An American View of British Railways

GIVEN, a railway system which earns each year just about what it earned the year previous, while the capital charged against it is each year materially greater; how are dividends always to be paid at the “usual rate?”

This is a problem which can be worded in many ways; it is subject to much twisting and turning about, while local conditions may greatly modify either or both of the main premises. But the central fact of it is confronting every British railway manager, and will not down; he has always the skeleton in his closet, and is fortunate if he can keep it hidden. It is not the purpose of the present paper to deal with statistics, but rather to show some of the broad tendencies of British railway transportation in their relation to the situation on this side of the Atlantic, and with especial reference to interesting differences in practice. Suffice it, then, to say, at the outset, that the average capitalization of the British lines, as reported by the Board of Trade, stands at some $273,000 per route mile, while that of our lines is approximately $67,000 a mile.

Taken by themselves, these figures are meaningless. We are comparing singletrack lines thrown across the Kansas plains, unfenced and unsignaled, with four-track roadways, splendidly built and safeguarded, leading into the heart of London. As our country grows up to its transportation system, the capital account will swell by leaps and bounds, and, in truth, expenditures during the last twenty years have been out of all proportion to the increases in route-mileage. We have fairly entered into the period when the characteristic of railway progress is the betterment and enlargement of existing facilities, rather than the opening of new territory with hastily constructed lines. But the fresh budget of capital expenditure charged each year against American railways is bringing constantly increasing returns; the money buys new tools, which enlarge the output of the plant. In England, unfortunately, this is not true. The 23,000 miles of railway in the British isles cover the country like the filaments of a cobweb; every traffic centre is splendidly served already, and not much new is to be hoped for. Gross earnings increase each year, it is true; but they increase very slowly, while the railway properties, built for all time, three quarters of a century ago, by engineers who had the hardihood to assume that their designs could not be bettered, cannot now be adapted to economical working, but must be carried as best may be, with their terrific burden of capital cost.

To put the matter in a word, the English managers, for the past fifty years, have been capitalizing maintenance in order to pay their dividends. They do not call it capitalizing maintenance. Theoretically, the strict up-keep of the line is paid for out of earnings, and the new capital goes into permanent betterments, larger and more powerful locomotives, heavier bridges, and many other items that leave the company with new assets to set against the new liabilities. But it is only too evident that, in the face of the sharp and ever-present competition in all quarters, these capital costs do not bring new traffic, - for there is not much new traffic to be brought, — but only serve to retain the existing business, and to keep it from falling into the hands of rival companies. British railways do not suffer from competition in rates; but they are gradually being bankrupted by competition in facilities.

At the bottom of the difficulty lies the sacredness of the dividend. Broadly speaking, American railways were built on the proceeds of bond issues; much, if not most, of the original stock was put on the market as a speculative venture, and when the load of capital became too great for the property to bear, the bondholders took possession, wiped out the stock, and reorganized on the best basis they could. Dividends were paid when it seemed expedient; not because the stockholders were deemed to have any particular right to them. The best American railway practice to-day not merely maintains the property out of earnings, in the British sense of the word maintain, but puts it in such shape that it can continue to hold its place in its own competitive territory without new capital costs. After that, a generous surplus is carried forward, and then the balance of the earnings is available for dividends.

But British railways have no bonds; there are simply three classes of stock, debenture, preference, and ordinary, receiving dividends in the order mentioned, and profits are shared almost to the last penny, — a great company, earning twelve million pounds sterling, carrying forward perhaps £25,000 as the year’s surplus.

For example, the balance carried forward as surplus by the Great Western Railway for the half year ending June 30, 1904, was equal to only one twenty-fourth of the common-stock dividend requirements for the same period. The dividends, that is to say, absorbed 96 per cent of surplus net earnings, after a scanty charge for maintenance. Dividends on the Pennsylvania Railroad in 1904 absorbed only about 64 per cent; on the Lake Shore and Michigan Southern they absorbed less than 40 per cent. Moreover, the English road includes its entire surplus carried forward in the sum available for dividends; while both of the American roads have tremendous accumulated surpluses from past years which they do not so include. The accumulated surplus of the Pennsylvania at the time of its last report amounted to nearly twentyfive millions; the Lake Shore had nearly seventeen millions; the Great Western (England) carried forward $125,000 as its sole reserve.

