Metropolitan District only was controlled and subject to Government
guarantee, should pool their receipts, including also the London
General Omnibus Company. To meet the peculiar conditions of the
situation a special Act of Parliament was passed, and from Sept. 26
1920 these lines were empowered to charge “revised fares,” the
Metropolitan District railway ceasing to come under the guarantee.
Allocation of passenger travel to specific routes, already partly in
desuetude, partially disappeared during the early months of 1921,
and finally in July of that year.
Goods Traffic.—During 1920 most of the special regulations imposed under war conditions disappeared, though the common-user of wagons still continued, and by coöperative action it had become possible to realize a higher standard of wagon loading. Commencing with the four weeks ending Jan. 29 1920, the Ministry of Transport commenced to issue detailed statistics of goods traffic operation, and on the completion of twelve months these were altered to agree with the calendar months, in combination with corresponding passenger traffic statistics. (J. A. K.)
United States
The decade 1910-20 was marked by many fundamentally important developments in organization, management, and public regulation of American railways. During the early part of the period a tendency, which had begun during the latter half of the preceding decade, toward a decreasing rate of return on the investment in railways caused serious financial distress and a marked decline from the normal rate of development of railway facilities, equipment and service. The years 1915 and 1916 brought large increases in freight tonnage through the transportation of war materials for the Allies. The active participation of the United States in the World War, beginning in April 1917, made even greater demands upon facilities already overtaxed. To meet these demands the railways tried the experiment of voluntary unification through a committee of railway presidents clothed with plenary power by the boards of directors of practically all railway companies to operate the railways as one national system during the war. In the national emergency, in which the closest possible coördination of the agencies of transportation with the several branches of the Federal Government was absolutely essential, the experiment of voluntary unification was not satisfactory, and on Jan. 1 1918, as a temporary war measure, the railways were taken over by the Government, to be operated by a director-general responsible to the President. Federal operation continued until March 1 1920, when the railways were returned to private operation under the terms of the Transportation Act of that year. That Act fundamentally amended the existing policy of national regulation of railways and extended the powers of the Interstate Commerce Commission. Principally because of the serious business depression of 1920-1, and the decline in the volume of railway traffic, the results of the first year of operation under the Transportation Act were disappointing. In the summer of 1921 the subject again was commanding national attention. A choice among three policies was then incumbent upon Congress: (1) to rely upon private ownership and operation under the principles of the Transportation Act (hereinafter described) to take care of the situation when business conditions became normal; (2) to make some compromise between a policy of private control and initiative and Government operation or ownership; and (3) completely to nationalize the railways.
Pre-War Conditions and Legislation.—The 1910 amendment to the original (1887) Act to regulate commerce (see 22.830) created the Commerce Court to act upon appeals from decisions of the Interstate Commerce Commission. The new court was intended to specialize in the technique of transportation and to expedite the determination of cases theretofore passed upon by Federal courts of general jurisdiction with crowded dockets containing cases of all kinds. In many of its early decisions the Commerce Court overruled the Interstate Commerce Commission and, because it appeared to limit the effectiveness of the Commission, the Court became unpopular. The public attitude toward railways at that time was unfriendly, and Congress responded to public pressure by abolishing the Commerce Court in 1913.
In response to an insistent public demand, growing out of the belief that the railways were being allowed to earn returns on fictitious capitalization, the Federal Valuation Act was passed in 1913. The Act required the Interstate Commerce Commission to determine the physical valuation of the railways individually, as of June 30 1914, and to cause records to be kept which would accurately reflect all changes in property values after that date. Three bases were prescribed tentatively: (1) original cost to date, in the cases where the information could be obtained; (2) estimated cost of reproduction, new; and (3) estimated cost of reproduction, new, less depreciation. The work of determining values had been in progress since 1914, but no final figures were available in 1921 or expected until 1923 at earliest, although tentative valuations of a few properties had been made public.
