1942: Transportation

Though its achievements have not been so spectacular as some of those of the construction, shipbuilding and manufacturing industries, the transportation industry has good reason to be proud of its record during the year 1942, a year which coincided nearly with our first year in a global war. For the trite but true saying that the all-out war effort would be impossible without transportation was never demonstrated more clearly than during the past epochal year. Certainly the steady increase in efficiency in domestic transportation was a vital element in turning the tide of war in favor of the United Nations, though the high efficiency in turn was enhanced by the better cooperation brought about by the all-out war effort and other wartime measures. And since the increase in efficiency was largely in railroad transportation, for the rails handled 85 per cent of the tremendous increase in freight traffic, our railroads deserve a lion's share of the credit, and of attention in this brief resumé of transportation in 1942.

Historical Background.

The splendid record of the railroads in 1942 did not just happen but was the result of years of planning, research and experience, particularly during the two decades since World War I. However little the world learned from that conflict, our railroad executives learned not to be caught napping again. It will be remembered that at that time the rails were taken over and operated by the Government, largely because of the piling up of goods for which no bottoms were available at Atlantic ports. To avoid possibility of a recurrence of this difficulty and to secure other economies of 'planned shipping,' thirteen Regional Shipper Advisory Boards were set up many years ago, and in the summer of 1942 the Office of Defense Transportation, which now controls practically all transportation under the wartime powers of the President, set up a Storage Control Section with the express purpose of seeing that goods are stored where space is available with a minimum of interference with other traffic. The shipper boards have cooperated splendidly with the railroads and have contributed materially to the better utilization of the equipment available.

Another railroad policy which has been of vital assistance to the ability to take care of the present emergency was 'Preparing Today for the Traffic of Tomorrow.' In pursuance of this policy the rails spent during the last twenty years and even through the depression, though necessarily at a reduced rate, over $10,000,000,000 for improved facilities. Thus, with the impetus provided by lend-lease activities before our own entry into the war, the rails found themselves at the beginning of 1942 with fairly adequate facilities and a personnel well trained to utilize those facilities to the utmost of their capacity.

Other Wartime Measures.

Many other wartime measures have been taken by the Office of Defense Transportation under the direction of Joseph B. Eastman, Chairman of the Interstate Commerce Commission, appointed on Dec. 23, 1941, sixteen days after Pearl Harbor. Mr. Eastman's duties extend not only to seeing that the best possible use is made of all our transportation facilities but to making suggestions as to changes in those facilities. Thus many schedules on rails, highways and in the air have been changed or abandoned and some new facilities have been provided and others abandoned. Some branch rail lines not well utilized have been taken up and the rails relaid or used for scrap.

The important means for securing better utilization of equipment are better maintenance of locomotives and cars, faster servicing at terminals, longer trains and heavier loading of cars. Thus the limitations of train lengths prevailing in some states were entirely removed and the minimum lading for less-than-carload freight was raised from six to ten tons. Longer engine runs also contributed to the economies.

Unfortunately, there is some question whether Mr. Eastman's powers are entirely adequate to enable him to fulfill his duties, though little coercion has been necessary thus far. However, his suggestion that it might be necessary to eliminate some long-haul uneconomical truck operations brought a threat from the army that in that event they would take over and operate the trucks themselves.

Results.

Since traffic began to increase almost as soon as war broke out in Europe in September 1939, some of our comparisons go back to that date. For instance, from that date to October 1942, 5,700 more locomotives were put to work by reducing the number awaiting repairs from 20 per cent to less than 6 per cent; and similarly for freight cars, 190,000 more serviceable freight cars were made available for use by reducing the number in bad order from 14 per cent to less than 3 per cent. During the same period the roads also increased the average train load by more than 25 per cent, got 40 per cent more service out of every car and 32 per cent more work out of every locomotive.

During the longer period from 1921 to 1942, the increase in efficiency of locomotives was such that the gross ton-miles per pound of coal increased from 6½ to 9, or 46.3 per cent.

Prospects.

Thus the rails have taken the tremendous war load in their stride, by concentrating on the job to be done and giving up advertising, soliciting and competitive activities and even the hope of new passenger equipment for the duration. But the war load itself has greatly increased the wear and tear on equipment and facilities, and the ability to carry the load with 10 or 11 per cent increase expected during 1943 will depend on whether they are allowed to have their minimum requirements in the way of new cars, locomotives, rails, etc. Allotments made thus far have been disappointing but it is hoped that they may be revised so that transportation will not become the bottleneck which retards our war effort.

Lack of manpower is critical in some cases but attempts are being made to arrange transfers from roads having ample forces to others which lack them without loss of seniority rights. Other attempts are being made to bring pensioned employees still competent to work back into the service and to import Mexican labor for maintenance-of-way work.

Transportation Other Than Railroad.

Highways, waterways, pipelines and airlines have divided the other 15 per cent of the increase in freight traffic, with most of it taken by the highways and waterways. But for passenger transportation it has been nip and tuck between the railroads and highways with both these means and the airlines carrying more passengers than ever before in their history. At the end of the year it was estimated that the rails alone were moving 2,000,000 troops a month an average journey of 1,500 miles. With gas and tire rationing it seems likely that still additional traffic will have to be handled on the rails, though every effort will be made to take care of the essential requirements for highway traffic. The new pipeline from the Oklahoma oil fields to Illinois will shorten somewhat the tank car haul. Steel was finally allocated for this fairly late in the year but its operation is now delayed because of failure to secure delivery on the pumps essential to its use.

Wages and Rates.

The final result of the increased traffic on the railroads was, of course, greater earnings and the Bureau of Transport Economics and Statistics of the I. C. C. has estimated that the net operating income for 1942 will exceed $1,500,000,000 and that net income after interest, rentals and taxes, including income taxes, will probably exceed $1,000,000,000. Such prosperity attracts attention, but instead of a see-saw between wages and rates experienced last year railroad earnings are now in danger of being ground to nothing between two millstones, viz., a demand by Leon Henderson of OPA for the elimination of the rate increases granted early in the year and the demand of their employees for increases in wages.

Reorganizations.

Last year's prediction that the temporary wave of prosperity would make it more difficult to terminate the receiverships and trusteeships under which nearly a third of our railway mileage was being operated has been proven entirely correct by the almost complete cessation of such settlements. However, the hope expressed at that time that all roads in bankruptcy would be treated alike in spite of the changed conditions seems likely of fulfillment also. For the plan approved by the I. C. C. for the New Haven last October followed the usual pattern of wiping out the common stockholders, although net profits for the first eight months of 1942 were $11,350,000, or $5.70 per common share. This decision blasted the hopes of common stockholders of most roads under reorganization, and not only did New Haven common fall 50 per cent overnight but St. Louis Southwestern common with earnings of $19.69 per share was bid at $4 and Missouri Pacific with earnings of $19.06 a share sold for 10 cents. Even 6 per cent preferred of the Chicago, Rock Island and Pacific with earnings of $20.43 per share sold for 75 cents.

