The Atlantic Monthly, Volume 05, No. 32, June, 1860

The Atlantic Monthly, Volume 05, No. 32, June, 1860
Various

Various

The Atlantic Monthly, Volume 05, No. 32, June, 1860 / A Magazine of Literature, Art, and Politics

THE FUTURE OF AMERICAN RAILWAYS

The condition of our railways, and their financial prospects, should interest all of us. It has become a common remark, that railways have benefited everybody but their projectors. There is a strong doubt in the minds of many intelligent persons, whether any railways have actually paid a return on the capital invested in them. It is believed that one of two results inevitably takes place: in the one case, there is not business enough to earn a dividend; in the other, although the apparent net earnings are large enough to pay from six to eight per cent. on the cost, yet in a few years it is discovered that the machine has been wearing itself out so fast that the cost of renewal has absorbed more than the earnings, and the deficiency has been made up by creating new capital or running in debt, to supply the place of what has been worn out and destroyed. The Illinois Central has been pointed out as an example of the first kind; the New-York Central, of the second; while the New-York and Erie is a melancholy instance of a railway which, never having enough legitimate business of its own, has worn itself out in carrying at unremunerative rates whatever it could steal from its neighbors. The general opinion of the community, after the crash of 1857, was, that all our railways approximated more or less closely to these unhappy conditions, and it was merely a question of time as to their final bankruptcy and ruin. Even now, when they have recovered themselves considerably, and are paying dividends again, capitalists are very shy of them.

It is our belief, contrary to the current opinion, that during the next decade such a change will have taken place in the condition of our railways, that we shall see them averaging eight to ten per cent, dividends on their legitimate cost. We propose in the present article to give the reasons which have led us to this conclusion.

The causes to which may be traced the languishing condition of our railways may be stated as follows:—Financial mismanagement; imperfect construction; and want of individual responsibility in their operation.

The financial mismanagement of our railways has arisen from precisely the opposite cause to that which has made British railways cost from two to three times as much as they should have done. Their excess of cost was owing to their having too much money; ours to our having too little. They were robbed right and left for Parliamentary expenses, land-damages, etc. The Great Northern, from London to York, three hundred and fourteen miles, expended five millions of dollars in getting its charter. Mr. E. Stephenson says that the cost of land and compensation on British railways has averaged forty-three thousand dollars per mile, or as much as the total cost of the railways of Massachusetts.

American railway-companies have never been troubled with too much money. They have usually commenced with a great desire for economy, selecting a "cheap" engineer, and getting a low estimate of the probable cost. A portion of the amount is subscribed for in stock, and the next thing is to run in debt. "First mortgage bonds" are issued and sold. The proceeds are expended, and the road is not half done. Another issue is sold at a great discount, and yet another, if possible. As the road approaches completion, the desperate Directors raise money by the most desperate expedients, such as would bankrupt any merchant in the country in his private business. Sometimes the road has vitality enough to work itself out of its troubles; but in other cases, unfortunately too numerous, it passes into the hands of the bond-holders, and all it can earn goes to remunerate trustees, and pay legal expenses, commissions, etc.

The financial mistakes of our railways have been, endeavoring to do too much with too little money, and crippling themselves with a load of debt that no project could stand under. This has led, as a matter of course, to the second evil,—Imperfect construction. The projectors of a new railway have thus reasoned with themselves:—"The average cost of our railways has been between forty and fifty thousand dollars per mile, and this one, no doubt, will reach those figures before we get through. But it will never do to talk so, or we could not get the money to build it. Mr. Transit, our engineer, says it can be opened for twenty thousand dollars per mile, and we will earn money enough to finish it by-and-by." So they go on, and, to get the road open for the small sum attainable, everything has to be "scrimped" and pared down to the lowest scale. The cuttings are taken out just wide enough for the cars to pass through, and the ends of the ties overhang the edges of the embankments. Temporary trestle-work of wood is substituted for stone bridges and culverts. Some reckless fellow tosses down the iron as fast as a horse can trot, and the road is opened.