Another piece of legislation, known as the Clayton Act, of 1914, contains a section which has an important bearing upon railways. The Act was intended to strengthen the so-called Anti-Trust Act and to prevent collusion between directors and officers of railways and directors and officers of manufacturing and other concerns dealing in railway equipment, coal and other supplies. It requires that contracts for supplies which will cost more than $50,000 must be open to competitive bids invited by advertisements. A railway company is prohibited from having dealings in excess of $50,000 per year with a concern having a director, officer or agent who is also a director, officer or agent of the railway. The Act was to be in force from 1916, but because of war conditions the effective date was postponed until Jan. 1 1921.
About 1906 a downward tendency began to be apparent in the rate of return on railway investment. This change restricted the flow of new capital into railway development new lines and improvements of existing lines. The traditional policy of American railways had been to keep their facilities well ahead of the demands of growing traffic. In view of the fact that the volume of freight traffic doubles about every 12 years, and that the numbers of passengers carried one mile doubles about every 15 years, the need of such a policy is apparent. The practice of the conservative railways was to “plough in” a substantial part of their net income each year by making improvements out of income instead of issuing new securities. Such a policy, however, could not be continued with constantly diminishing net income. The downward tendency in the rate of return was caused in part by a hardening of the rate structure through a more inflexible policy of public regulation, in part by steadily increasing costs of wages and materials, and in part by the greater difficulty of finding means through economies and new operating methods of overcoming increasing costs. With declining net returns, and a general lack of confidence on the part of the public toward railways, railway securities lost their attraction, and investors sought other fields. The railways experienced much difficulty in obtaining new capital for the additional facilities required to keep their plants in step with traffic growth, and many of the weak lines reached such financial straits that they could not maintain their solvency. The cumulative effect of these tendencies reached the climax in 1915 when 42,000 m., or about one-sixth of the entire mileage of the country, was in the hands of receivers, and when less new mileage was built than in any year since the period of the Civil War.
Effects of the World War.—This was the situation when the effect of the World War was first felt by American railways. The orders from the Allies for munitions and other war supplies caused a sudden increase in freight tonnage. The additional revenues acted as a stay against financial distress, but the railways found their traffic-carrying capacity taxed to the full. Then came the added traffic burden when the United States entered the war in April 1917.
To meet the emergency the railways, through the American
Railway Association, organized a railroad war board and delegated
to its five members complete control over operation. The purpose
was to coordinate management under private ownership and
control so that the railways, during the war emergency, would merge
their merely individual and competitive activities in the effort to
produce the maximum of transportation efficiency. The board did
much to increase the capacity of the railways through unified operation
and common use of facilities, and during the first six months
following voluntary unification, the heavily increased traffic was
handled satisfactorily. But during the late autumn and early
winter of 1917 acute traffic congestion occurred at the Atlantic
seaboard ports, through which the greater part of the war supplies
was exported, and the blockade extended back to the important
inland industrial centres. The congestion was caused by several
factors, among which two were outstanding. One has already been
mentioned the financial inability of the railways to keep up their
former programmes of providing additional facilities in advance of
traffic needs. The second was the lack of effective coördination
between the railways and the several branches of the Government,
each of which demanded priority of movement for its freight, thereby
creating great confusion. The congestion and its interference
with traffic, the perilous financial condition of the railways, the
spirit of unrest among railway employees because of the greatly
increased wage rates paid by manufacturing and ship-building plants,
and the need of better coordination of all agencies essential to the
successful prosecution of the war, led to the President's proclamation
of Dec. 26 1917, taking over the railways to be operated by the
Government from Jan. I 1918. The Government could advance
the funds required to provide the additional facilities urgently needed
for war purposes; by paying a rental equivalent to pre-war net
operating income it could prevent further bankruptcy of railway
companies; by paying higher wages than the railway companies
were able to pay, it could remove the cause of unrest among em-
