VI
AGRICULTURE, BANKING, AND THE CARRIER[1]
The three agencies, agriculture, banking, and the carrier, are most important in our part of the country. Upon the wisdom and energy with which they are conducted, upon their coöperation each with the other, and upon the wise and fair treatment accorded them by the public through the forces of Government, depend their success and the continued growth and success of our great Northwestern country.
The American Northwest is a great empire, very young but very strong and full of opportunity for the best kind of human endeavor. Much has been done, and great has been the growth in the last thirty years, as some of these figures will show:—
| States | Admitted to the Union as a State |
Land area sq. miles |
Area acres |
Population | |
| 1880 | 1910 | ||||
| Minnesota | 1858 | 80,858 | 51,749,120 | 780,773 | 2,075,708 |
| North Dakota | 1889 | 70435 | 44,917,120 | 135,177 | 577,056 |
| South Dakota | 1889 | 76,863 | 49,195,520 | 583,888 | |
| Montana | 1889 | 146,201 | 93,568,640 | 39,159 | 376,054 |
| Idaho | 1890 | 83,354 | 53,346,560 | 32,610 | 325,594 |
| Washington | 1889 | 66,836 | 42,775,040 | 75,116 | 1,141,000 |
| Oregon | 1859 | 95,607 | 61,188,480 | 174,768 | 672,765 |
| Total | 619,907 | 396,740,480 | 1,237,603 | 5,753,054 | |
| States | Railroad mileage | Banking capital (a) | ||
| 1880 | 1910 | 1880 (b) | 1912 | |
| Minnesota | 3151 | 8669 | $6,539,238 | $ 67,338,460 |
| North Dakota | 1,225 | 4,201 | 555,363 | 18,427,504 |
| South Dakota | 3,947 | 16,838792 | ||
| Montana | 106 | 4,207 | 382,700 | 18,834,517 |
| Idaho | 206 | 2,178 | 126,885 | 9,782,696 |
| Washington | 289 | 4,875 | 203,533 | 37,769,323 |
| Oregon | 508 | 2,284 | 640,657 | 25,945,979 |
| Total | 5,485 | 30,361 | $8,448,376 | $194,937,271 |
| (a) Banking capital includes capital, surplus, and undivided profits. | ||||
| (b) National banks only | ||||
This American Northwest of ours comprises 21 per cent of the area of the whole United States, but has only a little more than 6 per cent of the population. The railroads have been active in providing facilities, and there are only 190 people to the mile of railroad as compared with 382 people for the United States as a whole, showing that the railroads have been doing their share in the development of this region. The banking capital, from such figures as I have been able to obtain, is $33.88 per person for all classes of banks in the Northwest, and $18.00 for national banks only, as compared with $45.28 for all classes of banks and $18.98 per person far national banking capital for the whole country. The deposits in our banks are $941,935,000—not quite 5 per cent of the total deposits in the United States of $19,663,857,000; and the deposit per capita in our part of the country is $164.00 against $214.00 in the United States as a whole. What a chance here for growth
I have spoken of agriculture as the first of the great agencies the success of which is so vital to all, and in agriculture I include all forms of activity engaged in by the farmer. It is true that in Minnesota, Montana, Washington, Idaho, and Oregon lumbering is, and in the last four states for a considerable time will continue to be, a most important part of the business of the people. It is also true that in North Dakota, Montana, Idaho, and Washington, mining furnishes a field for the employment of labor, capital, and brains, but upon the wise and efficient use of the soil depends, more than upon all else, the future prosperity of the American Northwest.
Consider for a moment some of the figures about people engaged in agriculture and the results obtained in the American Northwest.
