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Title: The Railroad Question
A historical and practical treatise on railroads, and
remedies for their abuses
Author: William Larrabee
Release Date: July 2, 2009 [EBook #29294]
Language: English
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The Railroad Question.
THE RAILROAD QUESTION
A HISTORICAL AND PRACTICAL TREATISE ON
RAILROADS, AND REMEDIES FOR THEIR ABUSES
BY
WILLIAM LARRABEE,
LATE GOVERNOR OF IOWA.
_Salus populi suprema lex._
NINTH EDITION.
CHICAGO:
THE SCHULTE PUBLISHING COMPANY.
1898.
Copyright, 1893,
BY
WILLIAM LARRABEE.
PREFACE.
The people of the United States are engaged in the solution of the
railroad problem. The main question to be determined is: Shall the
railroads be owned and operated as public or as private property? Shall
these great arteries of commerce be owned and controlled by a few
persons for their own private use and gain, or shall they be made
highways to be kept under strict government control and to be open for
the use of all for a fixed, equal and reasonable compensation?
In a new and sparsely settled country which is rich in natural resources
there may be no great danger in pursuing a _laissez-faire_ policy in
governmental affairs, but as the population of a commonwealth becomes
denser, the quickened strife for property and the growing complexity of
social and industrial interests make an extension of the functions of
the state absolutely necessary to secure protection to property and
freedom to the individual.
The American people have shown themselves capable of solving any
political question yet presented to them, and the author has no doubt
that with full information upon the subject they will find the proper
solution of the railroad problem. The masses have an honest purpose and
a keen sense of right and wrong. With them a question is not settled
until it is settled right.
It must be conceded that of all the great inventions of modern times
none has contributed as much to the prosperity and happiness of mankind
as the railroad.
Our age is under lasting obligations to Watt and Stephenson and many
other heroes of industry who have aided in bringing the railroad to its
present state of perfection. Their genius is the product of our
civilization, and their legacies should be shared by all the people to
the greatest extent possible. An earnest desire to aid in attaining this
end has prompted this contribution to the literature on the subject.
The author is not an entire novice in railroad affairs. He has had
experience as a shipper and as a railroad promoter, owner and
stockholder, and has even had thrust upon him for a short time the
responsibility of a director, president and manager of a railroad
company. He has, moreover, had every opportunity to familiarize himself
with the various phases of the subject during his more than twenty
years' connection with active legislation.
He came to the young State of Iowa before any railroad had reached the
Mississippi. Engaging early in manufacturing, he suffered all the
inconveniences of pioneer transportation, and his experience instilled
into him liberal opinions concerning railroads and their promoters. He
extended to them from the beginning all the assistance in his power,
making not only private donations to new roads, but advocating also
public aid upon the ground that railroads are public roads.
As a member of the Iowa Senate he introduced and fathered the bill for
the act enabling townships, incorporated towns and cities to vote a five
per cent. tax in aid of railroad construction. He favored always such
legislation as would most encourage the building of railroads, believing
that with an increase of competitive lines the common law and
competition could be relied upon to correct abuses and solve the rate
problem. He has since become convinced of the falsity of this doctrine,
and now realizes the truth of Stephenson's saying that where
combination is possible competition is impossible.
It is the object of this work to show that as long as the railroads are
permitted to be managed as private property and are used by their
managers for speculative purposes or other personal gain, or as long
even as they are used with regard only for the interest of stockholders,
they are not performing their proper functions; and that they will not
serve their real purpose until they become in fact what they are in
theory, highways to be controlled by the government as thoroughly and
effectually as the common road, the turnpike and the ferry, or the
post-office and the custom-house.
This book has been written at such odd hours as the author could snatch
from his time, which is largely occupied with other business. He is
under obligations to many of our ministers and consuls abroad for
statistics and other valuable information concerning foreign railroads,
as well as to a number of personal friends for other assistance,
consisting chiefly in rendering the railroad literature of Europe
accessible to him.
WILLIAM LARRABEE.
_Clermont, Iowa, May, 1893._
CONTENTS.
I. HISTORY OF TRANSPORTATION 17
II. THE HISTORY OF RAILROADS 46
III. HISTORY OF RAILROADS IN THE UNITED STATES 76
IV. MONOPOLY IN TRANSPORTATION 90
V. RAILROAD ABUSES 124
VI. STOCK AND BOND INFLATION 163
VII. COMBINATIONS 189
VIII. RAILROADS IN POLITICS 205
IX. RAILROAD LITERATURE 231
X. RAILROAD LITERATURE--_Continued_ 273
XI. RAILROADS AND RAILROAD LEGISLATION IN IOWA 319
XII. THE INTERSTATE COMMERCE ACT 349
XIII. THE RATE QUESTION 370
XIV. REMEDIES 389
APPENDIX--TABLES AND STATISTICS 459
LIST OF AUTHORS AND WORKS CONSULTED AND QUOTED
ACWORTH, W. M. The Railways of England
ADAMS, C. F., JR. Railroads, Their Origin and Problems
ADAMS, H. C. Public Debts
ADAMS, HENRY History of the United States
ATKINSON, EDWARD The Distribution of Products
BAGEHOT, WALTER The English Constitution
BAKER, C. W. Monopolies and the People
BEACH, CHARLES F., JR. On Private Corporations
BLACKSTONE, W. Commentaries on Laws of England
BOISTED, C. A. The Interference Theory of Government
BOLLES, ALBERT S. Bankers' Magazine
BONHAM, JOHN M. Railway Secrecy and Trusts
BRYCE, JAMES The American Commonwealth
BUCKLE, H. T. History of Civilization of England
CAREY, H. C. Principles of Social Science
" " Unity of Law
CARY, M. View of System of Pennsylvania Internal
Improvements.
CLOUD, D. C. Monopolies and the People
CLEWS, HENRY Twenty-eight Years in Wall Street
COOLEY, THOMAS M. Constitutional Limitations
CONGRESSIONAL RECORD.
COMPILATION OF ENGLISH LAWS UPON RAILWAYS.
DABNEY W. D. The Public Regulation of Railways
DILLON, SIDNEY North American Review
DORN, ALEXANDER Aufgaben der Eisenbahnpolitik
DRAPER, J. W. Intellectual Development of Europe
ENCYCLOPEDIA, AMERICAN.
ENCYCLOPEDIA BRITANNICA.
ENCYCLOPÄDIE (RÖLL'S) DES EISENBAHNWESENS, 1892.
FINDLAY, GEORGE Working and Management of English Railways.
FINK, ALBERT Cost of Railroad Transportation, etc.
FISHER, G. P. Outlines of Universal History
FISK, JOHN American Political Ideas
" " Critical Period of American History
FOREIGN COMMERCE OF AMERICAN REPUBLICS AND COLONIES.
GRAHAM, WM. Socialism Old and New
GIBBON, EDWARD Decline and Fall of the Roman Empire
GREEN, JOHN K. History of English People
GILPIN, WM. The Cosmopolitan Railway
GRINNELL, J. B. Men and Events of Forty Years
GUNTON, GEORGE Wealth and Progress
GUIZOT, M. History of Civilization
HABOUR, THEODOR Geschichte des Eisenbahnwesens
HADLEY, A. T. Railway Transportation
HALL'S LIFE OF PRINCE BISMARCK.
HUDSON, J. T. The Railways and the Republic
JEANS, J. S. Railway Problems
JERVIS, JOHN B. Railway Property
JEVONS, W. S. Methods of Social Reform
KENT, JAMES Commentaries on American Law
KIRKMAN, M. M. Railway Rates and Government Control and other
works.
LECKEY, W. E. H. England in Eighteenth Century
LIEBER, FRANCIS Political Ethics
" " Civil Liberty and Self-Government
" " Miscellaneous Essays
LODGE, H. C. Life of General Washington
MARTINEAU, HARRIET History of England
MCMASTER, J. B. History of People of United States
MACAULAY, T. B. History of England
MOTLEY, J. L. The Dutch Republic
" " The United Netherlands
PAINE, CHARLES The Elements of Railroading
PATTEN, J. H. Natural Resources of the United States
PEFFER, W. A. The Farmer's Side
POOR'S RAILWAY MANUAL.
PORTER, HORACE North American Review
RAWLINSON, GEORGE Seven Great Monarchies
REDFIELD On Law of Railways
RECORDS OF CENTRAL IOWA TRAFFIC ASSOCIATION, 1886-1887.
RECORDS OF ASSOCIATION OF GENERAL FREIGHT AGENTS OF THE WEST.
RECORDS OF JOINT WESTERN CLASSIFICATION COMMITTEES.
REPORTS OF STATE BOARDS OF COMMISSIONERS.
REPORT OF HEPBURN COMMITTEE.
REPORTS OF UNITED STATES CENSUS.
REPORT OF WINDOM COMMITTEE.
REPORT OF BANKERS' ASSOCIATION, 1892.
REPORT OF CULLOM COMMITTEE.
ROEMER, JEAN Origin of English People, etc.
REUBEAUX, F. Der Weltverkehr und seine Mittel
RICHARDSON, D. N. A Girdle Round the Earth
ROGERS, JAMES E. THOROLD Economic Interpretation of History.
ROSCHER, WM. Political Economy
SCHREIBER Die Preussischen Eisenbahnen
SCHURZ, CARL Life of Henry Clay
SMITH, ADAM Wealth of Nations
SPELLING, T. CARL On Private Corporations
SPENCER, HERBERT Synthetic Philosophy
STERN, SIMON. Constitutional History and Political
Development of the United States.
STICKNEY, A. B. The Railroad Problem
STATISTIQUES DES CHEMINS DE FER DE L'EUROPE, 1882.
TAYLOR, HANNIS Origin and Growth of the English Constitution.
THE AMERICAN RAILWAY. Published by Charles Scribner's Sons.
VERSCHOYLE, REV. J. History of Ancient Civilization
VON WEBER, M. M. Privat-, Staats- und Reichs-Bahnen
" " " " Nationalität und Eisenbahn Politik
VON DER LEGEN, ALFRED Die Nordamerikanischen Eisenbahnen.
WALKER, ALDACE F. The Forum
WEEDEN, W. B. Economic and Social History of New England.
THE RAILROAD QUESTION.
CHAPTER I.
HISTORY of TRANSPORTATION.
While the prosperity of a country depends largely upon its
productiveness, the importance of proper facilities for the expeditious
transportation and ready exchange of its various products can scarcely
be overrated. The free circulation of commercial commodities is as
essential to the welfare of a people as is the unimpaired circulation of
the blood to the human organism.
The interest taken by man in the improvement of the roads over which he
must travel is one of the chief indications of civilization, and it
might even be said that the condition of the roads of a country shows
the degree of enlightenment which its people have reached. The trackless
though very fertile regions of Central Africa have for thousands of
years remained the seat of savages; but no nation that established a
system of public thoroughfares through its dominion ever failed to make
a distinguished figure in the theater of the world. There are some
authors who go even so far as to call the high roads of commerce the
pioneers of enlightenment and political eminence. It is true that as
roads and canals developed the commerce of Eastern Asia and Europe, the
attention of their people was turned to those objects which distinguish
cultured nations and lead to political consequence among the powers of
the world. The systems of roads and canals which we find among those
ancients who achieved an advanced state of civilization might well put
to shame the roads which disgraced not a few of the European states as
late as the eighteenth century.
Among the early nations of Asia of whose internal affairs we have any
historic knowledge are the Hindoos, the Assyrians and Babylonians, the
Phoenicians, the Persians and the Chinese.
The wealth of India was proverbial long before the Christian era. She
supplied Nineveh and Babylon, and later Greece and Rome, with steel,
zinc, pearls, precious stones, cotton, silk, sugar-cane, ivory, indigo,
pepper, cinnamon, incense and other commodities. If we accept the
testimony of the Vedas, the religious books of the ancient Hindoos, a
high degree of culture must have prevailed on the shores of the Ganges
more than three thousand years ago. Highways were constructed by the
state and connected the interior of the realm with the sea and the
countries to the northeast and northwest. For this purpose forests were
cleared, hills leveled, bridges built and tunnels dug. But the broad
statesmanship of the Hindoo did not pause here. To administer to the
convenience and comfort of the wayfaring public, and thus still more
encourage travel and the exchange of commodities, the state proceeded to
line these public roads with shade trees, to set out mile-stones, and to
establish stations provided with shady seats of repose, and wells at
which humane priests watered the thirsty beasts.
At intervals along these routes were also found commodious and
cleanly-kept inns to give shelter to the traveler at night. Buddha, the
great religious reformer of the Hindoos, commended the roads and
mountain passes of the country to the care of the pious, and the Greek
geographers speak with high praise of the excellence of the public
highways of Hindostan.
Among the Babylonians and Assyrians agriculture, trade and commerce
flourished at an almost equally remote period. The ancient inhabitants
of Mesopotamia cultivated the soil with the aid of dikes and canals, and
were experts in the manufacture of delicate fabrics, as linen, muslin
and silk. To them is attributed the invention, or at least the
perfection, of the cart, and the first use of domestic animals as beasts
of burden. Their cities had well-built and commodious streets, and the
roads which connected them with their dependencies aided to make them
the busy marts of Southeastern Asia.
During the later Babylonian Empire immense lakes were dug for retaining
the water of the Euphrates, whence a net-work of canals distributed it
over the plains to irrigate the land; and quays and breakwaters were
constructed along the Persian Gulf for the encouragement of commerce.
While highways among the Babylonians served the development of
agriculture and the exchange of industrial commodities, they were
constructed chiefly for strategic purposes by the more warlike
Assyrians, whose many wars made a system of good roads a necessity. The
Greek geographer Pausanias was shown a well-kept military road upon
which Memnon was said to have marched with an Assyrian army from Susa to
Troy to rescue King Priam. Traces of this road, called by the natives
"Itaki Atabeck," may be seen to this day.
The Phoenicians, who were the first of the great historic maritime
nations of antiquity, occupied the narrow strip of territory between the
mountains of Northern Palestine and the Mediterranean Sea. From their
situation they learned to rely upon the sea as their principal highway.
They transported to the islands of the Mediterranean as well as the
coast of Northern Africa and Southern Europe heavy cargoes consisting of
the product of their own skill and industry as well as of the manifold
exports of the east. They sailed even beyond the "Pillars of Hercules"
into the Atlantic Ocean and the North Sea. Through their hands "passed
the gold and pearls of the east and the purple of Tyre, slaves, ivory,
lion and panther skins from the interior of Africa, frankincense from
Arabia, the linen of Egypt, the pottery and fine wares of Greece, the
copper of Cyprus, the silver of Spain, tin from England, and iron from
Elba."
But while the Phoenicians for their commercial intercourse with other
nations relied chiefly upon the sea, the great highway of nature, they
neglected by no means road-building at home. They connected their great
cities, Sidon and Tyre, by a coast road, which they extended in time as
far as the Isthmus of Suez. They also established great commercial
routes by which their merchants penetrated the interior of Europe and
Asia. Caravan roads extended south to Arabia and east to Mesopotamia and
Armenia, penetrating the whole Orient as far as India, and even the
frontiers of China. The Phoenicians thus became the traders of
antiquity, Tyre being the link between the east and the west.
The Persian Empire, which under Darius stretched from east to west for a
distance of 3,000 miles and comprised no less than two million square
miles, with a population of seventy or eighty millions, had, with the
exception of the Romans, perhaps the best system of roads known to
ancient history. Indeed, it is doubtful whether without it such a vast
empire, more than half as large as modern Europe, could have been held
together. Each satrap, or prefect of a province, was obliged to make
regular reports to the king, who was also kept informed by spies of what
was taking place in every part of the empire. To aid the administration
of the government, postal communication for the exclusive use of the
king and his trusted servants connected the capital with the distant
provinces. This postal service was, four or five centuries later,
patterned after by the Romans. From Susa to Sardes led a royal road
along which were erected caravansaries at certain intervals. Over this
road, 1,700 miles long, the couriers of the king rode in six or seven
days. Under Darius the roads of the empire were surveyed and distances
marked by means of mile-stones, many of which are still found on the
road which led from Ecbatana to Babylon. These roads crossed the wildest
regions of that great monarchy. They connected the cities of Ionia with
Sardes in Lydia, with Babylon and with the royal city of Susa; they led
from Syria into Mesopotamia, from Ecbatana to Persepolis, from Armenia
into Southern Persia, and thence to Bactria and India.
The Chinese commenced road-building long before the Christian era. They
graded the roadway and then covered the whole with hewn blocks of stone,
carefully jointed and cemented together so that the entire surface
presented a perfectly smooth plane. Such roads, although very costly to
build, are almost indestructible by time. In China, as well as in
several other countries of Asia, the executive power has always charged
itself with both the construction and maintenance of roads and navigable
canals. In the instructions which are given to the governors of the
various provinces these objects, it is said, are constantly commanded to
them, and the judgment which the court forms of the conduct of each is
very much regulated by the attention which he appears to have paid to
this part of his instructions. This solicitude of the sovereign for the
internal thoroughfares is easily accounted for when it is considered
that his revenue arises almost entirely from a land-tax, or rent, which
rises and falls with the increase and decrease of the annual produce of
the land. The greatest interest of the sovereign, his revenue, is
therefore directly connected with the cultivation of the land, with the
extent of its produce and its value. But in order to render that produce
as great and as valuable as possible, it is necessary to procure for it
as extensive a market as possible, and, consequently, to establish the
freest, the easiest and the least expensive communication between all
the different parts of the country, which can be done only by means of
the best roads and the best navigable canals.
In Africa the Egyptians and Carthaginians are the only nations of
antiquity of which we have much historic knowledge. The former kept up a
very active commerce not only with the south, but also with the tribes
of Lydia on the west and with Palestine and the adjoining countries on
the east. To facilitate commerce, they constructed and maintained a
number of excellent highways leading in all directions. One of the most
important among these was the old royal road on the coast of the
Mediterranean Sea, or the "Road of the Philistines" of the Scriptures.
This road crossed the Isthmus of Suez and led through the land of the
Philistines and Samaria to Tyre and Sidon. Another road led, in a
northwesterly direction, from Rameses to Pelusium. This, however,
crossed marshes, lagoons and a whole system of canals, and was used only
by travelers without baggage, while the Pharaohs, accompanied by their
horses, chariots and troops, preferred the former road. A third road
led from Coptos, on the Nile, to Berenice, on the Red Sea. There were
between these two cities ten stations, about twenty-five miles apart
from each other, where travelers might rest with their camels each day,
after traveling all night, to avoid the heat. Still another road led
from the town of Babylon, opposite Memphis, along the east bank of the
Nile, into Nubia. Much of the commerce of Egypt in ancient times, as in
our day, was conducted on the Nile and its canals. The boatman and the
husbandman were, in fact, the founders of the gentle manners of the
people who flourished four thousand years ago in the blessed valley of
the Nile. There is one canal among the many which deserves special
mention. It flowed from the Bitter Lakes into the Red Sea near the city
of Arsinoe. It was first cut by Sesostris before the Trojan times, or,
according to other writers, by the son of Psammitichus, who only began
the work and then died. Darius I. set about to complete it, but gave up
the undertaking when it was nearly finished, influenced by the erroneous
opinion that the level of the Red Sea was higher than Egypt, and that if
the whole of the intervening isthmus were cut through, the country would
be overflowed by the sea. The Ptolemaic kings, however, did cut it
through and placed locks upon the canal.
Carthage was a Phoenician colony. The city was remarkable for its
situation. It was surrounded by a very fertile territory and had a
harbor deep enough for the anchorage of the largest vessels. Two long
piers reached out into the sea, forming a double harbor, the outer for
merchant ships and the inner for the navy. This city early became the
head of a North African empire, and her fleets plied in all navigable
waters known to antiquity. Her navy was the largest in the world, and
in the sea-fight with Regulus comprised three hundred and fifty vessels,
carrying one hundred and fifty thousand men. Though we have but meager
accounts of the internal affairs of Carthage, there can be no doubt that
much attention was given, both at home and in the colonies, to the
construction of highways, which were distinguished for their solidity.
It is said that the Romans learned from the Carthaginians the art of
paving roads.
European history began in Greece, the civilization of whose people
passed to the Romans and from them to the other Aryan nations which have
played an important role in the great historical drama of modern times.
The physical features of the Balkan Peninsula were an important factor
in the formation of the character of its inhabitants. The coast has a
large number of well-protected bays, most of which form good harbors.
Navigation and commerce were greatly stimulated in a country thus
favored by Nature. Nearly all the principal cities of Hellas could be
reached by ships, and the need of internal thoroughfares was but little
felt. Nevertheless, public highways connected all of the larger towns
with the national sanctuaries and oracles, as Olympia, the Isthmus,
Delphi and Dodona. Athens, after the Persian wars the metropolis of
Greece, was by the so-called Long Walls connected with the Piræus, its
harbor. This highway, protected by high walls built two hundred yards
apart, was over four miles long, and enabled the Athenians, as long as
they held the command of the sea, to bring supplies to their city, even
when it was surrounded by an enemy on the land.
Rome is the connecting link between antiquity and mediævalism. The great
empire sprang from a single city, whose power and dominion grew until
it comprised every civilized nation living upon the three continents
then known. Under the emperors, the Roman empire extended from the
Atlantic to the Euphrates, a distance of more than three thousand miles,
and from the Danube and the English Channel to the cataracts of the Nile
and the Desert of Sahara. Its population was from eighty to one hundred
and twenty millions. The empire was covered with a net-work of excellent
roads, which stimulated, together with the safety and peace which
followed the civil wars, traffic and intercourse between the different
regions united under the imperial government. More than 50,000 miles of
solidly constructed highways connected the various provinces of this
vast realm. There was one great chain of communication of 4,080 Roman
miles in length from the Wall of Antoninus in the northwest to Rome, and
thence to Jerusalem, a southeastern point of the empire. There were
several thousand miles of road in Italy alone. Rome's highways were
constructed for the purpose of facilitating military movements, but the
benefits which commerce derived from them cannot easily be
overestimated. These military roads were usually laid out in straight
lines from one station to another. Natural obstacles were frequently
passed by means of very extensive works, as excavations, bridges, and,
in some instances, long tunnels. The resources of the Roman Empire were
almost inexhaustible, and no public expenditures were larger than those
made on account of the construction of new roads. The fact that many of
these roads have borne the traffic of almost two thousand years without
material injury is abundant proof of the unsurpassed solidity of their
construction. The Roman engineers always secured a firm bottom, which
was done, when necessary, by ramming the ground with small stones, or
fragments of brick. Upon this foundation was placed a pavement of large
stones, which were firmly set in cement. These stones were sometimes
square, but more frequently irregular. They were, however, always
accurately fitted to each other. Many varieties of stone were used, but
the preference was given to basalt. Where large blocks could not be
conveniently obtained, small stones of hard quality were sometimes
cemented together with lime, forming a kind of concrete, of which masses
extending to a depth of several feet are still in existence. The
strength of the pavements is illustrated by the fact that the substrata
of some have been so completely washed away by water, without disturbing
the surface, that a man may creep under the road from side to side while
carriages pass over the pavement as over a bridge. The roads were
generally raised above the ordinary surface of the ground. They
frequently had two wagon-tracks, which were separated by a raised
foot-path in the center, and blocks of stone at intervals, to enable
travelers to mount on horseback. Furthermore, each mile was marked by a
numbered post, the distance being counted from the gate of the wall of
Servius. The mile-post was at first a roughly hewn stone, which in time
was exchanged for a monument, especially in the vicinity of Rome and
other large cities. The most celebrated road of Italy, which has always
excited the admiration of the student of antiquity, was the Via Appia,
the remains of which are still an object of wonder. It was first built
from Rome to Capua by Appius Claudius Cæcus in the fourth century before
Christ, and was afterwards continued as far as Brundisium. It was broad
enough for two carriages to pass each other, and was built of solid
stone. The stones were hewn sharp and smooth, and their corners fitted
into one another without the aid of any connecting material, so that,
according to Procopius, the whole appeared to be one natural stone. Each
side of the street had a high border for foot-passengers, on which were
also placed alternately seats and mile-stones. In spite of its age and
heavy traffic parts of this road are still in a good state of
preservation. After the completion of the Via Appia similar roads were
constructed, so that under the emperors seven great highways started
from Rome, viz.: the Via Appia and Latina to the south; two, Valeria and
Salaria, to the Adriatic; two, Cassia and Aurelia, to the northwest; and
the Via Æmilia, serving for both banks of the Po.
