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THE MORGAN COLLECTION Metsu was one of the most distinguished painters of the Dutch school, and the above picture is by many considered one of his masterpieces. He was born in 1630 and died at the age of thirty-seven.

“He painted chiefly scenes from the upper classes of society," says a critic, “yet he took pleasure in representing market scenes, huntsmen, cook-maids, and the like. In refinement of drawing and picturesque composition no painter of small subjects equaled him." The following description of the picture is from the Museum's catalogue : “At the right a young mother wearing a white satin dress and red jacket trimmed with white fur holds in her arms a baby in swaddling-clothes. Behind her stands the father, in a brown doublet with slashed sleeves. He holds his hat in his hand, greeting a lady who enters the room at the left, followed by a maid carrying a chair and a foot-warmer. A cradle is in the center of the picture, and behind it sits an old woman. In the background is a chimney-piece ; at the right is a table covered with a bright red and blue Ispahan rug, on which are silver vessels. Beyond is a gilt four-poster bed with dark-green hangings.” The picture is on canvas and is signed G. Metsu, 1661. See editorial comment

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JAMES E. GREGG, THE NEW PRINCIPAL OF This picture shows the tank “Britannia," at Camp Upton, burrowing in and over a trench. Three

HAMPTON INSTITUTE quarters of the tank is in midair, but still it never wavers, steadily overcoming the obstacles For a sketch of Mr. Gregg's career and achievements and an outbefore it. This tank weighs thirty-six tons, and is armed with six Lewis machine guns. It is making line of the problem before him see page 8 of The Outlook for an exhibition tour of the United States

January 2, 1918



À GERMAN SUBMARINE CREW SURRENDERING TO AN AMERICAN DESTROYER One of the most dramatic scenes of the war since America entered it occurred on November 24 last, when a German submarine was sunk by the American destroyers Fanning and Nicholson. After two depth bombs had been dropped over the place where the submarine had submerged, it rose to the surface and its crew surrendered. The submarine soon after sank. Four officers and thirty-five members of the crew were taken prisoners. The Fanning was commanded by Lieutenant A. S. Carpender

and the Nicholson by Lieutenant G. H. Fort. The submarine was first sighted by Coxswain David I). Loomis


A NEW STATUE OF ABRAHAM LINCOLN, BY ANDREW O'CONNOR This statue, which has been on exhibition in New York City, is destined for the Capitol grounds of Springfield, Illinois. Those who have followed the discussion over the merits of the Barnard statue of Lincoln, as well as all admirers of the Great Emancipator, will be interested in Mr. O'Connor's conception of his subject. "Whatever I know or have learned,” he says, " is in this work.” Mr. O'Connor was a pupil of Daniel C. French. Of late years he has lived in France. Among his many works are a statue of General Lew Wallace, at Washington ; " Adam and Eve,” Corcoran Gallery, Washington ; “ Justice'," Essex County Court-House, Newark, N. J.; Ornamental Doors, Luxembourg Museum, Paris; General Lawton, Indianapolis ; Statuary at the Main Entrance, Custom-House, New York

City; The Vanderbilt Memorial, St. Bartholomew's Church, New York City ; “Nehemiah,” Museum of Budapest

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system for the arms, another for the legs, and a third for the whom the obvious advantages of quick movement and conveni-
lungs, throat, and stomach to realize how defective the service ent terminals were kept constantly before shippers.
rendered by a number of un-coordinated railways must be, and Meantime the cost of operation was increasing. Wages, coal,
what a service the President has rendered to the country in steel, oil, cars, engines, and everything else required in the run
putting these railways under the direction of a single head. But ning of a railway advanced rapidly. The Inter-State Commerce
the analogy between the circulatory system of the body and our Commission grudgingly and tardily allowed a slight increase in
railway systems as it has been fails in another respect. Through freight rates, but it was not commensurate with the increase in
the arteries and veins the blood cells move as they are required expenses. Net earnings commenced to fall off, the credit of the
without relation to their identity. There is, so to speak, no railways became impaired, the capital required to buy new
change of cars or motive power. The blushing woman and the equipment, improve terminals, and build extensions could not
wounded man do not have to wait until some particular artery be had, and our transportation facilities ceased to grow, while
is cleared for the passage of a special sort of cell that travels the business of the country was expanding rapidly.
only on a single route.