But the roads stay in receivership for the most part and the requests of the Missouri Pacific for permission to pay off $36,934,000 RFC loans and accrued interest and $5,850,000 bank loans and of the St. Louis-San Francisco to pay $14,915,000 of its obligations look like attempts to better the situation in the hope of getting a better break for the common stockholders. Since the provisions for voluntary reorganizations provided in the Chandler Bill of three years ago are no longer in effect a statement made at that time is still pertinent and hence is here repeated. 'It would seem that some drastic action will be required to relieve the 31 per cent of our mileage now in receivership, or trusteeship, from the legal leeches and financial bloodsuckers fastened upon them by bankruptcy proceedings.' As long as attorneys for receivers are allowed fees as high and sometimes higher than receivers and trustees we may expect a continuation of these receiverships in the absence of some such 'drastic action.'

Board of Investigation and Research.

This board has held some hearings during the year but has completed no reports as yet, and the prospects of worthwhile results are not too good. The first report will deal with the board's studies of the interterritorial freight rate structure, a subject not really within the field of the board but which was undertaken at the behest of a Southern Senator, MacKellar of Tennessee. This is a rather clear indication that politics comes first, as it was largely as a result of taking up this study that the board got an additional appropriation of $500,000, much more than was recommended by the Bureau of the Budget, this past year. Then the resignation of Professor Cunningham from the staff of the board, in spite of the reasons given, is suspected to have been due in part at least to the fact that he may not have been given a free rein.

The second report will deal with the Board's studies of the Eastman Report on Public Aids to Carriers, or subsidies, which, it will be remembered, was severely criticized by the railroads. The third report will be on carrier taxation and will probably be ready about the end of the current fiscal year. This leaves the main purpose of the board, to study and report on the relative economy and fitness of the carriers, to the indefinite future. For while the Congress insisted on including in the bill appropriating $500,000, and reappropriating $143,330 for the use of the board, a provision that its work must be finished with these funds, this does not bind future Congresses, as was pointed out by Senator Barkley at the time the bill was under discussion.

One illuminating statement, one might almost say confession, was made by Theodore Brent, representative of several waterways associations, in opposing tolls on waterways at the hearing of the board last summer. He said, 'Any attempt to make waterways pay their way would disrupt the whole rate situation in the United States; it would wipe waterway traffic off the map.'

The use of the airplane for limited emergency freight service such as that between China and India since the closing of the Burma Road and across the South Atlantic to Africa and beyond, increased tremendously during 1942, but President Patterson of United Air Lines shows that for heavy freight service it would cost about 35 times as much to move the tonnage by cargo plane as by freight train. So it is very important that the board do an honest, unbiased job on its main assignment, though it will be a long time after the end of the war before conditions really become stabilized.

1941: Transportation

Office of Defense Transportation.

On Dec. 23, 1941, President Roosevelt issued an Executive Order placing all means of transportation under some degree of control by a single board for the first time in history. It will be remembered that the Maritime Commission and the Civil Aeronautics Board are independent of the I.C.C. This order sets up an Office for Defense Transportation in the Office for Emergency Management of the Executive Office of the President and provides for a Director who 'shall discharge and perform his responsibilities and authorities under the direction and supervision of the President.' The President named Joseph B. Eastman, Chairman of the I.C.C., as Director of the new ODT. The powers of the new ODT, with reference to the coordination of transportation policies, activities and traffic movements, investigation of adequacy of existing facilities and need for new ones, including storage and warehouse requirements, proposals for new legislation and other transportation matters essential to maximum efficiency for our wartime needs, are very sweeping. This experiment will be watched with interest, and already some have expressed the fear that it may lead to Government ownership. This does not necessarily follow, however, and it is to be hoped that Mr. East-man will not be too hampered in his great task by priorities and allocations, and also that he will receive the unstinted support of the President.

National Transportation Policy.

The provision of the National Transportation Act of 1940 for setting up a Board of Investigation and Research, was completely ignored by the President for six months or almost until the Board was supposed to submit its first report, and it was not until Aug. 11, 1941, that the President's final nominations were approved by the Senate. The only normal experiences of the year 1941 were the renewal of the see-saw between wages and rates and the continuation of reorganizations at their usual snail-like pace; unless we include the surrender of land claims by most of the land grant roads in order to qualify for the discontinuance, in part, of the so-called land grant rates, as required by the Transportation Act of 1940. Since most of these claims were about a half-century old and therefore could not be rated of much value, we feel justified in calling their surrender 'normal.' But elsewhere, upset predictions, confusion and chaos were the order of the day.

As noted last year much information in regard to taxes imposed on carriers and on subsidization is already available, particularly since the four-volume report of Mr. Eastman, formerly Coordinator of Transportation and now Chairman of the Interstate Commerce Commission and Director of the ODT, on subsidization was published during the year. This report was immediately and bitterly assailed by the rails as unfair and inconsistent and part of the work of the board will be to try to determine where the truth lies between these widely divergent views. As to taxes, it is to be hoped that sometime the public will learn that the whole tax structure can be simplified immensely by discontinuing the use of the railroads and other utilities as collection agencies. But the most important and most difficult task of the Board of Investigation and Research is to investigate 'the relative economy and fitness of carriers by railroad, motor carriers and water carriers for transportation service,' and hence it is pertinent to look over the personnel of the Board with this purpose, so fundamental to the establishment of a National Transportation Policy, in mind.

The members of the board are N. L. Smith of New Hampshire, Chairman, R. E. Webb of Kentucky and C. E. Childe of Nebraska. None of these could qualify as a national figure in transportation but the first two are comparatively young, 42 and 38, respectively, and both have had extensive academic training and experience on state utility commissions, Mr. Smith having been chairman of the New Hampshire Public Service Commission for several years. Certainly they now have a chance to achieve national distinction by carrying this job to a successful conclusion and selling their conclusions to the Congress and the public. Especially is this so in view of the fact that the third member of the board, Mr. C. E. Childe, has been well known as a railroad baiter and advocate of waterways, having been an active officer of the Mississippi Valley Association and having vigorously opposed the enactment of Part III of S. 2009, i.e., the part subjecting the waterways even to limited control of the I.C.C. Of course, Mr. Childe may acquire a judicious and unbiased attitude when he takes his place on this board. However, I repeat two statements made last year: first that '... it is deplorable that the Congress did not boldly recognize the condition confronting it and place all means of transportation under control of the I.C.C.,' and second that '... more money will be wasted, probably by men who know less about transportation than members of the I.C.C.'

Reorganizations.