Nor were the provinces by any means neglected. During the last Punic war
a paved road was constructed from Spain through Gaul to the Alps, and
similar roads were afterwards built in every part of Spain and Gaul,
through Illyricum, Macedonia and Thrace, to Constantinople, and along
the Danube to its mouths on the Black Sea. So, likewise, were the
islands of Sardinia, Corsica, Sicily and Great Britain crossed by them.
It has justly been said that the roads of the Roman Empire, whose strong
net-work enlaced the known world, were the architectural glory of its
people. These military roads caused in the various parts of the empire a
wonderful social and commercial revolution. They made it possible for
civilization to penetrate into the most remote retreats and to conquer
their inhabitants more completely than could Cæsar at the head of his
legions.
The Romans also had an efficient postal service, which was first
instituted by Augustus and greatly improved by Hadrian. The former, as
Gibbon states in his "Decline and Fall of the Roman Empire," placed
upon all roads leading away from the golden milestone of the Forum, at
short distances, relays of young men to serve as couriers, and later
provided vehicles to hurry information from the provinces. These posts
facilitated communication through all parts of the empire, and while
they were originally established in the interest of the government, they
proved serviceable to individuals as well, for there is no doubt, that,
together with the official dispatches, every courier carried private
letters also.
The expenses of the post were largely defrayed by the cities through
which it passed, these cities being obliged to provide the stations
established within their territories with the necessary stores. At the
principal stations were found inns, where the proprietors were held
responsible for injuries suffered by travelers while in their houses.
The communication of the Roman Empire was scarcely less free and open by
sea than it was by land. Italy has by nature few safe harbors, but the
energy and industry of the Romans corrected the deficiencies of nature
by the construction of several artificial ports.
After the downfall of the Roman Empire its roads were either destroyed
by the people through whose territories they led or by the conquerors,
to render more difficult the approach of an enemy.
Civilization and commerce greatly suffered through the downfall of Rome,
and did not again revive until after the struggles of the Northern
Christian races with the Southern and Eastern nations, which had become
Mohammedan. The sixth and seventh centuries were the darkest in the
history of Europe. Charlemagne, toward the close of the eighth century,
caused many of the old Roman roads to be repaired and new ones to be
constructed. He, as well as several of his immediate successors, made
use of mounted messengers to send imperial mandates from one part of the
realm to the other. The rulers of the succeeding centuries did not
profit, however, by this example, and the roads of the empire again fell
into decay. Moreover, the public safety was greatly impaired by robbers
and feudal knights, whose depredations were so heavy a tax upon commerce
as to greatly discourage it. Trade under these circumstances would have
been entirely destroyed, had it not been for the merchants' unions which
were formed by the larger cities for the protection of their interests.
These organizations maintained the most important thoroughfares, and
even furnished armed escorts to wayfaring merchants. Commerce thus
flourished in, and commercial relations were kept up among, the cities
immediate between Venice and Genoa, as well as the cities on the Rhine
and Danube. Florence, Verona, Milan, Strasbourg, Mayence, Augsburg, Ulm,
Ratisbon, Vienna and Nuremberg were flourishing marts, and through them
flowed the currents of trade between the north and the south. Out of
these commercial unions grew in time the Hanseatic League, which from
the thirteenth to the fifteenth century controlled the commerce of the
northern part of Europe on both the water and the land. The object of
this league, which at the height of its power included eighty-five
cities, was to protect its members against the feudal lords on the land
and against pirates on the sea. Its power extended from Norway to
Belgium and from England to Russia. In all the principal towns on the
highways of commerce the flag of the Hansa floated over its counting
houses. Wherever its influence reached, its members controlled roads,
mines, agriculture and manufactures. It often dictated terms to kings,
and almost succeeded in monopolizing the trade of Europe north of
Italy.
It is characteristic of the social and political condition of this time
that the postal service was not carried on by the state, but was in the
hands of the various municipalities, convents and universities. During
the fifteenth and sixteenth centuries national power and national life
made themselves felt, and with a change in the political system the
system of communication and transportation changed also. Louis XI. of
France took the first step toward making a nation of the French when he
transferred the postal service from the cities and other feudal
authorities to the state. Two or three centuries later, France obtained
a national system of roads and canals. The idea was largely due to
Colbert, the minister of Louis XIV. It was, however, not executed in
detail until the middle of the last century. Many abuses grew up in
connection with it, but on the whole it was probably the soundest and
most efficient part of the French administration. A system of lines of
communication, radiating from Paris, was constructed by skilled
engineers, and placed under the supervision of men of talent, especially
trained for the purpose at the Ecôle des Fonts et Chaussées. The whole
system was further improved by Napoleon, and has served as a basis for
the present system of railroad supervision.
The first artificial waterway constructed in France was the Languedoc
Canal, connecting the Bay of Biscay with the Mediterranean. This
gigantic work, designed by Riquet, was commenced in 1666, and completed
in 1681. The canal is 148 miles long and its summit level is 600 feet
above the sea, the works along its line embracing over one hundred locks
and fifty aqueducts. A large number of canals have since been
constructed, and France has at present over 4,000 miles of artificial
waterways, or more than any other country of Europe.
Nowhere else was the same completeness of organization possible. The
regular mail service of Germany dates back to the year of 1516, when
Emperor Maximilian established a postal route between Brussels and
Vienna and made Francis Count of Taxis Imperial Postmaster-General. The
postal service of the empire greatly improved up to the time of the
Thirty Years' War, which completely demoralized it. After the war the
individual states and free cities, usurping imperial prerogatives,
established postal routes of their own and thereby crippled the national
service. The same war also did great damage to the public thoroughfares,
and the commercial and manufacturing interests of the German empire were
until the end of the eighteenth century in a deplorable condition.
Frederick the Great, recognizing the fact that the industrial paralysis
of Germany was owing chiefly to its defective means of communication,
commenced to construct turnpikes and canals in Prussia, and the minor
German princes one by one imitated his example, until the Napoleonic
wars again put an end to internal improvements. The good work was
resumed, however, after the downfall of Napoleon, and in 1830 Germany
was intercrossed by from three to four thousand miles of turnpike.
In the Netherlands canals were constructed as early as the twelfth
century. Being particularly well adapted to the flat country of Holland,
they were rapidly extended until they connected all the cities, towns
and villages of the country, and to a large extent took the place of
roads. The largest canal of Holland is the one which connects the city
of Amsterdam with the North Sea. It was constructed between the years
of 1819 and 1825 at an expense of more than four million dollars. The
city of Amsterdam owes to this canal its present commercial prosperity.
Public roads and the state postal service are of comparatively recent
origin in Great Britain. The first public postal route was established
in 1635, during the reign of Charles I. In 1678 a public stage-coach
route was established between Edinburgh and Glasgow. The distance is
only forty-four miles, but the roads were so bad that, though the coach
was drawn by six able horses, the journey took three days. It was
considered a great improvement when in 1750 it could be completed in
half the time originally required. In 1763 a mail-coach made only
monthly trips between London and Edinburgh, eight long days being
required for the journey, which to-day is made in less than twelve
hours. The number of stage passengers between these two capitals
averaged about twenty-five a month, and rose to fifty on extraordinary
occasions. In those days coaches were very heavy and without springs,
and travelers not unfrequently cut short their journeys for want of
conveniences.
Turnpikes in Great Britain do not even date as far back as
stage-coaches. It is true the first turnpike act was passed as early as
1653, but the system was not extensively adopted until a century later.
Previous to that time the roads of England, such as they were, were
maintained by parish and statute labor. In the latter half of the last
century, under improved methods of construction, turnpike roads
multiplied rapidly. Both roads and vehicles attained, previous to the
advent of the railroads, such a degree of perfection that the
stage-coach made the journey between London and Manchester, 178 miles,
in 19 hours; between London and Liverpool, 203 miles, in less than 21
hours; and between London and Holyhead, 261 miles, in less than 27
hours.
In spite of these improved facilities, the transportation of merchandise
continued to be very expensive. Goods had to be conveyed from town to
town by heavy wagons, and the cost of land-carriage between Manchester
and Liverpool, a distance of thirty miles, was at times as high as forty
shillings per ton.
The various disadvantages of land transportation directed, toward the
middle of the last century, the attention of the British people to the
importance of a system of canals. They realized that these water
highways would open an easier and cheaper communication between distant
parts of the country, thus enabling manufacturers to collect their
materials and fuel from remote districts with less labor and expense,
and to convey their goods to a more distant and more profitable market.
It would also facilitate the conveyance of farm produce to a greater
distance and would thereby benefit both the producer and consumer. The
canal era was formally inaugurated in 1761, when the Duke of Bridgewater
presented to Parliament a petition for a bill to construct the canal
which has since borne his name. The canal was commenced in 1767 and was
completed in 1772. The next forty years were a period of great activity
in canal building, but it was left to private enterprise, with very
little aid from the government. Over a hundred canal acts were passed by
Parliament before the year 1800. The largest canal of the British Isles
is the Caledonian, extending from Inverness to Fort William, a distance
of sixty-three miles. It was commenced in 1803 and completed in 1847,
and cost £1,256,000. Other canals of importance are the Great Canal,
which connects the North Sea with the Atlantic Ocean, and the Grand
Function Canal, which is over one hundred miles long and connects most
of the water-ways of central England with the Thames River. It is
estimated that there were over 2,200 miles of navigable canals in Great
Britain before the introduction of railroads.
Canal-building in Spain dates back to the beginning of the sixteenth
century, when Charles V. built the Imperial Canal of Aragon, which is
over sixty miles long. The political and commercial decline of the
country during the seventeenth and eighteenth centuries, however,
brought the development of her highways to a standstill, and, with the
exception of Turkey, probably no European country has at the present
time more deficient transportation facilities than Spain.
The comparatively high state of civilization which existed in the
Italian cities during the middle ages, their commercial and industrial
thrift and the importance of Rome as the metropolis of the Catholic
Church combined to maintain many of the excellent ancient highways of
Italy. A number of canals were built in Northern Italy as early as the
fifteenth century, and it is claimed by some writers that locks were
first used on the Milanese canals in 1497. But while public
thoroughfares have always been well maintained in Northern Italy and
even as far south as Naples, they were during the past two or three
centuries permitted to greatly deteriorate in the southern part of the
peninsula, to the great detriment of both agriculture and commerce. The
condition of the large Italian islands is still more lamentable, Sicily
and Sardinia being almost entirely devoid of roads. She that was the
granary of ancient Rome to-day scarcely produces enough grain to supply
her own people.
Denmark and the Scandinavian peninsula had a good system of highways
long before the railroad era. Among the many excellent canals of Sweden
may be mentioned the Göta Canal, which was commenced by Charles XII. in
the early part of the last century, but was not entirely completed until
1832. It is, inclusive of the lakes, 118 miles long, and its
construction cost $3,750,000, three-fifths of which was contributed by
the state. This canal connects the Baltic Sea with Lake Wener, as well
as, through the Göta-Elf, with the North Sea.
Next to Turkey and Spain, no country of Europe has been as slow to
appreciate the advantages of a system of highways as Russia. At the
beginning of the nineteenth century the vast empire of the Czar had but
a few roads connecting its principal cities, and these were almost
impassable in the spring and fall. Much progress has, however, been made
since then, and at present Russia has over 75,000 miles of wagon-road
and artificial waterway, and 19,000 miles of railroad. A road has been
built through Siberia, extending from the Ural Mountains to the city of
Jakutsk on the Lena and sending out many branch roads north and south.
The development of Russia's resources has kept pace with that of her
system of highways, and the agricultural and mineral products of that
country are in the markets of the world constantly gaining ground in
their competition with the products of Western Europe and America.
Passing now to the Western Hemisphere, we find that in ancient Peru the
Incas built great roads, the remains of which still attest their
magnificence. Probably the most remarkable were the two which extended
from Quito to Cuzco, and thence on toward Chile, one passing over the
great Plateau, the other following the coast, Humboldt, in his "Aspects
of Nature," says of this mountain road: "But what above all things
relieves the severe aspect of the deserts of the Cordilleras are the
remains, as marvelous as unexpected, of a gigantic road, the work of the
Incas. In the pass of the Andes between Mausi and Loja we found on the
plain of Puttal much difficulty in making a way for the mules over a
marshy piece of ground, while for more than a German mile our sight
continually rested on the superb remains of a paved road of the Incas,
twenty feet wide, which we marked resting on its deep foundations, and
paved with well-cut, dark porphyritic stone. This road was wonderful and
does not fall behind the most imposing Roman ways which I have seen in
France, Spain and Italy. By barometrical observation I found that this
colossal work was at an elevation of 12,440 feet." The length of this
road, of which only parts remain, is variously estimated at from 1,500
to 2,000 miles. It was built of stone and was, in some parts at least,
covered with a bituminous cement, which time had made harder than the
stone itself. All the difficulties which a mountainous country presents
to the construction of roads were here overcome. Suspension bridges led
over mountain torrents, stairways cut in the rock made possible the
climbing of steep precipices, and mounds of solid masonry facilitated
the crossing of ravines. Under the rule of the Spaniards the roads of
the Incas went to ruin. In fact, throughout South America but little, if
anything, was done by the mother country to aid transportation.
North America, or at least that part of it which was settled by the
Anglo-Saxon race, fared much better in this respect. The great utility
of good roads was universally recognized even in the colonial times, but
the scarcity of capital, the great extent of territory as compared with
the population, and the want of harmonious action among the various
colonies, delayed extensive road and canal building until after the
establishment of the Union. Mistaken local interests but too often
wrecked well-advanced plans, and what road-building was done during the
colonial times was almost entirely left to individual exertion, without
any direct aid from the government.
The first American turnpike was built in Pennsylvania in 1790. From
there the system extended into New York and Southern New England. Up to
1822 more than six million dollars had been expended in Pennsylvania for
turnpikes, one-third of which sum, or over $1,000 a mile, had been
contributed by the commonwealth.
In 1800 three wagon-roads connected the Atlantic coast with the country
west of the Alleghanies, one leading from Philadelphia to Pittsburgh,
one from the Potomac to the Monongahela, and a third passed through
Virginia to Knoxville, in Tennessee. Much as was done during this period
for the improvement of the roads, stage-coach travel remained for years
comparatively slow. In 1792 Mr. Jefferson, then Secretary of State,
wrote to the Postmaster-General to know if the post, which was then
carried at the rate of fifty miles a day, could not be expedited to one
hundred. Even this latter rate was considered slow on the great
post-roads forty years later. In the year 1800 one general mail-route
was extended from Maine to Georgia, the trip being made in twenty days.
From Philadelphia a line went to Lexington in sixteen and to Nashville
in twenty-two days. The government of the United States, appreciating
the importance, for military purposes, of good roads leading to the
frontiers, commenced the construction of national, or military, roads.
A road was thus built from Baltimore through Cincinnati to St. Louis,
and another from Bangor to Houlton, in Maine. In 1807 Albert Gallatin,
Secretary of the Treasury, advocated the extensive construction of
public roads and canals by the general government. Mr. Gallatin took the
ground that the inconveniences, complaints, and perhaps dangers,
resulting from a vast extent of territory cannot otherwise be radically
removed than by opening speedy and easy communications through all its
parts; that good roads and canals would shorten distances, facilitate
commercial and personal intercourse, and unite by a still more intimate
community of interests the most remote quarters of the United States,
and that no other single operation within the power of the government
could more effectually tend to strengthen and perpetuate that union
which secured external independence, domestic peace and internal
liberty. The principal improvements recommended by Mr. Gallatin were the
following:
1. Canals opening an inland navigation from Massachusetts to North
Carolina.
2. Improvement of the navigation of the four great Atlantic rivers,
including canals parallel to them.
3. Great inland navigation by canals from the North River to Lake
Ontario.
4. Inland navigation from the North River to Lake Champlain.
5. Canal around the Falls and Rapids of Niagara.
6. A great turnpike road from Maine to Georgia, along the whole extent
of the Atlantic sea-coast.
7. Four turnpike roads from the four great Atlantic rivers across the
mountains to the four corresponding Western rivers.
8. Improvement of the roads to Detroit, St. Louis and New Orleans.
Mr. Gallatin also recommended that a sufficient number of local
improvements, consisting either of roads or canals, be undertaken so as
to do substantial justice to all parts of the country. The expenditure
necessary for these improvements was estimated at twenty million
dollars. Local jealousy and State rights prejudice practically defeated
this movement, the Cumberland road, or National Pike, being the only
result of any importance. The failure of the government to provide the
country with adequate roads left the construction of turnpike roads to
private enterprise, and these roads, before the general introduction of
railroads, often yielded much profit to capitalists. Great as were the
conveniences afforded by the turnpike, they were entirely inadequate for
the development of the resources of the interior of the country. The
products of a forest or a mine could not be transported upon them to any
great extent. The crossing of a single water-shed, owing to the
necessity for largely increased motive power, would often materially
decrease the value of the goods to be transported.
These drawbacks of land transportation directed, toward the close of the
last century, the attention of the people of the United States to the
necessity of providing for a system of canals that should bind together
the various parts of their extended country in the interest of commerce.
General Washington was among the first to urge upon his countrymen the
introduction of this great highway of interstate traffic, although but
little was done in this direction until after the War of 1812. The
people of New York had from an early period of the settlement of their
State been impressed with the importance of connecting the Hudson with
the Western lakes. In 1768 the provincial legislature discussed this
subject, but the political agitations of the times and the following
revolutionary struggle arrested further proceedings. After the war the
project was frequently brought before the legislature, but nothing was
done until 1808, when the assembly appointed a committee to investigate
the subject and to solicit the coöperation of the general government, if
the project should be found practicable. The report of the committee
concerning the practicability of the undertaking was in every respect
favorable, and in 1810 the legislature provided for a survey of the
entire route from the Hudson River to Lake Erie. The survey was made,
but, the expected aid from the national government not being
forthcoming, the matter rested until after the war with England. In 1816
a new board of commissioners was appointed, and the following year an
act was passed providing for a system of internal improvements in the
State. On the 4th day of July next the excavation of the Erie Canal was
commenced, and on the 26th of October, 1825, the first boat passed from
Lake Erie to the Hudson. The canal was 378 miles long and four feet
deep. It had a width of 40 feet at the surface and 28 feet on the
bottom, and carried boats of 76 tons burden. Owing to the rapid increase
of trade, the capacity of the canal was found inadequate within ten
years after its opening, and in 1835 measures were taken to enlarge it
to a width of 70 and 56 feet by a depth of seven feet, thus allowing the
passage of boats of 240 tons. The total length of the canal was,
however, subsequently shortened 12-1/2 miles, making its present length
365-1/2 miles. This enlargement was completed in 1862, and cost the
State over $7,000,000, making the total cost of the canal about
$50,000,000. New York has, inclusive of branches, some ten other canals
in operation, among them the Champlain Canal, extending from the head of
Lake Champlain to its junction with the Erie Canal at Waterford; the
Oswego Canal, from Lake Ontario at the city of Oswego to the Erie Canal
at Syracuse; the Black River Canal, from Rome to Lyon Falls; the Cayuga
and Seneca canals, extending from the Erie Canal to the Seneca and
Cayuga lakes. The State has expended for the construction of canals not
less than $70,000,000.
Canal-building in the State of Pennsylvania commenced about the time
that the original Erie Canal was completed in New York. In 1824 the
legislature authorized the appointment of commissioners to explore canal
routes from Philadelphia to Pittsburgh and the West. A year later
surveys were authorized to be made from Philadelphia to Pittsburgh, from
Allegheny to Erie, from Philadelphia to the northern boundary of the
State, and also south to the Potomac River. The construction of the main
lines of communication between the east and the west and the coal fields
in the north was soon commenced. Large loans were repeatedly made, and
the work was vigorously prosecuted. In 1834 Pennsylvania had 589 miles
of State canals, among them the Central Division Canal, 172 miles long,
and the Western Division Canal, 104 miles long. Public opinion strongly
favored an extended system of internal improvements, and it was believed
that these water-ways would soon become a source of revenue to the
State. These expectations might have been realized had the State carried
on enterprises on a less extensive and more economical basis. In 1840
the financial condition of the State had become such that canal-building
had to be abandoned. The amount expended by the State of Pennsylvania
for canals, including the Columbia Railroad, was about $40,000,000,
while the difference between net earnings and interest paid by the State
up to that time is estimated at $30,000,000. In 1857 and 1858 these
works were sold to the Pennsylvania Railroad Company and the Sunbury and
Erie Railway Company for $11,375,000, or about one-sixth of their cost
to the State.
In Ohio the legislature authorized the survey of a canal from Lake Erie
to the Ohio River. In 1825 an act was passed providing for the
construction of the Ohio Canal and a number of feeders. In 1831 the
canal was in operation from Cleveland to Newark, a distance of 176
miles, and the whole system was finished in 1833.
The State of Illinois completed in 1848 the Illinois and Michigan Canal,
connecting Chicago with La Salle on the Illinois River. This canal is
102 miles long, 60 feet wide and six feet deep. The construction by the
general government of the Hennepin Ship Canal, connecting the
Mississippi with Lake Michigan, has long been agitated in the Northwest.
Such a canal would be one of the most important channels of commerce in
the country, and it is to be hoped that this great project will be
completed at no distant day.
We have besides in the United States a large number of canals that were
constructed, and are still operated, by private companies, as the
Delaware and Hudson in New York and Pennsylvania, the Schuylkill, Lehigh
and Union canals in Pennsylvania, the Morris Canal in New Jersey, the
Chesapeake and Ohio and Maryland, etc. A large number of canals, some
public and others private property, have since the construction of
railroads been abandoned. Thus in New York 356 miles of canals, costing
$10,235,000; in Pennsylvania 477 miles, costing $12,745,000; in Ohio 205
miles, costing $3,000,000; in Indiana 379 miles, costing $6,325,000, are
no longer in use. All the canals that were ever built in New England
have likewise been abandoned for commercial purposes.
Nor was Canada slow in realizing the advantages which a system of canals
connecting the great lakes with the Atlantic Ocean promised to give her.
The construction of the Welland and St. Lawrence canals made it possible
for vessels to clear from Chicago direct for Liverpool, and this has to
a considerable extent diverted grain shipments to Montreal, giving the
Canadian dealers a decided advantage in this traffic.