Just as the British railway carriage started from the stage coach, and has never gotten far away, so the dividend system is based on the practice of the little manufacturing concern whose three owners repair the roof out of surplus earnings, and divide the cash balance at the end of the year. But the proprietors of the manufacturing concern are on the ground; if they are confronted with competition they can intelligently take counsel among themselves and agree to spend some of their profits in new facilities. Not so the thousands of railway shareholders. The standard of dividends set by the company may have been extravagantly high at the outset, so that it is maintained at great sacrifice by starvation of the property; but that does not interest them; they want their five per cent, or four, or three and one half per cent on an investment made in times of greater profits, and they look sharply to the chairman and his board for it. American charges are flexible, for the dividend — which is not a charge at all — can always be reduced or suspended entirely. But the whole system of British railway capital, based upon a small but regular return, as against the speculative returns in this country, depends on the dividend, and is extremely inflexible. So the capital has piled up, and must continue to pile up until earnings vanish. Our railroads took their hardships and deprivations in their youth; the English lines, after years of great prosperity, are looking forward to certain poverty in their old age.

It has often been said that British railway traffic had the characteristics of a retail business, while American railway traffic was analogous to a wholesale business. The extent to which this is true can scarcely be realized by the tourist; the difference is fundamental, and the conditions under which the lines are worked are as wide apart as the two continents. Some of the British lines have recently complained bitterly of the serious inroads into their passenger revenue made by tramways working within a radius of, say, three miles from the cities, — a traffic that the American manager never had, and does not want. The extreme minuteness, if the term may be so used, of the British merchandise business, tends to destroy all comparisons with American freight-carrying. As a result of these things, visiting railway officers in either country, newly come from the other, are perplexed and dismayed rather than enlightened by what they see. The British manager on a visit to America sees faulty permanent way-construction,locomotives built to be “scrapped” after seven or eight years’ service, unpunctual passenger trains, and a great proportion of the country’s mileage abounding in grade crossings and worked without block signals. On the other hand, the American manager in England sees a freight traffic that has degenerated into a parcels business, and a network of lines, extravagantly built and extravagantly worked, handicapped by an official formalism that reaches all branches of the service alike, while the capital account hangs over the lines like a black cloud, certain some day to descend in a storm that will wipe out many time-honored values.

British railways do not have presidents, and there is nobody on the official roll whose authority exactly corresponds to that of the American chief executive. The chairman, often titled and usually a layman, finds it his chief duty to preside over semi-annual meetings and to answer the extremely pertinent questions put to him by the proprietors, — for every British shareholder feels the weight and dignity of his proprietorship, and may not be gainsaid. To make, for the moment, a technical distinction, the characteristic organization of a British railway is departmental; the characteristic American organization is divisional. That is to say, we are prone to make each operating division of the road a separate entity, ruled by its superintendent, who reports to the general superintendent of all divisions. On most of the larger systems there are a group of vice-presidents, each responsible for a main branch of the business, but reporting in turn to the president, while they give the division superintendents, who are the operating units, as free a hand as possible. Our general managers are little more than full-powered general superintendents.

But in the British departmental organization, the branches of the business proceed in parallel lines that do not converge in any central authority. The British general manager is the operating head; but the locomotive-chief gets about the same salary, and theoretically reports to no one but the non-technical directors; while main questions of policy and finance are taken away from the general manager by the board. The chief traffic-manager has a position almost, though not quite, as independent as the locomotive-chief. The result is that the general manager, whose duty it is to move the traffic, may or may not. be able to haul the trains he wants to; it depends on the locomotivechief whether he can or not; and the locomotive-chief, desirous of making a fine record of working economy for his engines, does not always care to overwork them for the sake of enabling the general manager to make a good record of another sort. British railways often seem to obey the Scriptural injunction not to let the right hand know what the left hand is doing.

