INLAND WATERWAYS CORPORATION

The Inland Waterways Corporation was created by act of Congress in 1924 for the purpose of rehabilitating water commerce on certain of our interior streams. It operates the Federal Barge Line on the Mississippi, Missouri, and Warrior Rivers.

Its mission is to demonstrate the feasibility of carrying on river traffic to the mutual benefit of producers, shippers, and consumers. The policy of Congress with respect to inland water transportation was stated in the Transportation Act of 1920 to be "to promote, encourage, and develop water transportation, service, and facilities in connection with the commerce of the United States, and to foster and preserve in full vigor both rail and water transportation." At the time this declaration of policy was made other forms of transportation that have developed so astonishingly in recent years were not considered of more than local significance. It would seem that in the light of recent developments the Congress should restate its policy, with specific reference to rail, water, motor, air, and pipe-line transportation, respectively. All forms of transportation should be encouraged and developed, with the primary view of rendering public service at reasonably compensatory rates. At present some of these forms of transportation are destructively competitive, rather than cooperative. Federal regulation to curb cutthroat competition and to promote the public benefit by means of a "live and let live" policy would appear to be desirable.

In order that there might be no misunderstanding of the nature of the operations of the Inland Waterways Corporation in relation to private operation of water transportation on our rivers, I announced during the year that the corporation was governed by the following policy :

That the corporation was organized for the purpose of demonstrating through a Government-owned transportation system, the economy and feasibility of inland water transportation; that carrying on the operation of this system until such demonstration is completed and the business can be advantageously turned over to private capital and private enterprise is paramount; but that meanwhile every reasonable measure will be taken to promote and encourage private operation of common-carrier barge service on the rivers upon which the corporation operates.

During the recent depression the Inland Waterways Corporation, in common with other transportation agencies, suffered considerable losses due to a reduction in tonnage carried and to obsolescence of equipment. With a view to eliminating or reducing such losses, I gave a great deal of personal attention to the affairs of the corporation during the past fiscal year. I made a personal inspection of all of the facilities of the corporation along the streams on which it operates. I also had a business survey of the corporation made by an agency outside of the Government, and an audit of the fiscal affairs conducted by a firm of certified accountants.

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Revision of organization. My inspection of facilities disclosed that the corporation possesses a fine fleet of barges and towboats, with suitable terminals, and that it is rendering excellent service at reasonable rates. It seemed to me that the overhead was too high and the volume of freight too low. Accordingly I directed that the organization be revised with a view to reducing overhead, increasing the volume of freight moved, and increasing the revenue per ton-mile. It is with considerable satisfaction that I note that progress has been made toward these objectives. The annual budget of the corporation was reduced by approximately half a millon dollars and at the same time an increase in freight volume and in net earnings was effected. While in the calendar year 1934 the corporation had an operating deficit of $896,958.67, of which $625,998.78 was depreciation, the balance, $270,969.89, being charged against its reserve fund, there accrued from January 1 to June 30, 1935, a net increase in the reserve fund of the corporation of $475,110. The reserve fund on June 30 totaled $2,886,143. By September 20, 1935, this fund had grown to $3,314,317, which indicates, all things considered, a healthy business condition.

The survey of the corporation, which was directed by Dr. Marshall E. Dimock, associate professor of public administration of the University of Chicago, was of great assistance in improving the organization. The survey confirmed my own investigations and conclusions as to the economies of water transportation and the advantage to the public of continuing to make it available at reasonable rates.

Last January a simplified organization was formed. Later the bylaws were amended to provide for a board of managers in addition to the advisory board. These two boards are composed of persons interested in inland water transportation, who serve without compensation, and who render valuable advice and assistance in the management of the corporation.

Toward the close of the fiscal year a thorough and independent audit of the accounts of the corporation was completed by Haskins & Sells, certified public accountants. They found the accounting records had been kept in accordance with the rules prescribed by the Interstate Commerce Commission. The accountants checked balance sheets and related statements and verified items of cash and securities. They found that the valuation of property and equipment conformed to appraisals made by the American Appraisal Co.

River improvements. The operations of the corporation are dependent to a considerable extent on the navigability of the streams on which its vessels ply. The river improvements which have recently been made on the Mississippi and the Missouri have been of distinct advantage to the corporation as well as to the operators of private craft. The completion of a dependable channel made it possible last June to extend the operations on the Missouri River from St. Louis to Kansas City. Since that time regular and dependable service on this section of the Missouri River has been maintained by the corporation. I am confident that this service will redound to the great advantage of producers and shippers in the Missouri Valley.

The river improvement work now being rapidly advanced on the upper Mississippi and on the Missouri will make possible the

further extension of the service of the corporation. I am firmly of the opinion that the navigation improvements now being made will result in a notable increase in the utilization of our island waterway facilities, a long neglected natural resource, thus bringing the advantage of cheaper transportation to the vast interior of our continent, from the Rockies to the Appalachians, and from the Lakes to the Gulf. This should serve to bring industry to the midst of agriculture, where availability of raw materials combined with dependable water transportation should enhance substantially the prosperity of this region. Industrial development and agricultural prosperity are alike dependent upon ready accessibility to markets through cheap transportation. Modern barges and towboats of large capacity are again demonstrating the inherent economy of water haulage. Barge traffic, being limited to the streams, competes with railroads to only a limited extent, and the two might well supplement each other.

Respectfully,

(Sgd.) GEO. H. DERN, Secretary of War.

REPORT OF THE ASSISTANT SECRETARY OF WAR FOR THE FISCAL YEAR ENDED JUNE 30, 1935

MY DEAR MR. SECRETARY: This year marks the fifteenth anniversary of the post-World War amendment to the National Defense Act-the charter of our national security. The experience of the years previous to its enactment are embodied in the comprehensive provisions of the act. It gives legislative expression for the first time to the fundamental truth that plans for the mobilization of the material resources of the country must be coordinate with plans providing for manpower. Section 5a of the act places on my office the responsibility for supervising the procurement of all military supplies, and other business of the War Department pertaining thereto; and for the assuring of adequate provision for the mobilization of matériel and industrial organizations essential to war-time needs.

The period since the enactment of this measure has been of such length as to justify the expectation that real progress should have been made in developing an organization to perform the allotted tasks; and in formulating plans, at least workable, although not complete, for an orderly and rapid production of supplies in case of war. It is now possible for me to take stock of what has been accomplished. My review of the work done convinces me that satisfactory progress has been made along lines which should guarantee to the country that our industrial war effort will furnish the necessary military supplies promptly and with a minimum of confusion. While it cannot be expected that the plans will prove perfect in every respect, I do feel that they constitute a carefully thought-out procedure for bringing to bear timely in a national emergency the vast force of our great industrial machine. We have reached the point where increased personnel must be assigned to the task in order to realize on the results already accomplished.

During the late period of economic depression some opportunity has been afforded for checking our plans for the procurement of supplies. In my previous report to you I discussed the satisfactory working of these plans during the mobilization of the Civilian Conservation Corps and the subsequent supply of its units in their work camps. Especially during this past year the War Department and certain other agencies of the Government have been afforded opportunity to check the progress made in preparing the country industrially for war and in improving the methods of procuring military supplies. During this period the findings of the War Policies Commission and the War Department's plan for the mobilization of industry have been under the careful scrutiny of committees of Congress, particularly the Nye Committee. These documents were also studied by a special committee, of which Mr. Baruch was chairman, appointed by the President to make recommendations toward insuring the elimination of profits due to war. It has been a year in which unusual thought has been focused on the industrial phase of national defense.