It is a strange fact that, at least in this country, the zenith of the
canal-building era is found in the decade following the invention of the
steam railroad. For many years it was not believed that under ordinary
circumstances the iron horse could ever compete with the canal boat in
rates. The most sagacious business men had unlimited faith in the
destiny of the canal as a prime commercial factor and invested largely
in canal stocks. To many these investments proved a disappointment. The
marvelous improvements in locomotives and other rolling stock, the
unprecedented reductions in the prices of iron and steel, and above all
the fact that in our climate canal carriage is unavailable during five
months of the year, gave the railroads a decided advantage in their
competition with canal transportation. There can be no doubt, however,
that the presence of this competition was one of the chief causes of the
great reduction of railroad rates on through routes. In this respect
alone the canals have accomplished a very important mission. In the
transportation of many of the raw products of the soil and the mine
canals still compete successfully with the railroads, and it is still an
open question whether future inventions may not enable them to regain
lost ground in the carriage of other goods. It would certainly be a
short-sighted policy for our people to discourage the construction of
new canals.
For the improvement of navigable rivers, appropriations have been made
by Congress ever since the establishment of our national government, and
these appropriations now amount to millions of dollars annually. Since
the introduction of railroads the usefulness of these national highways
of commerce has ceased to depend upon the tonnage carried upon them, but
the influence which they exert upon the cost of transportation is so
great that it is not likely that the policy of making annual
appropriations for the improvement of these water ways will be abandoned
by the American people for many years to come.
There has recently been a strong agitation in some portions of the
United States in favor of extending government aid to the Nicaragua Ship
Canal, and there seem to be indeed many arguments in favor of such a
policy. President Harrison said in his annual message to Congress in
December, 1891:
"The annual report of the Maritime Canal Company of
Nicaragua shows that much costly and necessary preparatory
work has been done during the past year in the construction
of shops, railroad tracks and harbor piers and breakwaters,
and that the work of canal construction has made some
progress. I deem it to be a matter of the highest concern to
the United States that this canal, connecting the waters of
the Atlantic and Pacific oceans, and giving to us a short
water communication between our ports upon those two great
seas, should be speedily constructed, and at the smallest
practical limit of cost. The gain in freights to the people
and the direct saving to the government of the United
States in the use of its naval vessels would pay the entire
cost of the work within a short series of years. The report
of the Secretary of the Navy shows the saving in our naval
expenditures which would result. The Senator from Alabama,
Mr. Morgan, in his argument upon this subject before the
Senate of the last session, did not overestimate the
importance of the work when he said that 'The canal is the
most important subject now connected with the commercial
growth and progress of the United States.'"
And in his message of 1892 that:
"It is impossible to overestimate the value from every
standpoint of this great enterprise, and I hope that there
will be time, even in this Congress, to give it an impetus
that will insure the early completion of the canal and
secure to the United States its proper relation to it when
completed."
It is sincerely to be hoped that the people of the United States can be
convinced of the advisability of extending government aid to this
enterprise. It must be admitted that the experience of our government
with the Pacific railroads has created a strong prejudice among the
masses against such subsidies as were granted to those corporations, but
it is probable, with the people on the alert, that Congress would not
again permit great impositions to be practiced against the government.
When the great advantages to be derived by the people of the United
States from the use of this canal and the small outlay required are
considered, it would seem to be a wise policy for our government at once
to take such steps as are necessary to secure the early completion and
the future control of this great international highway.
CHAPTER II.
THE HISTORY OF RAILROADS.
In making inquiry into those inventions and improvements which were the
precursors of the modern railroad, we meet early the desire to render
the movement of wagons easier by a smooth roadway. Traces of this may be
found even in ancient times. The Romans constructed tracks consisting of
two lines of cut stones, and in the older Italian cities stone tracks
may still be seen in the streets, corresponding to wagon tracks, and
evidently designed for the purpose of rendering the movement of the
wheels easier.
The first rail tracks of which we have any knowledge were constructed at
the end of the sixteenth century. These rails, which were made of wood,
appear to have been an invention of miners in the Hartz Mountains. They
were the result of pressing necessity, for, as mines were usually so
situated that roads could only with great difficulty and expense have
been built to them, some cheaper sort of communication with the high
road had to be contrived.
After various experiments the wooden railway was adopted, and the
product of the mine was carried upon them to the place of shipment by
means of small cars. Queen Elizabeth had miners brought into England, to
develop the English mines, and through them the rail track was
introduced into Great Britain. Later the wooden rail was covered with an
iron strap to prevent the rapid wear of the wood, and about the year
1768 cast-iron rails commenced to be used. At the end of the last
century wheels were constructed with flanges, to prevent derailing.
More attention was also paid to the substructure, wood, iron and stone
being used for this purpose. Wrought-iron rails were patented in 1820.
The first authentic account of heat or steam engines is found in the
"Pneumatica" of Hero of Alexandria, who lived in the second century
before Christ. Hero describes a number of contrivances by which steam
was utilized as a source of power. Although these contrivances were at
the time of very little practical value, they are interesting as the
prototypes of the modern steam engine. The attempts to move wheels by
steam date back to the seventeenth century, when a number of experiments
were made, but their exact nature is not known, because they were all
soon abandoned, either on account of unsuccessful results or lack of
means. At the beginning of the eighteenth century Denis Papin
constructed a small steamboat, upon which he sailed in 1707 on the Fulda
River from Cassel to Munden, a distance of about fifteen miles.
The construction of locomotives engaged the attention of ingenious minds
a century and a half ago. It is claimed that Newton experimented with a
steam motor in 1680. Dr. Robinson described in 1759, in his "Mechanical
Philosophy," a steam vehicle. The Glasgow engineer James Watt devoted
himself from 1769 to 1785, with great energy, to the development of the
steam engine, and succeeded in inventing the system which became the
parent of the modern engine. An American, Oliver Evans, constructed at
the beginning of the present century a carriage propelled by steam, and
exhibited it, in 1804, in the streets of Philadelphia, before twenty
thousand spectators. While Evans' invention was never put to any
practical use, he prophesied that the time would come when steam cars
would be considered the most perfect means of transportation. On
Christmas eve, 1801, Richard Trevithick exhibited at Camborne, England,
a steam coach, and soon afterwards he and his cousin, A. Vivian,
obtained an English patent on a "steam engine for propelling carriages."
Seven years later a Mr. Blinkensop, of Middleton Colliery, near Leeds,
constructed another locomotive engine, upon which he obtained a patent
in 1811. These and a number of other inventors of steam engines vainly
expended great ingenuity in attempting to overcome a purely imaginary
difficulty. They believed that the adhesion between the face of the
wheel and the surface of the road was so slight that a considerable
portion of the propelling power would be lost by the slipping of the
wheels. It was not until about the year 1813 that the important fact was
ascertained that the friction of the wheels with the rails was
sufficient to propel the locomotive and even drag after it a load of
considerable weight. On the other hand these inventors failed to provide
in their engines adequate heating-power for the production of steam. In
1814 George Stephenson commenced to apply himself to the construction of
an improved locomotive. When, owing to his invention of the tubular
boiler, he saw, after fifteen years of arduous toil, his labors crowned
with success, the civilized world entered upon a new era of social,
industrial and commercial life. The first line upon which Stephenson's
invention was used was the Liverpool and Manchester Railway. In the year
1821, a number of Liverpool merchants formulated a plan for the
construction of a tramway between their city and Manchester. The
question of motive power was left open as between horses and the steam
engine, with which Mr. Stephenson was then experimenting. After much
opposition on the part of Parliament and the public a charter was
obtained in 1826. When the construction of the road was nearly
completed, the directors of the company, after having determined upon
the use of steam engines, offered a prize of £500 for the best
locomotive engine to run at a public trial on the Liverpool and
Manchester Railway. This proposal was announced in the spring of 1829,
and the trial took place at Rainhill on the 6th of October of that year.
The competing engines were the Rocket, constructed by Mr. Stephenson;
the Sanspareil, by Hackworth; the Perseverance, by Burstall, and the
Novelty, by Messrs. Braithwaite and Ericsson. Both Braithwaite and
Ericsson became subsequently residents of the United States, and the
latter achieved immortal fame as the inventor of the screw propeller and
the builder of the Monitor. The Rocket was the only engine that
performed the complete journey proposed, and obtained the prize. It is
claimed by the biographers of John Ericsson that he had really built a
much faster locomotive than Stephenson, and that, although it had to be
constructed very hastily and therefore broke down during the trial, the
superiority of the principle involved in it was universally recognized
by the engineers of that time. The Stephenson engines became the motive
power of the Liverpool and Manchester road, which was opened for public
traffic on the 16th of September, 1830. This line was, however, neither
the first public railway nor even the first steam railway. The first
railway or tramway act was passed in England in 1758, and in 1824 no
less than thirty-three private railway or tramway companies had been
chartered. In 1824 a charter was granted by Parliament authorizing the
construction of the Darlington and Stockton Railway, to be worked with
"men and horses, or otherwise." By a subsequent act the company was
empowered to work its railway with locomotive engines. The road was
opened in September, 1825, and was practically the first public carrier
of goods and passengers. The Monklands Railway in Scotland, opened in
1826, and several other small lines soon followed the example of the
Darlington and Stockton line and adopted steam traction, but the
Liverpool and Manchester Railway was the first to convince the world
that a revolution in traveling had taken place.
The road was from the very first successful, its traffic and income
greatly exceeding the expectations of its managers. It should also be
noted here that the cost of construction fell largely below the
elaborate estimates made by several distinguished engineers. The company
had expected to earn about £10,000 a year from passenger traffic, and
the very first year the receipts from that source were £101,829. The
gross annual receipts from freight had been estimated at £50,000, but
were £80,000 in 1833. From the first the stockholders obtained a
dividend of eight per cent., which soon rose to nine and to ten per
cent. It has since been demonstrated that the revenues of new roads
almost always exceed expectations.
The success of this railway stimulated railway enterprise throughout
Europe and America. But while railroad projects created much enthusiasm
on one side, they also met with bitter opposition on the other. The
prejudice of the short-sighted and the avarice of those whose interests
were threatened by a change in the mode of transportation used every
weapon in their power against the proposed innovation. The arguments
used were often most absurd. It was said that the smoke of the engine
was injurious to both man and beast, and that the sparks escaping from
it would set fire to the buildings along the line of road, the cows
would be scared and would cease to give their milk, that horses would
depreciate in value, and that their race would finally become extinct.
Nor did many of the European governments favor the new system of
transportation. Some openly opposed it as revolutionary and productive
of infinitely more evil than good. The Austrian court and statesmen
especially looked upon the new contrivance with undisguised distrust;
and from their point of view this distrust was perhaps well founded. The
rapid movement of the iron horse seemed to savor of dangerous
radicalism, not to say revolution. When the Emperor finally, in 1836,
concluded to sign a railroad charter, he based his action upon the
dubious ground that "the thing cannot maintain itself, anyhow." It may
be said that the history of the railroad is a conspicuous illustration
of human short-sightedness. The Prussian Postmaster-General Von Nagler
opposed the construction of a railroad between Berlin and Potsdam upon
the ground that the passenger business between those two cities was not
sufficient to keep even the stage-coach always full. It never occurred
to the Postmaster-General, as it does not occur to many railroad men of
to-day, that new and cheaper means of transportation increase the
traffic. Even so wise a statesman as Thiers said when railroad
construction was first agitated in France: "I do not see how railroads
can compete with our stage-coaches." M. Thiers also opposed for years
the building of a railroad between Paris and Versailles, declaring that
on account of a railroad not one passenger more would make the journey
between these two places.
But railroads came whether monarchical governments liked them or not.
The success of the Liverpool and Manchester Railroad stimulated railroad
building in England to a marvelous extent. Between 1830 and 1843 no
less than seventy-one different companies were organized, representing
about 2,100 miles. During the next four years 637 more roads, with an
authorized length of 9,400 miles, were chartered. The construction of
each new road required a special act of Parliament. These early roads
averaged only fifteen to thirty miles in length. The competition which
ensued soon led to the consolidation of roads, which continued until now
the 14,000 miles of railway in England and Wales are practically owned
by only a dozen companies. The total number of miles of railroad in
Great Britain and Ireland is at present over 20,000.
The news of the opening of the first steam railway in England spread
through Europe comparatively slowly. There were in those days but few
newspapers printed on the continent, and these were read very sparingly.
Railroad discussions were confined to merchants and manufacturers. Even
after the success of the railroad was assured in England, a large number
of people would not believe that, except between the largest cities,
railroads on the continent could ever be profitable. But few railroads
have ever been built which with honest, efficient and economical
management would not pay a fair rate of interest on actual cost of
construction. But in spite of this we have to this day a large number of
otherwise well-informed people who question the financial success of
every new railroad that is proposed.
In those days it occurred only to the most sagacious minds that with
increased facilities commerce would expand. The missionaries of railroad
enterprise found it therefore a difficult matter to interest capital in
their projects. Railroad committees were in time formed in all cities of
any importance, but, with capital cowardly, as usual, and governments
distrustful, their task was often a thankless one. Railroad projects
matured very slowly, and, when matured, were often wrecked by jealous
and short-sighted governments. After the formation of a company five and
even ten years would often pass away before a charter could be secured
and the work of construction commenced. It is true, there were some
laudable exceptions to this rule. Thus the governments of France and
Belgium led the people in railroad construction; but upon the whole it
can be said that the railroad forced itself by its intrinsic merit upon
monarchical governments. It soon became evident even to the most stupid
of autocratic ministries that it was a choice between the new mode of
transportation and national atrophy.
The first German line was built between the cities of Nuremberg and
Furth in 1835. It was only about four miles long, but the success of the
experiment gave an impetus to railroad building in other parts of
Germany. The Leipzig and Dresden line followed in 1837, and the
Berlin-Potsdam and Brunswick-Wolfenbuttel lines in 1838. At the end of
1840 Germany had 360 miles of railroad. In that year Frederick William
IV. succeeded to the throne of Prussia and inaugurated a new and
exceedingly liberal railroad policy in his realm. In 1843 the Prussian
government concluded to guarantee certain railroad companies a dividend
of 3-1/2 per cent. on the capital actually invested. The state also
secured considerable influence in the administration of the roads as
well as in the right to assume the management of the various lines under
certain conditions. The governments of the states of Southern Germany
now commenced to build state roads, and their example was, chiefly for
strategic reasons, soon imitated by Prussia. The system has since grown
to over 26,000 miles, and no less than eighty-seven per cent. of the
mileage is under state control. In all the states and provinces of the
empire, except Bavaria, the rates for transportation of passengers and
freight on all lines are controlled absolutely by the government.
In Austria, as has already been indicated, the building of railways was
greatly discouraged by the government until 1836. In that year the
Emperor rather reluctantly granted Baron Rothschild a charter for a
railway from Vienna into the province of Galicia. Another charter was
granted to a Baron Sina for a line from Vienna to Raab and Gloggnitz.
The policy then adopted in Austria guaranteed to each railroad company a
monopoly in its own district during the period for which the charter was
granted. Soon after the state also commenced building lines, but the
growth of the Austrian system was slow until after the war of 1866. An
era of railroad speculation was then inaugurated, which ended with the
crisis of 1873. The total length of the railroads of Austria-Hungary was
10,790 miles in 1875. At present that monarchy has nearly 16,400 miles
of railway, 8,600 of which are owned by private companies.
It has been the policy of Austria to reduce rates, and several roads,
especially those built in mountainous districts, have a certain revenue
guaranteed to them by the government.
The zone system recently adopted in Hungary reduced both the passenger
and freight rates of the government roads at least one-third, and this
reduction has, contrary to expectation, greatly increased their net
revenues.
In France railroad agitation commenced in 1832. A few short lines were
opened, as those from Paris to St. Germain and to Versailles; but,
owing to the conservatism of French capitalists, but little more was
done until the state took the matter in hand. Thiers proposed a scheme
by which the state was to furnish about half the cost while private
companies were to build the lines and operate them. The Western
Railroad, the first line of any great extent, was opened in 1837 between
Paris and Rouen, and the Eastern Railroad was opened two years later.
There were in 1859 six large companies operating their lines with
profit, but, to induce them to build additional lines that were needed,
the state guaranteed the interest on the capital required to make their
improvements. In 1884 there were about 17,000 miles of railroad in
operation. To bring about the construction of another 7,000 miles of
road, and to thus complete the railroad system of the country, the
government now guaranteed each company a dividend equal to the average
of recent years, but not to exceed seven per cent. It is doubtful
whether this system of monopoly has in all respects been favorable to
the encouragement of enterprise in the railroad circles of France. In
granting charters the state has, however, reserved valuable rights which
at a future period it will have an opportunity to assert for the public
benefit. The railroad companies have generally a lease for ninety-nine
years, and their lines become the property of the state after the
expiration of that period. To extinguish the bonded debt and stock, a
sinking fund has been created, from which a certain portion of the
shares and outstanding bonds is annually paid off and canceled. The
government requires of the companies the free carriage of the mails and
the transportation of military and other employes at very low rates.
Besides this the state levies upon the traffic of the railroads a duty
of ten per cent. of their gross earnings from passengers and from all
goods carried by fast trains. These facts are usually overlooked by our
railroad men when they indulge in making comparisons between the
railroad rates of this country and those of France. The French Republic
had 13,400 miles of road in 1875, and 22,600 in 1890. When all of the
proposed lines are completed, the total mileage of that country will be
over 25,000.
Belgium has the best-developed track system on the continent. The state
commenced the construction of railroads as early as 1834, and the first
line (Brussels Malines) was opened May 5th, 1835. Four great state lines
were constructed in different directions, and between these lines
private roads were permitted to be built. Between 1850 and 1870 the
private lines increased from 200 to 1,400 miles, and competition between
them and the state lines became so active as to reduce rates to the
lowest possible point. In 1870 the government decided to buy a large
number of competing lines. In 1874 it had acquired more than half, and
at present, with a few exceptions, they are all owned and controlled by
the state. The exceptions to this are a few short lines that were built
in the early days of railroad construction. The total mileage is now
3,210. Rates have, however, not been increased since this consolidation,
and they are still lower than any other country in Europe. The
transportation of mails is free, and troops, military materials and
prison vans are carried at reduced rates.
Railroads were originally built in Switzerland merely for the
accommodation of tourists and the local traffic. The first line, between
Zurich and Aarau, was completed in 1847, but general railroad enterprise
did not develop until after 1860. The St. Gothard route was then
projected, which opened a direct through line between Italy and
Germany. The roads are all owned by private companies, but are under
strict government control. Great publicity of their affairs is required.
The total mileage of Switzerland was 2,043 in 1891.
In Italy railroad enterprises have received attention since 1853. The
first roads were those of Lombardy, being commenced while that province
was still under Austrian rule. The treaties of Zurich in 1859 and of
Vienna in 1866 delivered these roads and the Venetian lines to the
kingdom of Italy. Between 1860 and 1870 the systematic construction of a
railroad net was commenced which connected the various lines with each
other and with Rome. Nearly all the railroads of Italy fell into the
hands of the government, but in 1885 they were leased for a term of
sixty years to three companies, terminable at the end of twenty or forty
years by either party upon two years' notice. Under the lease the state
received two per cent. of the gross receipts. The tariffs are fixed by
the state, are uniform and can be reduced by the state. A Council of
Tariffs, composed of delegates for the government, for agriculture,
commerce and industry, and for the railroad companies, all elected by
their own boards, has been instituted to study the wants and best
interests of the country. The total number of miles of railroad in Italy
was 8,110 in 1889.
The first road in Spain was opened in 1848 between Barcelona and Mataro.
The government greatly encouraged railroad construction by subsidies,
and during the decade following 1855 the development of the railway
system of the country was rapid. More than thirty companies have been
formed, which have built about twenty main lines, aggregating 6,200
miles.
In Portugal very little railroad building was done previous to 1863,
when a little over three hundred miles of road was constructed. The
government owns nearly half of the roads of the country, the remaining
lines being the property of private companies. The total number of miles
operated in the kingdom in 1889 was 1,280. The service and the financial
condition of the roads of Portugal are far from being satisfactory.
In Denmark the first railroad was built on the island of Seeland in
1847. Previous to 1880 the larger part of the roads of the kingdom was
owned by private companies. Since then several of the most important
private roads have been purchased by the state, which in 1889 owned 963
miles, while only 251 miles remained in private control. Only about
thirty miles more have since been constructed. The roads are well
managed, but their net earnings are less than two per cent. of the
capital invested.
On the Scandinavian Peninsula the railroad system has developed rather
slowly. Norway built the first line from Christiana to Eidsvold in 1854,
and Sweden commenced railroad building two years later. The narrow-gauge
system is fully developed here. While in Norway the greater part of the
lines is owned by the state, the roads of Sweden are chiefly in the
hands of private companies which on an average control but little more
than twenty-five miles each. The total mileage of Sweden is 5,970, and
that of Norway 970.
The first line of railroad in the Russian Empire was constructed from
St. Petersburg, sixteen miles, to Tsarskoji-Sielo, in 1842. The St.
Petersburg and Moscow line was opened in 1851. Railroad building then
stagnated until after the Crimean War, when a large number of lines
were constructed at once. The roads were surveyed by the government, but
constructed and operated by private companies.
State aid was, however, freely given. During the past ten years the
Russian government has directed its attention to the development of the
railroad system in its Asiatic possessions. A railway between the Black
and Caspian seas was completed in 1883, and the Siberian railroad is
extended as fast as the financial condition of the empire permits. There
are now about 20,000 miles of road in the Russian Empire operated by
private companies. The construction of a large number of the Russian
railways was dictated by military rather than commercial considerations.
Maximum rates are specified in charter, and every change of rates must
be approved by the Minister of Finance.
In the Balkan Peninsula railroad facilities are still ill provided for.
A few lines have been built, but these are, as a rule, badly managed.
Trains are slow, and rates often so high as to be prohibitory. Roumania
has undoubtedly the best railroad system of any of the Balkan states,
the government controlling 1,000 miles of road. Greece is also making
some progress and has at the present time 610 miles of railway. There is
reason to believe that through communication will soon be established in
these countries on a larger scale.
The introduction of the railway into Asia has been, except in the
Russian and English possessions, a very difficult task. The conservatism
or ignorance of the governments and the superstition of the people
combined to throw numberless obstacles before those who proposed to pave
the way for the iron horse. British India opened her first railway for
public traffic between Bombay and Tannah on November 18, 1852. In 1855
she had 841 miles of road, which increased to 6,515 miles in 1875 and to
15,828 miles in 1889, of which 8,423 miles were owned and operated by
the state. The total cost of these roads was $880,000,000.
In Asiatic Turkey the first line was opened between Smyrna and Trianda
on the 24th day of December, 1860. This line was in 1866 extended to
Aiden, and in 1882 to Sarakio. There are at present five lines with a
total extent of 446 miles, all owned by English companies. New lines,
covering in all 3,952 miles, have recently been projected.
The first line in Persia, only seven miles long, and extending from
Teheran to Schah-Abdal-Azzim, was opened on the 25th day of June, 1888.
Another line, from the Caspian Sea to Amol, is now in process of
construction. A line was opened last September between Joppa and
Jerusalem. It is 53 miles in length.
Japan may be said to be already thoroughly familiar with the European
system. The first and principal line was opened on the island of Napon,
between Tokio and Yokohama, on the 14th of October, 1872. Two other
short lines followed in 1874 and 1876, when the total extent of the
Japanese roads was about 135 miles. In 1883 the construction of the
Grand Trunk Railroad, from Tokio to Kioto, was commenced, which line has
been in operation for the past five years. Other lines, aggregating over
400 miles, will soon be opened for traffic. The total extent of road in
operation in 1888 was 580 miles, 310 of which were controlled by the
state, and the remainder by private companies. In 1890 the total number
of miles exceeded 900. The total average cost per mile was $58,000.
