The Washington herald., 1921-05-19
MISUNDERSTANDING BASIS
OF RAILROAD PROBLEM
Willard Challenges Subsidized Operation in
Continuation of Testimony.
BY J. SHIRLEY EATON.

The Cummins inquiry into the
railroad situation does not abate in
interest as it proceeds. Following
Julius Kruttschnitt. Daniel Willard
continued the presentation for the
railroads during the past three
days. His central theme was THE
railroad problem today is largely
one of Misunderstanding and
think il may be fairly said that the
misunderstanding has been caused
chiefly by the fact that during the
twenty-siX months of Federal con-
troll great economic problem was
dealt with in an unecopomic way"
Although president of the Ba,ti-
more and Ohio Railroad, Mr.. Will
lard's patriotic larger activities
have identified him in the public
mind with the whole railroad prob
lem. AS member of the Railroad
War Board and as railroad repre-
sentative on the War Industries
Board he was an outstanding figure
in the frantic stages of preparation
for war. Mr.. Willard directed his
testimony quickly to the heart of
the real issue-"Is the present
plight of the railroads the fault of
private operation?" Without dis
paraging the gravity of the crisis
he gave it proper perspective. THE
condition Of the railroads at the
present time differs only in degree
from the conditions generally sur
rounding all business activities and
Is the direct result of the economic
changes brought about by the war"
In this view the operations of a
twelve-month period. while they
may reach to the brink of disaster.
cover far too short a period and
embrace conditions far too irregu-
lar to give the operating results
significance as a guide to the flu
ture policies. Mr.. willard. however,
did introduce figures ard make
comparisons. He first indicated the
general tendencies in the return on
property value:
Glass Roads for the whole
! country. Return on property values:
Average last four years of private
operation, 5.3S per cent; average
government operation, 2.9S per cent;
1920 calendar year (ten months pri-
vate operation), .32 per cent: year
ending February IS, 1921 (private
operation), 0.1O9 per cent.
Disposition OF Returns.
Answering roughly the question
what the private management of
1920 did with its revenue he showed
that if 1919. the last year of gov
eminent operation had been under
the same burden of wages and price
increases it's total expense figure
would have slightly exceeded the
actual figures of 1920 under private
management. Turning to the gpoup
of Eastern carriers and selecting
1916 as the most prosperous year
of private operation he showed that
in 1920 expenses had increased 1876
per cent while revenue had increased
but So per cent.
The rise in wages and prices of
materials was not peculiar to rail-
roads, but where other business
could and did raise its charges the
railroad could'not do so. They came
down to the period of the war in
a weakened condition withS i'm
paired reserves and declining credit
With the outbreak of war two
courses were opened to the govern
ment, either to restore the economic
basis of railroad operation so long
neglected. by adjusting rates to the
general price level or to avoid the
issue and take over the operating
liabilities at the expense or the
United States Treasury. Wisely or
unwisely this latter course was
adopted and during the war the rail-
roads were not ar economic opera
tion. Wage raises were deferred as
far as possible and an unsettled ac-
count with the workers passed over
to private operation to liquidate.
avoidable during government con-
troll the administration was in posi-
ton to pass on to the taxpayer
wherever the revenue was made
quate.
The witness testified that the
breakdown of morale incidental to
rearrangement of properties regard
less of ownership, the reassignment
of officers to new duties and the re-
vision of status and reclassihcation
of men and a general atmosphere
of indefinite propaganda for perma-
nent government operation, Joined
with the psychological reaction fol-
lowing the tension of the war, rem
dered this first year of private op-
Grafton most difficult. Furthermore,
the properties were returned under
equipped and that equipment under
maintained and in the latter part
of the year the terrific business re-
actions set in. Most of these are
postwar phenomena and are not
the proper burden of private op--
Grafton to be discharged in a single
year.
Rate Adjustment.
OF the rate adjustment which was
made he said it did not fully restore
rates to parity with wages and
prices at the time it was made and
1t was predicated on a volume of
business which has so fallen off that
the original calculations failed to
apply in the latter part OF the year.
He had been alert to locate any
points where the high rates might
have overreacned but he apparently
felt the complaints he had known
were not justified. AS an illustra-
tion he Investigated the contention
that 1t cost more to haul wheat
from the wheat fields to New York
than from Buenos Ares. He was not
able exactly to verify the ocean rate
quoted but granting this the laying
down of raw wheat in New York
harbor had no commercial signifi-
canoe until the wheat was hauled
inland to a flour mill and then back
as a converted product On this ba-
sis the domestic wheat had the ad-
vantage in the case cited when all
charges had been computed He felt
the transportation act offered the
basis for saving the railroads. pro-
viding proper safeguards for labor