| 1880 | 1890 | |
| All land in farms (acres) | 23,561,289 | 124,345,917 |
| Improved land in farms (acres) | 11,540,115 | 72,992,996 |
| Land capable of being farmed and not in use (acres) | 12,021,174 | 51,352,921 |
| Number of farms | 135,971 | 466,856 |
| 1879 | 1909 | |||
| Bushel | Value not available | Bushel | Value | |
| Wheat | 47,842,928 | “ | 290,801,583 | $267,708,909 |
| Oats | 32,919,797 | “ | 252,593,225 | 96,305,612 |
| Barley | 5,048,623 | “ | 97,253,571 | 47,696,131 |
| Corn | 17,020,707 | “ | 130,004,006 | 60,400,992 |
| Flaxseed | 174,300 | “ | 18,731,213 | 28,031,509 |
| Total | 103,006,335 | “ | 789,384, 598 | $500,143,153 |
| Tons | Tons | |||
| Hay and Forage | 2,420,913 | 18,954,653 | $111,154,653 | |
| 1880 | 1910 | |||
| Number | Value not available | Number | Value | |
| Cattle | 1,607,917 | “ | 7,150,802 | $172,843,915 |
| Horses | 528,321 | “ | 3,139,153 | 347,783,768 |
| Sheep | 1,885,490 | “ | 13,078,131 | 65,923,572 |
| Poultry (all fowls) | 3,345,325 | “ | 25,333,553 | 12,150,697 |
| Hogs | 672,315 | “ | 3,572,890 | 32,972,560 |
| Total | 8,039,366 | 52,274,529 | $631,674,512 | |
| 1879 Value | $ 857,812 |
| 1909 Value | 10,106,702 |
| 1899 | 1909 | |
| Acres | 276,242 | 479,024 |
| Bushels | 29,497,186 | 56,237,161 |
| Value | $8,303,259 | $19,706,593 |
These figures are interesting in showing the development in a term of years. When we look at them we are inclined to “pat ourselves on the back” and think we have done wonders, for the total value of all crops, not counting live-stock and its products, for the last census year in the states comprising the American Northwest was $691,634,435. This is a very large sum of money, equal to $120 per inhabitant, but to only $5.50 per acre for all of the farms, and to $9.50 per acre based on the improved land in farms. Denmark, with a much more dense population of 183 to the square mile as compared with a little over 9 in the American Northwest, has so improved methods of work and of agriculture that the average annual value for the same classes of products for every acre in that little kingdom is $225.16. Because of the greater density of population, the production per person averages $65.33.
Something has been done in the direction of improving agricultural methods in this country, but these figures show how far behind we are in making the best and most productive use of our soil. Suppose that the yield per acre on improved farms only was one half of the average for the whole of Denmark, then the production from the soil in the American Northwest would amount to more than $8,000,000,000 of value, instead of the present $691,000,000. The addition of this vast sum to the wealth-production of the country north and west of here would mean much to every farmer, every banker, every business man, and every railroad employee in the country.
These startling figures emphasize that there is a great responsibility upon the man engaged in agriculture in improving his efficiency, and also a responsibility upon all in seeing that hand in hand with the development of agriculture shall go proper development of the banking and transportation interests of the country.
How about the banking capacity of the American Northwest? The growth of the banks in these states from less than $9,000,000 capital in 1880 to $195,000,000 in 1912 shows clearly that this agency has been keeping pace with the growth of the country, and in the whole United States the growth has been from $825,000,000 in 1880 to $4,164,914,181 in 1912. To-day there are more than 3360 banks in the American Northwest, taking care of nearly $1,000,000,000 of the people’s money and helping the farmer, the business man, and the railroad employee carry on their daily lives. In the United States as a whole, the deposits have increased from $2,201,900,000 in 1880 to $19,663,857,000 in 1912. The banker in his business meets many people and has a chance to direct attention to the right way of solving some of the difficulties that confront the country.
What about the carrier? What has been accomplished in creating that agency.? In our part of the country, the principal carrier for any distance is the railroad, and to a very large extent this is true in the United States as a whole. Without efficient railroads the country cannot develop any more than it can develop without efficient agriculture and safe and sound banks. Here are a few figures that will show what the owners of the railroad have done in producing a transportation machine to handle the people and products of the country:—
The American railroad system has been created in its present form since the Civil War, and practically built and rebuilt within the last forty years. The railroad-owner has provided, in round figures, 250,000 miles of railroad, 370,000 miles of track, 62,000 locomotives, 51,000 passenger-cars, and 2,200,000 freight-cars. The fair present value of this tremendous piece of machinery is probably at least $18,000,000,000, and in keeping it in order and in operating it about 1,700,000 men are employed with an annual payroll of nearly $1,300,000,000.
The securities representing this value are held by hundreds of thousands of individuals, and also by insurance companies, savings banks and trust companies, hospitals, churches, and colleges; and the people as a whole have as vital an interest in maintaining the credit and prosperity of the railroads as they have in maintaining the solvency of the banks. It is stated on good authority, that the life-insurance companies doing business in the state of New York hold one eighth of the entire railroad-bond issue of the country. There are about 20,000,000 policy-holders in these companies, and they are very much interested in the soundness of this great investment. There are 16,108 holders of Northern Pacific stock, of which 5675, or 35 per cent, are women, and presumably the same relation obtains in other large railroads.