No nation has probably opposed the introduction of the railway as
stubbornly as the Chinese. The first railroad, scarcely seven miles
long, was built by an English company near Kaiping to facilitate the
transportation of coal from the mines in that vicinity. In 1886 a
Chinese company purchased this line and has since extended it to
Tientsin, making its present length about eighty-four miles. The Chinese
government has recently authorized the further extension of this line to
Yangchou, a place but a few miles distant from Pekin.
Of the Asiatic islands Java has the largest and oldest railroad system.
On the 10th of August, 1867, the first line was opened between Samarang
and Tangveng. Other coast lines have since been constructed, but
communication is still sadly neglected in the interior. In 1889 there
were operated on the island nearly 800 miles of road, the greater part
being the property of private companies.
A road was opened upon the island of Ceylon between Colombo and Kandy in
1867, to which several branch lines and extensions have since been
added. The total system comprises at present about 180 miles.
Short lines have also been built in Burmah (1889); in the Malay
Peninsula (1885), in Sumatra (1876), and in Cochin China (1885). A line
from Bangkok to Bianghsen, in Siam, is being projected at the present
time.
In Africa, if we except its northern coast, the construction of
railroads has only kept pace with the slow development of the resources
of that continent. Its European colonies are still but thinly inhabited,
and their industrial and commercial life still resembles much that of
the American colonies of the seventeenth century. There can be little
doubt, however, that with the increasing immigration the growing demand
for better transportation facilities will speedily be met by European
capital.
The first railroad upon African soil was built by the Egyptian
government from Alexandria to Cairo, and from there through the desert
to Suez. A part of this line, 130 miles long, was opened to traffic in
1856, and the remaining ninety miles the year following. Nothing further
was done until after Ismail Pasha ascended the throne, in 1863. The
railroad system of Lower Egypt, between Alexandria in the west, Cairo in
the south, and Ismaila in the east, was then greatly extended and the
service materially improved.
After the opening of the Suez Canal the line through the desert to Suez
was abandoned. The railroad system of Egypt comprises at present about
1,250 miles, all of which belongs to the government except two short
lines which are private property.
The beginning of the railroad system of Algiers dates back to 1860, when
the French government gave a charter to the Companie des Chemins de Fer
Algérians, authorizing it to build a number of lines connecting the
principal cities of the province with the Mediterranean. The line from
Algiers to Blidah, thirty-two miles long, was opened on September 8,
1862. Further construction was then delayed until 1863, when the charter
of the original company was transferred to the Paris, Lyons and
Mediterranean Railroad Company. The original plans were then in the main
carried out, until the disturbances caused by the Franco-Prussian war
again put an end to railroad enterprises. In 1874 three new companies
were chartered and railroad building was resumed. In 1888 the Algerian
railroad system comprised 1,350 miles.
The first road in Tunis was built in 1872 from the city of Tunis to
Bardo and Gouletta by English capitalists. It was, in 1880, sold to an
Italian company to which the Italian government for political reasons
had seen fit to guarantee certain dividends. Other small lines have
since been constructed, and more important ones have been prospected.
The number of miles at present in operation is 153.
The French colony on the Senegal River has a number of short lines, of
which the first was opened in July, 1883. These lines aggregate at
present about 200 miles. It is now contemplated to extend this system to
the upper Niger. This would necessitate the construction of 240
additional miles of road.
The Cape Colony has the largest mileage of any of the European colonies
in Africa, the absence of navigable rivers rendering railroads here more
necessary than elsewhere. The first line was opened on the 13th of
February, 1862. It then extended from Cape Town to Earste River, but was
extended to Wellington the following year. The number of miles of road
in operation in 1875 was 906, and in 1891 it had increased to 2,067. All
the roads of the colony, excepting a line of 93 miles belonging to the
Cape Copper Mining Company, are operated by the colonial government.
Their net revenue in 1886 was 2.84 per cent. of the capital actually
invested.
Port Natal built her first railroad in 1860. It was only two miles long
and extended from the city of Durban to its harbor. Since then several
inland lines, aggregating over four hundred miles, have been constructed
at a cost of twenty-two million dollars. The roads are operated by the
colonial government and yielded in 1891 a net revenue of 4.4 per cent.
on the capital expended.
Short lines have also been built on Mauritius and Reunion, and there is
now every indication that Portuguese Africa and the Congo State will be
provided with railroad facilities in the near future.
The introduction of railroads into Australia dates back to the sixth
decade of the present century. The total number of miles of road
reported in 1889 by the several colonies was 8,883. If we estimate the
population of the continent at 3,000,000 for that year it will be seen
that Australia has more miles of road per capita than any other grand
division of the globe, save North America.
New South Wales, the mother colony of the Australian continent, opened
its first road on September 26, 1855, between Sydney and Paramalta. This
road was built by a private company, but was soon after its completion
purchased by the colonial government, and was in 1869 extended to
Goulbourn. In 1875 the colony had only 436 miles of road in operation.
The mountains, however, which separated the wide plains of the interior
from the coast had been surmounted, and the government commenced to push
the construction of new roads with great vigor. At the end of the year
1886 New South Wales had no less than 1,888 miles of road in operation,
for which the colony had expended $113,000,000. The net revenue during
that year was 2.9 per cent. on the capital invested. The total number of
miles of railroad in this colony was 2,247 in 1889.
Victoria, the smallest of the colonies, has made by far the greatest
progress in railroad building. The first road in the colony, and, in
fact, the first road upon the Australian continent, was built in 1854
between the city of Melbourne and its port, a distance of two and
one-half miles. Within the next five years four other lines were
constructed, connecting Melbourne with Williamstown, St. Kilda,
Brighton and Echuca, respectively. In 1870 there were in the colony 275
miles of railroad, which had increased to 1,198 miles in 1880, and to
2,283 miles in 1889. Several of the roads were originally owned by
private companies, but all of them were in time acquired by the colonial
government, the last one in 1878. The total capital invested in 1887 was
$125,000,000, which yielded a net revenue of $5,800,000. All lines are
under the control of a board so constituted as to be entirely removed
from political influence.
In South Australia a short line was built in 1856 from the city of
Adelaide to Port Adelaide. Another line was constructed in 1857 from
Adelaide to Salisbury, which three years later was extended to Kapunda.
The colony had then forty miles of road. The increase during the next
decade was only ninety-three miles. Since then the development has been
much more rapid, the whole system of railroads comprising 1,752 miles in
1889. All the roads save a few suburban lines are owned and operated by
the colony. Their total cost is not far from $60,000,000, and their net
annual revenue is about two and one-half per cent. of the capital
invested.
The colony of Queensland has only a system of narrow-gauge roads, with
the construction of which it commenced in 1865. Up to September, 1887,
the colonial government had constructed 1,641 miles of road at a total
cost of $47,700,000. The total number of miles has since been increased
to 2,058. The net revenue of the roads was a little over one million
dollars in 1886.
The transportation facilities of West Australia are still far behind
those of her sister colonies. The first line was opened in 1873, and the
total number of miles of road operated in the colony in 1889 was only
496. The government controls nearly all the railroads of the colony.
Of the islands of Australasia, Tasmania and New Zealand are as yet the
only ones that have railroad communication. The former built its first
road in 1870 and had at the end of the year 1890 about 1,900 miles in
operation. New Zealand opened its first railroad between Christchurch
and Lyttleton on December 1, 1863. The development of the system was
slow at first, there being but 25 miles of road in operation in 1870. In
1891 the number of miles of road had increased to 1,916, all but 92
miles being operated by the colonial government. The total amount
expended by the government for railroads is $55,000,000. The net revenue
in 1887 was about 2-1/2 per cent of the amount invested.
In South America railroad building is of comparatively recent date. The
first road was built in 1851, but the line was short and remained the
only one for several years. With thirty million people the South
American states have at present but little more than 16,000 miles of
railroad, a condition which must at least in part be ascribed to the
peculiar conservatism of the Latin race.
The United States of Colombia possesses less than 250 miles of road. Its
first line was the Panama Railroad, from Colon to Aspinwall. It connects
the Pacific with the Atlantic ocean, is 48 miles long and was
constructed in 1855. This, as well as the several other roads of
Colombia, is the property of private companies. A number of new roads
have recently been surveyed.
Venezuela opened in 1866 a road, 56 miles long, from Puerto Caballo to
Palito, which in 1870 was extended to Aroa. A number of other short
roads, aggregating about 350 miles, have since been constructed. The
total extent of railroad in Venezuela was 432 miles in 1889, of which
the greater part was operated by private companies. Several important
lines are in the process of construction, and will connect Caracas with
Carabobo, San Carlos and the port of La Guayra.
The Republic of Ecuador constructed in 1876 a road from Jaguachi to
Puente de Chimbo, a distance of 43 miles. This line was recently
extended to Siambe, and has now a total length of 94 miles. In 1886 a
charter was granted to a North American company, authorizing the
construction of a road from San Lorenzo to Esmeraldas and guaranteeing
certain dividends on the investment. At the close of the year 1889
Ecuador had 167 miles of road.
The first railroad in Peru was built in 1851, connecting the seaport
Callao with the capital, Lima. After this but little was done for more
than twenty years. At the beginning of the seventies an extensive
railroad system was projected at the instigation of President Don Manuel
Pardo, and the construction of the principal road of the system from
Mollendo on the Pacific Ocean to Santa Rosa was at once entered upon.
This road ascends the Western Cordillera, crosses a number of prodigious
mountain passes, reaches Lake Titicaca, and then proceeds in a
northwesterly direction to Santa Rosa. It is over 300 miles long, and
reaches near Puna an altitude of 14,700 feet. An extension of this line
from Santa Rosa to the old Inca city Cuzco was opened in 1875, but was
subsequently destroyed in the war with Chile, and has not been reopened.
Another road, extending from Callao to San Mateo, was opened in 1876. It
is eighty-seven miles long, and reaches with its enormous grades a
height of over 13,000 feet. It belongs, with the Santa Rosa road, to the
boldest creations of railroad engineering. Since the war with Chile
railroad enterprise has been checked. The number of miles of road in
operation rose from 962 in 1875 to 1,615 in 1880, but was, owing to the
abandonment of certain lines, diminished to 813 in 1884. Since that time
about 400 miles of new road have been opened.
In the Republic of Bolivia the first railroad was built about twenty
years ago from Antofogasta to Solar. After the cession of the province
of Antofogasta to Chile there remained but thirty-five miles of road in
Bolivia. More than 200 miles have since been added by the construction
of several short roads, chiefly the property of mining companies.
The Republic of Chile was the first of the South American states to
initiate the construction of railways. The building of a line from the
seaport Caldera to Copiapo was commenced in May, 1850, and was completed
on January 2, 1852. This line was constructed and operated by a private
company. The first state road, extending from Valparaiso to Santiago,
was opened on the 15th of September, 1865. To this road has since been
added an extension to Talcahuana, as well as several branch lines. The
total amount that has been expended by the Chilean government for the
construction of railroads is $43,000,000. The total number of miles of
road operated in Chile in 1887 was 1,674, of which 992 were the property
of private companies and 682 miles were owned by the state. Two hundred
and fifty miles of road have since been constructed, and the
construction of 700 additional miles of railroad has been authorized by
the government.
The Argentine Republic opened its first road, extending from Buenos
Ayres to Belgrano, in December, 1862. Several other lines soon
followed, and in 1870 over 600 miles of road had been constructed. This
number had increased to 1,440 in 1880 and to 5,100 in 1889. Since then
several new lines have been completed, aggregating over 600 miles. Among
the principal lines of the Argentine Republic is the transcontinental
road which connects the Atlantic with the Pacific Ocean. The whole line
is 880 miles long, of which 665 miles are in the Argentine Republic and
the remaining 115 miles in Chile. Of the 3,705 miles of road which were
in operation at the beginning of the year 1887 the republic owned 1,148,
the province of Buenos Ayres 572, the province of Santa Fe 102, and
private companies 1,888 miles. The total amount invested in railroads
was $154,000,000 in 1887, which yielded an average dividend of 3.9 per
cent.
The oldest railroad in Brazil is the Petropolis road. It was built by a
private company and opened on December 16, 1856. In 1881 the total
number of miles in operation was 2,422, and in 1889 it had increased to
5,766. Furthermore charters had been granted for the additional
construction of 2,271 miles of road. Of the lines in operation about
1,200 miles are the property of the state, yielding a revenue of nearly
3 per cent. on the capital invested. The state gives aid, besides, to
several private roads. The most important road of Brazil is the state
road Dom Pedro I., which connects the three richest provinces of the
country, Rio de Janeiro, Minas Gerals and Sao Paolo, with the national
capital. It was opened in 1883, and has a total extent of 544 miles.
The principal roads of Uruguay were built between 1865 and 1875. In the
latter year the total number of miles in operation in Uruguay was 190,
which in 1880 had increased to 230, and in 1889 to 469 miles.
In the remaining political divisions of South America the railroad
extended its dominion still more slowly. Paraguay opened as early as
1863 a line 45 miles long from Asuncion to Itangua, and in 1892 her
railroad system had increased to 159 miles in extent. British Guiana
completed in 1866 a line from Georgetown to New Amsterdam, but not one
mile of railroad has been built in that colony since. Of the islands of
South America Trinidad is the only one into which the railroad has been
introduced. The island has at present 50 miles of road, to 16 in 1878.
Central America has less than 600 miles of railway. The causes which
have retarded the development of the railroad system in South America
are also operative here. Of the five republics of Central America Costa
Rica has the largest number of miles of railroad, viz.: 161. It has
three different lines, of which the Limon and Carillo line, seventy
miles long, is the most important. This road, which connects with a New
York line of steamers at Limon, has greatly furthered the cultivation of
bananas in the Santa Clara valley.
Nicaragua completed its first road in 1880 between Corinto and
Chinandega, and has at present about 100 miles of railway in operation.
The Nicaragua Canal Company is constructing a road from Juan del Norte
to Ochoa, a distance of thirty-two miles, to be used in the construction
of the canal.
Honduras opened in 1871 its only line, thirty-seven miles long, between
Puerto Caballo and San Jago. In recent years an extension of nine miles
has been added to it.
San Salvador has, besides a street-car line between the cities of San
Salvador and Santa Tecla, only one line of railroad between Acajutla
and Armea, which was constructed with public funds and opened for
traffic on July 15, 1882.
Guatemala was the last of the Central American States to introduce the
railroad. Its first road, seventy-four miles long, and extending from
San Jose on the Pacific Ocean to the capital, Guatemala, was built by a
San Francisco company and opened on August 20, 1884. The state has at
the present time about 100 miles of road, with several short but quite
important lines under construction.
The West Indies have between 1,200 and 1,400 miles of railway, of which
more than 1,000 are in Cuba. The first road upon this island, 179 miles
long and extending from Habana to Guanajay, was opened as early as 1837.
The next ten years developed almost the whole of the railroad system of
the western half of Cuba. A number of important roads have since been
opened in the central and eastern portions of the island, whose railroad
mileage is at present larger per capita than that of any other political
division of the Western Hemisphere save that of Canada and the United
States. The second of the West India islands to construct a railroad was
Jamaica. A line connecting Kingston and Spanishtown was opened on the
21st of November, 1845. Two branch lines have since been added, making
the total number of miles of road on this island seventy-six at the
present time. About twenty-five miles more are now in the process of
construction. San Domingo and Hayti have also recently commenced to
build railroads. In the former republic a line from Sanchez to LaVega,
sixty-two and one-half miles long, is now open to traffic, and Hayti is
constructing a line from Gonaives, on the western coast, to Porte de
Paix, on the eastern coast of the island. The Spanish government in
1888 also granted a charter for the construction of a railroad on the
island of Porto Rica.
Of our neighbors on the North American continent, Mexico and Canada, the
former has been by far the slower to avail herself of the advantages of
railroad communication. The slow growth of the railroad system of Mexico
must be ascribed chiefly to the frequent political disturbances of the
country as well as to the many topographical obstacles which presented
themselves to the railroad engineer. The first Mexican railway,
excepting tramways, was the one which connects the capital with the city
of Vera Cruz. It was constructed by an English company and was opened on
the first day of January, 1873. In 1875 the total number of miles of
road in Mexico was 327, and five years later somewhat less than 700.
Since then the development of the system has been much more rapid. In
1880 several companies were formed for the purpose of building a system
of roads which would connect the Mexican capital with the United States
as well as with the most important harbors of the gulfs of Mexico and
California. The projectors of these lines, who were citizens of the
United States, received the hearty coöperation of the Mexican
government, and the work was at once pushed very vigorously. At the end
of the year 1885 more than 2,500 miles of new road were open for
traffic, and a thousand miles more at the end of the following year. In
1889 Mexico had 5,332 miles of road. The principal one of the newly
constructed roads is the Mexican Central, which connects Paso del Norte
with the City of Mexico. This line will also, when its branches are
completed, form a through route between the Gulf of Mexico and the
Pacific Ocean. Another scarcely less important through line north and
south is the National Mexican Railway, which is 722 miles long and
connects Laredo, on the Rio Grande, with the capital and the southern
states. Another line has recently been opened from Torreon to Durango.
The number of miles of road at present in operation in the Republic of
Mexico is about 6,800, with a number of new lines rapidly nearing
completion. The development of Mexico's resources has, during the past
decade, kept pace with the rapid expansion of its railroad system.
In the Dominion of Canada about fifteen miles of railroad line were
built as early as 1837, but only forty-three miles was added during the
next ten years. In 1852 there was still only 212 miles of railroad in
all of the British possessions in North America. At that time the
construction of the Grand Trunk system was commenced, the first section
of the system, Portland-Montreal, being opened in 1853. After this
railroads increased very rapidly in Canada, reaching an extent of 2,087
miles in 1860, 4,826 miles in 1875, 6,891 miles in 1880, and 10,150
miles in 1890. The majority of Canadian railroads are in the hands of
private companies, some of which have been very materially aided by the
government. One of the conditions upon which the union of the several
British provinces, except Newfoundland and Prince Edward Island, was
effected in 1867, was the construction of a railroad by the Dominion
government connecting the provinces of Ontario, Quebec, Nova Scotia and
New Brunswick. This road, the main line of which extends from Point
Levis, opposite Quebec, to Halifax, was accordingly built, and is still
operated by the Canadian government. Its cost was about 46,000,000.
But the most important enterprise in which the government is interested
is the Canadian Pacific Railway. Like the intercolonial railway, this
line was a result of the political union of the colonies. Its
construction was commenced by the government, but was subsequently
assigned to a private corporation, the Canadian Pacific Railway Company,
all that had been done by the government being turned over to the
company as a gift. It is estimated that the direct gifts of money, the
land grant and other privileges conferred by the Dominion government
upon the Pacific Railway Company exceed $100,000,000 in value, and that,
with the amount of bonds and stock guaranteed by the government, the par
value of its various aids amounts to $215,000,000, or $48,000,000 more
than the cost of the road, as will be shown by the following table,
taken from the report of the Interstate Commerce Committee of the Senate
of the Fifty-first Congress:
Subsidy granted by the act of Parliament of
February 13, 1881 $25,000,000
Seven hundred and fourteen miles of railroad
constructed by the Dominion Government, original
cost and interest 36,760,785
Capital stock guaranteed 65,000,000
Loan to the company authorized by Parliament of
1884, in part 29,880,912
Balance of above loan 15,000 000
Bonds, interest guaranteed by the Dominion for
50 years at 3-1/2 per cent 15,000,000
Land grant bonds 25,000,000
Subsidy of $186,000 a year, for 20 years 3,720,000
------------
Total $215,361,697
Total cost of road, according to the company's
balance sheet of December, 1888 $131,350,019
The Dominion Government owns and operates four railways, the cost of
which up to June 30, 1890, was $52,800,000. It has also granted to
railroad companies cash subsidies which to June 30, 1889, amounted to
over $46,000,000. The total number of miles of railroad in Canada was
14,004 in 1890. The people of Canada have, since the political union of
the colonies, pursued an exceedingly liberal policy toward their
railroads, but it appears that the great indulgence of the government
only bred license in railroad circles. The evil increased from year to
year, until the many complaints on the part of the public against
railroad management caused Parliament in 1886 to appoint a commission to
examine into the alleged abuses and to report as to the advisability of
the adoption of a general railroad law, and the appointment of a Board
of Railroad Commissioners. The committee reported to the
Governor-General of Canada on the 14th of January, 1888, and, acting
upon its recommendation, Parliament passed the Railway Act of May 22,
1888. This act, containing 309 paragraphs, provides for the complete
regulation of railroad affairs, and for this purpose creates a Board of
Railroad Commissioners, consisting of the Minister for Railroads and
Canals, the Minister of Justice and two or more members of the Privy
Council. The act also repeals all former railroad laws. Though it has
been in force less than five years, its beneficial effects are already
extensively felt by the Canadian public.
CHAPTER III.
HISTORY OF RAILROADS IN THE UNITED STATES.
In no country in the world has the growth of railroads been so rapid as
in the United States. With a population less than one-fifth as large as
that of Europe this country has a larger number of miles of railroad
than that continent. While European countries generally opposed the
introduction of the new system of transportation, our people extended to
it a hearty welcome. This difference of sentiment can easily be
accounted for. At the time of the invention of railroads Europe had a
system of turnpikes and canals which, at least for the time being,
answered every purpose. It became necessary for the railroads to enter
into competition with these well-established agencies of transportation,
which had the test of time, popular prejudice and governmental sanction
in their favor. Moreover, the railroad as a new and unknown quantity
caused a feeling of uneasiness in all conservative circles. It seemed to
make war against time-honored principles of statecraft and society, and
threatened to bring about a revolution the outcome of which no one could
foresee.
The condition of things was entirely different in the United States.
There were but few good roads and still fewer turnpikes and canals. A
vast territory in the interior awaited cultivation. Excepting the coast
and a few cities situated on the large navigable rivers, the East and
the West and the North and the South were practically without commercial
relations, and were only held together by a community of political
traditions and the artificial cement of a common constitution. Even had
the country had a system of turnpikes and canals, the Mississippi River
would still have been a forty days', and the extreme Northwest a three
months' journey distant from New York. It seems extremely doubtful
whether the different sections of so large a realm, having so little
community of commercial interests, could long be kept together under a
republican system of government. The settlement of the central portion
of the country and the development of its resources seemed to be the
task of future centuries. The railroad under these circumstances made
its appearance at a most opportune time for America, and the American
people were not slow to make the best of the opportunities presented to
them.
In the United States, as in England, the railroad was preceded by the
tram-road. The first tram-road in this country was opened in 1826. It
connected the granite quarries of Quincy with the Neponset River, and
was operated by horsepower. The second road of this kind was the Mauch
Chunk tramway, in Pennsylvania, opened in 1826, for the transportation
of coal. The trains were drawn up an inclined plane by stationary
engines and were moved down by their own weight. During the same year
the Delaware and Hudson Canal Company opened the Carbondale and
Homesdale tramway, connecting their mines with the Delaware and Hudson
Canal. It appears that an English locomotive was imported for use on
this line in 1828, but that it did not answer its purpose.
During the same year was commenced the construction of the first line of
importance in this country, the Baltimore and Ohio. The line was opened
for traffic in 1830, having then an extent of fourteen miles. In 1831 it
was extended sixty-one miles, and the year following sixty-seven miles.