This was the situation when the war broke out in 1914. The
There are different species of cells, it is true, just as there are impulse that the European demand soon gave to American
freight and passenger cars. Each species has a different function activity created a traffic that taxed the carrying capacity of the
to perform, but when they are needed the cells best adapted for American railways to the limit by the end of 1916.
the work that is to be done are rushed along the shortest route Their gross earnings were increasing, but expenses increased
to the point at which they are required. In other words, there more rapidly; the net result was that they began to lose, the
is no exclusive designation of rolling stock and equipment for movement of traffic became difficult, great congestion resulted,
use on particular lines. They are all public highways over which and when we entered the war and undertook to create, equip, and
any traffic may be moved by the shortest or most convenient move an army of one or two million men overseas, to build many
route, subject only to such regulation as may be necessary to new naval vessels and an enormous merchant marine, our trans-
avoid collision or congestion. With our railways as they were portation system broke down. The rest of the story is current
this was made impossible by self-interest and competition. history vividly impressed upon the public mind by the distress
Transformed as they may be, under the authority given by the that has been caused by the coal shortage, which is largely, if
President, it is entirely possible that the railway tracks of the not entirely, due to defective transportation.
United States may become the roadways of the Nation, over It is not to the discredit of those who have hitherto managed
which its traffic may be moved by the shortest or easiest routes, the American railways that this condition should have come to
irrespective of their previous ownership or affiliation. Just here exist. They were each of them heads of parts of an unco.
it is worth remarking that such a change would be a reversion ordinated system. They were charged with a dual responsibility,
to first principles.

They had one obligation to the public and another to the owners From the earliest time the construction and maintenance of of the properties they managed. To make money for their share roads that were open to all has been one of the functions of holders and provide the service that was demanded seemed to government.

be impossible. It is, for instance, generally admitted that, taken About one hundred years ago Congress committed itself to in its entirety, the passenger traffic on our American railways the policy of building post roads over which the stage-coaches does not pay. It must nevertheless be maintained, and when a and prairie schooners of those days should carry the traffic of railway president found it necessary to take off passenger trains the Nation. Two of these roads over the Alleghanies were com or to impose a freight embargo he was literally between the pleted and are in use to-day. Many more were planned, and devil and the deep sea. Had he controlled another and a parallel would no doubt have been built if the railways had not super road, he could have sent the through freight by that route, but seded them. Of the first railways not a few were built by the under the system that prevailed he had no such option. The States, and more probably would have been so built but for the Railroads War Board that was brought in to being some months eagerness of private capital to embark in a business that seemed ago tried to mobilize the country's traffic on some such plan, to promise great profits.

but was not successful because every car-load of freight taken The same idea of providing a public highway open to all for from one road and given to another meant a decrease in the the transportation of freight and passengers obtained when the earnings of one property and an increase in the revenue of a various States undertook to dig the canals that were to connect competitor. our lakes and rivers with the sea, and provide the transportation As each member of the War Board was pledged to make as system of which De Witt Clinton dreamed. Through these much money as he could for the owners of his property, and as canals any boat might travel irrespective of its ownership or the the railway presidents who were not, on the Board had a similar rate of freight charged, and the only function of the States was

obligation, it was not to be expected that they would entirely to see that there was no impediment to the traffic or discrim- disregard it. It is, in fact, doubtful whether they had the legal ination in its treatment.

or moral right to do so.
In its essence the principle thus applied is identical with the To meet this emergency the President stepped in. Acting
one that is embodied in the doctrine for which we are now under the authority given him by Congress in the Act approved
fighting, viz., “ the freedom of the seas,” by which is meant the August 29, 1916, whereby he“ is empowered in time of war to
right of unobstructed transportation for neutral commerce in take possession of and assume control of any system or systems
time of war and for all commerce when the world is at peace. of transportation," he has put the railways of the United States