The departmental system is also in part responsible for the official formalism, the dignity with which each department hedges itself about, as illustrated, in a measure, by the multiplication of clerical positions. That there is not enough work to occupy all the assistants, secretaries, and clerks is most obvious, and the amount of unnecessary correspondence that these persons carry on suggests government service. It is a common saying that any patient clerk can be sure of a comfortable berth if he bides his time and takes pains not to be so active in the performance of his duties as to alarm his immediate superior.

Yet in spite of these very patent defects which so seriously affect the economies of working, the fact must not for a moment be lost sight of, that the public service rendered by the British lines, the convenience to the traveler and the shipper, are far in excess of anything to be found in this country. The British Isles are absurdly small when compared with our vast areas, and this of course simplifies the operating problems; there are no snowdrifts to delay schedules, no sections of crudely built track awaiting perfection, and the locomotives are never far from their home shops. Yet, even with allowance for these advantages, both freight and passenger traffic are habitually handled with a regularity and certainty that deserve the highest degree of praise. In any large terminal in England the number of passenger trains that arrive either exactly on time or a minute or two ahead is far greater than that of trains even the least overdue; five minutes is usually a safe margin for an important connection. At Finsbury Park, a suburban station just outside London, trains pass on an average of one every two minutes night and day, yet this tremendous traffic is handled with clock-like precision. This punctuality, moreover, is not confined to the passenger service, and, in comparison with this country, it is in freight-working that it is the most marked.

Our freight roughly divides itself into two main classes, — “time” freight that is urgent, and “dead” freight that can wait; and on our larger systems it requires careful systematizing and the constant attention of a large staff to keep these classes separate and to insure that the “time” freight is not delayed. The way we do it is interesting, and varies only in detail among almost all the large lines. Certain stations are designated as time-freight way-billing points, and each of these stations has a telegraphic name, as, for example, “MA” for Minneapolis. Each station also has a set of numbers, — a large point like Minneapolis would have about six hundred, — and the cars of time freight “originating” there are numbered consecutively up to the limit, — MA 1, MA 2, etc., — after which the numbering reverts to MA 1 again. The superintendent of car-service — by whatever name he may be locally called — receives daily a telegraphic report of every time-freight car on the road, designated in this way, and frequently keeps a graphic record of his charges.. Stretching across his wall will be a great board with the names of the stations in consecutive order upon it; and stiff wires support smaller boards, representing the trains of time freight, which are moved along as their progress is reported from passing points, just as Lloyds’ stations report ships at sea. Each one of these small train-boards contains separate plugs, or slips of wood, on which are marked the symbols of each car. If at any time a fast-freight car is reported “set out” at any station from any cause whatsoever, its symbol-bearing plug or slip is removed from the board representing the train, and is left at the proper place. Thus the car-service superintendent has a continuous graphic record, not only of every time-freight train, but of every time-freight car on the road. The necessity for this is apparent on a system like the Great Northern (U. S. A.), where the fastest through freight trains are a week on the road between St. Paul and the coast.

The English method of handling fast freight is so different from this in its whole conception and environment,—at once so much more expeditious and so much more costly, — that there is no common ground for a comparison. As far back as 1885, when Hadley wrote his Railroad Transportation, he showed that freight could be received in London late in the afternoon and be delivered at the consignee’s door, anywhere south of Scotland, the next morning. The main features of this service have not been changed much in the last twenty years; but it has been polished by competition to a wonderful degree of perfection as regards facilities, although the cost of it, both to the railways and to the shippers, remains an unfailing source of astonishment to the American manager.

One of our great Eastern roads sends out four fast freight trains daily from New York; the London and North-Western sends out twenty-eight daily! Moreover, the English company cannot despatch these trains at its convenience, throughout the twenty-four hours, for the freight does not come in until late in the afternoon, and it must inevitably be delivered before working hours the next morning. So the trains must be worked on what is practically a passenger schedule, and to accomplish this they must be light. The standard train for this kind of traffic is made up of twenty-four or twenty-five little ten-ton wagons, and in the face of the conditions which have to be met, three tons of paying freight per wagon is considered good loading. That is to say, there must be a locomotive and a train crew for about every seventy tons of fast freight!¹ Incidentally, it may be noted that a single locomotive and train crew handle two thousand tons of paying freight, when grain is moving, on the New York Central; while this record is considerably exceeded by coal hard age over portions of the Pennsylvania system.