For a year the road was operated by horsepower, but in 1831 the company
purchased for its road an American locomotive.
The first road upon which a locomotive engine of American manufacture
was used was the South Carolina Railroad, which was commenced in 1830.
The engine was manufactured at West Point and was placed upon the road
in December of the same year. The line had then an extent of ten miles.
In 1832 it had increased to sixty-two miles, and in 1833 to 136 miles.
The construction of the Mohawk and Hudson was commenced in August, 1830,
and the road was opened in September of the following year. Its first
locomotive engine was also imported from England, but, being found too
heavy, was soon replaced by an American engine of half its weight. In
1831 two other New York roads were commenced, the Saratoga and the New
York and Harlem. A small portion of the latter was opened during the
same year, and the former in July, 1832. The Camden and Amboy Railroad
in New Jersey was likewise commenced in 1831, but its completion was not
reached till 1834. The New Castle and Frenchtown Railroad was completed
in 1832, the Philadelphia and Trenton in 1833, and the New Jersey in
1834. In 1835 the Washington branch of the Baltimore and Ohio was
opened, and the entire line had at the end of that year attained an
extent of 115 miles. During the same year three Massachusetts roads,
connecting Boston with Providence, Worcester and Lowell respectively,
were opened. In 1836 the New York Central route was opened to Utica. In
1837 the Richmond, Fredericksburg and Potomac Railroad was completed
from Richmond to Fredericksburg. In 1838 the Richmond and Petersburg and
the Philadelphia, Wilmington and Baltimore railroads were opened. The
Wilmington and Weldon Railroad was completed in 1840, and the Petersburg
and Roanoke three years later. There was now a continuous line of
railway from the Potomac to Wilmington, North Carolina. In 1842 the
whole line of the Boston and Albany road was completed, which thus
became the first important through route in America.
The construction of railroads in the United States was from the first
carried on without a system. Railroads in an early day were purely local
affairs. Each locality operated its own road in its own interest and
without any supervision from the State which had granted its charter.
Acts of incorporation or charters were granted as a matter of course.
Railroads were looked upon as the natural feeders of canals, and their
future importance was foreseen by very few men. The early roads were a
heavy burden on the capital of the country. A number of small roads were
built that proved unprofitable and had to be abandoned. After the
financial panic of 1837 there was, except in New England, a very
perceptible stagnation in railroad enterprise, which lasted until the
discovery of gold in California, in 1848. The average number of miles of
road constructed per annum during the ten years preceding 1848 was 380,
while it was nearly 1,800 per annum during the seven years following.
It may be said that with the discovery of gold in the West ends the
first or formative period of railroad construction. From the first
opening of the Baltimore and Ohio to the beginning of the year 1848, a
period of eighteen years, there were constructed in the United States
5,205 miles of railroad, or an average of 289 miles per annum. The
discovery of gold on the Pacific gave a new impetus to railroad
construction throughout the country. Railroads now ceased to be local
works and became interstate or national thoroughfares. Extensive new
lines were built and through routes were formed by the coalition of
local roads. It was during this period that railroad companies first
became conscious of the importance of their mission and that they
commenced to compete with river and canal carriers. In 1848 a through
route was completed between Cincinnati and Lake Erie. A more direct
line, the Cleveland, Columbus and Cincinnati road, was opened in 1851.
During the same year the Erie Railroad reached Lake Erie and connected
the lake with the Hudson, and a year later Chicago received railroad
connection with the East by the completion of the Michigan Central and
Michigan Southern. In 1854 the Chicago and Rock Island reached the
Mississippi River, and in 1855 the Chicago and Galena was opened. One
year later the Illinois Central reached the Mississippi at Cairo, and
the Chicago, Burlington and Quincy Railroad was opened to Quincy. The
Ohio and Mississippi, between Cincinnati and St. Louis, was completed at
about the same time. The Pittsburgh, Fort Wayne and Chicago, an
extension of the Pennsylvania road, was completed to Chicago in 1858. At
the beginning of 1859 the Hannibal and St. Joseph Railroad reached the
Missouri River, and eight years later the Cedar Rapids and Missouri was
completed to the Missouri at Council Bluffs.
To encourage the extension of railroads into new and thinly settled
territories, and to thus hasten their settlement and the development of
their resources, the people of the United States began at the
commencement of this period to favor the policy of land grants. Such
grants had repeatedly been made to roads and canals prior to the crisis
of 1837. The first railroad that received a land grant was the Illinois
Central. The scheme was proposed as early as 1836, but the act making
the grant was not passed until September 20, 1850. Other grants followed
in 1852 in Missouri, in 1853 in Arkansas, in 1856 in Michigan,
Wisconsin, Iowa, Florida and Louisiana. As a rule these lands were
granted by the National Government to the States, and by them to the
railroads. The land grants made during President Fillmore's
administration amounted to eight million, and those made during Pierce's
administration to nineteen million acres. The financial crisis of 1857
and the War of the Rebellion again checked railroad building, but this
period developed a new phase of railroad enterprise as well as of the
land grant policy. In those times of national trial a railroad to the
Pacific Coast seemed a political necessity. The project of connecting
the Atlantic and Pacific oceans by a line of railroads was first brought
prominently before the American people by Asa Whitney of New York. At a
meeting held under his auspices in Philadelphia on the 23d day of
December, 1846, a movement was inaugurated for the purpose of
interesting the people in this enterprise and securing the aid of the
government for its accomplishment. Various plans were urged, and earnest
discussions followed, in which the ablest minds of the nation
participated. The continual agitation of the subject finally led, on the
1st of July, 1862, to the passage by Congress of an act incorporating
the Union Pacific Railway Company and the adoption of the central route.
The Union and the Central Pacific companies received a virtual money
subsidy of $30,000,000 and a land grant aggregating nearly twenty-three
million acres, a domain almost equal to the State of Indiana. Other
direct grants of territorial lands soon followed. The Northern Pacific
received, just before the close of the war, a grant of forty-seven
million acres of land. In the Southwest public lands were also freely
given to new Pacific lines. The various grants made to railroads
comprise no less than 300,000 square miles, equal to four and a half
times the area of New England, or six times that of the State of New
York, or equal to the total area of Iowa, Wisconsin, Illinois, Indiana,
Michigan and Ohio. Where these grants were not deemed sufficient
inducement for the construction of roads, counties, cities and towns
freely voted subsidies, while private citizens made donations to or
subscribed for the securities of the new railroads.
As has already been stated, the consolidation of connecting lines and
their transformation into a few large through routes was one of the
characteristic features of this period. As through traffic, and
particularly through freight, grew in importance, it became more and
more apparent that frequent transhipment was an expense to the railroads
as well as a burden to the public. The system of railroad ownership and
management soon adapted itself to the necessities of business. The
change seems to have been inevitable, for it occurred in all parts of
the world at about the same time. Sagacious men early recognized the
importance of railroads as national lines of communication. This idea no
doubt controlled the projectors of the Baltimore and Ohio, of the Erie,
and of the Boston and Albany roads. The first consolidation of any
importance took place in 1853, when eleven different roads between
Albany and Buffalo were united to form the New York Central. Five branch
roads were added to the system between 1855 and 1858. In 1864 Cornelius
Vanderbilt secured control of the Hudson River road, and in 1867 of the
New York Central, which lines he consolidated in 1869. By gaining soon
afterward control of the Lake Shore and Michigan Central and Southern
Canadian roads, he united under one management over 4,000 miles of
railroad between New York and Chicago, and thus created the first
through line between the East and the West.
As has already been stated, the Pennsylvania road gained control of the
Pittsburgh, Fort Wayne and Chicago in 1858 and thus extended its system
as far as Chicago. Through the absorption of other lines it reached an
extent of over 7,000 miles. The creation of this through route was
chiefly the work of Thomas A. Scott, at that time vice-president, and
later president, of the Pennsylvania railroad.
In 1874 the Baltimore and Ohio, under the management of John W. Garrett,
extended its system to Chicago, and became a competitor of the two older
lines in the transportation of through freight. At about the same time
two other parallel trunk lines were developed, the Grand Trunk on the
north, and the Erie, between the Lake Shore and Pennsylvania lines.
There were, therefore, in 1874 five rival trunk lines competing for the
business between the West and the seaboard.
During the same period large rival lines developed west of Chicago and
St. Louis. From the former city radiate the St. Paul and Northwestern
systems, each with from 6,000 to 8,000 miles; the Atchison, Topeka and
Santa Fe with over 9,000 miles; then the Rock Island, the Chicago,
Burlington and Quincy, the Illinois Central, the Chicago Great-Western,
and the Chicago and Alton, their systems ranging from 1,000 to 6,000
miles in extent. From St. Louis radiate the various branches of the
Missouri Pacific and the closely allied Wabash system, controlling
together some 10,000 miles of road.
This process of consolidation also went on in the Southern States,
though to a less extent. Their systems do not run parallel, like the
trunk lines, nor do they radiate from a common center, like the roads of
the Northwest, but they radiate from the principal ports of the Atlantic
and the Gulf of Mexico toward the interior.
We now enter upon the third period of the history of American railroads,
the period of combinations. During the time of great activity in
railroad construction following the War of the Rebellion many abuses in
railroad management had been developed, which caused general complaint
and led to what is known as the Granger movement. Laws were demanded,
especially in the agricultural States of the West, which should regulate
the rates, methods of operation, and the political relations of the
railroads. The friends of this movement were successful in the political
contests that followed, and Granger legislatures were elected in the
States of Illinois, Wisconsin, Iowa and Minnesota. Laws were passed
fixing the rates on different classes of roads and providing penalties
for their violation. The companies contested these acts in the courts,
but were defeated at every step, until in 1877 the Supreme Court of the
United States sustained the constitutionality of the Granger laws. In
the meantime railroad managers tried their utmost to render, by shrewd
manipulation, these laws obnoxious, and they finally succeeded in having
them repealed or so amended as to render them largely ineffectual.
It was the principal object of the Granger movement to do away with the
many discriminating tariffs which so injuriously affected local points.
It is true, discriminations between individuals were practiced at
business centers, but rates upon the whole were low at such points as
compared with those which obtained at local stations. While the Granger
contest was still going on in the West, a new evil developed in the
East, which became characteristic of the period and finally grew into
one of the most intolerable abuses of railroad management. Railroad men
had gradually learned that it was in their power to maintain high rates
at competitive as well as at non-competitive points, provided all the
roads centering at such points could be induced to coöperate, or rather
to conspire for that purpose. The final solution of the problem was,
after some experimentation, found in the device to control the prices of
transportation generally known as the pool. It is doubtful whether any
contrivance connected with railroad management ever threatened to
subvert long-established principles of the common law more completely
than this. Within a few years it extended its dominion over the whole
country, exacting a heavy tribute from its commerce, until the people's
patience finally became exhausted and their determined demand for
railroad reform led to the enactment of the Interstate Commerce Act in
1887.
When this act passed, dire results were predicted by nearly every
railroad man in the country. Prophecies were freely made that it would
ruin half of the roads and seriously cripple and sadly interfere with
the usefulness of the other half, that it would derange the business of
the country, greatly depreciate all railroad securities and put an end
to railroad construction. Nearly seven years have passed since the
adoption of the law, but not one of these prophecies has come to pass.
There are at present probably less bankrupt roads in the United States
than there have been at any time for twenty years, our business
interests have been improved, the securities of honestly managed roads
are in better repute than they were previous to the passage of the law,
and the railroad mileage of the country is increasing at the rate of
about 6,000 miles a year. If any branch of business has suffered in
consequence of the enactment of the law, it is the branch monopolized by
Wall Street. Since 1885, the time when the Interstate Commerce Bill was
first seriously agitated, the aggregate of railroad securities has
increased nearly $2,500,000,000, or about one-third. This certainly does
not look as if capital had been seriously frightened by the Interstate
Commerce Act. There are other proofs of railroad prosperity. In 1885 the
gross earnings of the railroads of the United States were $772,568,833,
or 9.9 per cent. on their reported capital. In 1886 their gross earnings
were $829,940,836, or 10.2 per cent. on the reported railroad capital.
In 1890 the gross earnings had increased to $1,097,847,428, and equaled
10.8 per cent. on the reported capital. This includes even the
capitalization of new lines and others not reporting operations. Mr.
Poor gives the reported cost of the lines actually operated as
$8,519,670,421, against $10,122,635,900 reported cost of all the
railroads built. Omitting from the computation the lines not reporting
operations, the gross earnings of the roads actually operated equaled
12.7 per cent. and their net earnings 4 per cent. on the actual cost of
the lines which reported. The gross earnings for 1891 were
$1,138,024,459, and for the year ending June 30, 1892, $1,222,711,698.
The gross earnings per mile have increased from $6,265 in 1885, and
$6,570 in 1886, to $6,946 in 1890, and $7,409 in 1892. In 1885 the
capitalization per mile of road was $55,059 and the net earnings per
mile were $2,185. In 1890 the capitalization per mile had decreased to
$53,783, while the net earnings per mile increased to $2,195. The
railroad mileage of the country has grown from 128,361 in 1885 to
166,817 in 1890, to 170,601 in 1891, and to 175,000 in 1892.
The railroad system of the United States has had a phenomenal growth,
especially since 1870, since which time nearly 120,000 miles of road, or
more than two-thirds of the total mileage, have been constructed. The
table below shows the number of miles of railroad constructed and in
operation, by quinquennial periods from 1830 to the close of 1890,
inclusive:
YEAR. MILES IN OPERATION. INCREASE.
1830 23
1835 1,098 1,075
1840 2,818 1,720
1845 4,633 1,815
1850 9,021 4,388
1855 18,374 9,353
1860 30,626 12,252
1865 35,085 4,459
1870 52,922 17,837
1875 74,096 21,174
1880 93,296 19,200
1885 128,361 35,065
1890 166,817 38,456
It will be noticed that in the sixty years covered by the above table
there are but two quinquennial periods which show a falling-off in the
rate of growth, viz.: 1860-65 and 1875-80. During the former period
railroad construction was partially checked by the War of the Rebellion,
during the latter by the general financial depression following the
panic of 1873.
The length of railroads in the world has grown from 206 miles in 1830 to
about 400,000 miles in 1892. The following table shows the growth of
railroad mileage by quinquennial periods:
YEAR. MILES.
1830 206
1835 1,502
1840 5,335
1845 10,825
1850 23,625
1855 42,340
1860 66,413
1865 90,280
1870 131,638
1875 182,927
1880 231,190
1885 303,172
1890 385,000
From this table it is seen that the railroad mileage of the world has
doubled during the past fifteen years, and that its average annual
increase is at present not far from 17,000 miles. There is no doubt that
the extent of railroad construction has everywhere exceeded all
anticipations. So fast has the railroad system expanded in the most
highly civilized countries that it soon outgrew in nearly all of them
the laws originally adopted for railroad control. In time an almost
universal demand arose for reform, and the most progressive governments
were not slow in heeding it. For the past fifteen years there has been a
decided drift on the European continent toward state ownership of
railroads, or to such strict control of the transportation business as
virtually deprives the operating companies of the power to do injustice
to the public.
The railroad is assuming more and more the character of an international
highway. A movement is on foot to connect the railroad systems of the
United States with those of South America by an intercontinental or
"Pan-American" railroad. Appropriations have been made by the United
States and several of the South American republics for a preliminary
survey of the proposed line. Three different surveying parties are in
the field, one in Central America and the other two in the United States
of Colombia and Ecuador. The progress so far reported by them is
encouraging, and there is now some hope that before the close of the
nineteenth century one may be able to travel by railroad from New York
to Valparaiso without even a change of cars.
It has also been proposed to span Behring Strait and connect North
America with Asia and Europe by an international railway. This line, if
constructed, would be simply an extension of the proposed Pan-American
railroad and would follow the western coast of the United States as far
as Behring Strait, then cross over into Asia, traverse Siberia and
finally reach London via St. Petersburg, Berlin and Paris. It is very
questionable whether such a line is at present feasible either from a
technical or financial point of view, but the time will probably come
when the railroad track will connect New York and London.
CHAPTER IV.
MONOPOLY IN TRANSPORTATION.
From time immemorial efforts have been made by designing men to control
either commerce or its avenues, the highways on the land and on the sea,
by a power which law, custom, ingenuity, artifice or some other agency
had placed into their hands.
The ancient Phoenicians early aimed at and finally obtained the empire
of the sea by making themselves masters of the most commodious harbors
of the Mediterranean Sea and the Arabian Gulf. They established a
regular intercourse with the countries bordering on the Mediterranean as
well as with India and the eastern coast of Africa. From these latter
countries they imported many valuable commodities which were not known
to the people of other parts of the world, and during a long period they
held this lucrative branch of commerce without a rival. The character
and the situation of the Phoenicians aided them greatly in acquiring
this mastery of commerce. Neither their manners and customs nor their
institutions showed any marked national peculiarity; they had no
unsocial prejudices and they mingled with the people of other countries
without the least scruple or repugnance. As their native country was
small and quite barren, they early learned to rely upon commerce as the
best source of riches and power. Like the other Semitic tribes, the
Phoenicians were noted for their energy and acumen, and while they
were not a literary people in the strict sense of the word, ancient
civilization received probably a more powerful impetus through their
commercial supremacy than through any other agency.
During the reign of King Solomon the Jews made an attempt to wrest from
the Phoenicians at least a part of the world's trade. Solomon built
ships and imported Phoenician sailors for his fleet. For a time it
seemed as if the Israelites might become the rivals of their teachers in
the art of navigation and in the mysteries of trade; but their peculiar
religious customs in that early day proved a serious impediment to
commercial ascendancy, as it rendered them incapable of that unreserved
intercourse with strangers so essential in commerce.
The monopoly of the sea, at least of the Mediterranean, passed to the
Carthaginians, their descendants. The latter extended their navigation
toward the west and north. They planted colonies and opened new harbors,
and up to the time of the Punic wars kept almost the entire trade of the
countries bordering on the Mediterranean in their hands.
After the downfall of Carthage the control of the commerce of Southern
Europe and Northern Africa descended to the Romans. When Rome became the
capital of the world, it gathered the wealth and valuable productions of
all its provinces. Under the consuls and the earlier emperors the
vigilance of the Roman magistrates and the spirit of the Roman
government gave every possible security to commerce and prevented for a
time the rise of monopoly. Nowhere was national union so complete or
commercial intercourse so perfect as in the Roman empire. The
intelligence and the power of Rome stimulated and regulated the industry
of her people and permitted them to enjoy the fruits of their efforts
without public or private restrictions.
We have seen that the intercourse of Rome and her provinces was
facilitated by the construction of roads and the establishment of
imperial posts. During the decline of the empire the maintenance of
these posts led, however, to a grave abuse. We are informed by Gibbon in
his "Decline and Fall of the Roman Empire":
"But these beneficial establishments were accidentally connected with a
pernicious and intolerable abuse. Two or three hundred agents or
messengers were employed, under the jurisdiction of the master of the
offices, to announce the names of the annual consuls and the edicts or
victories of the emperors. They insensibly assumed the license of
reporting whatever they could observe of the conduct either of the
magistrates or private citizens, and were soon considered as the eyes of
the monarch and the scourge of the people. Under the warm influence of a
feeble reign they multiplied to the incredible number of ten thousand,
disdained the mild though frequent admonitions of the laws, and
exercised in the profitable management of the posts a rapacious and
insolent oppression. These official spies, who regularly corresponded
with the palace, were encouraged by favor and reward anxiously to watch
the progress of every treasonable design, from the faint and latent
symptoms of disaffection to the actual preparation of an open revolt.
Their careless or criminal violation of truth was covered by the
consecrated mask of zeal; and they might securely aim their poisoned
arrows at the breast either of the guilty or the innocent, who had
provoked their resentment."
After the downfall of the Romans, commerce remained paralyzed during the
period of Gothic ignorance and barbarism. The crusades for the recovery
of the Holy Land from the Saracens, in the eleventh and following
centuries, opened again communication between the east and the west by
leading multitudes from every European country into Asia; and though the
object of these expeditions was conquest, and not commerce, their
commercial effects were both beneficial and permanent. The crusades were
especially favorable to the commercial pursuits of the Italian states.
The vast armies which marched from all parts of Europe toward Asia gave
encouragement to the shipping of Venice, Genoa, and Pisa, which
sometimes transported them, and always supplied them with provisions and
military stores. Besides the immense sums which these states received on
this account, they obtained commercial privileges of great consequence
in the settlements which the crusaders made in the East. All the
commodities which they imported or exported were exempted from every
imposition, the property of entire suburbs in some of the maritime
towns, and of large streets in others, was vested in them, and all
questions arising among persons residing within their precincts, or who
traded under their protection, were decided by their own laws and by
judges of their own appointment. When the crusaders took Constantinople,
the Venetians did not neglect to secure to themselves many advantages
from that event. Nearly all the branches of commerce were in time
transferred from Constantinople to their city. At the end of the crusade
period Venice had monopolized nearly all the foreign trade of Europe.
She supplied the people of Italy, France and Germany with those
commodities with which the crusaders by their intercourse with more
refined nations had become acquainted. The possession of many Eastern
ports and the maintenance of a powerful navy made it possible for the
Venetians to retain their monopoly for several centuries.
The growth of commerce in Central Europe was but slow, owing to the
dangers to which it was exposed in those days of feudalism. The mountain
fastnesses of robber knights, which controlled every road and navigable
river, were so many toll-gates at which the wayfaring merchant was
stopped to pay tribute. In time this system of plunder grew to such an
extent that hundreds of feudal lords relied upon it for their support.
Such a tax upon commerce greatly enhanced the value of all commodities,
and this deplorable state of things lasted until the cities made their
power felt by forming alliances for mutual protection. One of these
alliances, the Rhenish League, comprised in time seventy towns, and the
ruins of the strong castles destroyed by its forces still exist along
the Rhine, picturesque memorials of these lawless times.
Perhaps the most powerful commercial union of the middle ages was the
Hanseatic League. To protect their commerce, the cities of Hamburg and
Lubeck formed about the middle of the thirteenth century an alliance for
mutual defense. The advantages derived from this union attracted other
towns to the confederacy. In a short time about eighty of the largest
cities lying between the Baltic and the Rhine joined this famous league,
which in time became so formidable that its alliance was courted and its
enmity was dreaded by the greatest monarchs. The League divided its
territory into several districts. Its members, like railway associations
of the present day, made their own laws, and met for this purpose at
regular intervals in the city of Lubeck. The original object of the
League, mutual assistance against outside attacks, was soon lost sight
of, and its constantly growing power was used to obtain still greater
commercial privileges in the adjoining countries, and even to force
their rulers to concede to its members a commercial monopoly. In 1361 a
controversy arose between the League and the King of Denmark, which led
to a long and bitter war between them. This war was participated in by
no less than seventy-seven cities on the part of the League. It
terminated in 1370, leaving the Hansa master of the situation. For many
years after this the League exerted its power in Denmark, Sweden and
Norway, and the rulers of these countries were compelled to respect the
wishes and even submit to the orders of these proud merchants. The
countries bordering on the Baltic Sea remained the domain of the League
for several centuries. They gathered there immense quantities of raw
material, which they sold in the various ports of Europe. The influence
of the League even reached as far as Novgorod in the east and London in
the west. In both cities the League had its quarters, and within them it
virtually exercised the right of sovereignty. Its main market was at
Bruges in Flanders, which was then a bee-hive of industry and thrift.
