000 in 1920, receiving the equivalent in dollars of £736,200,000 remuneration, to 1,487,000 in 1930, paid no more than £510,200,000. Em- ployment figures are the lowest in over forty years.

To save themselves from disaster, the railways have con- sidered four plans, and found three of them wanting. Neither consolidation, reorganisation (calling for declaration of insolvency), nor outright Government subsidy, they have found, would increase receipts or add to rolling-stock. The fourth plan, now being actively advocated by a number of responsible men, involves the Postalisation of Railroad Rates, and is popularly known as the Hastings Plan.

Postalisation of rail rates simply means the elimination of the distance factor in setting rates. Under the Hastings Plan, the most inexpensive, or " coach " travel from, say, New York to San Francisco, would sink from the present high of sixty-four dollars (say £12 6s.) to four dollars (16s.). Other services would be basically as follows, multi- plied once for each of the nine national zones through which the traveller might pass: Coach ... Parlour car Sleeper car ...

Express reserved train De Luxe train

• • • • • • • • • • • • • • •

I.00 3.00 5.00 10.00 15.00 Increased riding, the originator contends, would not neces- sarily come from the long-distance traveller, as proved in the New York subways, where for five cents (21d.) anyone who wants to can ride twenty-six miles. The greatest volume of business has not come from this source, but from the short-distance riders. Nor would the short-trip traveller have to pay for his long-trip friend. Present average rail- road fares (excluding suburban travel) are based on approxi- mately 24- cents a mile. Anyone paying $1.00, therefore, is entitled to ride approximately forty-five miles. Yet few take advantage of this distance allowance. Thus, though travel might increase as much as 500 per cent., few passengers would go to far-flung points just to go ; people do not go where they do not wish to go.

Though postalised rates might temporarily make deep inroads into the business of the 'bus and motor freight lines, it is hoped that these would soon find their r'ace in the national transportation network by supplementing the rail- ways. These enterprises do not represent capital investments in excess of £50,000,000, as compared with the £4,000,000,000 railway investment. If the railways can be plucked from the brink only through an atrophy of compet- ing services, the necessary steps must be taken.

Applicability of postalisation to freight rates is a moot question, and it has been suggested that the new rates be applied only to a limited list of agricultural and other essential commodities. There is not only a great need of reduced rates, but of standardisation of charges. Rate experts of the freight traffic division of the Interstate Com- merce Commission have disclosed that there are 5,000,000poo,000poo rate combinations existent in the com- bined American rail systems. The printing alone of the rates costs the Federal Government over £2,200,000 a year.

A base freight-rate of $1.00 per ton, in carload quantities, between any two points within any one railway system, regardless of distance, is advocated. The rate schedule runs thus: 100 pounds or less

0.25 lot to 25o pounds 0.37 251 to 499 pounds 0.55 500 to 799 pounds 0.83 Boo to t,000 pounds ... I.00

1,000 to 2,000 pounds... ... 1.50 The Government, acting through the Reconstruction Finance Corporation, a larger Interstate Commerce Commis- sion, or a Railway Authority, would, under the Postalisation scheme, finance its agency by printing four or five milliard pounds' worth of low-interest bonds. These would be exchanged for securiti:.:s in the dying railways, payment being made according to the average n arket price of all the various railway securities during the previous fifteen or twenty years, or according to the average earnings by the various railways on all securities outstanding during a similar period. The railways would be guaranteed a gross income equal to their average gross of the past five or ten years, or perhaps the same income on a passenger-car-mile basis operated. This would call for the payment of a differential between the postalised fare and the fare last approved by the I.C.C., payment continuing until such time as the railway could make a moderate profit without national aid. Meanwhile, this semi-subsidisation would be decreasing as receipts in- creased, in order to prevent any sudden market drop in the value of the new securities.

The Postalisation Plan is new to the greater part of the American public, though rumours of it have circulated for several years, and it underwent an experimental period in the suburban area of New York City. In 1935 it was introduced in Congress by Representative Brunner, of New York, with no definite results. In 1937 there was a minor discussion in the New York State legislature. And during the last Congress Representative Lemke, of North Dakota, introduced a Bill for the Postalisation of Railway Rates, substantially the same as the Plan herein described, which was pigeon-holed in Committee. In January of this year, Senator Wheeler of Montana, chairman of the Senate Inter- state Commerce Committee, told the national Press he was " interested " in proposals for rail rate postalisation. Other Congressmen have been even more wary of being the first actively to support the Hastings Plan, but it is at any rate being seriously discussed by members of both Houses.

The originator of the Plan, John A. Hastings, is an interesting figure. At twenty-one the youngest member of the Upper House of the New York legislature, he worked arduously over Bills on the protection of civil rights, savings bank life insurance, bank-deposit insurance, and other im- portant, original social measures. He always lays careful plans before publicising his proposals, and not only the framework, but the arguments for his latest plan show cautious drafting. Hastings charted the present 'bus system for New York City, and in 1936 submitted a system to the American Telephone and Telegraph Company for reduced long-distance communication rates that is in sub- stance being followed to-day.

The Rail Plan in its present stage is being financed by a non-partisan group of " independent, public-spirited American industrialists," who, except for their leader, remain anonymous. He is Mr. Frank R. Fageol, of Ohio, head of the Twin Coach Company. It is unusual to find such unselfish backing of an expensive campaign. Mr. Fageol stands to win nothing, should the proposal become law, except the appreciation of his countrymen. With America's entire rail system approaching the bridgeless chasm of insolvency, with money-crammed banks afraid to take the chance of subsidisation, only the Federal Government can be looked to for support. There are other plans to carry the railways over that chasm, but the sponsors of the Postalisa- tion plan claim that only one will keep them going after they cross.

[The first of the regular fortnightly articles arranged for from the United States is unavoidably held over till next week.]