Competition of Trolley and Truck

Electric lines some years ago took away a large part of the local passenger business of the steam railroads. Automobiles and power omnibuses are now taking away much more of this business. Short-haul freight business is passing over very largely to autotrucks. The financial difficulties that the railroads are encountering are due in no small part to the fact that the diversion of business to these newer kinds of transportation has prevented the intensive growth of railway traffic. Thus, while a complete Thus, while a complete unionizing of all the railroad workers under control of powerful and determined leadership might precipitate a strike that would cause terrible inconvenience and suffering for a time, the ultimate success of such methods would depend wholly upon the mental attitude of the larger public. If the country believed that the railroad unions were wrong in their claims and reckless in their methods, the power of these unions would speedily fade away. They are strong when an intelligent public opinion supports them; but they are to be intrinsically less powerful in the future than in the past because they are no longer a group of guilds possessing mysterious technical knowledge which renders all the rest of the community helpless through ignorance. This is not to disparage the skill and training of railway workers, but merely to recognize the changes due to new conditions.

Proposal to Buy and Run Roads

The thing that the railroad unions demand, besides their im

mediate insistence upon very large aggregate increases in wages, is the permanence of the present public control through the outright purchase of the railroads by the Government. They have brought forward a plan for the lease of the roads to an operating corporation. This leasing corporation would be managed by a board of directors, only a third of whom would be appointed by the Government, while one-third would be named by the socalled "officials" of the railroads and the other third by the classified railway workers. The profits would be divided-a part going to the Government and a part going to the workers. Something further and more specific with regard to the plan will be found in the special article on the "Plumb plan." We are not here discussing the proposals in detail, but only some of the principles involved, and refer our readers to the article.

Worthy of Frank Discussion

It is in our opinion, then, wholly timely and thoroughly appropriate that the railway brotherhoods should have brought forward their plan in order that Congress, the newspapers and the general public may discuss it thoroughly. We have no sympathy at all with the contemptuous dismissal of the plan; much less with the very serious misstatements about it which have appeared in various quarters. By far the largest single economic problem before the country is that of the future control and management of the railroads. President Wilson some time ago announced that at the end of the present calendar year, of which only four months now remain, the Government would cease to operate the roads and they would be returned to their former owners. In the July number of this magazine we published an important article contributed by Senator Cummins, Chairman of the Committee on Interstate Commerce, relative to the legislation that would be necessary in order that the resumption of private operation might be fairly satisfactory. Government operation has not proved itself to be as popular as was expected. It will be remembered that Mr. McAdoo, while com

bining the positions of Secretary of the Treas ury and Director-General of the Railroads, Congress to extend the period of Government was supported by the President in advising operation for some five years longer. In our opinion there was much to be said in favor of Mr. McAdoo's proposal. In the first place, Government operation under normal conditions has not as yet been possible; and in the second place, there is no agreement at all upon a satisfactory method of providing for a return to operation under private ownership. The failure of Congress to accept Mr. McAdoo's proposal led to the President's announcement that the roads would be returned very promptly, and to his later definite statement that the Government would relinquish its operation at the beginning of the new year.

MR. GLENN E. PLUMB (Author of the plan before Congress for nationalizing the railroads)

sional elections occur next year. But definite issues are now shaping themselves with respect to which the public man who is most direct and outspoken will be the most comfortable next summer when he faces his constituents. The men who are in Congress today were chosen in a period of great crisis, and were expected by the voters to face all such problems as those now pending with courage, and with power of clear decision. Trimming and "side-stepping" will not please the people in the home districts. On the other hand, this is no time to make political capital by a loud pretense of vigor and decision, accompanied by false alarms and by misstatements about matters in dispute.

Mr. Plumb's Proposals

A number of plans for railroad reorganization have been proposed, and the so-called Plumb plan is merely one more. It is absurd to denounce the plan without studying it, and it is desirable to look at it from the standpoint of its friends as well as from that of its opponents. Mr. Glenn Plumb, who admits that he is its author, and who last month expounded it before the House Committee, is a Chicago lawyer who appears as counsel at Washington for the organization of railway employees; and the heads of these brotherhoods are committed to his plan and prepared to

push it by methods of legislative and political propaganda in the use of which they have knowledge and skill. It does not follow that, because these men are successful heads of labor unions, they are competent to solve the railroad problem in all its phases for the hundred million people of the United States. Their endorsement of the plan puts a great deal of influence and power behind it, but does not relieve Congress of its responsibility. Mr. Plumb and the heads of the brotherhoods may readily persuade the rank and file of the membership of labor organizations to accept this plan without any analysis. But Congress and the country must proceed critically. The plan involves various principles, and a series of successive acts. These cannot be gulped down as a whole, but will have to be dealt with separately. And such consideration should not be hasty, but careful.

