From New International, Vol.2 No.4, pp.125-127.
Transcribed & marked up by Einde O’Callaghan for ETOL.
THE LABOR movement is anxiously expecting struggles in rubber, steel, autos, textiles and other key industries but apparently little attention is being paid to the railroads, employer of about forty percent of the organized workers in this country and in many respects the most important basic industry. Indications are, however, that in the not too distant future the latter will be the scene of gigantic class battles.
The situation in this branch of transportation is catastrophic – a classic example of what the general decay of capitalism carries in its wake. Last year about 42,000 miles of class I carriers, approximately one-sixth of the total, were in the hands of receivers or had applied for reorganization under the Federal bankruptcy act, and hardly a week has passed since without adding to this total.
Signs of decline were evident long before the crash of ’29. As carriers of passengers the roads reached their peak in 1920, about 1,270,000,000 persons travelling over them during that year, bringing in a revenue; of about $1,305,000,000. By 1929 the number of passengers had continuously fallen to 786,000,000 and income from this source to $876,000,000; by 1933 the number of travellers had been further reduced to 435,000,000 and passenger income to $330,000,000. The peak year for freight carried was 1926, the downward trend being shown by the following figures: 1926: 2,627,000,000 tons, income $4,906,000,000; 1929: 2,584,000,000 tons, income $4,899,000,000; 1933: 1,322,000,000 tons, income $2,529,000,000.  The reason for the decline, which is all the more significant in that it occurred during the greatest industrial boom in the nation’s history, is to be found chiefly in the competition of buses, trucks, oil pipe lines, and in the substitution of hydro-electric power for coal.
Control, of course, is in the hands of finance capital, so that the general chaos is accentuated by “high-finance” swindlings. Listen for a moment to the testimony, backed by sources, given by the liberal historian, Dr. Charles A. Beard, to the Senate Interstate Commerce Committee: “... the depression tightened the grip of the bankers on the railroads of the country” ... “the bankers are deep in every big railroad receivership and bankruptcy of the present day”; on the protective committees which have seized the reigns of power “you will find the names of partners, close friends and financial allies of J.P. Morgan & Company, Kuhn, Loeb & Company, J.&W. Seligman & Company, Dillon, Read & Company, National City Bank, Bankers Trust Company, Chase National Bank, and the Guaranty Trust Company” ... “when they needed every dollar of their money to get through the storm of the depression, when they could not afford a cent for speculation, for high finance, for stock market juggling or operations, or for anything Connected with Wall Street”, the carriers were engaged in “high finance”, and while “the Van Sweringens occupy a chair at the railway poker table, playing with the biggest chips in the game, behind them stands the Morgan Banking Syndicate with the power at any time to deprive the Van Sweringens of their seat at the table and to send them to the breadline”. (New York Times, March 21, 1935.)
In probably no individual industry is the non-social character of capitalist appropriation so vividly demonstrated. Despite the fall in earnings, interest on bonds was maintained, and according to A.F. Whitney, President of the Brotherhood of Railway Trainmen, who disclosed these figures under pressure of the discontent of the railroad workers, they were as follows: 1929, $511,000,000; 1930, $510,000,000; 1931, $518,000,000; 1932, $525,000,000; and in 1933, $533,000,000. (New York Times, March 18, 1934.)
These payments were maintained by borrowing from the Reconstruction Finance Corporation (for the years 1932 and 1933 deficits of $139,000,000 and $5,800,000, respectively, were incurred), by cutting wages (a 10% cut in hourly rates of pay went into effect in February 1932), and by eating into the basic capital of the industry.
Yearly annual capital expenditures, which ranged from $676,000,000 to $1,000,000,000 for the years 1923 to 1929, inclusive, dropped to $167,000,000 for 1932 and $104,000,000 for 1933. According to a statement of the Association of American Railroads on February 28 of this year 285,256 freight cars, 15.2% of the number on line, are in “disrepair”, and 10,419 locomotives, 22.3% of the number on line are “in need of classified repairs” (New York Times, February 28, 1936). The Federal coordinator, J.B. Eastman, being a little more blunt, estimated a short time ago that about 11,000 locomotives are fit only for the scrap heap. The Interstate Commerce Commission commented on March 30 as follows:
“The railroads today have available a considerably smaller supply of serviceable freight-carrying equipment and of motive power than they had in 1922 when the situation was notoriously bad. The continuing undermaintenance of equipment is so serious that its early correction will probably be necessary even under the present volume of traffic. The record is less definite as to the extent of undermaintenance of way and structures, but undoubtedly it, too, is considerable.” (New York Times, March 31, 1935.)