With the transfer of the properties of the old Chicago and Eastern Illinois Railway Co. by Benjamin Wham, Trustee, to C. T. O'Neal, President of the new C. & E. I. Railroad Co. on Dec. 31, 1940, this line became the first First Class Railroad in the United States to emerge from receivership under section 77 of the Bankruptcy Act, although final approval of the transfer of properties was not given by the court until June 1941. Since the plan adopted in this case typifies the treatment the I.C.C. is attempting to give the roads in bankruptcy, the details are of interest. Common stockholders received nothing; i.e., common stock with a par value of $23,845,300 was wiped out and the capitalization reduced accordingly, from approximately $85,000,000 to close to $61,000,000. Preferred stockholders of the old company received one share of common stock of the new company for each share of preferred stock held. Holders of general mortgage bonds of the old company received one-half the principal amount of their holdings in the new company's General Mortgage Income bonds and one-half in new Class A stock, plus one share of new common stock for each $1,000 bond held. They also received $35 interest since the plan took effect as of Jan. 1, 1937. This plan reduced fixed interest charges from $1,772,800 to about $485,000, and a similar plan by which the Erie Railroad ended its period of receivership in December cut its fixed charges from $14,551,610 to about $7,000,000, about one-third of its estimated earnings for this year. The Erie reorganization was unusually expeditious, taking only about four years, while many other roads have been in receivership for longer periods. See also RAILROADS.

Wages and Rates.

The renewal of the see-saw between wages and rates was principally due to the increased earnings occasioned by the additional amount of traffic stimulated by defense and aid activities. About the middle of 1941 it became fairly clear that earnings for the year would increase by about $1,000,000,000 and the railroad unions filed a demand for increases in wages, which the roads estimated would cost about $900,000,000.

This led to a long and bitter fight which ended when the President's Emergency Board, called upon for a second time in an effort to avert a nation-wide strike, granted increases estimated to amount to about $365,000,000 a year. The settlement, involving increases in basic wage rates and vacations with pay, means substantially an increase of 76 cents per 'day' for operating men and 80 cents for non-operating employees, effective Dec. 1. Retroactive increases from Sept. 1 to Dec. 1 will be at the somewhat lower rates recommended in the original report of the Emergency Board but rejected by the unions. This award was made on Dec. 2 and on Dec. 9 the see-saw began when the Association of American Railroads, meeting at Chicago, decided to ask the I.C.C. for permission to raise all passenger fares 10 per cent, except extra and furlough fares, and freight rates, except for some bulk commodities such as coal, ore and lumber, by about the same percentage. In doing this, it was pointed out that the wage increases will have cost the roads about $85,000,000 by the end of 1941 and the effect on November earnings was to produce a decrease for the first time during the year. But of course, earnings for the year were much higher than for 1940. The Bureau of Railway Economics of the A. R. A. estimated net income for the first ten months of 1941 at $408,625,472, as compared with $100,932,114 for the same period in 1940. The net railway operating income, before interest and rentals, was estimated at $846,824,141, a 3.79 per cent return, as compared with $532,132,347, a 2.4 per cent return, for the same periods, respectively, and $759,038,636, a 3.43 per cent return, in 1930. The above figures for 1941 probably should be revised downward a bit on account of the retroactive wage increases, but the important thing is that practically all roads are sharing in this prosperity.

Shipping.

Although part of the rail prosperity is due to the withdrawal of ships from intercoastal and coastwise routes, the boom in shipping is even greater than that in railroads. The need for ships was and is so great that these withdrawals were made for more essential service elsewhere, and shipyards on both coasts and on the Great Lakes, some of which have been idle for years, were reopened and are feverishly turning out new tonnage. Most United States ships have been used to replace British tonnage withdrawn for war duty, as for example, the 10 British ships formerly operating between North and South America, and the 25 from the United States Atlantic Coast to the Far East have all been replaced. United States ships going to the Far East have increased from 12 to 82, to India, from 12 to 85, and to Africa, from 17 to 51, with the net result that our U.S. Merchant Marine is operating in the black for almost the first time since the Civil War. It will be remembered that the law setting up the present Maritime Commission provided both construction and operating subsidies, and in fact the lines have been subsidized to the extent of about $3,500,000,000 in the last quarter century. Under the new conditions, American Export increased its net income from $216,631 for the first nine months of 1939 to $5,895,000 for the same period in 1940; similar increases were made by other lines. Withdrawal of 50 tankers from the Gulf Coast to the Atlantic Seaboard Service to supply Great Britain led to fear of a gasoline shortage in the eastern states, and upon request of Secretary Ickes, filling stations in this area closed at seven p.m., for a short time. But the railroads put several thousand tank cars back into service and eased the situation sufficiently so that early closing became unnecessary, although still continued by some stations.

It may be mentioned here that the President again submitted reports to Congress in favor of his pet project the St. Lawrence Seaway.

Since the beginning of war with Japan on Dec. 7, the problems of protecting United States ships and of replacing losses due to sinkings have become more acute but, as already stated, our yards are working overtime and new yards are being built to cope with the emergency.

Pipelines.

Although these furnish only a special kind of transportation, they are under the control of the I.C.C. and are an important part of the transportation picture, since 100,000 barrels are pumped daily from the Oklahoma and Texas fields to the Middle Atlantic States. However, this is only one-half the 200,000 barrels carried by tankers daily from Latin America and only one-twelfth the 1,200,000 barrels carried daily by tankers from the Gulf Ports to the North Atlantic Seaboard before the war. During the so-called gasoline shortage an attempt was made to secure steel for the construction of extensive additional pipe lines but the Priorities Board refused to allow the use of steel for this purpose. One 250-mile short-cut was allowed from Portland, Me., to Montreal which will do away with the long tanker haul around the Gaspé, and up the St. Lawrence.

The most important event for the pipeline companies and their owners, the major oil companies, was the issuance, by Judge David A. Pine immediately after the Government filed suit in December, of a consent decree resulting from Government charges that the large oil companies were violating the rebate provisions of the Interstate Commerce Act and the Elkins Act. The Government alleged that the pipeline companies had paid refunds and rebates to the shipper-owner companies under the guise of 'dividends' often amounting to 'exorbitant' returns on pipeline stock, and giving shipper-owners a 'discriminatory' advantage over competing shippers. The companies denied the charges but accepted the decree which limited the return on pipeline stock to seven per cent. One is reminded of similar railroad practices of a half-century ago, which were the most important reasons for the enactment of the Interstate Commerce Act in 1887.

Present Situation.

Although trucks, buses, inland waterways and airlines have all participated in the benefits of the increased volume and speed-up of business due to defense and war activities, the present situation is rather confused and chaotic. For instance, in spite of the need for bottoms, it is likely that some of the available tonnage will be idle on account of the very high insurance rates, at least until either adequate convoy protection is available or the Government shoulders the risks. Railroad efficiency has continued to increase and the rails have been able to handle virtually all the traffic offered for transport. Many additional streamliners have been provided during the past year and trainload shipments at special rates have been experimented with in freight service. Just as United States ships have replaced British ships on the seven seas, so United States airlines have displaced Axis airlines in some parts of the world. In South America this was accomplished by the simple expedient of United States oil companies refusing to sell gasoline to the German and Italian airline companies. So the fortunes of war will have a dominant bearing on the future of transportation, both domestic and foreign. See also INTERSTATE COMMERCE COMMISSION; MERCHANT MARINE, AMERICAN; RAILROADS.