This great piece of machinery handled last year 33,510,673,000 passengers one mile, and carried 267,313,687,000 tons of freight one mile. These figures are so vast that the human mind cannot comprehend them. But, if we assume that there are 92,000,000 people in the United States, it means that the railroads provided a trip of 364 miles and hauled 2905 tons of freight one mile for every man, woman, and child in the United States.
People from all over the world come to examine the American railroads and the American railroad system, and go away in wonder because the American railroads perform a greater service per mile of track than those of any other nation, at lower rates, and pay their employees higher wages.
The following are the average rates per ton per mile for handling freight in some of the important countries for the last years for which figures are obtainable:—
| United Kingdom | 2.33 cents |
| Germany | 1.41 “ |
| France | 1.39 “ |
| Russia | .95 “ |
| Austria | 1.45 “ |
| Hungary | 1.31 “ |
| Denmark | 2.16 “ |
| Holland | 1.32 “ |
| Switzerland | 2.91 “ |
| United States | .741 “ |
And here are some figures for capitalization per mile of road:—
| United Kingdom | $275,000 |
| Germany | 114,000 |
| France | 144,000 |
| Russia, including Siberia | 81,000 |
| Austria | 118,000 |
| Hungary | 67,000 |
| Denmark | 58,000 |
| Holland | 82,000 |
| Switzerland | 117,000 |
| United States | 60,000 |
And here are the average wages paid railroad employees per year:—
| United Kingdom | $270 |
| German Empire | 388 |
| France | 260 |
| Russian Empire | 196 |
| Austria | $277 |
| Hungary | 283 |
| Italy | 287 |
| Switzerland | 292 |
| United States | 733 |
People who do not study the figures often look upon the railroad as a great piece of machinery with an unlimited ability to obtain money in indefinite amounts for increasing its capacity and improving the quality of the service. The transactions are so large and the figures run into so many millions that the impression prevails that the railroads must be very rich, and that any failure or refusal of the management to do the things that people want done is due to an unwillingness and to a spirit of parsimony, when as a matter of fact it is because of the absolute inability of the owners and managers to obtain the money from any source whatsoever.
The equipment of the railroads alone represents at least $3,500,000,000, and that equipment must be maintained in good order, that it may perform the duty imposed upon it by the public. It must be improved in quality and quantity year by year. The imagination of the people is fired by the building of the Panama Canal, and it is thought of as a great work; but the railroad equipment for the use of the people is worth at least eight times the cost of that canal, and the annual cost of repairing and replacing that equipment, about $446,000,000 in 1912, is as much as the cost of the canal. To maintain a high standard of equipment for the use of the American people is fully as important as to have the Panama Canal, and yet rarely is any suggestion made to encourage the railroads in the work they are trying to do and to help them to make a better use of that equipment or to obtain rates that will enable them to have adequate facilities and adequate equipment for the fast-growing business of the country.
The railroads are struggling all the time to perform their work with less loss and damage to life and property, and few people not in the business realize the vast capital expenditures that should be made in order to equip the railroads with modern safety appliances that help to prevent accidents. Such appliances will not entirely stop accidents, because in the last analysis the human equation is the test, and not until public opinion holds to a rigid account railroad officers and employees who are unfaithful to their duty will accidents be minimized, in spite of all the appliances that modern science may adopt. Statistics show that about one twelfth of the accidents on the American railroads are due to causes that can be remedied by mechanical appliances for the protection of trains; the other eleven twelfths come from causes that are common to all classes of business.
Much has been said about accidents in this country, as if we were very far behind other countries in this respect. Look at the figures for a moment:—
In Europe, on 206,987 miles in 1910 there were killed 554 passengers, 2607 employees, and 4465 other persons, or a total of 7626. In the United States on 248,888 miles reported in 1912, there were killed 318 passengers, 3235 employees, and 6632 other persons, or a total of 10,185. Included in the figures for the United States were 5434 trespassers, and it is well known that in most European countries the public realize they have no right to trespass on railroad property, while in this country, except in a few states, people think the railroad right of way can be used as a highway, with the result that there are about 14 trespassers a day killed in the United States. These trespassers not only lose their own lives, but endanger most seriously the lives of employees and passengers on the trains.
Absolute obedience is not encouraged enough in American education or in the American home, and in spite of everything that railroad managers can do, it is very difficult to secure absolute obedience to reasonable rules.
Nearly $300,000,000 is needed to install suitable block signals on the American railroads, which means an annual charge for maintenance and depreciation of about $75,000,000.