Another way in which imperfect construction is inevitable is where companies admit their inability to be their own financiers by giving some influential contractor his price, and allowing him to "do his own engineering," in consideration of his taking such securities as they have to offer, and which he undertakes to float by means of his superior connections. Having the thing his own way, and being naturally anxious to build his road for as little money as possible, he pares down everything even below the standard of embarrassed railway-boards. If the road will only hold together until he has sold his bonds, it is all he asks. If the business is good, the road will perhaps be finished, or what is thought to be finished, some day or other. If business is dull, nothing is done, and the bridges and trestle-works remain such murder-traps as that on the Albany Northern Road which broke down last year.

But it is not with such miserable apologies for railways that we have to deal. It is on our really valuable roads, like the main lines in Massachusetts and New York, that we shall show that the evils of imperfect construction are felt, and will be felt, until a thorough reconstruction has taken place. It was observed some time ago that the returns of the Massachusetts railways for 1856 showed that there were 1,325 miles open, costing on an average $46,480 per mile, or $61,611,721 in all. The receipts per mile of road were $7,217, the expenses $4,260, leaving a net earning of $2,957, or 40 per cent. of the whole. This was equal to 6.42 per cent. on the whole cost of the railways.

For the same year the returns of all the railways in Great Britain showed that there were 8,502 miles open, costing $173,040 per mile, or $1,506,826,363 in all; and that the receipts per mile of road were $13,296, the expenses $6,249, leaving a net earning of $7,047, or 53 per cent of the whole. This was equal to a dividend of 3.97 per cent. on the whole cost. These figures showed, that, however extravagantly the British railways had been built, they certainly were worked more economically than our own.

At first view it might be thought that the economy was due to their greater business; but further inquiry showed, that, from the better shape of American cars, and from the wants of the public requiring fewer trains, the actual receipts per mile run of Massachusetts trains were $1.83 against $1.44 of British trains. The expenses per mile run of Massachusetts trains were $1.08, while those of British trains were only 63 3/8 cents. Could Massachusetts railways be worked as cheaply, the result would be that they could declare nine per cent. dividends on their cost, instead of six.

Here offered a rich reward for investigation. Accordingly two gentlemen well known to the railway world, Messrs. Zerah Colburn and Alexander L. Holley, made a trip to England for the purpose of discovering how it was that John Bull could work his railways so much cheaper than Brother Jonathan. The results of their investigations are embodied in a handsome quarto volume, illustrated with numerous drawings, which has been subscribed for by most of the railways and prominent railway-men throughout the country. It is not too much to say, that the effect of it, in directing the attention of American railway-managers to the weak points of their system, has resulted already in a saving to the stockholders of our railways of millions of dollars.[1 - The statistics of the English railways given in this article are taken from the volume here referred to. Because some cunning English contractors in South America took advantage of the statements in this book to depreciate the American railway system and American civil engineers, for their own private advantage in obtaining work, some Americans have been so foolish as to decry the book altogether, as traitorous to the interests of the country. Such mingled bigotry and conceit, shrinking from just criticism, would fetter all progress but fortunately it is rare.]

More than half the cost of operating a railway consists of the repairs of track and machinery and the cost of fuel and oil. These expenses are exactly proportional to the mileage of trains. It was soon seen that the greater economy of British railways was almost entirely confined to these items.

The cost of "maintenance of way" upon English railways was 10 1/2 cents per mile run, against 25 cents on those of Massachusetts. The cost of repairs of cars and engines was nearly the same on both. The cost of fuel per mile run was 6 1/2 cents, against 15 cents. While English trains are from 20 to 30 per cent. lighter than ours, they average 25 per cent. faster, so that practically these conditions must nearly balance each other. In alignment the English roads are superior to ours, and as to gradients they have some advantage; although grades of 40 to 52.8 feet per mile are quite common. In climate they have less severe difficulties to contend with; although their moist weather, the nature of their soil, and their heavy earthworks involve much extra expense. In prices, the advantage is at least 20 per cent, in their favor.