Roads

Mr. Plumb has proposed that (1) Valuing the the Government exercise its powers of eminent domain and make the railroads a national property by purchase. In order that this may not seem so formidable a thing, he weakens his argument by fallacious reasoning as to the history of the development of railroad property, so as to make it appear that it would be just to pay the present owners many billions of dollars less than has heretofore been regarded as a moderate estimate of the true worth of the property. The reasoning brought forward by Mr. Plumb and the brotherhood leaders to disparage and weaken the property rights of railroad owners is a kind of reasoning that would unsettle values in every direction. Thus it would apply much more properly to real estate values or to property in coal mines, iron and steel enterprises, and so on. Just now a workman's home which originally cost $3,000 would, in many places, sell readily for $6,000. If public uses required the acquisition of this property, the workman would properly expect to get the market price. In the case of the railroads, the undistributed profits through long years past were legally and morally the property of the share owners. If these profits were turned back to the improvement of the roads, in order to meet expanding needs for railway service, they remained the property of the shareholders quite as much as if they had been actually paid out in dividends which in turn had been used by the shareholders in the purchase of real estate.

Operation

The American railroads have (2) Temporary become a very valuable property, which ought to be allowed to earn a fair percentage of compensation. Doubtless, in case of Government purchase, the courts would protect the property rights of the present owners. If then, the Plumb plan is to be adopted, the first step must be a continuation of the present Government operation in order to cover a period within which the difficult financial business of fixing valuations and buying the roads can be worked out by Congress and the Administration, in accord with the owners of something like $20,000,000,000 worth of railroad property. When the property that the Government is now controlling on a sort of temporary leasehold basis is actually purchased and becomes a national affair, it will doubtless be necessary to continue the Director-Generalship_ of Mr. Hines or his successor, while Congress is considering the question of a permanent method of operation. It will then become necessary for Mr. Plumb, and the heads of the railway unions, to convince Congress and the country that this vast system ought to be turned over to a leasing corporation to be controlled by a board of directors only one-third of whom are to be appointed by the Government as representing the country that will have burdened itself with the stupendous cost of the investment.

(3) Dividing the Profits

The Plumb plan proposes that one set of employees called "officials" shall choose one-third of the board, while the wage-earning employees as a whole shall also choose a third. The plan further provides for a division of profits, although no reason is given why the profits of this public enterprise should go to those citizens who draw salaries in connection with it, rather than to less favored citizens who must get along without such salaries. We are thus brought face to face with an assumption which will have to be thoroughly discussed before the Plumb plan can ever hope to be adopted. Just now the United States Shipping Board, which employs a great many men in the construction of ships and also in their operation, happens to be making large profits. Nobody, so far as we are aware, has come forward with the claim that these profits ought, in whole or in part, to be distributed among the of ficials of the Shipping Board, or the seamen who operate ships, or the mechanics who

build them. These men work for their salaries and their wages, and they are free to obtain other employment if not satisfied.

Profits in Public Work

The fact that the United States Shipping Board happens in its immediate operations to be making money is due to conditions which are not in any sense created by the employees of the Board, or the mechanics who build ships. In some years the United States Post Office Department shows surplus profits above cost of operation and in some years it shows deficits. No one has hitherto claimed that the profits, when there are such, ought to be distributed to the Post Office employees. These profits are due to the business activities of the patrons of the Post Office; and not to the meritorious men and women who handle the mails. Much less has it ever been proposed that the losses in the operation of the Post Office should be charged against the employees and deducted from their salaries. If the railroads become a public property, whether operated directly or under lease, it would be necessary to put their employees on a strict civil-service basis. Every boy in the United States would have an equal opportunity to enter railroad service, and promotion would have to be strictly upon merit. Accident insurance and retirement pensions would have to be provided. The system itself would furnish incentives for faithfulness and efficiency. The unfaithful and the inefficient would of necessity be dropped. If, therefore, the roads earn profits or if they encounter losses, the great body of employees would be deserving neither of praise nor of blame. Profits and losses would be due to the business conditions in the country, and to rates charged for transporting passengers and freight.

Not a Hopeful Outlook

The advocates of the Plumb plan say that it is based upon the principle of giving transportation to the public without profit. Consistency, then, would require that the unexpected profits of one year should be held to meet the unexpected losses of another year, rates being adjusted on the average to make the system self-sustaining. It would be very difficult to make the system earn enough for its proper maintenance and its gradual extension, while also paying interest on the purchase price and also accumulating a sinking fund. The device of a leasing corporation would not keep the railroads out of

politics nor relieve Congress of its responsibility. It would be necessary to provide for a revoking of the lease on short notice; and in any case we should be carrying on the business of steam-railroading as a national enterprise, while energetic private competition would be operating ever-increasing systems of distribution by motor trucks, by electric trolley lines, and so on. Frankly, we see scanty ground for the hopes of Mr. Glenn Plumb and his supporters.