The revenue of the railroads is collected in the main from the handling of property and passengers, and they cannot pay out more than they take in. In 1912, of every dollar that the railroads received, the following disposition was made:—
| Labor direct | 44.17 | cents |
| Fuel and oil, 70 per cent labor | 8.93 | “ |
| Material, supplies, and miscellaneous expenses | 14.06 | “ |
| Loss and damages | 2.20 | “ |
| Taxes | 4.21 | “ |
| Rents for leased roads | 4.41 | “ |
| Interest on debt | 13.43 | “ |
| Total | 91.41 | “ |
| Balance | 8.59 | “ |
| 100.00 | “ |
Of this balance 3.75 cents was for betterments and deficits, and 4.84 cents for dividends. In other words, of the dollar collected there had to be paid out 91.41 cents for those things that were absolutely necessary for maintaining and operating the property and paying taxes and interest, leaving only the small balance of 8.59 cents for improvements and dividends.
Without effective banking the great railroad systems of the country could not have been developed to the extent that they have been, and one of the great problems confronting the carriers to-day is that of making both ends meet, and having enough money left over so that bankers will be able to obtain from investors new funds to increase the facilities. It is a matter of common knowledge and evident in the lives of all of us that expenses and the cost of living are greater to-day than a few years ago, and the same causes that affect the individual affect the great transportation companies. The demands of labor, the increased cost of material, ever-growing taxes, many new federal and state laws unnecessarily increasing the payroll, requirements of prosperous people for better service, all tend to increase the railroad expense, but so far with no increase in rates. As a result, the balance left to pay a return upon investments is not the amount that it should be to enable the banker to say to his client, “Lend me your money, that I may furnish it to the railroads so they can go on with their work.”
Figures compiled from the reports of the Interstate Commerce Commission for the fiscal years 1907 and 1911 are given below:—
| 1911 | 1907 | |
| Cost of road and equipment * | $14,984,796,837 | $12,940,379,220 |
| Revenues | 2,852,854.721 | 2,570,795,058 |
| Expenses | 2,005,528,462 | 1,737,698,201 |
| Balance | 847,326,259 | 833,096,857 |
| Taxes | 102,657,157 | 79,640,013 |
| Operating income | 744,669,102 | 753,456,844 |
| Increased cost of road compared with 1907 | 2,044,417,617 | |
| Decrease in income | 8,787,742 | |
| * Cost, taken from balance sheets, is far less than present real value. | ||
In other words, with $2,000,000,000 new capital put into the business there was nearly $9,000,000 less return. How long will people go on putting money into a business that makes no return on the new capital required?
In 1900 the value of farm property in the States of the American Northwest was $1,843,409,554, and in 1910 it was $5,436,255,070, an increase of 194.9 per cent.
| 1900 | 1910 | |
| Minnesota | $788,684,642 | $1,476,411,737 |
| North Dakota | 974,814,205 | 255,266,751 |
| South Dakota | 297,525,302 | 1,166,096,980 |
| Montana | 117,859,823 | 347,828,770 |
| Idaho | 67,271,202 | 305,317,185 |
| Washington | 144,040,547 | 637,543,411 |
| Oregon | 172,761,287 | 528,243,782 |
| $1,843,409,554 | $5,436,256,070 |
The capital, surplus, and undivided profits of all the banks of the United States for 1912 are given as $4,164,914,181. The net earnings in the same periods for national banks, and not including state and private banks, which are said to do as well, if not better than national banks, based on capital and surplus, were 6.66 per cent in 1880; 8.63 per cent in 1890; 8.20 per cent in 1900; 9.67 per cent in 1910. Or, if based upon capital alone, the net earnings were: 8.36 per cent in 1880; 11.48 per cent in 1890; 11.60 per cent in 1900; 16 per cent in 1910.
The capitalization of the railroads in 1910, represented by securities in the hands of the public, was $14,338,575,940. The return on capital invested in railroads was investigated carefully by the Railroad Securities Commission, with President Hadley of Yale at the head, whose report was sent to Congress by the President on December 8, 1911. What the Commission says in that report tells the story:—
“Neither the rate of return actually received on the par value of American railroad bonds and stocks to-day, nor the security which can be offered for additional railroad investments in the future, will make it easy to raise the needed amount of capital. The rates of interest and dividends to outstanding bonds and stocks of American railroads is not quite four and one half per cent in each case.”
And again:—
“A reasonable return is one which, under honest accounting and responsible management, will attract the amount of investors’ money needed for the development of our railroad facilities. If rates are going to be reduced whenever dividends exceed current rates of interest, investors will seek other fields where the hazard is less or the opportunity greater.”