These considerations might account for an economy of 30 per cent. as compared with our expenses for maintenance of way, but they cannot account for the great actual economy of 60 per cent. which we have seen. We must seek farther to find the explanation of this, and we soon discover it by comparing the condition of the road-beds and tracks on the railways of the two countries.

The English railways are thoroughly built, are not opened to the public until finished, and no expense is spared to keep them in order. American railways are too often put in operation when half finished. The consequence is, they never are finished, and are continually wearing out,—not lasting, on an average, more than half as long as they should, if once thoroughly constructed. Wooden bridges are allowed to rot down for want of protection. Rails are left to be battered to pieces for want of drainage and ballast. One road spends thirty-four thousand dollars a year for "watching cuts," and fifty-five thousand more for removing slides that should never have taken place. Everything is done for the moment, and nothing thoroughly. Who can wonder that this system tells upon the cost of maintenance of way?

The amount of fuel burned is the exact measure of the resistance to be overcome, and a rough track must necessarily require a larger amount of fuel. The English roads now generally burn bituminous coal; most American roads burn wood; but these being reduced to the same equivalent quantity, it will be found that the American roads burn nearly twice as much as the English.

That the cost of the repairs of American cars and engines is not more is attributable solely to their superior design. An English engine and cars would be battered to pieces in a few months on our rough roads, on account of their rigidity and concentration of weight; while those of America, by yielding to shocks both vertically and horizontally, escape injury. American cars and engines are as much superior in design to the English as their roads excel ours in solidity and finish.

But it will be asked, Shall we imitate the notorious extravagance of British railways built at a cost of one hundred and seventy-three thousand dollars per mile?

The answer is plain. The only thing about them to be imitated is their thorough and permanent construction. That this need not involve extravagance is evident from the fact that the actual cost of construction has been only eighty-eight thousand dollars per mile of double-track railway, including all the costly viaducts, tunnels, and bridges, which in many cases a more judicious location or a bolder use of gradients would have avoided. The remainder of their cost is made up of law and Parliamentary expenses, engineering and management, land and damages, interest on stock, bonuses, dividends paid from capital, etc., etc., amounting to eighty-five thousand dollars per mile. The folly of all this has been seen, and neither the financial nor the engineering errors of that day are now repeated. To show that a better system prevails, it is only necessary to state that between 1848 and 1858, 390 miles of first-class single-track railway have been opened at an average cost of $46.692 per mile, and in all that relates to economical maintenance are not inferior to any in the kingdom.

Such railways as these, costing no more than our own, we would hold up for imitation. How, then, do they differ from ours? or rather, what must be done to put ours into the same condition of economical efficiency?

In the first place, stone culverts and earth embankments should replace wooden structures, wherever possible. As fast as wooden bridges decay, they should be replaced with iron; and if the piers and abutments require it, as is too often the case, they should be rebuilt in a substantial manner.

The tubular iron bridge we do not recommend, on account of its excessive cost. For short spans of sixty feet and under, two riveted boiler-plate girders under the track make a cheap and permanent bridge, and can be manufactured in any part of the country. For large spans there are several excellent forms of iron trusses, Bollman's, Fink's, or, still better, the wrought-iron lattice.

Cuttings should be widened, if not already wide enough, so as to admit of good ditches along the track. The slopes should be dressed off and turfed. This costs little, and prevents the earth from washing down and choking up the ditches, and much of that terrible nuisance, dust.

The secret of all good road-making, whether railways or common roads, lies in thorough drainage. Until our railways are well drained, it is of little use to try to improve the condition of the track. "In an economical view," says Mr. Colburn, "the damage occasioned by water is far greater than the utmost cost of its removal. The track is disturbed, the iron bruised, the fastenings strained, the chairs broken, the ties rotted, the resistance and thereby the consumption of fuel increased, and the whole wear and tear greatly enhanced."

