The United States Railroad Administration (USRA)
Nationalisation, to many Americans, sounds like something that only happened in socialist Europe. It may come as some surprise to many Americans that the United States nationalised its railroad system in 1917. It only lasted a few years, but it did change the face of American railroading.
On April 6, 1917, the United States entered World War I, and very soon the nation's railroads proved inadequate to the task of supplying the nation's war effort. The backdrop to this is that the railroads were experiencing one of the most difficult financial periods in their history; costs (especially wages) were rising, taxes had been raised, yet the rates the railroads could charge remained static. By late 1915 fully one-sixth of the railroad trackage in the country belonged to roads in receivership. The railroad unions, desiring shorter working days and better pay, threatened strike action in the second half of 1916, their demands for an eight hour working day being met through Government action, President Woodrow Wilson pushing a last minute bill through Congress forcing the railroads to comply. With skilled workers leaving the railroads to work in the growing armaments industry, and many more signing up to go to war, things were getting rather difficult for the cash-strapped railroads.
The railroads attempted to join forces to help the war effort, but it was difficult; for one thing, their cooperation was possibly in breach of the Sherman antitrust act, furthermore it was too tempting for financially hard-up railroads to cheat the system, and there was a huge lack of both funding and morale. Before long the Government stepped in and started regulating more and more aspects of the industry - mandatory car pooling, directing priorities of various cargoes. The efforts were largely a failure; Government departments sought priority for every single shipment made on their behalf, whether truly urgent or not, and huge amounts of cargo were dispatched and then could not be unloaded, forcing loaded cars to sit around waiting while elsewhere in the country, an estimated 158,000 car shortfall was reported. In December 1917, the labor unions began threatening strike action again, in search of a 40% pay raise.
On December 26, 1917, President Wilson used the Federal Possession and Control Act to nationalise the vast majority of US railroads. William McAdoo, Secretary of the Treasury, was appointed Director General of Railroads, with the Santa Fe's chairman Walker D Hines appointed Assistant Director General. The United States Railroad Administration officially took charge at noon on December 28.
Changes and New Equipment
Change happened swiftly. The railroads were divided into three Divisions; East, West and South. Duplicate passenger services were killed off, 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 locomotives were ordered at a cost of $380 million, all of new USRA Standard designs, which were up-to-date and standardised types, designed to be the best that could be produced to replace much outdated equipment. However, as with all designs approved by a committee and paid for by the Government, some of the designs were inefficient and the costs higher than they should have been.
On March 21, the Railroad Control Act became law; it 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 nationalisation. This act laid down in concrete that the nationalisation would be only a temporary thing; 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.
With the Armistice in November of 1918, McAdoo retired from his post, leaving Hines as the Director General.
In early 1920 the ICC (Interstate Commerce Commission)'s powers over the railroads were substantially increased, in readiness for the USRA's disbandment in March 1920. They were given powers to approve or reject railroad mergers, to set rates, to approve or reject abandonments of service, and much else. 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.
On March 1, the railroads were handed back to their original owners and the USRA disbanded.
It is estimated that the USRA and the nationalising of the American railroads between December 28, 1918, and March 1, 1920, cost the United States government $1.12 billion dollars, which was a huge amount of money back then. The USRA was certainly effective in getting things moving for the war effort, but at a steep price.
The locomotives the USRA built, the USRA Standard designs, were immensely successful, and after the war were copied in great numbers, becoming the closest thing the United States locomotive builders came to standard designs. Indeed, the last steam locomotive built for a Class 1 railroad was a USRA copy, an 0-8-0 for the Norfolk and Western. More controversy exists about their freightcar designs, but they were certainly an improvement on many outdated cars in service before the USRA period. It can certainly be said, however, that the influx of new and modern locomotives and cars 'for free' assisted in the revival of the railroads' hitherto shaky fortunes and set up, in the years between the Great War and the Great Depression, a semi 'Golden Age' for railroading.
The experiment was not repeated. In World War II, the private railroads handled the war effort admirably, though one could argue that some major East Coast railroads impoverished themselves in so doing, setting up the later railroad collapses in the region.