To quote again from this report:—
“The necessary development of railroad facilities is now endangered by the reluctance of investors to purchase new issues of railroad securities in the amounts required. This reluctance is likely to continue until the American public understands the essential community of interest between shipper and investor, and the folly of attempting to protect the one by taking away the rewards of good management from the other.”
The evidence all indicates that the returns upon capital invested from both agriculture and banking have been much more attractive to the investor than have the returns upon capital advanced to the carrier, and the Securities Commission points out very clearly that the returns upon railroad investment are not enough to attract the needed capital.
I have tried to give you a few of the important facts about agriculture, banking, and the carrier,—the A, B, C of the alphabet of progress in the American Northwest, If these three agencies are not efficient and progressive, then there will be indifferent progress in merchandising, in manufacturing, and in the development of the more complex forms of human effort that do not flourish until there is some surplus of brains, energy, and capital over and above the imperative needs of the simpler forms of business.
Following, and to some extent coincident with the success of, this A, B, and C, come the things every man works for, and hopes for,—better homes, better care of women and children in schools, hospitals, and churches, and better facilities for the general welfare and uplifting of society. We all of us want these things, and we all want agriculture, banking, and the carrier to go on with their work, and to succeed. The practical question is, What can any one of us do to help out, that we are not doing?
It is gratifying that the country generally is awakening to the fact that agriculture is an occupation that needs the best attention and the best brains that can be given to it. Too long has the farmer’s life been pictured as unattractive, unremunerative, and something that the young men and young women should shun. Lately, however, the Government, the bankers, the carriers, and people generally have awakened to the fact that it is important to improve living conditions on the farm and to increase the productivity of the farm. Progress has been made, but much remains to be done to help and encourage the farmer and his family and to increase the product from each acre.
For many years the attention of thoughtful men has been directed to our monetary policy, and the mantle of government protection has been thrown around our banking methods, and every reasonable effort made to safeguard that important business. There are some weak spots in our system which it is hoped will be cured in due time.
The third great agency, that of the carrier, has for forty years struggled to create a good transportation machine, much of the time without helpful support from either the public or the Government, and of late years in the face of restrictive and harassing legislation. That the business has succeeded to the extent that it has, has been due to the wonderful growth of the United States, which has carried forward all classes of business to a fair, and in some cases a high, degree of prosperity.
Now a problem is confronting the American people that is just as important to their future welfare as is the success of agriculture, or of our monetary system. When the silver question was rampant, many people said they did not care about that, because it was a question for the bankers, and it did not affect them; they learned later on, however, that the policy of our financial system affected every man from one end of the country to the other. Many people say now that in some miraculous way the railroads are going to provide all the facilities that are necessary for the expanding country, and that it is their business to get the money, spend it, and have adequate facilities. The inability or failure in providing these facilities will sooner or later affect every one from one end of the country to the other, and it is just as much to the interest of the farmer, the banker, and the business man to see that fair treatment is accorded to the railroads, so that money will be attracted to that business, as it is to have sound agricultural practice and a sound banking policy.
There is one feature of railroad-operation that is not often considered, and that is the question of manning this great machine. There are many high-minded, earnest men in all departments of railroad work who are giving the best that is in them in trying to do their duty to the owners of the property and to the public. It is an unfortunate fact, however, that of late years young men in the United States who are fortunate enough to be trained in the best schools and colleges for business and professional life, and who have the liberty of choice in selecting their life work, do not select the transportation business, so that the supply of trained railroad officers is not as great as it should be for the magnitude of the business. Experienced men of high character in the management of the railroads give confidence to the investor and to the public, and they are more important than money, engines, tracks, and physical facilities, if progress in the right direction is to be made. It is very much to the interest of the future growth of the United States to have the railroad business offer such rewards to the investor that money will flow freely into building up the transportation machine, and to offer such attractions to the best talent of the country, that men will engage in the business as freely as they engage in banking, in law, in medicine, in manufacturing, and in agriculture.
There is the closest connection between the railroads and the bankers, because the railroads must turn to the banking fraternity to help them in getting funds to carry on the great work of providing sufficient transportation. Is it not to the interest of bankers to try so to shape public opinion that not only will the particular business in which they are engaged receive fair treatment, and agriculture receive help and fair treatment, but the great business of the carrier will receive like encouragement and fair treatment, so that the capital now invested in that important business, and needed so much in the future, will receive a return sufficient to justify bankers in recommending and obtaining the funds to be used for expanding the facilities of this great country? I believe that it is, and that every one can do something in his own life to foster a better understanding and a saner public opinion about these questions so vital to all.
- ↑ Address delivered before the Minneapolis Chapter of the American Institute of Banking, at Minneapolis, Minn., April 26, 1913.