The United States Railroad Administration (USRA) was the name of the nationalized railroad system of the United States between December 28, 1917, and March 1st, 1920. It was possibly the largest American experiment with nationalization, and was undertaken against a background of war emergency.
On April 6th, 1917, the United States entered World War I, and very soon the nation's railroads proved inadequate to the task of serving the war effort. There were several sources of the problem. Although the carriers had made massive investments in the first years of the 20th century, there remained 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 work 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[who?] 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.:3
Finally, in December 1917 the ICC recommended federal control of the railroad industry to ensure efficient operation. The takeover measures 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.
Change happened swiftly. The railroads were organized into three divisions: East, West, and South. Duplicate passenger services were eliminated, while costly and employee-heavy sleeping car services were cut back and extra fares applied to discourage their use. Uniform passenger ticketing was instituted, and competing services on different former railroads were cut back. Terminals, facilities, and shops were shared.
Over 100,000 railroad cars and 1,930 steam locomotives were ordered at a cost of $380 million, all of new USRA standard designs, which were up-to-date and standardized types, designed to be the best that could be produced to replace outdated equipment.
Before the new USRA standard locomotive types were built and released, locomotives that builders had on hand were issued to various railroads. 2-8-0 "Consolidation" locomotives built by the Baldwin Locomotive Works for transport and use in France were made available. Then 2-10-0 "Decapod" locomotives built for Imperial Russia by both ALCO and Baldwin, but stranded in the US by the Russian Revolution of 1917, were also made available to the railroads. The USRA leased these locomotives.
On March 21, 1918, the Railway Administration Act became law, and Wilson's 1917 nationalization order was affirmed. Wilson appointed his son-in-law, Secretary of the Treasury William Gibbs McAdoo, as Director General of the newly formed USRA.:12
The law guaranteed the return of the railroads to their former owners within 21 months of a peace treaty, and guaranteed that their properties would be handed back in at least as good a condition as when they were taken over. It also guaranteed compensation for the use of their assets at the average operational income of the railroads in the three years previous to nationalization. This act laid down in concrete that the nationalization would be only a temporary measure; before, it was not defined as necessarily so.
Both wages and rates for both passenger and freight traffic were raised by the USRA during 1918, wages being increased disproportionately for the lower-paid employees, which proved unpopular among more senior ones.
There was support among labor unions for continuing the nationalization of the railroads after the war. However, this position was not supported by Wilson nor the public generally. Because the United States was not a party to the Treaty of Versailles ending the war in 1919, which would have been the legal basis for returning the railroads to private ownership under the Railway Administration Act, legislation was drafted to effect the return.
Congress passed the Esch-Cummins Act (Railroad Transportation Act) in February 1920, which substantially increased the ICC's powers over the railroads, and the USRA's authority ended on March 1, 1920. The ICC was given powers to approve or reject railroad mergers, to set rates, to approve or reject abandonments of service, and additional oversight responsibilities. The government also made financial guarantees to the railroads after control was handed back to them, to ensure their financial survival after the restoration of control.
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