That our insistence upon respect for this doctrine abroad under control of Mr. McĀdoo, who is directed to enter upon
should have made it possible for us to extend its application at negotiations with the several companies looking to agreements
home may be something more than a coincidence. In both cases for just and reasonable compensation for the use of their prop
the result will be to equalize opportunity and dispossess private erties on the basis of an annual guaranteed compensation
interest from the enjoyment of peculiar privileges. For years above accruing depreciation and the maintenance of their prop,
the Nation has been considering whether this dispossession erties equal to their average net incomes for the three-year
would be wise and just. The Inter-State Commerce Commis- period ending June 30,1917. The result of these negotiations
sion was formed, and for a time it was hoped that the control is to be reported to the President for such action as may be
it was empowered to exercise might correct the evils of which appropriate and lawful.
both the carriers and the public complained. The result was, The lines italicized are a quotation from the President's Mes.
however, disappointing. Both the authority and the policy of sage slightly paraphrased for brevity. They propose, it will be
the Commission were restrictive rather than constructive. noticed, a basis upon which owners of the roads may be com-

The Sherman Law, moreover, stood in the way and stopped pensated or upon which their properties may be leased, but the
all progress toward co-ordination by consolidation, combination,

President has no power to conclude a lease that shall involve or pooling. Competition by rate-cutting or rebates was pre the Government in any financial liability. In this regard the vented, but competition in service continued ; and the stronger proposed arrangement is subject to the confirmation of Conroads, which could afford it, succeeded in obtaining a larger gress before it can be made effective. This phase of the matter share of the traffic by the employment of solicitors, through is emphasized because there are some whe assume that the


felt are :

Miles Operated. 230,906

Year ended
June 30.

1917. 1916,




President has absolute anthority, and that the roads are already Mr. McAdoo has intimated that the bonds or debts that may leased upon the terms that he has suggested. This is not mature during the time that the Government controls the roads the case. The question will no doubt be actively debated in

will be taken care of, though the exact method by which this Congress, and up to this writing all that has been done is to put will be arranged is not as yet announced. For these details and the railways under the direction of Mr McAdoo.

a great many others we shall have to wait. Mr. Wilson's action has, however, been so universally ap The two larger questions about which most concern is now proved and his plans seem so fair that their adoption may be taken for granted.

1. Does the advance which has already occurred in the market Briefly

, he proposes that the United States Government shall prices of railway securities adequately reflect their changed lease the railways for an annual payment of $947,267,472. This status? sum is their average“ net operating income,” as reported to the

2. Will Government operation outlast the war and become Inter-State Commerce Commission for the three years ending permanent ? June 30, 1917.

An answer to the first question depends upon the reply that Here are the figures for each year

can be made to the second. Net operating

The end of the war is uncertain. It may come to-morrow. It $1,069,750,514

may not come for years. If, when peace is re-established, the rail. 257,544

1,043,839,822 way properties are to be handed back to their owners and we 256,213


are to revert to the conditions that obtained prior to the Presi

$2,841,802,415 dent's proclamation and for some years previously, then the Average of three years...


earnings now guaranteed do not materially increase the attractThe apparent decrease of mileage from 257,544 in 1916 to

iveness of railway investments, and they should be sold rather 230,906 in 1917 is due to the fact that some 26,000 miles of than bought at present prices. switching and terminal tracks were eliminated from the returns

If, on the other hand, Government operation is to be per of 1917 for the first time. This, however, changes only the manent, railway stocks and bonds will become in effect, though mileage figures and not the earnings.

not in fact, the obligations of the United States Government, * Net operating income” is what is left after operating ex and pass at once into the category of those investments whose penses and taxes have been deducted from gross earnings. It is market value is determined entirely by the interest they pay. out of net operating income that dividends and interest pay. This statement will explain why I believe that Government ments are made. The account for the year ended June 30, 1917, operation

of the railways has come to stay. It is manifestly to was as follows:

the interest of the public and the investors. The one will be Gross earnings......