Through stress of’ competition, practically all kinds of freight are hauled in this extravagant manner in British practice, excepting only coal, pig iron, brick, and art icles that belong in a similar classification. As a result, the business methods of the provincial shopkeepers have been arranged to fit the conditions. A Leeds tailor carries only a small stock of cloth, his customers ordering by sample. If the order is received by four o’clock in the afternoon, the tailor can telegraph the number of the sample to London and receive the cloth by the time he opens his shop in the morning. The purchaser of goods that weigh fifty pounds or so does not feel the freight charge, and gets a service unequaled in any part of the world; but the habitual shipper finds his freight bills extremely high, since the average rate received by the railway companies on the goods moved by these fast trains is not far from a sovereign a ton. It is only fair to say that this rate, besides providing for rapid movement, also includes collection and delivery; but it has remained practically unchanged throughout the last twenty-five years, while every one who has followed the recent arguments against Federal rate-regulation in this country must have been struck with the great decreases in our own freight rates during a similar period. So far as freight movement is concerned, it is a safe generalization to say that advances in the science of transportation have been applied in this country primarily to the reduction of costs; in England to the improvement of facilities.

The odd part about the extraordinarily rapid movement of British freight is that the shipper, viewed as an average person, is not much interested in it. Of course some commodities must move fast or not at all. Meat traffic from Liverpool to London — “dead meat,” as the English describe it, with their wondrously definite habit of mind — must positively reach the city prior to six in the morning, for the reason that the trains are run around from the main lines north of the city to the east-side markets on the tracks of the Metropolitan and District underground lines, and these tracks must be cleared for the early morning passenger traffic. But the great bulk of the traffic — chinaware, groceries, bicycles, birdcages, and what-not — is far less urgent than would appear; several railway managers have told me that only the tiniest proportion of their shippers were really much concerned about over-night deliveries. If the competing railways could agree among themselves to reduce the number of trains, and consolidate into economical loads the traffic that could wait, there would be no real dissatisfaction, and the saving would be tremendous. But this is just the sort of agreement that will never be made, because the fast trains are the only weapon left to competition. “Besides,” says the English manager, “I would rather move the traffic in the present wasteful manner and get a sovereign a ton for it, than consolidate my trains and face the appeals for a lower rate.” And, in a country where there is no potential traffic awaiting stimulation, he is right.

If I were asked to name the characteristics which, from the standpoint of the casual traveler, make British railways most unlike American railways, I should reply unhesitatingly, hedges, and the Board of Trade. Each of these terms is somewhat symbolic, as used. The hedges, perfectly trimmed and laid out like the boundaries of a model garden, suggest the neatness and careful exactitude that pervade the service. They may fairly be made to stand for the politeness of the employees, the “railway servants,” as well; for one does not expect to find rude servants in an old-fashioned garden. The traveler does not see the Board of Trade, but he is surrounded on all sides by its handiwork, and watched over by its inspectors. Specifically, the Board of Trade as a British railway characteristic stands for the broad masonry station platforms, the overhead bridges from the up-line to the down-line, the absence of grade crossings, the efficient system of block signaling, and the careful inspection and report that follow even the most insignificant accident. More broadly, it denotes the great British Public Opinion, that may be inefficient, but is always honest and courageous, and carries an influence — whether it expresses itself in the shareholders’ meeting or in the columns of the Times — which has no parallel in this country. Nor does public opinion, or public seriousmindedness, stop with the proprietors and the critics; the humblest railway guard feels his responsibilities, and respects the traditions of law and order to an extent that is simply astonishing. He may be stupid; he usually is; but his fidelity to the book of rules and to his own small but essential share in railway working seems to belong to a different race of individuals from the American trainman, with alertness and carelessness well mingled in his make-up.

