employees; by making the railways a branch of the Government it
could more effectively coördinate transportation with other Government
activities; and by the complete temporary elimination of lines
of corporate interest a more effective unification of all facilities and
equipment would be possible.
Federal Control in the War.—The Federal Control Act of 1918 provided that the railways should be operated for the President by a director-general of railroads. Practically all of the railways were taken over, and were operated, with little change in the individual units, by Federal managers (in nearly all cases the former operating executive) reporting to regional directors, seven in all, who in turn reported to the director-general. The latter was assisted by staff-directors in charge of the several divisions law, finance, purchasing, traffic, operation, labour, accounting, public service and capital expenditures. With few exceptions the entire organization, from the Federal managers to the regional and division directors, was made up of men carefully selected from the railway service. Political influence had no play in appointment. The Act provided that the railways should be returned to their owners for private operation within 21 months after the signing of the treaty of peace. The Government during the period of Federal control was required to keep up the usual standards of maintenance, so that the properties would be returned at the end of Federal control in as good condition and as complete in equipment as when taken. Failing to do this, the railway companies were to be compensated for the deficiencies. The annual rental was set as a sum equal to the average annual net operating income earned by the companies during the three years ended June 30 1917. The principles of unification and consolidation of facilities and equipment were carried much further by the director-general than by the Railroad War Board. Terminals and other facilities, and locomotives and cars, were used in common. Advertising, soliciting, off-line agencies, and other normal competitive activitives were abolished. Traffic was routed by the most convenient lines, regardless of shippers' directions, or of the effect of diversions on the earnings of the individual units in the national system. The aim was to utilize every instrumentality of transportation to the highest degree of traffic-handling efficiency.
The results of Federal control during the year 1918 while the war was in progress were satisfactory in that they met the emergency. The traffic of that year, both in ton-miles and in passenger-miles, exceeded all previous records. What was more important, the coördination of railway management with other branches of the Government had the effect of producing the kind of transportation most necessary for war purposes. The congestion of the early winter of 1917 was quickly relieved. The heavy demands of troop movements were completely met. The loaded cars on hand at the seaboard were always a little ahead of the ocean-going tonnage capacity, and the railways, after May 1, kept up their part of the programme of moving export food supplies for the civilian population of the Allies. The insistent preference given to war traffic naturally entailed some curtailments in service for civilian population of the United States. These curtailments were patriotically accepted. A system of centralized control established priority for the various kinds of freight and controlled traffic at the source by requiring permits before freight would be accepted. Such permits were not issued unless transportation conditions at destination were such that the freight could be quickly unloaded. Manufacturers and dealers were asked to load cars with larger shipment units, or otherwise to conserve car space by changing methods of packing. One of the first acts of the director-general was to appoint a commission to make recommendations as to wage increases. The commission made its report in May and its recommendations were adopted and made retroactive to Jan. 1 1918. The increases in pay-roll expenditure were substantial. Coincident with the promulgation of the new wage scale, the director-general created the Board of Railway Wages and Working Conditions and later he appointed three Boards of Adjustment to pass upon disputes as to working rules and discipline. Both the wage and the adjustment boards were bi-partisan with equal representation from the officials, representing management, and from the executives of the labour organizations, representing the employees. During 1918 there were no strikes or other labour disturbances. The director-general was given almost autocratic authority to increase freight and passenger rates and other transportation charges or regulations. The Interstate Commerce Commission and the state commissions temporarily were shorn of power. An increase of 25% in freight rates and about 20% in passenger rates was made effective in June, a few days after the wage increases were announced. While in a general way it was hoped that the advances in rates, coupled with the expected economies in unified control, would offset the higher wage rates and other increases in operating costs, the net financial results were regarded as of secondary importance as compared with the increase of transportation capacity. The rate advances were insufficient to meet rising costs and the final result of the first year of Federal control, with no allowances for deficiences in maintenance or depletion in stocks of materials and supplies, was a deficit of over $200,000,000. In other words, the net operating income earned by the director-general was that much less than the rentals paid to the railway companies. This deficit, however, may properly be regarded as one item of the cost of carrying on the war. In view of the satisfactory transportation service, particularly during the summer of 1918 when the armies of the United States were at the height of their activities, and comparing the deficit with the expenditures of other branches of the Government, the cost was not great.
The second phase of Federal control was the period from the signing of the Armistice in Nov. 1918, until March 1 1920, when the roads were returned to private management. This post-war period of Federal control was not marked by results as satisfactory as those of 1918. It would have been much better if the period of Federal control had ended Dec. 31 1918. Immediately after the Armistice the moral factor of patriotism, which had been so effective during the first ten months of Federal control, almost entirely disappeared. As soon as the war was over the employees through their organizations began a campaign to hold and to extend further the concessions which had been made freely under the exigencies of war; the thoughts of the officers began to turn to their corporate and personal interests; and among a minority of the administration officials active steps were taken to bring about an indefinite extension of Federal control with the ultimate aim of nationalization. The public, however, had little patience with the director-general's proposal to Congress that Federal control should be extended five years, and the suggestion had little support outside of the labour organizations and the political forces aligned on the side of nationalization. Chambers of commerce, shippers' organizations, and the general public, in the natural reaction against perpetuating war-time governmental control of business, insisted that the railways should be returned to private control. This general attitude toward the subject, and the alarming deficits which were being added to that of 1918, influenced Congress to take active steps to restore the railways to their pre-war status, but great difficulty was experienced in agreeing upon a plan which would be satisfactory in detail to both the House and the Senate. While the hearings and the debates dragged throughout the year 1919, the transportation service suffered in efficiency and among the more radically inclined employees there were frequent and serious strikes. It was found necessary to grant further increases in wages and to enter into the so-called “national agreements” containing many burdensome and restrictive rules such as, for example, the abolition of piece-work in shops. Most of these national agreements were made almost on the eve of the return of the railways. They were drawn by the labour advisors to the director-general and were adopted over the protest of the railway operating officials. These national agreements were partially abrogated July 1 1921, by order of the Railway Labor Board created by the Transportation Act of 1920.
The final cost to the Government for the 26 months of Federal control was estimated by the director-general at a minimum of $1,200,000,000. It seemed probable that it would be much
