United States Railroad Administration - Background

Background

On April 4 1917, the United States entered World War I, and very soon the nation's railroads proved inadequate to the task of serving the nation's war efforts. There were several sources of the problem. Although the carriers had made massive investments in the first years of the twentieth century, there were still inadequacies in terminals, trackage, and rolling stock. Inflation struck the American economy, and when in 1906 Congress empowered the Interstate Commerce Commission (ICC) to set maximum shipping rates, the rail firms had difficulty securing revenue sufficient to keep pace with rising costs. The ICC did allow some increases in rates, however. Also, investors had overexpanded the nation's trackage, so by late 1915 fully one-sixth of the railroad trackage in the country belonged to roads in receivership (bankruptcy). The railroad unions (commonly called "brotherhoods"), desiring shorter working days and better pay, threatened strike action in the second half of 1916. To avert a strike, President Woodrow Wilson secured Congressional passage of the Adamson Act, which set the eight hour day as the industry standard. When the Supreme Court ruled the law constitutional, the carriers had no choice but to comply.

The railroads attempted to coordinate their efforts to support the war by creating the Railroads' War Board, but private action ran into anti-trust and other regulatory barriers. Observers noted, for example, that sometimes competitive practices prevailed that were not in the best interests of efficient mobilization. Also, government departments sought priority for shipment made on their behalf, and congestion in freight yards, terminals, and port facilities became staggering.

Finally, in December 1917 the ICC recommended federal control of the railroad industry to ensure efficient operation. The resulting efficiencies were to go beyond simply easing the congestion and expediting the flow of goods; they were to bring all parties—management, labor, investors, and shippers—together in a harmonious whole working on behalf of the national interest. President Wilson issued an order for nationalization on December 26, 1917.