It would indeed be surprising if, in face of these conditions, a series of major railroad accidents did not occur, and it is difficult to avoid the suspicion that news of many accidents is being suppressed. The callous disregard of the money bags for anything but their own profits is vividly illustrated by the further report of Dr. Beard’s testimony:
“... Mr. Beard said that evidence in a St. Louis court two weeks ago disclosed that the St. Louis-San Francisco began to close down its repair shops and lay off men on instructions from the bankers in New York that expenses must be cut to the bone so that the stock would show a profit, while at the same time the president of the road sent pleading letters to New York protesting that reduction in operating expense was not consistent with safety ... Matters finally got to a point where as many as twenty-five broken rails in a day were found on the road.” (New York Times, March 21, 1935.)
If the bankers, throwing the bulk of the losses on to the smaller investors, were able to maintain their share of the profits by sucking the juice out of the roads, the workers bore the full brunt of the catastrophic conditions. The total number of employees, which had declined from 1,821,804 in 1926 to 1,694,042 in 1929, further declined to 990,839 in 1933, i.e., over 41% of those working in 1929 were unemployed. The average annual income of employees dropped from $1,744 in 1929 to $1,445 in 1933, a cut of about 17%. For wage workers the reduction was 21%, the average of $1,646 in 1929 falling to $1,300 in 1932. According to the president of the Brotherhood of Trainmen, A.F. Whitney,
“... railway employees of long service have been turned out to accept charity or starve; hundreds of thousands have gone on part time ... track and roadway section men received as little as 25¢ an hour and worked only three days in February. From this weekly wage of six dollars the management deducted 60¢ under the 10% arrangement ... On the Atlantic Coastline section men are paid $1.70 a day ... On the New York Central section men receive a basic wage of 43¢ an hour and are working as little as ten days a month ... This gives them $8.60 a week from which 10% is deducted, leaving $7.74 a week in a territory where the PWA minimum is $15 ... The Florida East Coast pays a basic wage of 20¢ an hour to section men ... The Illinois Central pays section men as little as 25¢ an hour, works them as little as two days a week, enabling them to make $4.00 a week ... For the year 1932 there were 140,000 railway employees whose earnings were approximately $50 a month or less ... This number embraces about 13% of all railway employees. Approximately 266,000 railway employees, over 25% of the total number, earned $75 a month or less. There were over 434,000 employees, 42% of the total, who earned less than $100 a month. The railway employees who earned $125 a month or less numbered 749,000, and this group embraced about 72% of all railway employees.” (NY Times, March 18, 1934.)
Capitalism can maintain itself only by unloading the burdens of the crisis on to the backs of the workers. This, the general law of capitalist decay, applies with a vengeance to the railroads. The influx of new capital is an absolute and immediate necessity.
The limits which can be bled from the fixed capital have been reached, the equipment of the roads must be restored, and, to meet competition, radical changes must be made in the design of passenger and freight equipment and new types of motive power must be developed. Debts must be paid. According to the Interstate Commerce Commission the roads
“... will be faced with maturing funded debts aggregating $380,760,000 in 1935 and $434,975,000 in 1936, including $204,307,000 in loans from the Reconstruction Finance Corporation which will become due in 1935 and 1936”. (New York Times, March 31, 1935)
Based on the 1931 earnings the commission had estimated previously that “... maturities of funds and equipment obligations in the years 1932-35 inclusive ... would average about $263,540,000 annually”, so that from some source or other the roads must raise about $150,000,000 more per year for the next two years than was earned in 1931.
However, no one has yet discovered a method for enticing capital into an enterprise unless the basis for a profit exists or appears to exist. Somewhere, somehow, an increase in income to justify the investment of new capital must be found.