False

portant article by Professor Irving Fisher, of Yale University, and another by Mr. Byron Holt, of New York, upon the terrible evils to society that result from a rapid change in the purchasing power of the nominal measure of value. Professor Fisher is bold enough to propose a remedy. For many years he has been teaching students of money and finance the danger of relying through long periods upon a precise quantity of a single commodity as a standard both of exchange and of measurement. At different times in history the quantities of gold or of silver comprising such a unit as a dollar have been somewhat altered. Professor Fisher has a scientific prescription for using gold as a support of credit, while using a composite factor based upon the price of numerous useful articles as a standard for value measurement, that is, for dollar-content.

When people are uneasy and disRemedies and contented, they are very apt to Real Evils endorse some proposal of a public kind, without stopping to think whether the thing advocated is remedial or not. What, in point of fact, is the matter with the railroad brotherhoods, and why have they committed themselves so unthinkingly to the absurdities of the Plumb plan? The answer is quite simple. Railroad employees, like millions of other people, have been disturbed by the rapid increase in the cost of things they have to buy. Through powerful organization and remarkable political strategy, they had secured their basic eight-hour day, with very considerable increases in money wages. The mounting costs of living, however, had promptly overtaken such increases and they felt themselves no better off than before. Contrary to the opinion of some people, railroad employees hate strikes and disorder, and the leaders of railway unions, like Mr. Stone and his compeers, yearn for some plan which will provide properly for the welfare of the men and obviate agitation. Their aims and motives are those of first-class American citizens who wish to see their families live in comfort and their children properly instructed. They have seized upon the Plumb plan as something offering the promise of stability, while remedying many of the old evils of capitalistic railway management and control.

What the

If we believed that the Plumb Men Really plan would accomplish what Mr. Want Warren S. Stone thinks it will do, we should certainly not oppose it; but it does not appeal to us as a timely solution of the railway problem. What the railroad brotherhoods really want is stability of conditions, reasonable hours of work, and good living wages. In short, they wish to be paid in dollars which will buy a normal quantity of food, clothes, fuel, and rent. Elsewhere in this number we are publishing a very im

KEEPING HIM AFTER SCHOOL

From the World (New York)

[The House of Representatives had agreed to take a five weeks' vacation, but at President Wilson's request this was given up in order that Congress might deal with the situation caused by rapidly increasing prices, industrial unrest, and particularly the attitude of the railway brotherhoods]

Professor Fisher's remedy for the distress caused by increased prices in the ratio of money inflation. Sooner or later, we have no doubt, something much more scientific than the present money system will have to be adopted in order that nominal wages and real wages may not part company so violently. These are the times when men are bold enough to adopt important innovations. The gold standard no longer meets the world's needs for the purposes to which it has been subjected since the demonetization of silver almost half a century ago. The wage-earning classes, in spite of the average increase in nominal wages, are to no small extent the victims of price-changes under the existing monetary system. Even greater sufferers under that system are the schoolteachers, the clergymen, the clerks and office employees, and others whose modest fixed salaries have not been greatly increased. The owners of conservative railroad bonds and other securities such as real-estate mortgages drawing a low rate of interest-are also sufferers because their fixed incomes have lost half of their purchasing power. Why not try to agree upon a method for bringing about so desirable a reform?

Europe's

Burden Us

While Professor Fisher is doubtNeeds Also less right in attributing a large part of the evil of high prices to our monetary system, he would doubtless agree with us that the exceptional faultiness of the present money standard just now is due to its inability to meet abnormal conditions. These conditions, of course, have not been produced by the money system, but by the world war. Governments acted arbitrarily to suspend the ordinary working of the law of supply and demand. Our high prices of food are due in large part to the exceptional demands still made upon us by Europe's shortage. It is a mistake to suppose that the American people are the gainers by Europe's distress, which creates an immense nominal balance of trade in our favor. The sooner Europe can produce abundantly, and cease to subject us to the toil of producing these great export supplies, the better off we shall be. We are permanently the poorer because we have shipped out of the country so much of the phosphates of our soil in the foodstuffs we have been exporting. We have been shipping away the iron and copper that the next generation will need here at home. The best help we can render ourselves is to aid Europe to recover its full

PROFESSOR IRVING FISHER, OF YALE UNIVERSITY (Eminent political economist, and recognized authority in monetary science).

volume of agricultural and industrial production.

Thrift Still a Virtue

Meanwhile, there are some practical ways by which to help reduce the cost of living. The Government's attacks upon the so-called "profiteers" will probably have helped to lower the prices of a few commodities at a few market points; but in the main these efforts will amount to little. The Government's own policies, due to war emergency, have been many times more responsible for the high prices than the misconduct of merchants. To some extent the situation can be remedied by those members of the community who can afford to withdraw patronage from the profiteers. If those who can manage to get along with their present supplies of clothing will be content for a time to wear their old suits, mended shoes, and last year's hats, there will soon be a resumption of the normal relation of supply and demand, and prices will be less prohibitory for those who are compelled to buy shoes in order that their children may go to school. It happens that the prosperous people have been spending too freely in some directions. We believe in keeping trade good, and we