There the Italian traders came with the products of the east, such as
spices, perfumes, oil, sugar, cotton and silk, to exchange them for the
raw materials of the north. While taxes and imposts everywhere else
harassed merchants, commerce was free in the cities of Flanders, owing
to the liberality, or rather shrewdness, of her rulers. In Bruges the
members of the Hansa met the merchants of Venice on equal terms, and the
exchange of the products of the north for those of the east and south
could be effected there to the greatest advantage of both.
While it must be admitted that the Hanseatic League developed the
resources of Northern Europe, and that, even at the time of its greatest
power, there was always competition among its own members, the fact
remains that it abused its power by the suppression of all outside
competition, and that it usurped rights which belong only to the state,
thus often producing abuses as great as those which it was organized to
remedy. Its final downfall was caused by the development of national
power in the northern kingdoms and the growth of commerce and
navigation in Great Britain. A stubborn assertion of antiquated
privileges on the part of the Hansa involved it in a feud with the
illustrious and lion-hearted Queen Elizabeth of England. In 1589 the
Queen caused sixty of their vessels to be captured on the Tagus, and
later even took possession of their hall and wharves in London. After
this the League's decline was very rapid, though its organization was
kept up till 1669, when its delegates held their last session.
Contemporary with the decline of the Hanseatic commerce in the north was
that of the Italian cities, especially Venice, in the south. They had
prospered by their commerce with the Levant until Vasco de Gama
discovered the sea route to East India in 1497. His countrymen, the
Portuguese, soon utilized this discovery. They took possession of the
coast of India and of the islands to the south of it. They also
succeeded in excluding the Arabs from the commerce with that country, of
which up to that time they had had exclusive control. For this purpose
they built fortresses and factories on the west coast of Hindostan, took
possession of the island of Socotra in the Arabian, and of Ormus in the
Persian Gulf, and forced the Indian princes to grant them the exclusive
privilege of trading with their subjects. They also captured the city of
Malacca, where the trade between China, Japan, the Philippine Islands,
the Moluccas and India had concentrated itself. In this way they got in
a comparatively short time control of the commerce of India, Arabia, and
even Egypt. By forcing the Venetians and their commercial allies out of
those markets, they secured for themselves a monopoly of the commerce
between Europe and the east. The political ascendancy of the Turks in
the islands situated in, and in the countries bordering on, the Eastern
Mediterranean, caused the loss of Cyprus, Crete (Candia) and Morea to
the Venetians and greatly aided the Portuguese in establishing their
commercial supremacy. Less profitable for the latter was the possession
of their American colonies. They, as well as the Spaniards, adopted here
a policy which ultimately brought commercial and industrial ruin upon
both. Entirely neglecting agriculture and relying on the mineral
resources of their transatlantic colonies, which were believed to be
inexhaustible, they strove to amass riches by reserving for themselves
the exclusive privilege of supplying them with the manufactures of
Europe in exchange for American gold. Neglecting home industries, they
bought their supplies as well as those of their colonies in France,
Holland and England. A spirit of speculation and adventure enervated
their people, and led in time to commercial bankruptcy and political
disaster.
Spain also drained her treasury by her wars with her Dutch dependencies,
and the loss of her northern provinces was a serious blow to her
commerce. Antwerp, which had become the successor of Bruges as the
commercial emporium of the north, began to decline, and Amsterdam, the
metropolis of the new Dutch republic, became heir to its glory and its
riches. The young republic at once commenced to compete in the carrying
trade with Spain and Portugal, and to make inroads into the eastern
commerce of the latter.
The Dutch East India Company, which was organized in 1602, sent a fleet
of fourteen vessels into the Indian Archipelago to found colonies in
Java, Sumatra and the Moluccas. In a short time they had monopolized the
entire spice trade, which immediately became a source of great wealth.
A cargo of five vessels, which returned to Amsterdam in 1603, consisted
of over two million pounds of spices. This cargo was purchased for
588,874 florins and was sold for 2,000,000 florins. It is under these
circumstances not surprising that the dividends of the company's
stockholders often amounted to 75 per cent., and never went below 12-1/2
per cent. previous to 1720. Holland's colonial trade made Amsterdam the
commercial metropolis of Europe. It became the grain market from which
Spain, Italy and other countries drew their supplies. All the products
of the world found purchasers here, and a well-developed banking system
greatly facilitated the exchange. The rapid accumulation of fortunes by
the Dutch merchants and bankers was without precedent in Europe. Besides
this, the progress which Holland made in ship-building and navigation
and the advantages which she derived from her colonial trade placed her
in a position to outstrip all other nations in the carrying trade of
Europe. During the first half of the seventeenth century the Dutch were
justly called the freighters of Europe. But the injury which their
policy did to the commercial and manufacturing interests of other
European nations led both England and France to adopt measures well
calculated to accomplish, in a short time, their commercial
emancipation. Louis XIV., in order to build up French shipping,
collected a tonnage from every foreign ship which entered a French
harbor. England went still further. In 1651 Oliver Cromwell promulgated
the Navigation Act, by which foreign ships were prohibited from
importing into England any goods except such as were produced or
manufactured in their own countries. This was a heavy blow at the Dutch,
who were thus deprived of the privilege of effecting the exchange of
commercial commodities between England and her colonies as well as the
continent. The war which the Dutch Republic waged against England, to
force her to revoke this act, resulted in favor of the latter and ended
the commercial supremacy of the Dutch in Europe.
England, which before this time had played but a secondary role as a
commercial power, rose fast to prominence after her successful struggle
with the Dutch. She commenced to strengthen her industries by the
adoption of a high tariff policy, and her merchants were encouraged to
enter into commercial relations with colonists and foreigners. The
privileges which had been given to foreign tradesmen were revoked, while
ship-building and navigation were greatly favored by the government. As
England gained greater strength as a naval power, her foreign policy
became more aggressive.
In 1600 the "Company of Merchants of London Trading to the East Indies"
obtained a charter, and, in spite of Dutch and Portuguese opposition,
soon gained a foothold on the Moluccas and the coast of Malabar, whence
it extended in time its dominion to Surat, Bombay, Madras and Calcutta.
Here they built forts and established their commerce. From these places
the company pushed into the interior, until finally, after repeated
struggles with the natives and European rivals, the whole of Hindostan
came under English dominion. As its power increased, the company
commenced to abuse shamefully the monopoly which it had been granted, by
inaugurating a system of plunder and oppression which is perhaps without
its equal in the annals of history. These growing abuses led to frequent
revolts and seriously imperiled England's dominion in these territories.
To remedy these evils, Parliament at the close of the seventeenth
century annulled the charter of the company and declared the commerce
with the East Indies open to all of the King's subjects. A number of
small companies were formed, but in 1702 they all combined and organized
the East India Company. Monopoly was again established, but the patience
of the natives was exhausted, and England's interests in Hindostan were
in a critical condition. At this juncture the East India Company adopted
a policy of moderation, and this, together with the aid which the
government gave to the company, enabled it to strengthen again its
weakened commercial relations and to further enlarge its territory. But
the temptation to abuse its power was too great for this strong
corporation to be long resisted. Abuses again crept into its management
and continued to grow until its charter was finally repealed.
The policy adopted by Great Britain for the government of her American
colonies during the eighteenth century was less rapacious, but scarcely
more just than that pursued in her eastern possessions. To retain those
colonies as commercial no less than as political dependencies,
Parliament enacted laws compelling their people to trade with the mother
country exclusively and laying restraint on their manufactures. But the
American pioneers felt that they had brought with them across the ocean
the rights of Englishmen; they objected to taxation without
representation, and the men who for opinion's sake had left comfortable
homes to brave upon a distant shore the dangers of frontier life were
prepared, if necessary, to emphasize their objection by armed
resistance. England, intent upon maintaining her barbaric system of
discriminative duties and commercial monopolies, blindly attempted
coercion, but the war which resulted wrested from the English crown its
brightest jewel, and the War of 1812 established upon American soil the
principle of industrial and commercial liberty.
It must not be supposed, however, that America and the United States in
particular have been free from monopolies growing out of the
transportation business. Nothing would be farther from the truth. There
is no law so stringent but that it will be violated; there is no
government so vigilant but that it will at times be imposed upon. It is
true, our government sanctions no monopoly, but the very liberty of
action which exists here among corporations as well as individuals
offers to organized wealth and power a wide field for abuses.
We have seen in the foregoing that almost from time immemorial efforts
have been made to monopolize transportation and trade, and that these
efforts were successful whenever either from ignorance or weakness the
masses fell into political apathy. There is a natural tendency among men
to utilize commercial advantages to the detriment of others. In modern
times the opportunities for building up large monopolies have greatly
increased and have been turned to the most profitable account by
designing men. Great and even unbearable abuses have always followed
where the greed and ambition of such men have not been checked by
governmental agencies. In this respect the people of the United States
have had about the same experience as the rest of mankind. Ever since
the introduction of railroads into this country there has been a
well-marked drift toward monopolizing the transportation business.
As long as the dangers of monopoly remained unknown to the American
people, legislation for the control of railroads and other public
carriers was both scarce and crude, and shrewd railroad men were not
slow in taking advantage of the situation. It is foreign to the design
of this treatise to give a complete history of railroad monopoly in the
United States. The author will therefore confine himself to showing that
transportation companies will, like the great commercial organizations
of the past, when left to follow their instincts, invariably use their
power to oppress the public by exacting excessive charges for their
services, or to discriminate against the many by extending special
privileges to the few. Hundreds of cases might be given to illustrate
the above rule, but a history of two of these corporations will suffice
to show to what extent corporate abuses can be carried, and to serve as
a warning against the adoption of any "_laissez faire_" policy in the
railroad legislation of the future. The corporations selected for this
purpose are the Camden and Amboy Railroad and the Standard Oil
Companies, both typical representatives of the Rob Roy policy which
organized wealth has pursued since the dawn of civilization, when not
prevented by the wisdom and strength of a good government.
THE CAMDEN AND AMBOY RAILROAD COMPANY.
For almost forty years the Camden and Amboy Railroad was the only direct
route between the cities of New York and Philadelphia. It is doubtful
whether previous to the war a more important or a more remunerative road
existed in the United States, for, besides connecting the two largest
cities in the Union, it formed part of the direct land route from the
East to the South.
The efforts to open a direct through route between New York and
Philadelphia date back to the year 1812, when the construction of a
canal between the Hudson and the Delaware was proposed, but an
ill-advised jealousy of the State of Pennsylvania delayed for many years
the realization of the project. When this obstacle was finally overcome,
a change of sentiment had taken place in New Jersey. Railroads had just
made their appearance in the United States, and a large number of the
people of New Jersey preferred a railroad to a canal.
The matter was finally compromised in the legislature of New Jersey,
which on the 4th of February, 1830, simultaneously granted charters to
the Delaware and Raritan Canal Company and the Camden and Amboy
Transportation Company, fixing the capital stock of each company at
$1,000,000, with the right to increase it to $1,500,000. The charter
further stipulated what taxes should be paid to the State, and also
contained the provision that within five miles of the starting-point and
within three miles of the terminus of each line no other railroad or
canal should be built. It was believed the existence of both a water and
a land route would be sufficient to maintain competition on this
important thoroughfare of interstate traffic. The construction of the
railroad, which had been surveyed in almost a straight line between its
termini, was at once commenced. A number of well-to-do and practical men
took hold of the enterprise, among them one John Stevens, who together
with his three sons took one-half of the capital stock. The canal
project did not do so well at first. At the middle of the year 1830 only
about one-twelfth of its capital stock had been sold, and there was
great danger that the company might forfeit its charter, as the time
allowed for the subscription of its stock was nearing its end. At this
juncture Robert Field Stockton, a young man of ability, enthusiasm and
wealth, came to the rescue of the canal company. He not only bought for
himself a goodly share of the canal stock, but also prevailed on his
rich father-in-law, Mr. John Porter, to invest $400,000 in the
enterprise. The financial difficulties of the company were thus removed.
At the next session of the legislature Mr. Stockton secured an amendment
to their charter which apparently only authorized the enlargement of the
canal, but in reality empowered the canal company to construct a second
railway.
It was from the beginning Mr. Stockton's object to share with the
railroad company the advantages which their line promised to give them.
The enlargement of his company's franchise placed him in a position to
dictate terms to the Camden and Amboy Transportation Company. The latter
was given the choice, to prepare for competition with a rival railroad
line, or to consolidate with the Delaware and Raritan Canal Company. It
chose the latter alternative, and on the 15th day of February, 1831, the
two companies became one. The consolidation still required the sanction
of the legislature. This was obtained in consideration of the transfer
of 2,000 shares of the capital stock of the company to the State. It was
further stipulated that the new company should pay to the State a tax of
10 cents for each passenger and of 15 cents for each ton of freight
carried over its line through the State, as well as an annual tax of
$30,000, and that the State in return should protect the company against
any and all competition in the direct passenger and freight traffic
between the cities of New York and Philadelphia. Serious doubts were at
the time entertained by many, whether the State of New Jersey under the
Federal Constitution possessed the right to thus create a monopoly in
transportation facilities, and to regulate arbitrarily the commerce
between sister States.
Five days after it had granted this charter to the Camden and Amboy
Company, the legislature granted another charter authorizing the
construction of a railroad from Jersey City to New Brunswick on the
Raritan River. On the 23d of February of the same year a charter had
been granted by the legislature of the State of Pennsylvania to a
company which had been formed for the purpose of constructing a railroad
from Philadelphia to Trenton. This company had likewise been authorized
by its charter to buy the right of way for a railroad from Trenton to
New York, which it proceeded at once to do. It was evident that as soon
as the two new roads would meet at New Brunswick, an understanding would
be reached between them, by which another through line would be created
between New York and Philadelphia, which would have the advantage over
the Camden and Amboy road that it touched the capital of New Jersey and
could thus make itself serviceable to members of the legislature,
officers of State and influential politicians.
The Camden and Amboy Freight Company soon arrived at the conclusion that
it could not permit such rivalry. It appealed to the legislature for
protection. Resolutions were passed in its favor, but the Philadelphia
and Trenton Railroad Company paid no attention to those resolutions, but
quietly continued to lay its track. Mr. Stockton and his friends did not
dare to invoke the aid of the courts, because a judicial investigation
might have resulted in the destruction of their own charter. The
situation was critical, but Mr. Stockton was equal to the occasion. He
bought quietly a sufficient number of shares to control the management
of the Philadelphia and Trenton road, and, in April, 1836, secured the
consolidation of the Philadelphia and Trenton and the Camden and Amboy
railroad companies.
The canal of the company was not completed until 1838. It had consumed a
sum of money largely in excess of the original estimate. To connect the
two lines of the consolidated company, a branch road was constructed
from Trenton to Bordentown. Later the road from Trenton to Brunswick was
completed and an agreement entered into with the Jersey City company for
a division of the traffic of the two roads. The large cost of these
improvements suggested to the company the advisability of increasing its
revenues and of decreasing its expenditures. Its charter provided for a
payment to the State of 10 cents for each through passenger. By an
artifice the company avoided the payment of this tax. It compelled its
through passengers to walk over the bridge at Trenton and then continue
their journey by rail via Bordentown to Jersey City.
The company's charter also stipulated, that the fare between New York
and Philadelphia should not exceed $3 per passenger. Its officers
interpreted this stipulation to apply only to the intermediate traffic
and proceeded to collect $2.50 for the trip from New York to Trenton,
and $1.50 from there to Philadelphia, thus increasing the fare for the
entire journey to $4.00, one dollar above the maximum allowed by law.
One Jacob Ridgway, who was the owner of a ferry-boat at Camden, saw here
an opportunity for starting a lucrative business. He bought a steamer
and carried passengers from Philadelphia to Trenton for one-third of the
fare demanded by the railroad. After the Camden and Amboy Company had
made several unsuccessful attempts to intimidate Mr. Ridgway and his
force, one of which even brought Mr. Stockton in contact with the
criminal courts, it purchased the boat with all terminal facilities at
Philadelphia and Trenton. The attention of the legislature of New
Jersey was repeatedly called to the company's failure to comply with the
provisions of its charter, but these appeals were on the whole of no
avail. In 1842, after a long discussion, a resolution was carried
declaring the charge of $4 for the through journey illegal, but the
company entirely ignored this legislative reminder and continued its old
tariff.
The company's charter also reserved for the State the right to acquire
the Camden and Amboy road under certain conditions upon the payment of a
reasonable compensation. In 1844, through Mr. Stockton's engineering,
the constitution of New Jersey was so amended as to practically deprive
the State of the power to acquire the company's property.
During the first few years of the existence of the Camden and Amboy
Transportation Company its business was managed in the interest of its
owners, but soon a few of its leading stockholders managed to turn its
enormous profits into their own pockets. The Stevens and Stockton
families, together with two other directors of the Camden and Amboy
Company, had come into possession of a line of steamers that plied on
the Raritan, between New Brunswick and New York. The enterprise, in
spite of its largely watered capital, had been made to pay dividends
ranging from 30 to 40 per cent. Its owners saw an opportunity for a
larger field of usefulness and larger dividends. In 1834 a majority of
the board of directors of the Camden and Amboy Company proposed that the
company rid itself of the responsibility connected with the
transportation business and lease its railroad and canal. Mr. Stevens,
as representative of the Camden and Amboy Company, then negotiated with
Mr. Stevens, the representative of the Napoleon Steamer Company, and the
negotiations soon resulted in an agreement between the two companies by
which the latter leased the railroad and canal lines of the former and
agreed to pay it a fixed toll of $7.64 per ton upon all freights carried
by rail, and one-quarter of all its revenues derived from the canal.
Soon afterward the Napoleon Company entered into a similar contract with
the Camden Ferry Company and now had a complete monopoly of the
transportation business between New York and Philadelphia. It at once
commenced to develop a system of organized plunder. Instead of the
maximum charter tariff of 8 cents per ton per mile, it charged 10, 12,
and even 15 cents. The through rates charged were several times as high
as those fixed by the charter. Canal rates were raised to such an extent
as to make them prohibitory and to compel the public to ship by rail. It
is difficult even to estimate the total annual profits of the
directorial syndicate. Their accounts, if any were kept, were not
accessible, and surmises can only be based upon such data as
occasionally found their way to the public. In 1845 the share of the
canal tolls paid to the company's stockholders was $359,000. The
directors' share under the terms of their lease is thus found not to
have been less than $1,077,000. Another item of $170,000, tolls
collected for the transportation of 27,000 tons of freight, was so
divided that the Camden Ferry Company, or its other self, the
directorial syndicate, received $32,000 for one mile, while the Camden
and Amboy Railroad Company received $63,000, or less than twice as much,
for ninety-two miles. The directors under their lease were entitled to
the remaining $75,000.
The service of the company was as bad as it was expensive; its trains
were slow and irregular, and its employes arrogant. The syndicate which
controlled the company defied its stockholders, the public and the
courts alike. When one of the stockholders, a Trenton merchant by the
name of Hagar, applied to the courts for an order to compel the
directors to produce their books and render an account, the syndicate
bought Mr. Hagar's shares, for which he had paid $125 a share, at the
price of $1,456 a share. The suit was then withdrawn and the matter
hushed up.
In 1848 a number of articles appeared in a paper published at
Burlington, Pa., which were signed by "A Citizen of Burlington" and
contained much surprising information concerning the Camden and Amboy
Transportation Company. It was charged that the directors had defrauded
both the State and the company's stockholders of large sums of money,
that they had grossly violated their charter by charging illegal and
extortionate rates, oppressive to both commerce and travel. It was shown
that while the average rate per ton per mile of thirty-five neighboring
roads was 2.85 cents, that of the Camden and Amboy Company was 4.54
cents. It was also shown that neither the stockholders nor the State had
received the share of the company's revenues to which they were
entitled. These articles were extensively reprinted and caused a great
commotion wherever they appeared. After the first storm had subsided the
directors issued an address to the people of New Jersey, in which they
bitterly complained of the people's loss of confidence in their
integrity, and declared that the charges preferred against them were
founded on falsehoods.
The "Citizen of Burlington" replied by accusing the directors of
defalcation and falsifying their books. He charged that from 1840 to
1847 no account had been rendered of the receipt of no less than
$5,266,431, on which $493,066 was due to the State. As soon as the
legislature convened, a resolution was introduced that a commission be
appointed to investigate the charges preferred against the Camden and
Amboy Transportation Company. The resolution was adopted, but it was
virtually left to the accused to select the members of the commission.
That the directors had a guilty conscience appeared from the fact that
the last annual report of the company, which had just been printed, was
withdrawn and destroyed. To silence their unknown accuser, they
threatened him with criminal prosecution. He now gave his name. It was
Henry C. Carey, the noted writer and authority on political economy. Mr.
Carey did not give up the contest. He proceeded to show how the policy
of the managers of the Camden and Amboy Transportation Company depressed
commerce, manufactures and agriculture alike. He showed how the company
as a public carrier discriminated in favor of industries which they
carried on as private individuals. He claimed that the company had
forfeited its charter, and that it was the duty of the State to
authorize the construction of another road. In the meantime, early in
1849, the legislative investigation committee submitted its report. It
was perhaps as shameless a document as was ever placed before a
legislative assembly. It lauded the directors, to whose influence the
members of the commission owed their selection, and whitewashed their
past management of the company's affairs.
But the people of New Jersey were far from being satisfied with this
report and demanded the appointment of another committee. Another
investigation was ordered, and this time the company, or rather its
directors, found it impossible to control the selection of its members.
Soon after their appointment the committee asked Mr. Carey to lend them
his assistance in their labors, and he readily consented. During the
summer of 1849 the members of the committee had occasion to go to
Bordentown, to inspect the company's books. From that time on a
wonderful change seemed to have come over the committee. They found they
could dispense with Mr. Carey's further services. What had previously
appeared to them a ring of rapacious monopolists seemed now an
association of worthy philanthropical gentlemen. In their report to the
legislature they completely exonerated the company's managers. They
admitted that the State had not been paid all that was due to it, but
they asserted that this difference in the company's accounts was due
solely to clerical errors, for which the management were in no wise
responsible. The report was accepted, although not even the annexed
testimony supported it, and thus the matter was dropped.
This was a great victory for Mr. Stockton and his friends. It
demonstrated the success of their methods of dealing with public
servants. Mr. Carey repeated his charges, but the directors failed to
prosecute him for libel as they had threatened. He asked that he be
permitted to inspect the company's books, but was met with a peremptory
refusal. Public opinion was defied, and the old methods were continued.
The extortionate and discriminating tariff of the only through route of
New Jersey affected seriously the agricultural as well as the commercial
interests of that State. The Camden and Amboy monopoly kept the State of
New Jersey for many years far behind the New England States in railroad
facilities. In 1860 New Jersey had only one mile of railroad for every
17.6 square miles of territory, while the proportion of miles of
railroad to square miles of territory for the same year was 1 to 7.9 in
Connecticut, 1 to 7.6 in Rhode Island, and 1 to 6 in Massachusetts. At
present New Jersey has one mile of railroad to every 3.79 square miles,
and therefore leads all the States in the Union in density of railroad
track.