$3,824,419,739 better served, the other will be better paid , and even if it were Operating expenses,


possible at the end of one or two years to unscramble the syn: Operating income...


thesized railway system that is now in process of construction, it Less taxes...


would not be politically practicable, for nearly every one would Net operating income....


oppose the disintegration. From the President's proclamation and the accompanying Inasmuch, therefore, as many railway bonds and stocks are statement it is clear that he intends that the railway properties still selling upon a basis that will provide every one but the shall be maintained in as good repair and as complete equipment very rich (whose incomes are heavily taxed) with a higher reas when they were taken over, and that the Government will turn than they could obtain from non-taxable Government bonds, stand any increase in taxation that may be imposed during the I conclude that the former will gradually advance to somewhere time that it may operate the roads, as the “net operating near the parity of " Governments” as the President's plan is income” is the balance left after deducting taxes, as well as the developed by Mr. McAdoo and approved by Congress. other costs of doing business, such as wages, fuel, upkeep, etc. But in making this concluding statement I would not be un

Out of the $947,267,472 which the railways will receive they derstood as encouraging speculation in railway stocks as it is will first pay the interest on their outstanding bonds, and any generally understood, that is, buying them on margin or with balance then remaining may be distributed as dividends on their borrowed money. Speculation of that sort is never justifiable stocks, but such dividends may not, seemingly, exceed the “reg. except for those who make a business of it, and they need ular dividends hitherto declared.” Any surplus remaining after

advice. the payment of such regular dividends will presumably pass into I feel, nevertheless, that the intelligent support of values is a the treasuries of the various corporations.

present duty for all those who have or can save money to invest, On June 30, 1915, the railways of the United States had an and for them the purchase of railway securities selected with aggregate funded debt of $12,133,064,357, and outstanding discrimination will, I believe, be profitable unless the war is to stock amounting to $8,994,894,721-a total of $21,127,959,078. continue indefinitely and bankrupt the United States as well as Some of these securities were, however, intercorporate issues.

the rest of the world. That is, they were held by one railway corporation to insure its con Such purchases should, however, be made only after consultrol of another. Therefore they are not all in the hands of invest tation with an expert. We employ a lawyer to look after our 09, and it is estimated that they represent an actual investment in legal affairs, and the average man, I fear, knows less of the road and equipment of about $17,000,000,000. The market value intricacies of corporate finance than he does of law. There are of the securities which have been issued against this investment some railway companies which will receive less under the Presihas not as yet been computed. At the prices current just before dent's plan than they would probably have earned as independthe President's announcement, it was probably much less than ently operated corporations. The intrinsic value of their securi$17,000,000,000, on which sum the Government would appear ties will not be increased, although their market value may be to have guaranteed the roads 5.57 per cent per annum.

This stabilized. Others will get more than they could have reasonably return, considering the hazard of the business and the enterprise expected to earn for themselves, but their right to the distriburequired in its establishment, is certainly not excessive.

tion of increased dividends will not be clear until Congress has This rate will not, however, apply

pro rata as to either in acted. For these and a great many other reasons, great circumvestment or mileage. The roads that have been well managed spection and the advice of a specialist are desirable in the selecin the past will receive their average net earnings for the last tion of investments. There is, moreover, no need for haste. three years, and those which have spent a larger percentage of

Nathan Rothschild is said to have remarked that one need their gross receipts in conducting the business will get their never hurry to the Stock Exchange," and it would be fatuous to average excess of gross

over expenses. To this extent all the assume that the President with all his power can settle over roads will be the heritors of their past, but the great advantage night a problem that has defied the statesmanship of American of the arrangement for the owners of the properties is that their public

men for twenty years or more. I believe that

Mr. Wilson return is guaranteed while the Government operates the roads, has acted wisely and that Congress will support him, but it is and for that period, at least, there is no uncertainty in regard to

not to be expected that he will be unopposed or that his the income they will receive.

opposers will fail to make themselves heard, at least for a time.


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