New-York tribune., 1920-10-13
By c. H. Markham
resident of the Illinois Central

@VuSe' ouu company
Developing rapidly, but still largely
undeveloped, tho South, like other sec
hons of the country, is feeling the
pinch Of serious shortage Of railroad
transportation, and may have to pause
IN It's development in order to give the
railroads time to catch up with the
growth Of industry and agriculture,
but am an optimist and believe that
this impediment win be removed in q
comparatively short time, and that the
South's unexampled prosperity will not
be seriously interrupted.
The growth of the South having
overtaken and surpassed the capacity
OF Its railroads, further DEVELOPMENT
IS wholly dependent upon the growth
and expansion Of the railroads. It is.
therefore, imperative that the rail
roads expend hundreds of millions of
collars as promptly as the money can
oe secured by the sale of their securi-
ties IN enlarging the railroad plant of
tne South so as to place it in advance
OF the development of this favored
section. Double tracking, enlargng of
terminals and acquiring of additional
equipment are among tho larger items
Whlch Will require the greatest eX-
pendlture of money. The owners and
managers of these great properties are
ready to spend the money. The para
mount question is when and where and
at What rate Of interest the money can
be obtained.
1t should be borne in mind that at
n n1
1916 with 1919, the Southern carriers
found that their operating revenues
had increased 58.S7 per cent while op-
Grating expenses had increased 1853
per cent; that the operating ratio had
gone from 6663 per cent in 1916 to
88.44 per cent in 1919; that net income
IN this period had decreased 6288 per
cent and that the rate of return on
property investment had fallen from
$50 per cent in 1916 to 1888 per cent
in 1919.
Increased Expenses
1t should also be borne in mind that
railroad wages in five years have con-
siderably more than doubled; that the
cost of locomotives, cars and other
materials and supplies have more than
trobled; that a comparatively few years
ago financially strong railroads could
obtain money in abundance at from 8 u
to per cent and that the prevailing
rate at the present time is double those
rates; that the cost Of coal has trebled
and that all other commodities which
must be used in quantities in the
maintenance Of great railroad proper
ties have substantially increased in
prlce.
On the surface the situation present.
cd does not look very encouraging, but
railroad managers and owners have
taith in the efficiency Of the new trans
portation act and the honesty and sim
cerity Of purpose of the Interstate
Commerce Commission in applying it
with fairness and liberality, and face
the future with confidence.
For years students Of railroad trans
portation fundamentals have been
warning the public that peril caused
by shortage of transportation was i'm
pending because railroad credit
was being destroyed by process of
strangulation of the railroads through
intense regulation Of forty-eight states
and the National government, and that
if the peril came it would prove more
hurtful to industry, to agriculture and
the public generally than to the rail-
roads themselves. We have not exactly
encountered this peril in its entirety,
but for some time we have been al
most touching the edges of it. We
have gotten close enough to it to en-
able US to realize that it Is thing to
be dreaded above all other things and
to be avoided at any cost. Fortunately
we are beginning to steer away from it,,
and once at safe distance we shall
be safe for many years to come.
Hills Views
The following is quoted from a mem
orable speech delivered by James j.
Hill, lamented president Of the Great
Northern Railroad, in New York, De-
cember 10, 1912: "The railroads must
be permitted to earn enough to assure
capital that they can pay interest and
principal on the heavy additional
loans asked. By the light Of this prac-
teal Interchangeable fact, the railway
regulation of the future must be
guided. If it is not, then congestion
and a general paralysis OF trade, cost
ing the country more than double its
whole bin for transportation, cannot
be avoided. Each mile of line
in the country paid $199 in taxes in
1890. and S43l In 1910 ($916 paid in
1879. The owner Of capital will not
be over-anxious to loan it to concerns
which, if the present tendency is not
checked or reversed, Will presently see
all receipts beyond bare living in
come diverted by taxation to the pub
lie treasury. The railroad
treasury has come to be looked upon as
the public milch COW, from which a
new supply of nourisbment may al
ways be obtained"
And these words from report made
by the Railroad Securities Commission
ten years ago: "Where the future is
uncertain the investor demands, and
is justified in demanding, a chance Of
added profit to compensate for his risk.
We cannot secure the immense amount
of capital needed unless we make
profits and risks commensurate. If
rates are going to be reduced whenever
dividends exceed current rates Of in
tcrest investors viii seek other fields
where the hazard is less or the oppor-
tunity greater. In no event can we eX-
pect railroads to be developed merely
to pay their owners such a return as
they could have obtained by the pur-
chase of investment securities which
do not involve the hazards Of construc-
tion or the risks of operation"
Lumberman Changes Belief
A prominent lumberman of the South
who had for many years been active in
fighting all rate increases applied for
by the railroads, came to ne recently
and asked if there was anything he
could do to help the railroads. He said
it was no longer question Of rates
in his hNsiness hut was now entirely