The question may be asked how the Camden and Amboy Transportation
Company, or rather the syndicate which controlled it, contrived to
maintain its power for so many years, to the great detriment of industry
and commerce. The only answer that can be given is that the men for whom
the maintenance of the monopoly was a source of great wealth were
constantly using a part of this wealth for the corruption of those who
were in a position to influence public opinion or to direct the policy
of the State. Prominent politicians were favored with passes, attorneys
were retained by the company as local solicitors, corrupt and servile
legislators were bribed by money or the promise of lucrative positions,
and newspapers were given large subsidies. In addition to this public
men were constantly made to realize the political power of the company,
whose many employes had always been trained to do the bidding of their
masters. If the opposition, in spite of this, was ever successful at
legislative elections, the company's managers found it less expensive to
gain the good will of a few members of the legislature after election
than it would have been to gain the good will of their constituents
before election. Dissatisfied stockholders who threatened with judicial
investigation were quietly bought out or impressed with the danger of
inviting public discussion in regard to the validity of the company's
charter, as it might lead to its annihilation. The good people of New
Jersey made several attempts to rid the State of the despotism of the
company by making the question a political issue, but they were each
time defeated through the lavish and scandalous expenditure of the
company's money.
The original charter of the Camden and Amboy Railroad Company was
granted for a period of twenty years, and should have expired in 1853,
but its managers succeeded in having it extended to January 1, 1859. In
1854 another extension was asked for, and after a long and bitter debate
the company was again triumphant. An act was passed on the 16th of
March, 1854, making it illegal to build previous to the first day of
January, 1869, without the consent of the Camden and Amboy
Transportation Company, a railroad in the State of New Jersey for the
transportation of passengers and freight between New York and
Philadelphia. At the end of this period even a third extension was
granted, and the company, though after January 1, 1867, under a new
name, maintained its monopoly until it consolidated, in 1871, with the
Pennsylvania Railroad Company.
That the spirit of the past is still at work was shown by the recent act
of the legislature of New Jersey legalizing the consolidation of the
coal roads. The coal barons found the legislature as servile as the
managers of the Camden and Amboy Railroad Company had found them of
yore, and their well-planned scheme would probably have been successful
had it not been for Governor Abbot's courageous veto of the disgraceful
act, and it is more than probable that they will yet succeed. They have,
in fact, during the last year advanced the price of coal about one
dollar per ton.
THE STANDARD OIL MONOPOLY.
The Standard Oil monopoly may be said to be the crowning monument of
corporation conspiracy. It is, indeed, doubtful whether the combined
brotherhoods of mediæval knights ever were guilty of such acts of
plunder and oppression as the Standard Oil Company and its railroad
allies stand convicted of before the American people. The facts that
have been unearthed by official investigations show a frightful
prevalence of corporate lawlessness and official corruption, and there
can be no doubt that, could certain high railroad dignitaries have been
compelled to testify, and could the truth have been fathomed, it would
have been found that not only the public, but railroad stockholders as
well, were victimized by those transactions.
The founder of the Standard Oil monopoly was some twenty years ago part
owner of a petroleum refinery at Cleveland, Ohio. His fertile brain
conceived the thought that with the coöperation of the railroad
companies a few men of means could control the petroleum business of the
United States. With this end in view he approached the managers of the
New York Central, the Erie and the Pennsylvania Central railroad
companies, and on January 18, 1872, entered with them into a secret
compact by which they agreed to coöperate with the South Improvement
Company (an organization formed by that gentleman to aid in the
accomplishment of his designs) to grant to said companies certain
rebates and to secure it against loss or injury by competition. The
South Improvement Company, in consideration of these favors, guaranteed
to the railroad companies a fair division of its freights. The existence
of this contract soon became known and caused a violent protest among
the oil-producers. An indignation meeting was held and a committee was
appointed to wait on the railroad managers and demand fair treatment for
all.
The railroad companies yielded and promised to give equal rates to all
shippers and to grant to no person either rebates or any other advantage
whatever. New rates were fixed for the transportation of both crude and
refined oil, and it was agreed on the part of the railroad companies
that at least ninety days' notice should be given of any change that
might be made in the rates. Steps were also taken to have the charter of
the South Improvement Company canceled because it had been found that it
was neither the owner of a refinery nor of an oil well, and could
therefore not comply with the legal requirements concerning the
organization of stock companies. While the South Improvement Company
thus came to a sudden and rather inglorious end, its founders soon
contrived other means to carry out their ingenious plans. They bought a
refinery, reorganized by taking the prepossessing title of Standard Oil
Company, and were now prepared to resume their operations under the
guise of legal authority.
The railroad companies seemed to have relished their novel business
connections, for, without paying the least attention to the agreement
into which they had entered with the other producers and refiners of
oil, they extended the privileges of the defunct South Improvement
Company to its successors. The new company received secret rebates
ranging from 50 cents to $1.32 per barrel. The agreement also contained
the stipulation that if lower rates should ever be granted to their
competitors, an additional rebate should be given to the Standard Oil
Company. Endowed with these privileges, the favored company proceeded to
unite under its banner, by consolidation, purchase or lease, the
leading refineries of Cleveland.
The effect of the discriminations practiced against independent
refineries soon became apparent. In less than two years there were
closed in Pittsburgh twenty-one refineries, that represented an
aggregate capital of $2,000,000 and had given employment to over 3,000
people. A large number of the remaining refineries were forced to
consolidate with the Standard Oil Company.
The next step toward the entire suppression of competition was an attack
planned against the independent pipe lines. The Standard had early
secured control of the United Pipe Line. To exterminate competing lines,
they again appealed to the railroad companies, and on the 9th day of
September, 1874, J. H. Rutter, general freight agent of the New York
Central, issued a new oil tariff which discriminated greatly in favor of
the oil brought by the United Pipe Line to the refineries. Up to that
time this company had done from 25 to 30 per cent. of the total business
of the various pipe lines. Within one year after the adoption of the new
tariff it did fully 80 per cent. of the entire business. This forced the
independent lines either to sell out to the Standard or to suspend
business, for the latter's rebate was larger than their toll. The oil
tariff of the Pennsylvania Central compelled the independent Pittsburgh
refiners to ship their refined oil over that company's line, if they
would avail themselves of the rebate which it granted on the rates for
the transportation of crude oil to Pittsburgh. The evident purpose and
the effect of such a tariff was to prohibit oil shipments over the
Baltimore and Ohio. Had this road made ever so reasonable a tariff, the
combined charges for the transportation of the crude petroleum from the
oil regions to Pittsburgh by the Pennsylvania Central, and for that of
the refined oil to the sea coast by the Baltimore and Ohio, would still
have been prohibitive in competition with the special transit rates
granted to the Standard Oil Company. As a remedy it was proposed to
organize a new pipe line, it being believed that the crude oil could be
brought to Pittsburgh by that line, refined there, shipped to the
seaboard by the Baltimore and Ohio, and sold there at as good or even a
better profit than the product of the Standard, notwithstanding the
favors received by the latter from the allied trunk lines. This movement
resulted in the creation of the Columbia Conduit Company, which at once
proceeded to lay its pipes from the oil wells to Pittsburgh. Under the
laws of the State of Pennsylvania it became necessary for this company
to obtain the permission of property-holders to lay the pipes through
their lands. Consent was everywhere readily given, and the pipes were
laid without hindrance until the track of the Pennsylvania Railroad was
reached, within a few miles of the Pittsburgh refineries. This company
peremptorily refused to let the pipes be laid under its track. The pipe
line company after some delay contrived a way to obviate the difficulty.
It laid its pipes on each side of the road as close to the track as it
could without trespassing against the legal rights of the Pennsylvania
Central, and then conveyed the oil from one side of the track to the
other by means of large oil tanks on wheels, which could not be
prevented from passing over the railroad track at the public crossing.
After several months the railroad company allowed the pipes to be laid
under its track, but it soon appeared that another combination had been
effected to destroy the value of this concession. A railroad war had
given the three trunk lines an opportunity to force the Baltimore and
Ohio into the pool. A uniform rate of $1.15 was established for
shipments of refined petroleum from any point to the seaboard. While
this was in itself an unjust discrimination against Pittsburgh, which is
250 miles nearer tidewater than Cleveland, the railroads in addition
granted the Standard secret rebates which enabled it to sell its oil on
the coast for less than the sum of its first cost at the refineries and
the open rate of transportation to the points of export. The independent
refiners of Pittsburgh found themselves again cut off from the market,
but necessity soon made them discover another outlet. Shipping their oil
down the Ohio River to Huntington, W. Va., they had it taken by the
Chesapeake and Ohio Railroad to Richmond. In spite of the fact that this
route was more than twice as long as the direct line from Pittsburgh to
the seaboard, and in spite of the further fact that it necessitated an
expensive transfer, a rate equal to about two-thirds of the trunk line
rate for the direct shipment proved remunerative to the Chesapeake and
Ohio. The independent refiners kept up their competition for some time,
but the great disadvantage of river travel and the insufficient export
facilities of Richmond finally forced them to give up the contest.
Until the year 1877 the Standard Oil Company had worked hand in hand
with the railroads. It had obtained all its privileges by asking for
them and by holding out inducements to railroad managers to grant them.
It now commenced to dictate terms to refractory railroad companies.
The Pennsylvania road ventured to carry oil not the property of the
Standard on terms which that company did not approve. The latter ordered
the road to refuse to carry the product of their competitors. This the
railroad company declined to do, and the Standard at once withdrew its
custom. The Pennsylvania retaliated by carrying the oil of the
independent refineries at merely nominal rates and even went so far as
to make its rates dependent upon the profits realized by the shippers. A
fierce freight war was thus precipitated, in which the Erie and New York
Central supported the Standard Company. The Pennsylvania road was soon
forced to surrender and sign an ignominious treaty.
The Baltimore and Ohio, which had again commenced to carry the product
of those Pittsburgh refineries which received their crude oil through
the Columbia Conduit Company, was in a similar manner forced to reject
their freights. The pipe line, whose value was thus almost entirely
destroyed, was soon after sold to the Standard Oil Company. This company
had now an almost complete monopoly of the oil business of the United
States, and still it was not satisfied. It appears that some of the
producers of crude oil had been in the habit of shipping a part of their
product in spite of the advantages which the Standard had through its
rebates. To prevent even these shipments, or rather to exact another
tribute from railroad stockholders, the American Transfer Company, one
of the auxiliaries of the Standard Oil Trust, in 1878, demanded and
received from the Pennsylvania road a "commission" of 20 cents a barrel
on all shipments of petroleum _made by any_ shipper. It had been shown
to the satisfaction of the Pennsylvania Railroad Company that similar
commissions, ranging from 20 to 35 cents a barrel, were being paid by
the New York Central and Erie roads.
When, in 1879, an effort was made to establish a pipe line from the oil
regions to the seaboard, nothing was left undone by the trunk lines to
thwart the enterprise. The new company finally succeeded in making
connection with a railway which had no part in the pool, and there was
some hope that under this arrangement competition might at least be
maintained at some points. The Standard Company again appealed to the
trunk lines to protect it against injury by competition and obtained
from them a special rate of 20 cents per barrel, which rate was even
reduced to 15 cents per barrel two months later. Against such a rate it
was impossible to compete, and after a short struggle the new line found
itself compelled to sell its works to the Standard.
To crown its monopoly, the Standard Oil Company finally bought of the
New York Central and Erie roads their terminal facilities for the
transportation of oil, and thereby made it virtually impossible for them
to transport oil for any of its few remaining competitors. Mr. Josiah
Lombard, part owner of the New York refinery, stated in 1879 before the
investigating committee of the legislature of New York that in 1878 he
had requested the Erie Company to transport for him 100 cars of crude
oil from Carrollton to New York; that he had called upon Mr. Vilas, the
general freight agent of the company, in person, but had never been able
to obtain the cars, though the oil had been held in Carrollton three or
four months ready to be loaded. This gentleman also testified that he
had found it impossible to obtain cars from the New York Central, and
that the company's general freight agent had informed him that the road
did not own and could not furnish any oil cars.
After the Standard Oil Company had secured control of the various pipe
lines of the oil regions, it frequently lowered the price of crude oil
to such an extent as to make its production unprofitable. It even
refused to buy oil, basing its refusal upon the ground that the railroad
companies failed to furnish cars for its transportation. When the
well-owners had their tanks filled, they had the choice to let the oil
run away or to be at the expense of closing up their wells. In one
instance, however, when their ruse threatened to cause a riot, several
hundred cars were brought to the wells within a few hours.
The Standard Oil Trust, not satisfied with the monopoly of the wholesale
trade, even tried in places to control the retail trade by peddling oil
at private houses. This method of destroying competition was chiefly
resorted to where independent dealers obtained their supply by a water
route.
That many of the deeds of the Standard are dark is evident from the fact
that its members, when summoned by the Hepburn committee, declined to
testify, lest their testimony be used to convict them of crime.
Officials of the trust have bribed or attempted to bribe employes of
rival firms, for the purpose of ruining their business. By its peculiar
methods the company has been successful in courts of justice and
legislative halls, and has enjoyed an impunity for its conspiracy
against the public that is without precedent in America. It has
accumulated a capital of more than $100,000,000, and it is even claimed
that for years its annual dividends have exceeded in amount the capital
actually invested. This is not at all strange when it is considered that
they have levied upon the producers, consumers and transporters alike.
Mr. Cassat testified before the New York investigating committee that in
eighteen months the railroads had paid the Standard in rebates no less
than $10,000,000. And the very payment of these enormous rebates
enabled the Standard to decrease the price of oil to the producer and to
increase it to the consumer.
It is claimed by the defenders of the Standard monopoly that under the
trust the price of petroleum has been constantly decreased to the
consumer. That the price of kerosene is lower now than it was fifteen
years ago is undoubtedly true, but the reductions were brought about not
by the trust, but in spite of the trust. The price now maintained is an
unnatural one. The Standard Oil Company never lowered the price of its
oil except when compelled to do so by competition. The largely increased
output of crude oil, the improved methods of refining, the greatly
lowered cost of transportation would have lowered the price of coal oil
without the philanthropy of the Standard Oil Company. Iron, steel,
calico, woolen goods and a thousand other commodities have within almost
the same period suffered much larger reductions than coal oil. But even
if the Standard monopoly had voluntarily lowered the price of its
products, the American people could never approve of its methods. They
can never be made to believe that the end sanctifies the means,
especially when those means are railroad favors, secret combinations,
bribery, intimidation and lawless arrogance.
Many other interesting cases might be given. The Southern Pacific
Railway Company, for instance, owns nearly all of the railways of
California, and enjoys at the present time almost a complete monopoly of
the transportation business of that State and much more of the Pacific
Coast. Perhaps no set of managers would be more considerate of the
people's rights in the absence of legal restraint than those in charge
of this company, yet there is not a business man on the Pacific Coast
who comes in contact with this company who does not realize and feel
the power of its iron hand, unless it be those who for various reasons
are recipients of its special favors. It has become notorious that the
legislature, Board of Railroad Commissioners and some of the judges of
the courts of that State are as servile to the demands of this railway
company as are its own employes.
The railway company is a closely organized body of shrewd, active men,
while those who furnish business for it are not organized, and they will
never be able to properly protect their own interests until they control
the machinery of their State government.
CHAPTER V.
RAILROAD ABUSES.
As has already been shown, railroad enterprise met with comparatively
little opposition in the United States, for, as compared with the
interests certain to be benefited by the introduction of the new mode of
transportation, those likely to be injured by it were insignificant. It
is true, the innate conservatism of man even here recorded its
objections to the innovation. It viewed with distrust the new power
which threatened to revolutionize well-established systems of
transportation and time-honored customs and to force upon the people
economic factors the exact nature and value of which could only be
ascertained by practical tests. But the progressive portion of the
community was so decidedly predominant that these protests were soon
drowned in the general demand for improved facilities of transportation.
The farmer who had to haul his produce a great distance to reach a
market appreciated the advantages to be derived from the location of a
railroad station nearer home. The manufacturer who heretofore had, had a
very limited territory for the sale of his products well realized that
he could with the aid of a railroad enlarge his territory and increase
his output, and with it his profits. The pioneer merchant found that he
could no longer compete with former rivals in adjoining towns, since the
iron horse had reached them and lowered their freights, and he also
became a convert to the new order of things and clamored loud for
railroad facilities. Railroads seemed the panacea for industrial and
commercial ills, and every inducement was held out and every sacrifice
made by communities to become participants of their blessings. So great
was the estimate of the conveniences afforded by them and so strongly
was public opinion prejudiced in their favor that it is no exaggeration
to say that railroad companies as a rule were permitted to prepare their
own charters, and that these charters almost invariably received
legislative sanction.
To such an extent was the public mind prepossessed in favor of railroads
that any legislator who would have been instrumental in delaying the
granting of a railroad charter for the purpose of perfecting it, to
protect the people against possible abuses, would have been denounced as
a short-sighted stickler and obstructor of public improvements. Anxious
for railroad facilities, the people were deaf to the warnings of
history. Their liberality knew no bounds. National, State and county aid
was freely extended to new railroad enterprises. Communities taxed
themselves heavily for their benefit, and municipalities and individuals
vied with each other in donating money, rights of way and station
buildings. This was especially true of the West, whose undeveloped
resources had most to gain by railroad extension. So large were the
public and private donations in several of the Western States that their
value was equal to one-fifth of the total cost of all the roads
constructed. To still more encourage promoters of railroad enterprises,
general incorporation laws were passed which permitted companies to be
formed and roads to be built practically without State supervision. In
their admiration for the bright side of the picture, the people entirely
overlooked the shady side.
Besides this, there was virtually an absence of all law regulating the
operation of railroads. It was, under these circumstances, not strange
that abuses early crept into railroad management which, long tolerated
by the people and unchecked and even encouraged by public officers,
finally assumed such proportions as to threaten the very foundation of
free government. Great discoveries that add rapidly to the wealth of a
country tend to overthrow a settled condition of things, and organized
capital and power, if not restrained by wholesome laws and public
watchfulness, will ever take advantage of the unorganized masses. The
people of those regions which the railroad stimulus had caused to be
settled thrived for years so well upon a virgin soil that they gladly
divided their surplus with the railroad companies. They looked upon the
railroads as the source of their prosperity and upon railroad managers
as high-minded philanthropists and public benefactors, with whom to
quarrel would be an act of sordid ingratitude, and they paid but little
attention to the means employed by them to exact an undue share of their
earnings. Railroad men did whatever they could to foster through their
emissaries this misplaced adoration. They posed before the public as the
rightful heirs of the laurels of Watt and Stephenson, insisting that
their genius, capital and enterprise had built up vast cities and opened
for settlement and civilization the boundless prairies of the West.
These claims have been persistently repeated by railroad men, though
they are so preposterous that they scarcely deserve refutation. The
railroad, gradually developed by active minds of the past, and greatly
improved by the inventions of hundreds of men in the humbler walks of
life, is the common inheritance of all mankind, though no class of
people have derived greater benefits from it than railroad constructors,
managers and manipulators. Railroad managers are no more entitled to
the special gratitude of the public for dispensing railroad
transportation at much more than remunerative rates than is the Western
Union monopoly for maintaining among us an expensive and inefficient
telegraph service. No one believes that the disbanding of the Western
Union would leave us long without telegraphic communication. In like
manner railroads will be built whenever and wherever they promise to be
profitable. If one company does not take advantage of the opportunities
offered, another will. That large cities have been built up by the
railroads is true, but it is equally true that these cities by their
commerce and manufactures administer to the prosperity of the railroads
as much as the railroads administer to theirs. Commercial centers in
days gone by existed without railroads, but railroads could not long
exist without the stimulating influence of these busy marts of trade.
The same argument applies with still greater force to the agricultural
sections of our country, especially the great Northwest. The dry-goods
merchant might as well boast of having clad the public as the railroad
manager of having built up farming communities by selling to them
transportation.
And yet the American people have never ceased to be mindful of the
conveniences afforded to them by this modern mode of transportation. On
the contrary, they have been but too prone to credit railroad men with
being benefactors, when they were but beneficiaries, and this liberality
of spirit made them overlook, or at least tolerate, the abuses which
grew proportionately with the wealth and power of the companies.
The first railroad acts of England had contemplated to make the roads
highways, like turnpikes and canals. These roads were established by the
power of eminent domain. Companies were empowered to build and maintain
them and to reimburse themselves by the collection of fixed tolls. Had
the owners of the roads from the beginning been deprived of the
privilege of becoming carriers over their own lines, the system might
have so adjusted itself as to become entirely practicable; but as they
were allowed to compete with other carriers in the transportation of
passengers and merchandise, they were soon able to demonstrate, at least
to the satisfaction of Parliament, that the use of the track by
different carriers was impracticable and unsafe. A number of
circumstances combined to aid the railroad companies in their efforts to
monopolize the trade on their lines. In the first place, when the early
railroad charters were granted, but few persons had any conception of
the enormous growth of commerce which was destined to follow everywhere
the introduction of railways. The tolls as fixed in the charters soon
yielded an income out of proportion to the cost of the construction and
maintenance of the roads. Their large margins of profit enabled the
owners of the roads to transport goods at lower rates than other
carriers and to thus compel the latter to abandon their business.
Another defect of the original charters worked greatly to the
disadvantage of independent carriers. They contained no provision as to
the use of terminal facilities. The railroad companies claimed that
these facilities were not affected by the public franchise and were
therefore their personal property. This placed independent carriers at a
great disadvantage and made in itself competition on a large scale
impossible. These carriers were thus at the mercy of the railroad
companies for the transportation of their cars, and the companies never
permitted their business to become lucrative enough to induce many to
engage in it. It soon became apparent that under the charters granted
to the railroad companies such competition as existed on turnpikes and
canals was out of the question on their roads. In England the great
abundance of water-ways exercised for many years a wholesome control
over the rates of railway companies, until these companies, greatly
annoyed by such restraint, absorbed many of the larger canals by
purchase and made them tributary to their systems. These companies have
also acquired complete control over many important harbors.
In the United States the people depended from the beginning of the
railroad era on free competition for the regulation of railroad charges.
This desire to maintain free competition led to the adoption of general
incorporation acts, it being quite generally believed that such
competition as obtains between merchants, manufacturers and mechanics
was possible among railroads and would, when allowed to be operative,
regulate prices and prevent abuses. The remedy was applied freely
throughout the country, but for once it did not prove successful.
Stephenson's saying, that where combination was possible competition was
impossible, was here fully verified. The great ingenuity of the class of
men usually engaged in railroad enterprises succeeded in thwarting this
policy of commercial freedom. The opportunities for those in control of
railroads to operate them in their own interest, regardless of the
interests of their patrons or stockholders, were so great that men of a
speculative turn of mind were attracted to this business, which indeed
soon proved a most productive field for them. One road after another
fell into the control of men who had learned rapidly the methods
employed to make large fortunes in a short time.
As the roads multiplied, transportation abuses increased. A considerable
number of people early favored State control of railroads as the best
means of regulating transportation, but a majority looked upon the
existing abuses as being merely incidental to the formative period, and
hoped that with a greater expansion of the railroad system they would
correct themselves. And this doctrine was industriously disseminated by
railroad managers and their allies. They lost no opportunity to impress
upon the people that State regulation was an undue interference with
private business and that such a policy would soon react against those
who hoped to profit by it, inasmuch as it would prevent the building of
new roads and would thus hinder, rather than aid, in bringing about the
right solution of the railway question, viz., regulation by competition.
They contended, in short, that State regulation would be destructive to
railroads as well as to every other class of property.
Railroad sophistry for many years succeeded in preventing the masses
from realizing that an increased supply of transportation does not
necessarily lower its price, or, in other words, that railroad abuses do
not necessarily correct themselves through the influence of competition.
