New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-08-06


previous total was made in 1918. 1t
was S3,250, 100000.
Gross earnings represent what the
railroads take in. The rest Of the
story is what they pay out. That Is
not vet available for the full year,
but from the detailed studies of the
Bureau of Railway Economics at
Washington, which works from the
figures of the Interstate Commerce
Commission, it is possible to approx
mate the cost to the railroads of pro
ducing and selling transportation
during the last year. These figures
are cast on a per mile basis. They
show that the gross earnings OF all
the roads for eleven months, TO the
end of May, increased 1876 per cent
over the corresponding eleven months
of the preceding year. That was the
average increase of all roads. When
they are thrown into groups 1t ap-
pears that the gross revenues per
mile increased 20.3 per cent in the
East, 1916 per cent in the West and
only 1876 per cent in the South. So
il is easy to see where what we call
prosperity has been most pro-
nounced. The expansion in indus
trial tonnage must have been greater
than that of other tonnage, notwith-
standing the fact that the Western
railroads had very large crops to
q haul out, and the goods for which
they were exchanged 10 haul back.
The disparity between Eastern and
[ Western roads will be partly &C
counted for by the enormous amount
/ of industrial war activity in the
! East. But that is not the whole eX-
PLANTATION. The particularly hand
some earnings of the Eastern rail
roads reflect for the first time the
full effects of the 5 per cent hori-
zontal rate increase allowed by the
Interstate Commerce Commission al
the end of 1914.
Now we come to costs. Gross rev
enues of all the railroads increased
( 1876 per cent. But what the Inter
state Commerce Commission calls
operating income, which is the re
mainder after operating expenses
and taxes have been deducted, in
creased 43.3 per cent. That is
extraordinary. The increase in oper-
ating income corresponds geograph-
ically to the gross earnings; that /;
to say. it was 56.7 per cent in the
East, 29.7 per cent in the West anC
29.7 per cent in the South.
In the average of all, the increase
in operating income, or IN the re
mainder after taxes was two and one
half times the increase in gross reve
nues. That means, of course, that
operating expenses did not rise as
fast as gross earnings. This result
was not achieved by charging rela-
lively less TO operating expenses for
maintenance. On the contrary, the
expenditures for maintenance by al
the railroads increased in the clever
months S82,l10,O00. So it is fair tC
saw. not only that the railroads OF
the country have earned more gross
and made more profit in the last year
than ever before, but that they have
never been so well maintained.
There is no need of trying to dis
guise the fact that such earnings as
the railroads have made in the last
year entail some embarrassment
They encourage the organized en-
ployeS to demand more pay and In
cline the casual-minded onlooker to
believe that the railroads can afford
to increase their division with labor
Perhaps they can, but the figures dc
not prove it in themselves. There
are qualifications which the exper-
fenced railroad man knows only toe
well, but which are not easily COM
pretended without some knowledge
of the dry and unexciting science OF
accounting. On a rising tide OF
gross earnings the ratio of operat-
ing costs tends always to fall and
the ratio of profits to rise. That Is
because a fixed and irreducible body
of expenses is prorated over larger
business. But to assume, as Wal
Street often has done in its moments
of enthusiasm, that the ratio of oper-
ating expenses has been permanent
ly reduced is to fall into dangerous
error. The other side of it is that
when business slumps it is impossible
to cut expenses in the same ratio