The importance of the railways as an industry employing labor is shown in the following table: The employees enumerated in the above table include only those directly employed in the operation of railways, and not the many thousands of addi tional men engaged in the building of railway cars and equipment.
The financial aspect of the railway in dustry is told in the following figures: During the past forty years the pas senger traffic, or the use made of the railways by the people for purposes of travel has increased three times faster than the population. And while the pop ulation doubled, freight traffic increased twelvefold. During the past 18 years, while population has increased a little over a third, freight traffic has increased by 180 per cent.
In 1916 and 1917 there came a crisis in the railway industry which has usu ally been associated with the war as a cause, a fact which is only indirectly true.
Early in the seventies the constant friction between the farmers of the Mid dle West and the railways over freight rates has led, largely because of the agitation of the Patrons of Husbandry and similar farmers' organizations, to the institution of Federal regulation of interstate commerce (see INTERSTATE COMMERCE COMMISSION). Thus the power of the Federal Government be came the chief factor in the fixing of freight rates. Until several years ago this system worked with fair satisfac tion to all parties concerned. But then came the gradual rise in the prices of all products of industry, and, so far as the railways were concerned, the prices of steel rails and other metals and those raw materials needed for the manufac ture of railway equipment also rose. Finally the demands of the powerfully organized railway employees caused a rise in the cost of labor. Unable to meet these rising costs with a proportionate increase in rates, to which the regulating bodies would not consent for fear of popular disapproval, the railway man agements gradually found themselves facing a deficit in the financial adminis tration of their lines.
The crisis came in 1917, with the out break of the war with Germany, when many of the railways of the country were on the verge of bankruptcy. To avert the threatened financial crisis in the railway industry, President Wilson, on Dec. 26, 1917, issued a proclama tion instituting government administra tion of the railways of the country and suspending private management. The administration of all railways was im mediately placed under a Director-Gen eral of Railways, who had not only the power to control, but actually to manage them and to appoint or dismiss such heads as he might choose.
Other contributing reasons there were, too, for this act; the need of pooling all the transportation resources and equip ment of the nation for war purposes, which were for the time being para mount.
By an Act of Congress, which became law on March 21, 1918, the proclamation of the President was approved and Fed eral administration of railways was fixed for the duration of the war and for twenty-one months after, though the President retained the power to return the roads to private management any time after the close of hostilities, should he see fit. By this Act the private own ers were to be allowed remuneration equal to the average earnings of the dif ferent roads during the three years pre ceding the taking over of the adminis tration by the Government. A special Court of Claims was granted jurisdic tion over any claims that might be made by railway owners under this guarantee, but in most cases special cnntracts were made with the individual railway corn panies, whereby these claims were ad justed.
Under Government administration railway rates, both passenger and freight, were substantially increased, yet on Aug. 1, 1919, Director-General Hines reported a deficit in the revenues of the railways under his control amounting to $296,000,000 for the first six months of the year.
The war having come to an end, there immediately arose a strong agitation, emanating from the RAILWAY BROTHER HOODS (q. v.) against the return of the roads to their private ownership, the al ternative offered being a proposal known as the Plumb whereby it was pro posed that the administration of the rail ways should remain in the hands of a commission on which the Government and the employees should be equally rep resented. This proposal, however, found little support outside the ranks of the organized railway employees and radical circles, and on Dec. 24, 1919, President Wilson signed a decree returning the railways to private administration, to take effect on March 1, 1920. Since then numerous hearings have been held regarding the financial condition of the railways of the country, with the result that a demand has been formulated by the various owners for heavy financial aid to be granted by the Government for the purpose of restoring the roads and their equipment to their former degree of efficiency, much deteriorated since the early days of the war.