1940: Transportation

Passage of Transportation Act of 1940.

The most important event in the field of transportation in 1940 was a legislative one, viz., the placing of S.2009, or the Wheeler-Lea Omnibus Transportation Bill, on the statute books as the Transportation Act of 1940. This bill was in conference last year and it was predicted that there would be 'a long struggle before anything is agreed upon and enacted into law.' Of course, the struggle goes back more than a year, primarily to the attempt of the railroads in 1938 to secure wage reductions after they had been refused adequate rate increases; but, in spite of the protracted hearings before the Senate and House Committees on Interstate Commerce in 1939, the fight went on in the Conference Committee during the regular session of the Congress until the committee's report was submitted on May 3. But then the railway unions, all but one of which had previously approved the bill, joined forces with its opponents and succeeded in having it recommitted in the House on May 9.

Had the Congress adjourned at the usual time there would have been no Transportation Act of 1940, for the attitude of the President was such that there is no likelihood that a special session would have been called for this purpose. But conditions in Europe kept the Congress in session and after three months of even more bitter fighting the Conference Committee again reported to the House on Aug. 7. After a brief but bitter fight on the floor the House approved the Conference Report on Aug. 12. The report was not submitted to the Senate until Aug. 30, but it was passed on Sept. 9 and was signed by the President on Sept. 18.

There is no gainsaying the fact that the passage of this Act was an important step in progress toward the realization of a National Transportation Policy, but there is also no doubt that the Act falls far short of carrying out the recommendations of President Roosevelt's Committee of Six which, it will be remembered, reported in December 1938. There was somewhat more than a tacit understanding that the administration would support the findings of this committee when the railroads abandoned their wage reduction case in 1938 to give full opportunity to the President to accomplish something through this committee. But, instead of support, the President vetoed the only bill passed in 1939 carrying out a recommendation of the committee, the so-called 'Bridge Bill' freeing railroads from the expense of making alterations in structures due to flood-control and other projects from which they did not benefit. This bill was generally recognized as just and equitable and in fact it was later passed by the Congress over the President's veto. And during the long struggle over S.2009 the Administration stood aloof, except that two members of the Cabinet appeared at hearings in opposition to certain provisions of the bill. Hence the blame for many of the shortcomings of the Act must be placed on the Administration.

Nevertheless the Act accomplishes something, being the first legislative step since the Motor Carriers Act of 1935 and, according to some, the most important transportation legislation for 20 years, i.e., since the Transportation Act of 1920. And probably most people will agree that its most important part is Part III which becomes Part III of the Interstate Commerce Act. This subjects to I.C.C. regulation coastwise, intercoastal, inland and Great Lakes common and contract carriers by water engaged in interstate or foreign commerce, but exempts bulk carriers when the cargo space of the vessel is being used for not more than three commodities, including tank vessels designed especially for a single commodity in liquid form. Perhaps next in importance, potentially, is the provision for the Board of Investigation and Research noted above, though the results of its work are entirely conjectural and thus far the Board has not even been appointed.

Report of the Committee of Six on Transportation Problems.

Since the report of the Committee of Six formed the basis of S.2009 to a considerable degree, let us see how some of its other recommendations fared. First, the Act starts out bravely with the new 'Declaration of National Transportation Policy' recommended by the committee, which may mean much or little depending on how it is implemented by legislation. It declares the policy to be:

'to provide for fair and impartial regulation of all modes of transportation subject to the provisions of this Act, so administered as to recognize and preserve the inherent advantages of each; to promote safe, adequate, economical and efficient service and foster sound economic conditions in transportation and among the several carriers; to encourage the establishment and maintenance of reasonable charges for transportation services, without unjust discriminations, undue preferences or advantages, or unfair or destructive practices; to cooperate with the several States and the duly authorized officials thereof; and to encourage fair wages and equitable working conditions; — all to the end of developing, coordinating and preserving a national transportation system by water, highway and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the Postal Service and of the national defense. All of the provisions of this Act shall be administered and enforced with a view to carrying out the above declaration of policy.'

The recommendation of the committee for the repeal of reduced rates on government property under the land grant law was enacted in part, with the reduced rates still applying on war materials and military travel. It was also stipulated that the repeal shall not apply to any railroad which fails within one year to file a release of claims for lands in litigation with the Government, thus preventing its complete application.

Section 4 of the Interstate Commerce Act, the long and short haul clause, was not repealed as recommended, but was amended and extended to carriers by water. Fourth Section relief was expedited by a provision that tariffs may be submitted together with the application for relief and that the Commission may permit such tariffs to become effective on one day's notice.

The rule of rate making for carriers by rail was amended, though not as recommended, and now reads as follows:

'In the exercise of its power to prescribe just and reasonable rates the Commission shall give due consideration, among other factors, to the effect of rates on the movement of traffic by the carrier or carriers for which the rates are prescribed; to the need, in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable the carriers, under honest, economical and efficient management, to provide such service.' (See also RAILROADS.)

Restrictions on RFC loans were somewhat modified but not to the extent recommended by the committee. The total sum authorized for loans was increased from $350,000,000 to $500,000,000.

A Permanent Transportation Board was not provided for as recommended, since the Board of Investigation and Research is to terminate at the end of two years unless its term is extended for a maximum of two years more by proclamation of the President. This Board is to be composed of three members appointed by the President, by and with the advice and consent of the Senate, and its duties are to investigate:

'(1) The relative economy and fitness of carriers by railroad, motor carriers, and water carriers for transportation service, or any particular classes or descriptions thereof, with a view of determining the service for which each type of carrier is especially fitted or unfitted; the methods by which each type can and should be developed so that there may be provided a national transportation system adequate to meet the needs of the commerce of the United States, of the Postal Service and of the national defense.

'(2) The extent to which the right-of-way or other transportation facilities and special services have been or are provided by public funds for the use, within the territorial limits of continental United States, of each of the three types of carriers without adequate compensation, direct or indirect, therefor, and the extent to which such carriers have been or are aided by donations of public property, payments from public funds in excess of adequate compensation for services rendered in return therefor, or extensions of Government credit; and

'(3) The extent to which taxes are imposed upon such carriers by the United States, and the several States, and by other agencies of government, including county, municipal, district and local agencies.'