Next to drainage in importance is plenty of good ballast. The New-England roads are well ballasted, as a general thing; but in the West, where gravel is scarce, they do not trouble themselves to find a substitute. Even the great New York and Erie road, after ten years' use, is only half ballasted, which accounts for its being more than half worn out.

Much has been said and written on the necessity of a good joint for the rails, and many are the inventions for securing this object,—"compound rails," "fished joints," "bracket chairs," "sleeve joints," etc., etc. But without better road-beds no form of superstructure will last, and with road-beds as good as they ought to be almost any simple and easily adjusted arrangement will answer well enough.

But a more important matter than all these, so far as the economy of maintenance is concerned, is the quality and shape of the iron rails, forming one-eighth of the whole cost of our railways. Where companies, instead of buying rails, are selling bonds, they have no right to complain, if the iron turn out as worthless as the debentures. But where they pay cash, they can insist on good iron, and will get it, if they will pay the price, which will rule from eighteen to twenty dollars per ton over that of the poorest article. Nor should the shape and weight of the rail be overlooked. Experience, that stern schoolmaster, has taught us, that, while heavy rails of seventy pounds to the yard, and over, of ordinary iron, go to pieces in three or four years, sixty-pound rails of well-worked and good iron will last more than double that time. The extraordinary durability of the forty-five pound rails made for the Reading Railway Company by the Ebbw Vale Company in 1837 is well known to railway men.

A short calculation will show the superiority, in point of economy, of light and good rails to heavy rails of an inferior quality. A seventy-pound rail requires 110 tons to the mile, costing, at 860 per ton, $6,600. At the end of four years this has to be re-rolled at a cost of $30 per ton, or $3,300 more. This is equal in eight years to an annual depreciation of $1,237 per mile. A sixty-pound rail requires 94 tons to a mile, costing for the best iron that can be rolled $80 per ton, or $7,520 per mile. This would last eight years, and the annual depreciation would be $940 per mile, or $297 less than the other. The 30,000 miles of American railways are thus taxed annually nearly nine millions of dollars for preferring quantity to quality.

In England, it is the custom to retain the best engineering talent upon railways, after as well as during construction. In this country, as soon as the engineer has made out his "final estimate," he is dismissed with as little ceremony as a daylaborer. We employ the best mechanical engineers that we can find to look after the repairs of our engines and cars; while the road, which is more important, and upon the good condition of which we have seen that the success or failure of a railway as a commercial enterprise may depend, is handed over to some ignorant fellow whose only qualifications are industry and obedience.

There are no unmixed evils in this world. The impecuniosity of American railways, besides causing the bad results which we have described, has had a good effect upon the training of American engineers. Being obliged to do a great deal with a little money, they have steered clear of those enormous extravagances which have characterized the works of such engineers as the late Mr. Brunel, colossal less in proportions than cost. It has been well observed, that there was more talent shown on a certain division of the New-York and Erie Railway, in avoiding the necessity for viaducts, than could possibly have been exhibited in constructing them. This remark is a key to the difference between the old English and the American systems of civil engineering. The one is for show, the other for use. We say the old English system, because a better practice has now arisen. Cost is looked to as well as splendor; and there is no engineer now in England whose reputation, would sustain him in constructing such monuments of extravagance as the Great Western Railway or the Britannia Bridge. American civil engineers have not been fairly treated. The wretched construction of many of our railways, and the uneconomical condition of all, have been cast against them by their English brethren as a reproach. But the faults of construction, we have shown, are attributable to another cause. No engineer of standing would lend himself to many of the schemes that have been pushed through in the West. But in order to build a "cheap" road, it is only necessary to get a "cheap" engineer, and that is a commodity easily picked up. If their ignorance and blunders tarnish the fair fame of the profession, it cannot be helped. But if American engineers of standing had been allowed to finish the railways begun by them, and to take care of them and see that they were not abused after they were finished, our railway securities would be quoted at higher rates than they now are.