As a palliative, a partial increase in rates was recently permitted but, due to competition, it was felt that this might even lower the roads’ total income, or, as expressed by one of the Interstate Commerce Commissioners, Porter,
“If the struggle between the railroads and other forms of transportation is to become more intense ... then the railroads had better fortify themselves by a reduction in freight rates instead of an increase.” (New York Times, March 31, 1935)
Overhead expenses have already been cut to the bone so that practically no saving is possible from such items as fuel, depreciation, taxes, insurance, etc.
There still remains a source: the wages of the workers. Taking 1933 as a basis, and all indications are that 1935 will not find the roads in a better condition, the railroad income was distributed as follows: wages and salaries, $1,424,000,000 or 43.2%; fuel, taxes, insurance, depreciation, etc., $1,237,000,000 or 41.5%; and “net operating income” (available for interest, dividends and maturing debts), $477,000,000 or 15.3%. The net operating income for that year was based, among other things, on a 10% cut in the 1929 hourly rates of pay. To raise the additionally required $150,000,000 it will be necessary to effect another cut of over 10% and, since the number of employees has decreased since 1933, 15% additional would be close to the correct figure. Since, on April 1 of this year, the 1929 base pay was restored, but with the agreement that by May 1 a reduction could again be “negotiated” for, all indications are that the bookkeeping of the capitalists will dictate to them the necessity, this time, of reducing the base pay of 1929 not only by 10% but by not less than 25%.
This approximate calculation was recently confirmed by P.H. Joyce, president of the Chicago Great Western Railroad:
“... if railway labor would take a 25% reduction in wages, 15% of the saving would be used to employ more men and the remaining 10% retained by the management.” (New York Times, March 19, 1935.)
(How much Joyce’s promises are worth can be seen by the fact that when the 10% cut of January 1932 was introduced, it was also promised that more men would be put to work whereas actually the number declined from 1,282,825 in 1931 to 1,052,285 in 1932 and 990,839 in 1933.)
It should therefore be made clear to the railroad workers that the 10% cut which will be asked for after May 1 is only a beginning; the capitalists cannot and will not stop at this.
That the whole logic of the situation must evoke large class battles can hardly be doubted. It was due mainly to the unrest in the workers’ ranks last year (strikes occurred on several roads) that the conservative leadership of the railroad Brotherhoods was forced to insist on the restoration of the cut which was so recently completed.
Unfortunately the condition of the workers’ organizations is not the best that could be desired. The Brotherhoods and other railroad unions are divided into 21 separate craft organizations, controlled by as corrupt and conservative a bureaucracy as is to be found anywhere; a group which feels itself so far removed from the control of the ranks that it, literally speaking, dared to applaud when the wage cut of 1932 went into effect. The unions have been decimated by unemployment, by the corruption of the bureaucracy which swindled or lost the savings of the membership in the building of “labor banks”, and by the fact that not all; the Brotherhoods insist on closed shops. To this must be added the seniority rulings which have tended to conservatize the older men, who have lost comparatively less time and pay, whereas the younger ones, finding themselves almost totally unemployed, fall out of the unions and are unable to exert what might otherwise be a radicalizing influence.
These obstacles are by no means insurmountable, except that an organized Left wing, the weapon with which to overcome them, does not exist in the Brotherhoods. It must be built. The coming situation offers the opportunity to rally the progressives, and it is precisely at this time, before any major engagements occur, that they must entrench themselves. Two problems must be immediately tackled: the consolidation of all the craft unions into one union in the industry, and the organization of the unorganized; propaganda and agitation in this direction should be immediately begun. Because of the social character of the industry, a class battle on the roads, particularly during this epoch, is a political struggle of high order. Moreover, a special significance must be attached to it. The employed railroaders constitute the last important mass basis of craft and conservative unionism, so that the assault on their living standards, by ending this conservatism, will profoundly affect the entire labor movement, giving it new color and tone, and, at the same time that it undermines another of the mass bases for reformism, will open up deeper reservoirs for the revolutionary movement in this country.
1. Unless otherwise stated, all figures are from official publications of the Federal Interstate Commerce Commission.
Last updated on 31.7.2006