The Board of Trade is a branch of the government, and its railway department is concerned almost solely with public safety. It views public safety broadly; it will not permit any new line to be opened for traffic until its inspectors have passed on it; and the inspectors require compliance with almost countless arbitrary requirements that entail a tremendous expense on the railway company, and have, in considerable part, no real bearing on safety. Many of these requirements are traditional rather than expedient; if railways were to be built de novo in the year 1906 it is certain that the Board of Trade would be immensely shocked, if not insulted, at the suggestion that a 100-ton locomotive should rely on wheel flanges less than one and a half inches deep to keep it on the rails, at a speed of seventy miles an hour. But the traveler who is not a shareholder has no occasion to worry over excessive safety, and he can feel assured that every British railway on which he is permitted to travel has passed a rigid examination at the hands of one of the most critical examining bodies in the world.

The Railway Department of the Board of Trade has four principal inspectors, who are retired army officers, — at present three lieutenant-colonels and a major. These gentlemen naturally had no railway experience prior to their appointment; in fact, the very circumstance of their army career indicates the impersonal, non-partisan service which is expected of them. Without technical skill, except that which they have acquired in the prosecution of their duties, they stand for dignity and absolute integrity, as representatives of the government. One inspector personally investigates every accident, every new line which it is proposed to open for traffic, every installation of a new type of signal, and the like, and receives testimony much like a circuit judge, except, that the proceedings are informal. In due course of time he presents his report, quoting the important testimony, and adding conclusions and recommendations of his own which have practically the force of statute, because of the power possessed by the Board to require compliance on the part of the companies. The reasons gravely alleged by the Board as the cause of a wreck often fail to convince; the remedies suggested may do nothing more than reiterate the need of care in train-working; but the limelight is turned squarely on all the operating methods and physical conditions contributory to the accident, and any real evils that may be discovered are dealt with in no uncertain manner.

For example, at the famous Hall Road accident, on the electrified portion of the Lancashire and Yorkshire, the whole system of facing-point switches throughout the country was under trial, although the primary cause of the accident was an order to proceed, wrongly given, by a signalman. The country was aroused by the accident; but the Board of Trade went about its investigation without haste or hysteria, and laid the entire blame where it belonged, — on the mental confusion of the signalman. The American press as a whole can be relied on always to assume, tacitly or sonorously, that a serious railroad accident is due to “corporate greed,” implying that if the shareholders cared to spend what they should, they could bring about a condition of perfection that would make accidents unheard of. The British press does not share this attitude of mind, because it places perfect confidence in its Board of Trade. When the inspectors of the Hall Road disaster fully exonerated the facing-point switch from the charge that it was accessory to accidents in general, the press had no more to say on this point. It is easy to imagine the heroic stand which our sensational papers would have taken in such a discussion. They would have formed their own conclusion months before the Board of Trade hearings were finished, exonerating the poor signalman, — and incidentally publishing his portrait,— placing all blame on the directors, and appealing to high Heaven and President Roosevelt for a law requiring the abolition of facing-point switches.

The British observer is naturally surprised to see that our safety measures are enforced primarily by the newspapers; he is scandalized to learn that the cause of some of our worst accidents is never known, and hence that preventive measures do not follow. For example, the Mentor wreck, on the Lake Shore, is still unexplained, after incomplete and unscientific examinations made by coroners’ juries and the inefficient State Railroad Commission. Two things, however, have always worked to hinder really useful work by any national railroad commission in this country: the separate state government system, and the fact that internal communications played so vital a part in the development and in the prosperity of the land that public opinion, at the outset, was not at all critical. What was wanted was railroads; if they could be safe railroads, so much the better; but this was not the essential thing. The early lines across the plains, with all their crudities, were so infinitely superior to pack trains, both in efficiency and in safety, that their shortcomings were not judged harshly. Now we have awakened to the fact that a preventable accident is a criminal thing, and we hold our railroads in low esteem because they cannot at once alter their physical structure to conform to our point of view. It is fair to say, however, that we very greatly need an institution with inspection powers like those of the British Board of Trade, but with expense ideas tempered to the wide difference in situation.