Although there are many civil engineers of standing and experience who have been thrown out of employment by the general stoppage of public works, and who are better qualified to take care of that costly and delicate machine, a Railway, than men whose knowledge is entirely empirical, yet few railways employ a resident engineer. Those that follow this practice are generally supposed to do so because he is a relative of some Director, and wants a place, and not because such an officer is really required.

"Construction accounts," says Mr. Colburn, "can never be closed, until our roads are built. To attempt it only involves a destruction account of fearful magnitude. Under our present system, we are perpetually rebuilding our roads, not realizing the life of our works, and thereby running capital to waste."

"With good earthwork, thoroughly drained, well-ballasted tracks, rails of good iron, correct form, not exceeding 60 pounds per yard, and properly supported at the joints, the ties properly preserved, and the whole maintained by a judicious system of repairs, the average working expenses might unquestionably be reduced by as much as 18 cents per mile run."

The mileage of the Massachusetts railways for 1859 was 5,949,761 miles run, and the expenses of operating $0.93, being a saving of 15 cents over those of 1856, amounting to $892,464. If, by a judicious expenditure of $5,000 per mile, a still further saving of 18 cents per mile run could be made, it would amount, on the present mileage, to $1,070,956 per annum, which, the receipts being equal, would return eight per cent. on the increased capital of sixty-eight and a half millions of dollars.

* * * * *

We have thus shown the combined effects of financial mismanagement and imperfect construction upon our railway property. But there is a third evil to be cured before it can become productive.

Under the present system of railway management, everybody is busy getting rich at the expense of the stockholders. Railway men are as honest as the average of mankind, but there is no reason why they should be more so; and if their temptations are greater, a certain percentage of them will inevitably yield to those temptations,—just as statistical tables show that the average number of arrests for drunkenness and disorderly conduct is greater on Sundays and holidays than on working-days.

A few years ago it was impossible to compare the results of the working of one railway with those of another. The returns were so ingeniously made out, that only one thing was certain,—the amount of dividend that it pleased the Board of Directors to declare. If this was three or four per cent. for the half-year, the stockholders were delighted, and passed a vote of thanks to those worthy gentlemen for devoting so much valuable time to their interests gratuitously. What if a dividend was not earned? it was easy enough to raise money in Wall Street on the Company's paper, until some excuse could be found for a new issue of bonds or stock. But those benefactors of the human race, Tuckerman and Schuyler, put a stop to all this. After their proceedings became public, and still more certainly after the crash of 1857, if railways did not earn a dividend, they had to say so. This led to investigations, and stockholders became "posted," as the phrase is. Chiefly by the exertions of one newspaper, the "Boston Railway Times," railway companies were shamed into giving their reports in such form as to distinguish the expenses per mile run, for fuel, oil, repairs of road, machines, etc., etc. This gave a common standard of comparison; and, as we have seen, it was made use of to discover in what particular departments English railways were worked more economically than our own. This has led, as we have also seen, to a great reduction in the cost of operating; and the revival of railways, as an investment, dates from that time, 1857-8.

But there is something more wanted yet. As we have said, railway men are not out of the reach of temptation. Let the various officers of a railway manage it so as not to exceed the average expense of other roads of their State, and their reputation stands high. Let them reduce their expenses below the average, and their power is despotic. If they are men of ability, they can do all this,—operate their road for less than many others, run their trains regularly and without accident, even treat the public with civility, and make themselves rich, in a few years, by percentages and commissions on the cost of supplies, and by other modes, which, perhaps, had better not be referred to here. If any one doubt this, let him take pains to inquire how large a proportion of railway-men get rich in a few years on salaries of from one to two thousand dollars per annum. Nor can this be prevented; for every new check is only a transfer of power from intelligent to ignorant hands; and ignorance, however honest, is a more expensive manager and easier victim than knavery. There is but one remedy. Make it for men's interest to reduce the expenses of operating to a minimum. Make it for their interest to do so, by allowing them to share in the profits, and then the question is solved, and you have a thousand vigilant guardians of your property day and night. Let all supplies be furnished by public competition under sealed tender, as is done in the army and navy, and on the large railways of Great Britain.

