Marie Gonzalez Sat, Jan 27, 9:30 AM (1 day ago) to chaosgodof530, me, charles.schlehr 10$?

1918 Railroads Railroaded This essay explores the important role of the American railroads during World War I and a link back to the creation of the Federal Reserve. FREDERICK R SMITH JAN 27 Foreword This essay explores the vital role of the American railroads during World War I. Government intervention in railroad businesses and the involvement of a critical personality instrumental in creating the Federal Reserve make for an intriguing and entertaining read. Tips appreciated! Executive Summary Introduction: In 1917, the U.S. entered World War I, prompting a need for efficient rail transportation of essential materials. Financial challenges in the railroad industry, rooted in the aftermath of the Panic of 1907, exacerbated by labor shortages and increased costs during the war, led to operational difficulties. Creation of USRA: President Wilson established the United States Railroad Administration (USRA) in 1918 to address the crisis, assuming control of the nation’s railroads. The USRA aimed to prevent congestion and wasted equipment and ensure unified direction in equipment handling and maintenance. Challenges and Achievements: The USRA faced difficulties, including locomotive shortages and the need for standardized equipment. Although the twelve chosen designs aimed at minimizing variety, they faced criticism for failing to achieve this goal effectively. The controversy also stemmed from perceived government interference in business. Defects and Financial Burden: The USRA incurred a substantial deficit during its operations, leading to controversy. Political factors, including opposition from the Republican Party, influenced public perception. The analogy between the deficit and wartime sacrifices emphasized the context but did not alleviate criticism. Media and Industry Opposition: The controversy extended to the standardization of rolling stock, particularly locomotives. While generally accepted, freight car and locomotive standardization faced opposition from industry figures and publications like Railway Age. Arguments against standardization included concerns about hindering progress and complicating maintenance. Railroad Complaints: The USRA faced challenges maintaining standardized locomotives due to shopmen’s resistance and complaints. A 1920 booklet highlighted various criticisms, often lacking sufficient support. Over time, as shopmen became more familiar with USRA locomotives, initial challenges were overcome, and the standardized designs demonstrated long-term success. William Gibbs McAdoo: William Gibbs McAdoo was a prominent American lawyer, politician, and statesman known for his significant contributions during the early 20th century. His political journey led him to Washington, D.C., where he served as an assistant secretary of the Navy under President Woodrow Wilson, marking the beginning of a close association with Wilson. In 1913, McAdoo became the Secretary of the Treasury, playing a crucial role in passing the Federal Reserve Act of 1913, reforming the nation’s banking system. During World War I, he served as the first director general of the USRA, managing the nation’s railways and facilitating efficient troop and resource transportation. Introduction Amtrak is short for the National Railroad Passenger Corporation. Following the 1970 Rail Passenger Service Act, the government established Amtrak in 1971. The goal was to merge and revitalize intercity passenger rail services. Amtrak is a government-owned and funded money-losing corporation. It receives federal funding and generates revenue through ticket sales. The government plays a significant role in financing, route decisions, and oversight. Arguably, that makes it a nationalized operation because it involves government ownership, support, and control. Government control allows the government to regulate and influence industry operations. The approach chosen depends on the specific goals and circumstances of the government at the time. Much of Amtrak’s trains operate over private railroads. That gives the government the ability to use the term “quasi-government.” It mitigates the need to call it nationalization. With Amtrak as an example, let’s take a historical trip to another experiment in “quasi-nationalization.” In 1917, the United States entered World War I. President Woodrow Wilson delivered a war message. It prompted the nation to mobilize and support its allies abroad. The nation’s railroads transported essential materials. Goods included food, supplies, and munitions. Yet, the railroads were already facing challenges. President Samuel Rea of the Pennsylvania Railroad emphasized extensive terminal facilities. In 1917, under the authority of the Federal Control Act, they established the United States Railroad Administration (USRA).¹ The USRA took over operational control. That ensured efficient transportation of troops and resources during the war. USRA controlled pricing, schedules, and other operations. Yet, private companies still owned the infrastructure. Thus, that experiment stopped short of nationalization. Congress passed the Railroad Control Act into law in March 1918. The government would return control of the railroads to their owners within 21 months of a peace treaty. The owners would receive compensation for the usage of their property. So, they disbanded the USRA two years later, in March 1920. The railroads controlled their property once again. History of Crisis The railroads’ financial woes had roots in the aftermath of the Panic of 1907. By 1915, a $4 billion investment increased earnings. Yet, the railroads struggled to meet operating costs, payroll, and taxes. They accumulated a large deficit. The annual interest charges further strained their financial health. The rigid structure of ratemaking and over-regulation persisted until the passage of the Esch-Cummins Act in 1920. This act acknowledged the carriers’ need for enough revenue. It allowed formal combinations and pooling agreements. That provided some relief to the struggling railroads. During World War I, railroads faced more challenges. Labor shortages and increased costs were due to the