to such properties as the Santa Fé, the Burlington, the Pennsylvania, the North Western, or the Baltimore and Ohio railroads—to mention a few out of many, many instances. These are good roads; in some instances because they have been extraordinarily well located, but in most instances because of their continuous enlightened management. Yet some of them have been hard put to it of late to maintain their dividend obligations to their stockholders. And many roads have been compelled to lower or else suspend entirely the dividends paid in the years gone before.

“How about efficiency?” you may interject.

You are not the first to ask that question. It was asked several years ago by a distinguished citizen of Boston—Louis D. Brandeis, now a justice of the Supreme Court at Washington. In the course of a rate hearing in which he appeared as counsel, Brandeis asked the question, then answered it himself.

“I could save the railroads of the United States a million dollars a day, by applying the principles of modern efficiency to their operations,” was his quiet answer to his own interrogation.

The remark was a distinct shock to the railroad executives, to put it mildly. Some of them were angered by it. The wiser ones, however, went home and sent their secretaries scurrying out after all the books on the then new science of efficiency that could be found.

The more they studied efficiency the less these wise men were inclined to anger against Brandeis. Some of them found that they had been practicing efficiency on their properties for a long time past—only they had not known it by that name. They had been rebuilding whole divisions of their lines, relocating and reconstructing them so as to lower grades and iron out curves—all to the ultimate of a more economical operation of their roads. A bettered railroad means invariably a cheaper one to operate. The saving in grades and curves—no matter what may be the initial cost—means a more than proportionate saving in fuel cost, as well as in wear and tear upon the track and cars.

Remember, if you will, that one of the biggest things that efficiency spells is economy. And economy is always a popular virtue in railroading, particularly among those gentlemen whose only interest in the railroads arises from the fact that they own them. If greater efficiency meant greater economy—well, perhaps it was just as well that that smart attorney from Boston made his remark at the rate hearing, only perhaps he might have phrased it in a little less violent fashion.

That is why a man like Daniel Willard, the remarkably efficient president of the Baltimore and Ohio Railroad—the man who has done so much toward rehabilitating that one-time minstrel-show joke into one of the best railroad properties in the United States—spent days and nights reading every scrap about efficiency that could be brought to his attention, why he brought Harrington Emerson, one of the best-known of the efficiency experts into his own offices and staff, why, beginning with his great car and engine repair and construction shops, he is gradually extending the principles of modern scientific efficiency to every corner of the railroad which he heads. Willard’s example has been followed by other railroad executives. And it is because of these and other efficiency principles that the best of our railroads have been enabled to crawl through the hard years of the past decade, without going into bankruptcy.

It is a gloomy record—these lean years in Egypt. They came succeeding a decade of apparent prosperity for most of the railroads. I say “apparent” advisedly. For, when you get well under the surface of things, you will find that even the first six or seven years of the present century were not genuinely prosperous for the overland carriers. Dip into statistics for a moment. They are dry and generally uninteresting things but nevertheless they are the straws which will show the way the wind is blowing. Look at these:

In 1901 the net capitalization of our railroads was, in round figures, $11,700,000,000. Six years later, or at the end of the greatest period of material prosperity that the United States has ever known, this capitalization had increased to $16,100,000,000—approximately thirty-seven per cent.

A great deal has been written about railroad capitalization—a great deal without knowledge of the real facts in the case, and a great deal more with knowledge but also with malicious intent. These figures speak for themselves. Translated, they represent the expenditures of the railroads for permanent improvements and expansions during that busy seven-year period. At first glance an expenditure of more than $4,000,000,000 is staggering. Yet what are the facts? The facts are that hardly one of these roads expended enough that memorable season to keep pace with the vast demands of the freight and passenger traffic—particularly the freight—upon them. We experienced great railroad congestions during the winters of 1903, 1905, 1906, and 1907. And the loss to the large users of railroad facilities because of these earlier congestions is no vague thing; it can be figured high in the millions of dollars. And furthermore it can be said that there is no period of expansion in recent American commercial history that has not been both limited and hampered by the lack of transportation facilities. What a commentary this, on our so-called national efficiency!

Today we are just crossing the threshold of what seems to be an even greater period in the industrial expansion of the nation.[1] Yet how are our railroads prepared to meet their great problem? In 1901, as we have already seen, they met it by an expansion of their physical facilities. But in 1901 the railroads had credit. In 1916 the credit of many of them had become a rather doubtful matter. And this, of course, has been a serious detriment to their expansion—to put it mildly.

An analysis of the service, both freight and passenger, of the railroads in the year 1907, the last of the “big years” in railroad traffic, compared with that of 1914—the most recent year whose figures are available—is illuminating in estimating railroad credit today, or the lack of it. The passenger-mile—representing the progress of one train over one mile of track—is the unit of that form of traffic. In 1914 the total passenger-miles had increased to 35,100,000,000 from the total of 27,700,000,000 in 1907—or 25.7 per cent. Similarly the ton-mile is the unit of freight transportation. As the name indicates, it represents the carrying of one ton of goods of any description for a mile. In 1914 the ton-miles had grown to 288,700,000,000 from 236,600,000,000—or twenty-two per cent.

But, as the traffic grew, it was necessary that the railroad should grow. Despite supreme difficulties in finding credit it did manage to invest some $4,042,000,000 in property expansions and reconstructions during the seven years from 1907 to 1914. Yet this very money must be paid for, and, in view of the gradually impaired credit, paid for rather generously. At five per cent, this expenditure represents an added annual interest charge of $202,101,000 to the railroads of the United States, a figure whose great size may be the better appreciated when one realizes that it is considerably more than half a million dollars a day.

Against this increased outgo one must measure increased revenues for 1914 over 1907, of $452,188,000—one deals in large figures when one speaks of the earnings and