The Board is given ample powers to carry out such investigations and is required to transmit preliminary reports of its studies and investigations to the President and to the Congress on or before May 1, 1941, together with such findings and recommendations as it is by that time prepared to make. Other reports, including an annual and a final one are required. Much of the information called for in items 2 and 3 is already available from previous studies, notably those of the former Coordinator of Transportation, but findings as to relative economy seem to depend upon who makes the study. Unified control under the I.C.C. by able men unhampered by the multitudinous statutory exceptions, regulations and restrictions would certainly simplify and clarify the entire situation.

With reference to consolidations, the Act was improved by relieving the I.C.C. from the duty of prescribing a fixed plan, which has been found impracticable, and by increasing the discretionary powers of the Commission in consolidation cases. On the other side of the ledger, however, is the 'Harrington Amendment' protecting the rights of labor to continued employment, which virtually prevents for some time the securing of any economic benefit from consolidations.

Limited I.C.C. regulation of water carriers, as recommended by the committee, was provided as already noted, but the Act did not require the Government to dispose of the Federal Barge Line or provide for tolls on inland waterways, both of which were also recommended. Nor did a recommendation that waterway projects be undertaken only after a finding of 'public interest' by an impartial tribunal find a place in the Act. The Act does provide, however, that — 'In the application of the provisions of Part III to any (water) carrier owned or controlled by the United States, no different policy, rule of rate making, system of accounting, or method of determining costs of service, value of property or rate of return may be applied than is applied in the case of carriers not so owned or controlled.' This sounds good but it is probable that most, if not all, of the Government-owned vessels may escape regulation under the provision exempting bulk carriers.

It will be noted that air transportation was not mentioned in the declaration of policy, except that it might be considered that the phrase 'as well as other means,' refers to it, and this follows the prediction made previously that the setting up of the Civil Aeronautics Authority and the Air Safety Board would in all probability take care of air transportation and that the question of putting it under the control of the I.C.C. would not again arise. Last May, however, President Roosevelt promulgated Reorganization Plan No. 4, transferring CAA from its independent status and making it a Bureau of the Department of Commerce and also abolishing the independent Air Safety Board. The recent United Air Lines crash at Chicago, the third fatal crash since Aug. 30, contrasts grimly with the perfect record of 17 months before that during which not a single passenger was killed and puts the new CAB in the spotlight. In fact, it is probable that legislation restoring the independent Air Safety Board will be introduced as soon as the new Congress convenes in January.

Summary of Progress.

Aside from legislation or perhaps in addition to legislation, steady progress has been made in practically all fields, due to the constant study and research which is being devoted to transportation problems. Air conditioning, stream lining, power economies, track improvement and many other items are receiving constant attention, and so are highways and motor vehicles. Of course, defense activities and the possibility of having to defend our own territory have accentuated many of these problems such as that of doing away with bottlenecks in our extensive highway system. (See also AUTOMOBILE INDUSTRY.)

The increased traffic due to defense activities has helped out financially and return on capital invested has been estimated at 2.38 per cent for the first ten months of 1940 as compared with 2.07 per cent for the same period of 1939. There is little or no improvement in the matter of reorganizations and about the same mileage is under the control of receivers and trustees as last year. However, it is believed that our railroads are prepared for whatever conditions may arise on account of the war. In fact, they have already set up a system of traffic control which will prevent the congestion at ports which caused the breakdown during the first world war, a system which has already been tried with success. Such plans, together with the new equipment which is coming from our factories in large quantities, will make our backbone of defense ready. To construct highways and bridges will take longer, but maybe we shall not need them.

1939: Transportation

National Policy.

The end of the year 1939 finds the United States of America still without a clear-cut and comprehensive National Transportation Policy, in spite of the strong recommendations made in December 1938 that such a policy be adopted. Some progress was made, however, in that each house of the Congress passed its own general transportation bill, but action in the House of Representatives came so late in the session that there was time left only for the appointment of the conference committee. The special session in September was limited absolutely to consideration of the neutrality laws, and the conference committee meetings, first scheduled for Dec. 10, have been postponed and in all probability will not begin until the Congress reconvenes in January. Each of the two bills embodies some of the recommendations of the President's Committee, but neither goes far enough and there will undoubtedly be a long struggle before anything is agreed upon and enacted into law.

Probably the most important and certainly the most controversial of the recommendations included in these bills is that the waterways be placed under the control of the Interstate Commerce Commission. The chances for the success of this change were not enhanced by the transfer, last July, of the Inland Waterways Commission and the Federal Barge Lines from the War Department to the Department of Commerce under the governmental reorganization bill. Shortly afterward, General T. Q. Ashburn, for many years the head of both the commission and the barge lines, resigned under pressure and was succeeded by Chester Thompson, and associates. As Mr. Thompson is a waterways advocate, having been for many years a member of the Mississippi Valley Association, this does not mean that it will be any easier to bring the waterways under the Interstate Commerce Commission, especially if an attempt is made to carry out the further recommendation of the President's Committee that tolls be imposed on commercial shipping on the waterways.

As predicted last year, the smooth and relatively efficient working of the new Civil Aeronautics Authority seems to have eliminated most of the talk of placing air transportation under the I.C.C., though air-rail express rates gave rise to some discussion during the past year. Provision of airports and operating subsidies have continued without much control, except by the C.A.A. for the latter.

Highway Transportation.

There is little talk of including the highways in the transportation bill, though the suggestion in last year's article that they might well be required to obtain certificates of public necessity and convenience has been mentioned by two or three other writers during the year. This was due largely to the proposal of the Public Roads Administration, successor to the United States Bureau of Public Roads formerly in the Department of Agriculture, that $40,000,000,000 to $50,000,000,000 be spent within the next twenty years on super-highways in and around large cities. This recommendation was somewhat of a surprise after the report of the bureau on super-highways earlier in the year in which cross-country or transcontinental super-highways were definitely rejected as uneconomical and unwise, though the same report recommended improvement of existing highways, widening of streets and elimination of bottlenecks in and around cities. Perhaps this is what is meant by the later recommendation, though such work used to be done principally by municipalities but now leans heavily on Federal assistance. Of course, interstate motor carrier traffic is already regulated by the I.C.C. under the Motor Carrier Act of 1935 as amended in 1938. This act is working fairly well under the Motor Carrier Division of the I.C.C., though some further amendments are likely within the next year or two as the result of experience in the enforcement of the act. One of the chief difficulties is still the varying state regulations as to weights and dimensions of trucks. However, strong efforts are being continued to reach workable agreements on these matters.

Maritime Transportation.