There are, no doubt, practical difficulties in the way of carrying out these changes, as there are in introducing all new systems. You have to meet the doubts and suspicions of those who are unacquainted with them, the opposition of interested parties, and the general feeling which influences all men to let well enough alone. But that there are no insuperable obstacles in the way is evident from the fact that this system has already been partially applied on a railway doing a very large business, the Philadelphia, Wilmington, and Baltimore, under the able superintendence of S. M. Felton, Esq., who, in his last Report, says, "It still works well, and is productive of much saving to the Company.[2 - The cost of operating this railway for 1859, as per last Report, was only 37.4 per cent. of the receipts, while that of the railways of Massachusetts for the same year was 56.9 per cent. The result is a dividend of 8-1/2 per cent. on capital, after paying the interest on bonded debt.] It promotes regularity in running the trains, and in all branches of our business. It diminishes accidents, by bringing home the responsibility directly upon individuals instead of the corporation."

There is a great deal of significance in this last remark. Every one knows, that, when an accident happens on a railway, "no one is to blame,"—which means, that everybody should have so much blame as can be expressed by a fraction whose numerator is unity and whose denominator represents the whole number of employees. Such an infinitesimal dose of censure, contrary to the homeopathic doctrine, always produces infinitesimal results.

To what is the extraordinary success of the Hudson's Bay Company owing,—that wonderful organization which rules the wilds of British North America with a discipline which has no parallel in the history of mankind, except that of the order of Jesuits? Simply to the fact, that every man whose duties require intelligent action is a partner of the Company, shares in its gains, and loses with its losses. And so it should be with our railway-employees. Instead of excusing waste of time and property by the stereotyped phrase, "The Company is rich and can stand it," they would strive to exercise a rigid economy, knowing that at the end of the week their pockets would be so much the heavier.

To show how the thing should be done would involve matters of detail which would be out of place here. What we desire to show is the principle. Instead of paying all men alike, good, bad, and indifferent, let the amount of a man's wages depend on his skill and intelligence; the more he shows, the better let him be paid. In almost every department of manufacturing and commercial business this is done. Why not in railway management?

We subjoin a tabular statement of the railways of the world, made up to 1857, except those of the United States, which are for 1858-9.

–– |Name of country. |Cost per|Receipts |Percentage of|Percentage of | | | mile. | per mile| expenses to | net earnings | | | | of road.| receipts. | to total | | | | | | capital. | |–|–|–|–|–| |Great Britain |$173,040| $13,296 | 47 | 4.00 | |Australia | 169,225| 6,810 | 72 | 1.02 | |India | 51,400| 8,645 | 42 | 4.09 | |France | 128,340| 13,530 | 44 | 6.58 | |Belgium | 81,955| 10,790 | 58 | 5.48 | |Austria | 92,325| 13,430 | 54 | 6.75 | |Prussia | 72,430| 9,915 | 45 | 7.44 | |Other German States| 66,160| 7,085 | 63 | 5.52 | |United States | 41,376| 6,170 | 60 | 5.51 | –

From this it will be seen how much economy of working has to do with paying a dividend,—as in the case of the Indian railways, where, although the receipts are very small, the prime cost and expenses of working are also very small, and they divide 4.09 per cent, while the Australian railways, whose cost and expense of working are large, can pay only 1.02 per cent. It is proper to say, however, that this was during the "gold fever." Railways are now built in Australia for $50,000 per mile.