The Washington herald., 1914-03-30
Expenses Rapidly Increased.

| as mucn as any Otner class OF Dusines'
increase the cost of making permanent
Expenses Rapidly Increased.
II has often been said that the railway
business Is one of increasing returns. By
this is meant that II Is business IN
which as the volume of business handled
increases. the cost OF handling each uni
decreases. But this theory OF increasing
returns as applied TO any business, anc
especially to the railway business, is sub
| ject to many qualifications. 1t is neces
ssrily based on the assumption that while
the volume of business handled increases
the unit costs of labor. materials, anC
so on. will remain practically unchanged
Manifestly. II while the volume of bust
ness handled Is increasing the prices
which must be raid for all kinds of ma
terials and the wages which must bt
| paid for any given amount or quality oi
| labor are also INCREASING. these increases
| in the costs of materials and labor may
more than offset the effect OF the in.
crease in the volume Of business. Fur
thermore, the law OF increasing returns
applies only up to the point where a
concern is working to its maximum ca
pacity. After that, to turn out more
product or handle more traffic requires
additional investment in facilities, which
also tends to counteract the operation OF
the law OF increasing returns.
Now. not only have the railways within
recent years had to pay rapidly increas-
ing prices and wages. but many roads
which formerly were not working to their
capacity are now working to the very
limit OF their capacity. All Of these things
have strongly tended to increase the ex-
penses which the railways must incur
TO handle each ton and each passenger.
Higher Standards Demanded.
Still another and most important in
fluence has been affecting their ex-
penses. The public has been and is con-
stantly demanding a higher standard OF
service. Passengers demand faster and
more luxurious trains. They insist on
more regular and frequent service. The
public demands larger and far more eN-
pensfve passenger stations both in small
towns and large cities. II demands
greater safety in transportation. and the
purchase OF steel cars, the installation of
block signal systems the elimination of
grade crossings, the widening OF clear
ances. and innumerabIe other improve
ments that are assumed to promote
safety. The public also demands eNpen-
sive improvements In the freight service
rendered.
Now. every one OF these improvements
in the quality OF the service Involves
either an increase in operating expenses
or an increase in the permanent invest
ment that must be made in every mile of
railway line and track. or both: and
these additional expenses and the return
on this additional investment must be
paid from the rates charged.
ka he rinrlS
regulating bodies. is requiring the rail-
way arrangements to do many things for
the special benefit of their employees. For
example, legislation, both national and
state, has restricted the hours of labor
Of employees: in many states 1t has re-
quired increases in the number of men
employed on trains; and in many II has
increased the total compensation that
must be paid for personal injuries.
How to Meet the situation.
by which the railways might conceivably
deal with the situation resulting from
these increases in their costs Of opera
ton and these demands of the public for
a higher grade OF service: ID by increas-
ing the efficiency of their operations:
C9 by making a different use of the
earnings which they have left after pay
ing operating expenses and taxes: C0 by
increasing their rates.
/. Railway managements have tried the
first method. For almost fifteen years
they have been so increasing the eff
cheney of their operations that in spite
of the heavy increases meantime in the
prices and wages paid by them. they
have managed to get along without any
increases in the average freight and pas
senger rates. No other large industry
has euualed that record. ] do not imply
that all railways are as efficiently man
aged as is theoretically possible. Some.
are much more efficiently
than others. But the same thing
may be said of concerns in every other
line of business. Railways are and al
ways must be managed by human beings.
This being so. no road ever has been or
ever will be managed with theoretical
efficiency Of 100 per cent. BY the same
token, some roads always will be man
aged worse. and some much worse, than
the best managed. 1t is manifestly unfair
to pick out an extremely well-managed
road and condemn all other railways for
not being so well managed. just as it is
unfair to pick out an ill-managed road
and say. as many do, that all roads are
EQUALLY as badly managed The situation
must be considered and dealt with as an
entirety.
Lead the World in Economy,
II II be considered in this way. every
man competent to judge is bound to reach
he conclusion that, as a whole, the
railways Of the United States have been
and are managed with reasonable pru-
ience efficiency. and economy. 1t seems
20 be the almost unanimous opinion OF
foreign railway experts who have visited
this country that in respect to economy
II operation our railways lead the world.
At any rate, II is the judgment OF all
iirectly concerned with the management
,f our railways that IL has become physi- |
ally impossible to continue TO hold down
heir operating expenses as has been
lone in the past. and at the same time |
o pay the present high and increasing /
prices and wages and comply with the |
demands of the public for great improve |
nents in the service rendered and in the !
reatment given to labor.
2. Can the railways, then, SO change |
he use made of their net earnings as to |
nable them to continue to pay the pres |
mt high and oVe- increasing prices and !!
wages and at the same time give to the /
,ublic the better service which II de- /
nanes?
The charge often has been made that |
he railways have watered their capi-
alization, and that they pay out an /
xcessive amount of net earnings in in
crest and dividends on these watered /
ecurities; the implication apparently be-
ng that IL they would make a different /
md better use of their net earnings they /
Eculd be all right.
What are the facts? The gross CANT