Though coastwise shipping rates have a definite effect on some interstate rates by land there is no likelihood that authority over them will be vested in the I.C.C. and the merchant marine is flourishing under the Maritime Commission. Practically every shipyard and coastal steel plant in the country is being rehabilitated and has received contracts for construction of vessels for the commission, while most of the larger yards are busily engaged in building for the United States Navy. The commission has continued liberal construction and operating subsidies but has failed to exercise its power to fix minimum intercoastal rates, this in spite of the cutthroat competition which resulted in the withdrawal of the American-Hawaiian and Luckenbach steamship companies from the Intercoastal Steamship Freight Association last spring. The largest ship built by the commission is the America which was launched early in September. This 34,000-ton vessel cost $17,000,000 and is scheduled to enter the trans-atlantic service next spring, war regulations permitting. The ship can carry 1,219 passengers, has a top speed of 22 knots, and is also equipped with safety devices which would keep her afloat even though three compartments were flooded. The commission has placed under construction or launched 69 other vessels and established three training stations equipped to turn out 3,000 merchant marines a year. In addition, the commission has developed standardized designs for two types of cargo vessels and 24 Pacific coast ships. American shipping is now in a peculiarly demoralized condition due to the order of President Roosevelt, in conformance with the Neutrality Act, prohibiting American ships and citizens from entering the war zone, but it is hoped that some additional business will become available in the South American trade due to the necessary withdrawal of the ships of the belligerent and other nations. At any rate, the policy of the commission is to provide a merchant fleet ample to take advantage of any opportunity or meet any emergency. (See also MERCHANT MARINE, AMERICAN.)

Railroads.

The reorganization situation of railroads in 1939 is virtually the same as last year. Only two Class I roads, the Chicago and Eastern Indiana, 808 miles, whose reorganization plan has been approved by both the I.C.C. and the courts, and the Central Railroad of New Jersey, 1,155 miles, joined 81 other roads, 31 per cent of United States mileage, in bankruptcy during the year, although some progress has been made on other reorganization plans. It will be remembered that Section 77 of the Bankruptcy Act was extended to the railroads a few years ago in the hope of expediting reorganization through bankruptcy proceedings. A further step was taken this past year in the only railroad bill passed by both houses of the Congress and signed by President Roosevelt on July 28, 1939. This was the Chandler Bill, designed to provide for voluntary reorganizations without the expense of bankruptcy proceedings. This provides that any railroad not in need of reorganization under Section 77 of the Bankruptcy Act may file a reorganization or readjustment plan with the I.C.C. if it has the approval of 25 per cent of the creditors. The commission may hold the plan from 120 to 180 days depending on the complications. If approved by the commission, two-thirds of the creditors and a majority of each class of creditors, the plan may then be filed in a District Court. Filing must take place within one year of the enactment of legislation. If approved by the Court and 75 per cent of creditors and 60 per cent of each class of creditors it will be promulgated by the Court. Final readjustments must be completed within one year of filing with the Court or the Plan becomes void.

It is hoped that this voluntary reorganization plan will enable the Lehigh Valley and the Baltimore and Ohio and some other roads which barely escaped receiverships under Section 77 to put into effect plans on which they have been working for some time. It came too late to save the Jersey Central. This was partly because of exorbitant tax claims by the state, amounting to $11,500,000 for this road alone, which were unpaid since 1932 because of dispute. As one decision has already been rendered in their favor, it seems likely that this and the other roads involved, principally the Pennsylvania, Reading and Lehigh Valley, will be relieved of part of this burden by the courts. It seems unreasonable that state taxes alone should constitute 40 per cent of the roads' total tax bill.

It should be noted that the Chandler Bill will be in effect for only one year, unless extended by the Congress, and it remains to be seen whether it will be more effective than the old 'friendly' receiverships which resulted from bankruptcy proceedings before Section 77 became available to the rails. At least, proceedings can not drag along in the courts for years as they do now, for there has been little change in the situation for the last five or six years. It would seem that some drastic action will be required to relieve the 31 per cent of our mileage now in receivership, or trusteeship, of the legal and financial entanglements fastened upon them by bankruptcy proceedings.

One of the main reforms is the wiping out of the equities of stockholders and unsecured creditors, a condition insisted upon by the I.C.C. in practically all cases which they have approved, and it is worth noting that this policy has received support from the Supreme Court, though not in a railroad case. In the reorganization of the Los Angeles Lumber Products Co., the Court concurred unanimously in an opinion written by Associate Justice Douglas which said, 'We believe that to accord the creditor his full right of priority against the corporate assets . . . the stockholders' participation must be based on a contribution in money or in money's worth.' Under this policy the stockholders will have to be satisfied and in fact should be happy if allowed to get out from under with a whole skin.

Another interesting development of the last few months in connection with some of the reorganization proceedings is the protest of the RFC against failure to recognize its loans as prior liens or claims to be paid in full. No decision has been reached in the matter in any case but the railroads still owe the RFC $436,651,283, as of Oct. 31, 1939, and the question of scaling down these governmental claims in the same way as those of other creditors is certainly a live issue. The Railroad Credit Corporation has made additional small disbursements during the year, bringing the total to approximately 80 per cent of the original fund with which it was entrusted.

Continued progress in operating efficiency and in the introduction of stream-lining and air-conditioning took place during the year and both freight and passenger schedules were speeded up. And while the roads operated at a loss for the first six months of the year, traffic began to pick up in June. This continued until September, when an unprecedented upturn in business raised industrial production to the highest level in ten years and brought steel production to nearly the actual production capacity of the mills. Housing construction was steadily increasing before this upturn and will be the largest since 1929. The rails profited by this activity and car loadings for the week ending November 11 were 75 per cent of the 1925-29 average for that week and the highest, allowing for seasonal changes, since May 1937 when the 'recession' began. Hence earnings are likely to be better than those of 1938 and already one or two of the more prosperous roads have announced special dividends. In-the matter of facilities this increase in business caught some of the roads with insufficient equipment and in fact it was only by quick action in remanning shops for the rehabilitation of equipment that a national car shortage was averted. This naturally resulted in orders for railway materials and equipment, and President J. J. Pelly of the American Association of Railroads estimated in his report to the association in November that freight car orders for the year would total 65,000 as compared with 16,303 in 1938. For the first ten months of 1939, 640,000 tons of rail were ordered, as compared with 230,115 for the similar period of 1938.

Wages and rates have remained practically static during the year. The rails abandoned their attempt to secure a 15 per cent reduction in wages when the President's Committee reported against them in favor of legislation for which they claim the administration promised support. They now allege that this promise has been broken since the President has given no active support and two of his Cabinet members have appeared in opposition to certain provisions of the Wheeler-Lea or general transportation bills now before the Congress. Passenger coach-fares on the Eastern roads have been on the experimental basis of 2½ cents per mile begun July 24, 1938 and to end on Jan. 24, 1940 unless the 18-month experimental period is extended by the I.C.C. On account of the uncertainty introduced by the two World's Fairs of 1939, the roads affected have already asked for a nine-month extension in order to obtain a six-month 'normal period' (Nov. 1, 1939, to May 1, 1940) unaffected by World's Fair traffic. These rates provide reductions for round trips but the rates will go back to 2 cents per mile in coaches, a rate put into effect by order of the Commission on June 1, 1936, if the above extension is not granted. Special World's Fair rates were in effect last year from April 28 to October 28 by which one could travel from any point in the United States to both fairs and return for $90 in coaches and $135 first class with Pullman charges added. Tickets were good for two months by any route and with any number of stop-overs. The National Bus Traffic Association offered the same service for $69.95 soon after the offer was made by the railroads. Of course, other special rates were made for round trips to each of the fairs. (See also RAILROADS.)