To revert from the Board of Trade to the hedge characteristic of British lines: the baggage system, plus the cab arrangements, never fails to delight an American. He never knows, and never can be made to know, what there is in the system that offers the slightest hindrance to the professional collector of other people’s baggage; he is fully convinced that the porter would place on his hansom any bag he designated as his own, without a moment’s hesitation. In a country where checks are not used in ordinary baggage handling, the entire system rests on the simple affirmation, “This is my bag.” Yet the claim-departments of British railways find that theft of baggage from station platforms is practically a negligible item in their accounting. From the standpoint of the ordinary traveler, the British method is incomparably superior to ours. A four-wheeler in London costs a shilling for the first two miles. Add a few odd pence for each piece of baggage carried outside, and construe the distance liberally, and you may arrive at the station, with all your paraphernalia, for a ridiculously small sum. English visitors to New York habitually dine in tweeds on the night of their arrival, because the expressman, who lightly guarantees immediate delivery of their belongings, finds it more convenient to call the following morning.

The Englishman travels with two kitbags, a hat-box, an ulster, and a rug, and never carries any of these things himself. He marvels at the hidden resources of the American dress-suit case, not understanding the stern necessity that requires us to provide apparel for the day in such form that we can manage it without relying on the porter or the expressman. It has always seemed to me that the polite porters who swarm about English railway stations were, in the last analysis, responsible for the abominable coldness of the trains; for without the porter’s assistance the traveler could not manage his ulster and his rug, and would be unable to regard a railway journey as akin to a drive in an open carriage. Our trains are overheated, and we remove superfluous outer garments when we travel; English trains are really not heated at all, and the traveler must dress as he would dress on board ship.

Taking into consideration all the differences, great, and small, it is hard to say with conviction that, the railway system of either country offers any marked advantage over the other in the comfort it affords the traveler. England is a land of short distances; and, speaking of the lines as a whole, they subordinate their freight business to their passenger business. In this country we unhesitatingly subordinate the passenger traffic. As a result, the English service offers many more shortdistance trains, which run with infinitely greater punctuality. But the long-distance traffic, — that is to say, the service between England and Scotland,— lacks many comfort-giving features to which we are accustomed. The traveler in the fall and winter months is likely to be chiefly concerned by the coldness of the trains, mentioned above. He is also expected to remain in one place throughout the journey; there is no library car at the front of the train, no observation smoker at the rear. In recent years an excellent dining-car service has been maintained on the best trains; but dining-cars are still somewhat of a specialty, rather than an essential feature of a through train. As an alternative there is the basket lunch, — a cold chicken, lettuce salad, bread, butter, and cheese, designed to be eaten from the lap. Personally, I am inclined to think that an American dining-car affords more nourishment and considerably more variety than does a basket lunch; but this is a moot point. The din ing-car at least gives the traveler a chance to move about, and to substitute oak and rattan for plush. The English dining-car, when found, is so thoroughly satisfactory that it may rest quite exempt from the criticism of a reasonably philosophic traveler.

The same is true of the British sleeping-car, which, like the diner, is a recent development, but is now always to be found on the Scotch night expresses. Each passenger has a narrow compartment to himself; there areno upper berths, and there is an individual washstand in the compartment. If the journey begins at bed-time and ends at getting-up time, the traveler will be thoroughly comfortable; but if he is bound to a point not reached by his rising hour,—Aberdeen, for example, — he must needs make up his own berth and remain in his compartment; the cars are not convertible into day coaches, and he must be content with a basket breakfast, likewise eaten from the berth.

The upshot of a comparison between English and American railways is that each country has provided itself with the system that, broadly considered, answers its own needs the best, and that, when all circumstances are taken into account, neither has much to learn from the other. Certain great defects stand out in each; English railway financing and American railway carelessness are both deserving of censure. Yet these defects are quite explainable in their outgrowth from the physical conditions at hand, and they are not amenable to any off-hand remedy. Likewise, certain points of especial attractiveness, such as the English baggage system and the punctuality of trains, and the American luxury of through travel, have arisen from a complicated set of local circumstances, and could not be transplanted unless all the circumstances were transplanted as well. Most forcible of all is the impression gained by such a study that the essential belief, the very creed and doctrine of one country, as regards the economics of its railway working, may not be so much as discussed in another, where the same ultimate problem is gotten at in a wholly different way.