implementation of the Adamson Act (1916). The act mandated an eight-hour workday for train and engine crews, contributing to rising labor expenses. The registration and conscription of men for the war effort further exacerbated the labor shortage. Unlike World War II, it saw the emergence of a significant female workforce. The surge in business from 1916 onwards, marked by a 32% increase in ton-miles, left the railroads unprepared. A shortage of railcars developed, causing congestion at terminals along the Atlantic coast. Insufficient capacity and facilities led to a backlog of unloaded cars. The railroads’ desire for return loads added operational challenges. By February 1917, 145,000 cars had accumulated at terminals. USRA Director-General William G. McAdoo (see below) noted that many railroads’ rolling stock was in poor condition. American railroads were not ready for war. They needed development and improvement. Breakdown in Winter 1917-1918 President Wilson acted to address an impending crisis in the railroad industry. He recognized the need for unprecedented cooperation. Despite emphasizing competition, the Interstate Commerce Commission was historical. Wilson established the War Industries Board (WIB). He did so to ensure collaboration and preserve competition. Around seventy railroad presidents convened in Washington within five days of the Declaration of War. They selected five members to form the WIB. It granted “power of attorney” over 635 sizable railroads to override individual interests. Political cartoon characterizing the startup of the USRA 1918 ~ Libray of Congress image archive Dynamic CEOs, such as Fairfax Harrison (Southern Railway), Julius Kruttschnidt (Southern Pacific), Howard Elliot (New York, New Haven, & Hartford), Samuel Rea (Pennsylvania Railroad), and Hale Holden (Chicago, Burlington and Quincy Railroad), led the WIB. Ex officio members Daniel Willard (Baltimore & Ohio) and Edgar E. Clark (Interstate Commerce Commission) also served. They relied on persuasion, education, and occasional apologies to influence railroads. Yet, the WIB faced challenges as many companies resisted cooperation, fearing revenue loss. Individual railroads prioritized their interests. The WIB needed more authority to enforce its directives. A significant issue was the issuance of priorities for “essential” shipments. By the end of 1917, 85% of Pittsburgh Division of the Pennsylvania Railroad traffic moved under priority orders. The eastern lines experienced a surplus of idle-loaded cars, shortages of 158,000 cars for loading, and a looming coal famine in New England. The harbors along the Eastern seaboard experienced congestion. Ships couldn’t leave because of coal shortages caused by railroad congestion. Yard congestion compounded these issues. Ports had inadequate storage facilities. More cars and locomotives were also needed. Railroad workers demanded higher wages. Severe weather in December 1917 almost brought railroading to a standstill. It disrupted the supply chain for ships heading to Europe. That led to the necessity of federal government intervention. It also led to establishing federal control as the only viable option. At that time, 441 corporations owned the 260,000 route-mile rail network in the United States. The government acted swiftly when the 2,905 companies and subsidiaries that owned 397,014 miles of track refused to cooperate (with each other) and caused a standstill on the rails. By late 1915, approximately one-sixth of the country’s railroad trackage was bankrupt. That was due to excessive expansion by investors. The national railway investment totaled $17.5 billion. The railroads financed over half ($8.75 billion) through debt. Its estimated value was $16 billion. Creation of USRA In December 1917, President Wilson assumed control of the nation’s railroads. He did this through the Army Appropriations Act of 1916. He established the United States Railroad Administration (USRA) on January 1, 1918. The Federal Control Act passed in March 1918, appropriated funds for railroads. It also guaranteed compensation. The USRA aimed to prevent clogged terminals and wasted equipment. It also sought to ensure unified direction in equipment handling and maintenance. The Railway Administration Act became law on March 21, 1918. It affirmed Wilson’s 1917 nationalization order. Wilson appointed his son-in-law, William Gibbs McAdoo, as the first Director General of the USRA. It was operational until March 1920. In 1919, Walker Hines, the USRA director-general, highlighted two achievements. They were controlling traffic to prevent congestion. They were also providing unified direction in equipment handling. At the start of federal control, there were shortages of locomotives. The late delivery of the ordered locomotives for U.S. forces and allies in Europe caused this. During World War I, Russia bought 857 2-10-0 Decapods from the United States. The War Department held up delivery of the last 200 because of the Bolshevik Revolution in 1917. They converted the locomotives from the Russian 5-foot gauge to the 4 feet 8-½ inch standard gauge. United States railroads then leased them to help reduce power shortages. Regions in need received the surplus domestic locomotives. Cooperation with the “mechanical crafts” expedited repairs. To further address deficiencies, the USRA diverted some locomotives and expedited the rehabilitation of others. Russian Decapod (2-10-0) before shipment from the Baldwin plant Eddystone, PA ~ Wikimedia image The USRA purchased standardized freight cars and locomotives. They aimed for sound designs meeting various railroad needs while minimizing types. They deemed the twelve locomotive designs valuable. The USRA Standard Locomotives and Cars Based on their wheel arrangement, builders classified North American steam locomotives. They use a system called “The Whyte System.” This classification method assigns numbers to the locomotive’s leading, driving, and trailing wheels. The first number represents the number of leading wheels. The middle number(s) show the number and arrangement of driving wheels. The last number signifies the count of trailing wheels, typically positioned under the firebox. For instance, a “2-8-4” or