Air Transportation.

The accident and disaster situation has not materially changed in any of the fields of transportation as only about a 5 per cent decrease is expected in both fatalities and accidents. Transpacific air service has steadily developed and Pan American Airways is inaugurating a bi-monthly service with its California Clipper of approximately 4 days over the 7,500 miles from San Francisco, California, to Auckland, New Zealand. After some experimental flights PAA also made its first mail-carrying flight across the Atlantic last May, on the twelfth anniversary of Lindbergh's flight to Europe. Lisbon, Portugal, was reached 26½ hours after leaving the United States. Six hours were lost at Horta while postal employees stamped 23,000 letters. Five mail flights were made before the semi-weekly passenger flights were inaugurated. In June Imperial Airways inaugurated mail service between Port Washington, N. Y., and Southampton, England. The transatlantic rate is 30 cents per ½ ounce. For the first time in history the Post Office Department reported a profit on air mail, amounting to $736,954, for the fiscal year ending June 30, 1939. See also AVIATION; BUSINESS; NEW YORK MUNICIPAL AIRPORT.

1938: Transportation

Need of a National Transportation Policy.

The end of the year 1938 finds the United States of America still without a clear-cut and comprehensive national transportation policy. Such a policy was strongly recommended in a report submitted to the President, Dec. 23, by the committee appointed by him in September to look into the difficulties of the railroads and to recommend how these difficulties can be reduced or eliminated. The committee was made up almost entirely of representatives of railway management and labor. They found the transportation problem complicated by wasteful competition, unequal regulation, and inequitable subsidies; wherefore the Committee advocated the adoption of a definite national policy providing for fair, impartial regulation of all modes of transportation, so administered as to preserve the inherent advantages of each. This is not the first time the rails have made this recommendation; but now the long-drawn-out wage dispute, which culminated in this report, has made the entire country conscious of the problem and of the necessity for action. Hence it may be possible to move the Congress to action during 1939.

Of course, the greatest stumbling-block to such action will be the opposition of those who are receiving favored treatment and subsidies — augmented during these parlous years by various Federal grants; the principal beneficiaries being highways, waterways — including the Federal barge lines, airports and airlines, and the merchant marine. The Congress itself put a new obstacle in the way at its last session by enacting the McCarran-Lea Bill setting up a Civil Aeronautics Authority and an Air Safety Board. These two bodies, with able appointees, began to function last July (see AVIATION); and it is safe to say that the better they function for civil air transportation the more difficult it will be to bring 'all modes of transportation under a single centralized control.' To determine what is fair among all these conflicting interests is a tremendous task, and studies have been made by the Federal Coordinator of Transportation and by various organizations. The basis must be efficiency; that is, the lowest total cost by and large of providing the service must be sought, though the matter may be complicated by other factors, such as convenience of the public especially in considering abandonment of existing facilities and national defense. With the above basis in mind, let us 'look at the record.'

Railroads.

In technical matters, the railroads and, in fact, most means of transportation can justly claim progress over a period of years and during 1938. The efficiency of motive power, the use of lightweight cars for both passenger and freight service, streamlining and air-conditioning, all have contributed materially to increase speed and comfort for the traveler by rail and to increase traffic. The race between steam and Diesel-electric power is as yet undecided, except for yard service where Diesel power is supreme. And a new locomotive has appeared which may revolutionize the motive power of railroads. This is the steam turbine-electric completed during the past year by the Union Pacific Railway in collaboration with the General Electric Company. Fired with fuel oil, this 5,000 h.p. monster weighs 265 tons and develops a tractive force of about 70,000 lb., enabling it to haul a 12-car train up a 2.2 per cent grade without a helper. Its maximum rated speed is 125 m.p.h., and it can travel from 500 to 700 miles without stopping for fuel and water. Steam at 1,500 lb. per square inch pressure and 920° F. of superheat is generated from distilled water in a closed system, the losses being replaced from the evaporator which supplies the train heat. Thermal efficiency from fuel to driver is more than double that of the common steam locomotive; and electric braking saves wear on brake shoes and tires. There are no unbalanced reciprocating parts, and the use of distilled water eliminates boiler corrosion and scale.

Financial Structure.

Financially, the picture is different; but some progress is being made in applying correctives to individual roads at the only point where individual correctives can be applied — to the financial structure. Before Section 77 of the National Bankruptcy Law was extended to railroads in 1933, receiverships were usually 'friendly' and reorganizations seldom resulted in much improvement, as the equities of the stockholders were generally well protected. Since 1933, although nearly one third of Class I mileage is and has been in receivership, or trusteeship for from two to five years, no reorganizations have been completed. For the first time, however, some have been approved by the Interstate Commerce Commission and will go into effect when approved by the courts. The first two affected little mileage, being the mergers of the Spokane International Railway with the Cour-d'Alene and Pend d'Oreille Railway in Washington and of the Akron, Canton and Youngstown with the Northern Ohio in the State of Ohio. The third affected a major first-class road, the Chicago Great Western, and is typical of reorganizations under Section 77. The equity of the common stockholders was wiped out entirely, and the capitalization was cut from $139,247,313 to $62,291,827, and the fixed charges from $1,705,532 to $767,701. In the case of the Western Pacific, four plans failed to satisfy the I.C.C. and finally it advanced a plan of its own, an unprecedented action. Common stock and unsecured debts will be wiped out if this plan meets the approval of the court. Capitalization will be reduced from $150,597,000 to $93,726,517, and fixed charges from $3,634,000 to $511,001. The plan for the Chicago and Eastern Illinois, operating 921 miles, will reduce the capitalization from $80,500,000 to $61,000,000 and fixed charges from $1,700,000 to $505,000. The Erie has filed a plan which will cut its fixed charges of $12,000,000 in half; and the Chicago and Northwestern and the Chicago, Milwaukee, St. Paul, and Pacific are attempting to work out a consolidation scheme to replace reorganization plans before submitted. The above are drastic reductions, though not in all cases sufficiently drastic to satisfy all members of the Commission; and the application of the same policy to all roads in receivership will go a long way toward removing that long-standing fester of over-capitalization. Unreasonably high salaries and some of the iniquities of holding companies would still be troublesome; but these are not peculiar to the railroad field, and it is believed that the Commission can gradually abate these abuses.

Rate Increase.

