Evening journal., 1919-02-10
Mr.. Warburo's Plan for The Railroads
tFrom the New York Tribune.)

The constructive contrlbut' on mad
yesterday by Mr.. Paul Warburg 10 tn
literature Of the railroad . oblem can
not fal 10 arrest widespread attention
Mr.. Warhurg approaches the question
OF what 10 do with our great trans
portatlOn system from the point O
view Of his valuable experience as
pember OF the Federal Reserve Boar.
in the first four years OF hs existence
The soltu on he offers will comment
itself for It's slmpl city and its ade
quate consideration OF the widely con.
flict'ng interests involved.
II is universally recognized that IN,
roads must have a more adequate re-
turh upon their investment. or thcs
fail. Al the present time. as Mr.. War
bury points out. only about ten OF IN,
more important companies are able q
sell thelr capital stock at par or above
Unless they have assurance OF a large,
return, the roads cannot go on ralsinH
money at Increasing rates OF interest
on mortgages. The alternative is =
higher return or government ownership
in some form.
Mr.. Warburg reviews at length the
difficulties Involved In the latter, the
lack OF initiative and enterprise, the
inevitable political pressure, the ten
dency TO extravaganza He remarks:
Anybody who has lived for fOu'
years In Wash ngton and has had the
opportunity for intimate observations
OF the difficulties, delays and dangers
lying in the way OF government admin
lE IN rul uh ruFho he frlr
OF what would be The result OF our
body polite and economic II twenty
billions worth OF railroad property be-
came The object for development AMI
operation by party government Who
would doubt that through the elimi-
nation OF competition and the substi-
futon OF governmental officlaldom for
private enterprise. general eric'ency
and progress would suffes. while the
cost OF operation would Increase by
leaps and bounds2
I'm order 10 protect the roads from
the grave danger Of seeing their offices
fllled through a process OF political IA
vorit SIN, it Is necessary 10 erect the
breastwork OF the civil service sys-
tenn. But the latte- has the never-fail-
Ing effect OF deadening personal ambi-
tion and the spirit Of enterprise and OF
creating in It's stead a system OF slow
moving and, on the whole lneffclenS
bureaucracy"
Mr. Warbu-g scutely points out that
even lve-year test under government
operation would not offer any real evil
dence as TO future results inasmuch as
"the test would be carried on with a
stan and under the leadership OF men
still trained IN the school Of modern
business such as bureaucracy after ten
years OF administration would no long
e. be capable OF producing" Regard ng
these difficulties as inherently insu-
perable and opposed TO the whole spir-
II OF the country he asks II there Is
no middle grounl. There has been wide
agreement as TO some form OF govern
ment guarantee or rates assuring ade-
quate return. But upon what basis I!
Not upon or & nal cost replies NJ.
Warburg for that Is simply impossible
TO determ ne. Scarcely on replacement
value for al the present level OF costs
and materials this would be extgava-
CANT and unjust 10 the country Not
upon the average net earnings for these
have been confesesdly too low TO per-
NIT OF proper development Of the roads
Scarcely upon prevailing stock AMI
bond values for in these there has been
a ruinous slump.
'The enumeration OF these difficulties
leads us 10 conclusion that no math
emstical or technical rule could prob
ably be devised hat II far TO one road
might not be doing violence o. be too
favorable TO another. Shall we then
throw upo our hands and surrender 10
COVE -nment operation? Let us remem
ber that government operation cannot