Ex Parte 123, the Fifteen Per cent Rate Case, which was before the Commission at the beginning of 1938, was decided early in the year, and the roads were allowed only a five-per cent increase in freight rates and were not allowed to increase passenger coach fares to 2½ cents per mile. Later in the year the Commission reversed itself on passenger fares and allowed the increase to the Eastern roads. The Southern and Western roads, which had been operating at a 1½ cent rate, increased to the legal maximum of 2 cents per mile in November 1937. The results of the increase granted the Eastern roads were very disappointing at first, the traffic in August being the lowest for many years; and in November the Southern roads became dissatisfied with the 2-cent rate and decided to go back to 1½ cents as soon as tariffs could be worked out and published, probably in January 1939. In Ex Parte 125, the Pullman Company's request for a 10-per cent increase, the Commission allowed a 5-per cent increase on June 27, 1938, in spite of the opinion expressed by Commissioner Eastman that no United States industry had been treated more generously by the public than had the Pullman Company. (See also RAILROADS.)

Wage Reductions.

Dissatisfied with the decision in Ex Parte 123, the rails gave notice in May of a 15 per cent reduction in wages to be effective July 1; and this set in motion the provisions of the Railway Labor Act, as the cut was opposed by railway labor. The National Mediation Board was unable to effect an agreement, and the Emergency Fact-Finding Board went into action after the Unions rejected arbitration although management accepted it. The Fact-Finding Board brought in an adverse report in September, holding that the reductions were unnecessary and out of line with the trend of wages in other industries. Then the President appointed the committee whose report was referred to in the first paragraph of this article. (See LABOR ARBITRATION.)

Transportation Board Recommended.

More in detail, the committee recommended that a 'transportation board' be established, this to be a new and independent agency with the duty of investigating and reporting to the Congress the relative economy and fitness of the several modes of transportation and the extent to which any of them is now being subsidized, with recommendations for further legislation. This board would be responsible for the unified development of the nation's transportation system, including: issuing of certificates of convenience and necessity covering new construction or abandonment of existing facilities; issuance of new securities, consolidations, mergers, leases, etc.; exercising all control over transportation except with respect to rates, services, and accounting, which would remain under the control of the Interstate Commission. The committee also recommended: repeal of the present rate-making rule of the Interstate Commerce Act and the substitution of a new rule covering all modes of transportation; repeal of the long-and-short-haul clause; extension of the powers of the I.C.C. with reference to intrastate rates; the setting up of a fair and reasonable system of tolls for the commercial use of certain inland waterways; and the elimination of the Inland Waterways Corporation. Other recommendations of the committee were: the repeal of the reduced-rate provisions of the so-called land-grant statutes; elimination of taxes believed to be unjust to the railroads; elimination of the present requirement that the roads bear a large part of the cost of elimination of grade crossings and reconstruction of bridges and rail lines in connection with navigation and flood-control projects. Elimination of the present plan (now practically a dead letter), whereby the I.C.C. is required to develop a consolidation plan for the entire railroad system of the country, is also recommended. The I.C.C. would also be relieved of all responsibility in connection with railroad reorganization, and a special court would be established to take jurisdiction over such matters; and, finally, liberalization of R.F.C. loans to the railroads is proposed. This may be considered a railroad program, agreed upon by management and labor, and probably little fault could be found with it if fearlessly and equitably carried out. But even its main provisions are not likely to receive an immediate trial, though some states have reduced already the burden of grade-crossing elimination and adopted in part some of the other provisions.

The railroad accident record for 1938 was extremely bad, in view of the previous excellent record maintained for several years; but this does not seem to be limited to the United States. London, England, had its first fatal subway accident in 30 years, a collision in which 6 passengers were killed. In Jamaica, B.W.I. a leading engine was derailed, and the pusher piled the coaches up in a heap, killing 52 and injuring 70. The worst accident in the United States was caused by a cloudburst near Saugus, Mont., which undermined a bridge and let some cars of the St. Paul's Olympian down into the raging stream, drowning 47 passengers.

Highway Transportation.

There is little new in highway transport, the Federal and state governments have continued to pour funds into new construction, and the tendency is toward construction of a larger mileage of low-cost roads. There is also much talk of super-highways, but it is rumored that the Federal Bureau of Public Roads will not indorse transcontinental super-highways. It is hoped that this is true, as it is believed that much greater benefit will be obtained by making present roads safe for present traffic. It would be a salutary thing if certificates of convenience and necessity were required in some jurisdictions for highways as well as for railroads. Highway safety has tremendously improved, and it now looks as if the year would show about a 20 per cent reduction in traffic fatalities as compared with 1937, during which 39,500 persons were killed. This saving of about 8,000 lives is not to be belittled; but there is no proof that Pennsylvania, which heads the list with a 40 per cent reduction attributed to her 50-mile-per-hour speed limit, would not have accomplished practically the same result with a 60-mile-per-hour limit similarly enforced. Some traffic experts believe that speed has been made the scapegoat, and undoubtedly the 50-mile-per-hour limit is unduly burdensome to the long-distance traveler. An encouraging sign is that some states and communities are waking up to the fact that the safe speed varies with the locality and circumstances and are posting speed zones with varying speed limits. Bus travel continues to develop under the Motor Carrier Act, and Diesel power and air-conditioned buses are becoming more and more common. Interstate trucking, though also under the Motor Carrier Act, is in a somewhat chaotic condition due to the varying state regulations, which have been upheld by the United States Supreme Court during the past year. There is, however, a strong movement toward uniform regulations throughout the nation.

Air Transportation.

Air transportation has benefited by large expenditures by PWA for airports, the new air terminal at Washington, D.C., being the most notable and also the most expensive. There has been steady technical progress, but the accident record is as bad as, or worse than, that of last year. Trans-Atlantic service over the North Atlantic is still in the offing; and service by dirigibles has been discontinued entirely, due to the refusal of Secretary Ickes to allow the export of helium to Germany on the ground that it might be used for war purposes. England, France, and Germany have continued experimental flights and are believed about ready to start transoceanic service when America says the word, which probably will not be until the Pan American Airways are ready.

Maritime Transportation.

The Merchant Marine Act was in force throughout 1938, and the Maritime Commission was busy subsidizing construction and operation. Operating subsidies of $13,500,000 were paid to 13 lines. Early in the year the Commission took over the Panama Pacific Company's three ships for a $10,000,000 debt, refurnished and rechristened them, and put them into South American service as a 'Good Neighbor' fleet. Later in the year the famous Dollar Line was taken over for the same reason. With the help of construction subsidies from the Maritime Commission, United States shipping set a peacetime high in 1938, reaching almost 1,000,000 tons of merchant and naval vessels; and a prosperous year is expected in 1939, with new yards opening up and old ones expanding to meet the new demand. See also AVIATION; BUSINESS; ELECTRICAL ENGINEERING; RAILROAD EQUIPMENT; RAILROADS; SHIPBUILDING.)