A large capital is required to build and maintain a railroad, which must
necessarily be managed by a few persons. Besides this, the construction
of a railroad practically banishes at once from its field all other
means of land transportation. The railroad has thus a practical monopoly
within its territory, and its managers, if left to follow their
instinct, will despotically control all the business tributary to it,
with unlimited power to build up and tear down, to punish its enemies
and to reward its friends.
It is not true that State control checks railroad building. While it may
prevent the construction of useless lines and discourage speculation, it
will encourage the building of roads for which there is a legitimate
demand. Stockholders as a whole do not participate in the management of
the roads and do not profit by railroad abuses, the origin of which may
almost invariably be traced to selfish designs on the part of a few
entrusted with the management of the property. Where through wise
legislation these abuses are prevented, the roads are managed in the
interest of all the stockholders, develop business and enjoy lasting
prosperity.
It may be laid down as a general rule that the policy which best
subserves the interests of the patrons of a road is always the best
policy for its owners. Injustice to a railroad will interfere with its
usefulness; injustice to shippers depresses production and consumption;
and in either case both the road and its patrons will suffer. State
control is therefore as much needed in the interest of the owners of
railroads as in the interest of their patrons. What should be the nature
of such control will be discussed hereafter. A full understanding of the
question at issue, however, makes necessary an inquiry into the various
abuses which unrestrained railroad management of the past has developed.
Perhaps no better presentation of the evils and abuses of railroads and
their consequences can be found than that contained in the report of the
Senate Committee on Interstate Commerce, submitted by Senator Cullom, in
1886. This report charges:
1. That local rates are unreasonably high, as compared with through
rates.
2. That local and through rates are unreasonably high at non-competing
points, either from the absence of competition or in consequence of
pooling agreements that restrict its operation.
3. That rates are established without apparent regard to the actual cost
of the service performed, and are based largely on "what the traffic
will bear."
4. That unjustifiable discriminations are constantly made between
individuals in the rates charged for like service under similar
circumstances.
5. That improper discriminations are constantly made between articles of
freight and branches of business of a like character, and between
different quantities of the same class of freight.
6. That unreasonable discriminations are made between localities
similarly situated.
7. That the effect of the prevailing policy of railroad management is,
by an elaborate system of secret special rates, rebates, drawbacks and
concessions, to foster monopoly, to enrich favored shippers, and to
prevent free competition in many lines of trade in which the item of
transportation is an important factor.
8. That such favoritism and secrecy introduce an element of uncertainty
into legitimate business that greatly retards the development of our
industries and commerce.
9. That the secret cutting of rates and the sudden fluctuations that
constantly take place are demoralizing to all business except that of a
purely speculative character, and frequently occasion great injustice
and heavy losses.
10. That, in the absence of national and uniform legislation, the
railroads are able by various devices to avoid their responsibility as
carriers, especially on shipments over more than one road, or from one
State to another, and that shippers find great difficulty in recovering
damages for the loss of property or for injury therefor.
11. That railroads refuse to be bound by their own contracts, and
arbitrarily collect large sums in the shape of overcharges in addition
to the rates agreed upon at the time of shipment.
12. That railroads often refuse to recognize or to be responsible for
the acts of dishonest agents acting under their authority.
13. That the common law fails to afford a remedy for such grievances,
and that in cases of dispute the shipper is compelled to submit to the
decision of the railroad manager or pool commissioner, or run the risk
of incurring further losses by greater discriminations.
14. That the differences, in the classifications in use in various parts
of the country, and sometimes for shipments over the same roads in
different directions, are a fruitful source of misunderstandings, and
are often made a means of extortion.
15. That a privileged class is created by the granting of passes, and
that the cost of the passenger service is largely increased by the
extent of this abuse.
16. That the capitalization and bonded indebtedness of the roads largely
exceed the actual cost of their construction or their present value, and
that unreasonable rates are charged in the effort to pay dividends on
watered stock and interest on bonds improperly issued.
17. That railroad corporations have improperly engaged in lines of
business entirely distinct from that of transportation, and that undue
advantages have been afforded to business enterprises where railroad
officials were interested.
18. That the management of the railroad business is extravagant and
wasteful, and that a needless tax is imposed upon the shipping and
traveling public by the necessary expenditure of large sums in the
maintenance of a costly force of agents engaged in a reckless strife for
competitive business.
Under the operation of the Interstate Commerce Law some of these evils
have, so far at least as interstate commerce is concerned, disappeared,
and others have been considerably mitigated. It cannot be expected,
however, that a bad system of railroad management, to the development of
which the ingenuity of railroad managers has contributed for two
generations, could be entirely reformed in a few years. It is a
comparatively easy task for shrewd and unscrupulous men, assisted by
able counsel and unlimited wealth, to evade the spirit of the law and to
obey its letter, or to violate even both its letter and spirit, and
escape punishment by making it impossible for the State to obtain proof
of their guilt.
It is a humiliating spectacle to see the self-debased railroad officials
confessing their own guilt by refusing to testify before the Interstate
Commerce Commission on the ground that they would thereby criminate
themselves. Congress should have sufficient respect for this commission
and for itself to provide a way to punish such recusant witnesses who
are willing to degrade themselves in so base a manner. Whether the law
will eventually be respected by all depends upon the vigilance and
courage of the people.
That our railroad legislation is not yet perfect even its friends will
admit; and as under a free government the demand of an enlightened
public opinion is the first step toward the enactment of a law, it
behooves the intelligent citizen to study the various railroad problems
and to then exert his influence toward bringing about such a solution of
them as justice and wisdom demand.
In discussing the various evils of railroad management, the author will
commence with and dwell more particularly upon those abuses which maybe
said to be the cardinal ones, viz., discrimination, extortion,
combinations and stock and bond inflation. When these are once
effectually eradicated, other abuses of railroad management which have
been the subject of public complaint will not long survive them.
One of the strongest arguments that could be adduced by the founders of
the American Constitution in favor of the establishment of a more
perfect union was that the inequality of taxes placed upon commerce by
the various States was a serious obstacle to its free development. Much
as the individual States dislike to give up a part of their sovereignty
to a central or national power, the demand for a common and uniform
system of commercial taxation was so great that they were forced to
yield and ratify the new Constitution. Our forefathers thus considered
it a dangerous policy to permit a single State to lay any imposts upon
the commercial commodities which passed over its borders. They were
rightly of the opinion that industrial and commercial liberty was as
essential to the welfare of the nation as political freedom and that
therefore interstate commerce should not be hemmed in or controlled
within State lines, but that the power to regulate it should be lodged
in the supreme legislative authority of the nation, the Congress of the
United States. For over half a century Congress alone exercised the
power thus conferred upon it by the people. After the introduction of
railroads, however, their managers gradually assumed the right to
regulate the commerce of the country in their own interest through the
adoption of arbitrary freight tariffs. Freight charges are practically a
tax which follows the commodity from the producer to the consumer. An
arbitrary and unjust charge is therefore an arbitrary and unjust tax
imposed upon the public without its consent. It is a well-established
rule of society that laws should be equitable and just to all citizens.
Congress never assumed the role of Providence by attempting to equalize
those differences among individuals which superior intellect, greater
industry and a thousand other uncontrollable forces have ever created
and will ever create. It has been reserved to railroad managers to
demonstrate to the public that a power has been allowed to grow up which
has assumed the right to counteract the dispensations of Providence, to
enrich the slothful, to impoverish the industrious, to curtail the
profits of remunerative industries and revive by bounties those
languishing for want of vitality, to humble proud and self-reliant marts
of trade and to build up cities in the desert. It will scarcely be
claimed even by railroad managers that their policy of thus arbitrarily
regulating commerce originated in philanthropic motives. They are forced
to admit that it grew out of an attempt to increase the income of
railroads by the extension of favors to naturally weak enterprises and
to recoup by overtaxing stronger ones.
The practical operation of this system soon showed to railroad managers
their power and to the patrons of railroads their dependence upon those
who dispensed railroad favors. The former soon discovered that their
power might be used to further their private interests as well as those
of the roads, and unscrupulous patrons were not slow to offer
considerations for favors which they coveted. When such favors were once
granted by the officials of one road, rival roads would grant similar
ones in self-protection. Thus this vicious system grew until the payment
of a regular tariff rate was rather the exception than the rule, and
special rates became an indispensable condition of success in business.
We may distinguish three classes of railroad discriminations, viz.:
1. Those which affect certain individuals.
2. Those which affect certain localities.
3. Those which affect certain branches of business.
Discrimination between individuals is the most objectionable, because it
is the most demoralizing of all. Where such discrimination obtains,
every shipper is in the power of the railroad corporation. It makes of
independent citizens of a free country fawning parasites and obsequious
sycophants who accept favors from railroad managers and in return do
their bidding, however humiliating this may be. The shipper, realizing
that the manager's displeasure or good will toward him finds practical
expression in his daily freight bills, finally loses, like the serf, all
self-esteem in his efforts to propitiate an overbearing master. He is
intimidated to such an extent that he never speaks openly of existing
abuses, lest he lose the special rates which have been given him, or, if
he is not a participant of such privileges, lest additional favors be
given to his rivals and they be thus enabled to crush him. Intimidation
of shippers prevailed to such an extent previous to the enactment of the
Interstate Commerce Law that when, in 1879, the special committee on
railroads appointed by the legislature of New York invited all persons
having grievances against railroads to come before them to testify, not
one shipper testified voluntarily. On the contrary, they all insisted
upon being subpoenaed, hoping that the railroad managers would not
hold them responsible for any statement which they might be compelled to
make under such circumstances. The report of that committee stated that
the number of special contracts in force within the period of one year
on the New York Central and Hudson River Railroad alone was estimated
by the railroad people at 6,000. Mr. Depew, when he made the statement:
"In territories comparatively new, and with little responsibility on the
part of the managers to distant owners, they became in many cases very
arbitrary and exercised favoritism and discriminations, which led to
popular indignation and legislation," had probably not heard of this.
The committee's report further stated that these special rates conformed
to no system and varied without rule, that every application for a
special rate was judged by itself and with reference to its own peculiar
circumstances, and that it depended upon the judgment, or rather
caprice, of the officer to whom the application was made, whether and to
what extent a special rate should be granted. The reductions made to
privileged merchants often amounted to more than what would be a fair
profit to the dealer on the commodities shipped. The privileged dealer
was thus enabled to undersell his rivals and eventually force them out
of business or into bankruptcy. It was not at all uncommon for railroad
companies to allow discounts amounting to 50, 60, 70 and even 80 per
cent. of the regular rates. The New York Central gave a Utica dry-goods
merchant a special rate of 9 cents while the regular rate was 33 cents
on first-class freights. The lowest special rate granted at Syracuse was
as low as 20 per cent. of the regular tariff rate on first-class goods.
David Dows & Company and Jesse Hoyt & Company, by means of a grain rate
from 2-1/2 to 5 cents lower than those given to other firms, were
enabled to control in the winter of 1877 the grain trade of New York.
The railroad even extended its fostering aid to A. T. Stewart & Co.,
giving them a special rate "to build up and develop their business." The
testimony given by Mr. Goodman, assistant general freight agent of the
New York Central, in reference to the principle by which he was guided
in granting special rates, is of sufficient interest to be given a place
here:
Question. You made the rate for A. T. Stewart & Company? Answer. Yes,
sir.
Q. Was that to build up and develop their business? A. Yes, sir.
Q. That was the object? A. That was one of the objects.
Q. January 11th, 1879? A. Yes, sir.
Q. You thought that business was not yet sufficiently built up and
developed? A. No, sir; not the manufacturing part of it.
Q. How long had the factories of A. T. Stewart & Company been in
existence? A. The one at Duchess Junction about three years, I think; it
isn't completed yet.
Q. And they were languishing and suffering? A. To a great extent; yes,
sir.
Q. And you acted as a fostering mother to A. T. Stewart & Company to
build it up? A. Yes, sir; I added my mite to develop their traffic; we
wanted to carry the freight; boats might have carried it in the summer.
Q. Do you know anything of G. C. Buell & Company? A. Yes, sir.
Q. You wanted to develop their business? A. Yes, sir; they are at
Rochester--wholesale dealers.
Q. Do you know H. S. Ballou, of Rochester? A. I do not.
Q. He seems to be a grocer there? A. A small concern, perhaps.
Q. Small concerns are not worth developing, according to your opinion?
A. Our tariff rates are low enough for them at Rochester.
Q. That is to say, a small concern ought to pay 40, 30, 25 and 20, as
against a large concern, 13; that is your rule? A. Well, if he is a
grocer, most of his business is fourth-class freight.
Q. And he ought to pay 20, as against 13? A. Yes, sir.
Q. That small man has no right to develop? A. He has the same chance
that the other man has.
Q. At 20 against 13? A. Oh, yes.
Q. Do you call that the same chance? A. About the same chance, yes, sir.
Q. You consider it the same chance? A. Yes, sir.
Many reasons were assigned by railroad men in justification of their
practices. It was claimed that special rates were given to regular
shippers, but it has been proved that not all regular shippers had
special rates, and that persons who made only single shipments were
often fortunate enough to obtain special favors. It was further claimed
that special rates were given to those who, starting out new in business
or developing new enterprises, needed aid and encouragement. But it was
shown on the other hand that the aid and encouragement thus given to
some bankrupted others, and in the end deprived the companies of more
business than their policy of discrimination brought them. Railroad
managers also argued that they could afford to make lower rates on large
shipments than on small ones for the same reasons that the wholesale
merchant can sell his goods for less than the retailer. But while this
may be a good reason why rates on car-load shipments should be lower
than rates on shipments in less than car-load lots, it is certainly no
good reason why five car-loads belonging to one shipper should be
transported the same distance for less than five carloads belonging to
five shippers. In the case of local shipments the car is scarcely ever
loaded to its full capacity; one shipment after another is taken from it
as the train moves along, and the car perhaps reaches its final
destination nearly, if not entirely, empty. The terminal charges are
here also largely increased, and it is but just that the shipper should
pay the additional cost of carrying and handling the goods. The case is
entirely different when the railroad company carries five full carloads
from one station of its line to another. Whether they have been loaded
by one or five persons, whether they are consigned to one or five
persons, matters little to the railroad company. It merely transports
the cars, and in either case its responsibility and its services are the
same. The car-load must therefore be accepted and is now generally
accepted by the best railroad men as the unit of wholesale shipments,
and any discrimination made in favor of large wholesale shippers is
arbitrary and unjust. In the shipment of some commodities, such as
wheat, flour and coal, a small advantage in rates is sufficient to
enable the favored shipper to "freeze out" all competitors. It is
certainly not to the interest of any railroad company to pursue such a
policy; for by driving small establishments out of the business it
encourages monopoly, which almost invariably enhances prices and
decreases consumption. The railroad thus suffers in common with the
public the consequences of its short-sighted policy. That even railroad
managers realize that these practices cannot be defended upon any
principle of justice or equity is apparent from the fact that one of the
never-varying conditions of special rates is that they be kept secret. A
specimen of a special rate agreement which was placed before the New
York investigating committee is here presented to the reader:
"This agreement, made and entered into this eighteenth day of
March, 1878, by and between the New York Central and Hudson
River Railroad Company, party of the first part, and
Schoellkopf & Mathews, of the city of Buffalo, N.Y., party of
the second part:
"Witnesseth, That said party of the first part hath promised
and agreed, and by these presents does promise and agree to
transport wheat from the elevator in Buffalo, reached directly
by said first party's tracks, except at such mills as time
said tracks may be obstructed by snow or ice, to the which
said second party may erect or operate at Niagara Falls, N. Y.,
at and for the rate of one and a quarter cents per bushel.
"And further, that said first party shall and will at all
times give, grant and allow to said second parties as low
rate of transportation on all property shipped by them from
their said mills at Niagara Falls, and as favorable facilities
and accommodation in all respects as are afforded by the party
of the first part to the millers of Buffalo and Black Rock.
And also that the said party of the first part will transport
for said second party all of their east-bound New York freight
at and for the price or rate of forty-seven per cent. of the
current all-rail through rates, via the route of party of the
first part, from Chicago to New York, at the times of shipment,
adding thereto three cents per barrel for flour and one and
one-half cents per hundred pounds for mill feed or grain, as
a terminal charge, to provide for the incidental expenses
attending local transportation.
"And will transport their freight to Boston and all points in
New England, taking Boston rates at the same rate as to New
York, with ten cents per barrel added for flour and five cents
per hundred pounds added for mill feed or grain.
"Provided, however, and this agreement is made upon the express
understanding and consideration, that said second party shall
regard and treat this agreement as confidential, and will use
all reasonable precaution to keep the same secret.
"And upon condition also that said second party shall ship
by the first party's road all the product from their mill at
Niagara Falls destined to all points in New York, Pennsylvania
and New England, reached by said first party, directly or by
connections with other routes.
"And this agreement shall be and remain in force for the term
of five years from and following the first day of September,
1878, after which period it may be terminated by sixty days'
written notice from either party.
"In witness whereof, the parties hereto have signed these
presents the day and year first above written.
"N. Y. C. & H. R. R. R. Co.,
By J. H. RUTLER,
General Traffic Manager.
SCHOELLKOPF & MATHEWS."
It will be noticed that this agreement was based upon the expressed
condition that Schoellkopf & Mathews treat it as "confidential," and use
all reasonable precaution to keep it secret. It is difficult to account
for this strong injunction of secrecy except upon the assumption that
the managers of the road, conscious of the great wrong which they
inflicted upon the body of the people by their discriminations, hoped to
escape public criticism by adopting a policy of secret dealing. Much as
special rates were sought after, but few shippers to whom they had been
granted were contented with their lot, for none was confident that his
rivals did not have better rates than himself.
Discriminations between localities had their origin in the natural
desire of competing roads to increase their business at the expense of
their rivals. When two or more railroads touched the same point each
would attempt to secure the largest possible share of the through
business by holding out every possible inducement in rates to the
shippers of that place. Indeed, the freight rates at competitive points
were often so low that railroad managers found themselves placed in a
rather unpleasant dilemma. They either had to admit that the rates
charged by them at non-competitive places were exorbitant or that they
were carrying the freights of competitive points at a loss and were thus
squandering the money of their stockholders. They preferred as a rule
to admit that they were doing competitive business at a loss, but
asserted that, inasmuch as they were compelled to run their trains, they
could better afford to do competitive business temporarily at a loss
than not to do it at all. The same logic might with equal propriety be
employed by the grocer. To draw to him distant customers, he might offer
to sell to them at cost or even at a loss; and then, to recuperate, he
might advance the prices of his goods for his regular customers. If
there is any difference between the grocer and the railroad company, it
lies in the fact that the former's old customers would soon find relief
at a rival store, while the patrons of the railroad at non-competitive
points are like the traveler in the hands of a highwayman, without
immediate redress. The railway company which discriminates between
competitive and non-competitive points forgets that its line is a common
highway for all points tributary to it; that all have equal rights, and
that the only differences in tariff which the principles of the common
law permit are those which arise from a difference of service and cost.
All other differences that railroad companies may make are unjust
discriminations in violation of their charter and expose them to a
forfeiture of the franchises conferred upon them.
The nature and extent of the discrimination practiced between different
places are often such that no interest of the company can possibly be
subserved by them, and the conclusion is forced upon us that the
advantages granted by railroad managers to certain places are designed
to serve chiefly personal and selfish interests. The great fortunes
amassed in a brief period of time by railroad managers can in almost
every case be traced to stock, real estate, commercial and other
speculations directly or indirectly connected with railroad
construction or management. And where other than personal interest
cannot be shown, this is the only basis upon which the many apparent
absurdities of railroad discrimination can be harmonized.
It is claimed by railroad men that transportation by water is a
regulator of railway rates which they must respect. It is contended, for
instance, that, although the cities situated on our large lakes enjoy
superior commercial advantages which are mainly due to their having at
their disposal water communication with the Atlantic Ocean, inland towns
have no cause to complain against the railroads for not equalizing those
differences which nature has largely created. It might be more difficult
to meet this argument if, owing to peculiar combinations, these water
rates were not made to extend their influence to almost every inland
city north, east and south in the Union, and if those cities were not
given much lower rates than hundreds of places much nearer the lakes.
The teamster who, half a century ago, found it impossible to compete
with the canal, river or lake boats, simply surrendered the field to
them and confined his operations to such a territory as could give him
assurance of a profitable business. Let the railroads do likewise. No
company has a right to destroy a rival route, water or rail, by adopting
special tariffs for competing points. There are at points accessible to
water transportation certain freights requiring speedy carriage which
will go to the railroads at profitable rates, but the heavier freights,
as coal, lumber and even certain kinds of grain, should go to the
carrier by water if he can afford to transport them at lower cost.
There have been but few legislative investigations of railroad abuses in
this country, but the disclosures which they have made to the public
are astounding. The most noteworthy of these were made by the Hepburn
committee, of New York, to which reference has already been made. It is
difficult to understand how a free and enlightened community could so
long and so patiently bear railroad despotism. Individual discrimination
might, under the veil of secrecy, long escape notice, but that a system
of open and widespread discrimination affecting every non-competitive
and even many a competitive point in the State, doing visible and
irreparable injury to thousands of shippers, and infringing upon the
rights of millions, should long be borne by a free and enlightened
people, is a strange phenomenon of democratic endurance.
It would lead us too far from our subject to review in detail the many
and glaring instances of local discrimination which the report
enumerates. A few will suffice to show their scope and nature.
William W. Mack, of Rochester, a manufacturer of edged tools, testified
that, in order to save fourteen cents per hundredweight on his freights
to Cincinnati, he shipped his goods to New York and had them shipped
from there to their destination, via Rochester; and that he availed
himself of the same roundabout route for his St. Louis shipments, and
saved thereby eighteen cents per hundredweight. In both of these cases
the railroad company carried the goods 700 miles farther than the direct
distance for a less charge.
Port Jervis millers had their grain shipped from the West to Newburgh, a
point fifty miles to the east of them, and then had it returned to Port
Jervis on the same line, at a less rate than that charged for a direct
shipment.
The grain rates from Chicago to Pittsburgh were 25 cents per hundred in
March, 1878, and only 15 cents from Chicago to New York.
Flour was carried from Milwaukee to New York for 20 cents, while the
rate from Rochester to New York was 30 cents at the same time. It was
also carried from East St. Louis to Troy at the same rate as from
Rochester to Troy. The rate on butter from St. Lawrence County, N.Y., to
Boston, over the Ogdensburg and Lake Champlain and Vermont Central, was
60 cents per hundred; from the nearer county of Franklin, 70 cents; it
then continued to increase as the distance decreased, until it reached
90 cents at St. Albans, Vermont.
Soap shipped by Babbit & Co., of New York, to Crouse & Co., of Syracuse,
paid 8 cents per box when the freight was paid in Syracuse, but 12 cents
per box when paid by the shipper in New York.
It cannot even be said that New York fared worse than any of her sister
States. There is hardly a business man in any community in the United
States who cannot cite many cases of similar discrimination. Hundreds of
well authenticated cases have been reported from every part of the
country. A few striking ones may be given space here:
The Illinois Central Company hauled cotton from Memphis to New Orleans,
a distance of 450 miles, at $1.00 a bale, while the rate from Winona,
Miss., to New Orleans, about two-thirds of the distance, was $3.25 a
bale. The same company charged for fourth-class freight from Chicago to
Kankakee, a distance of 56 miles, 16 cents per hundred, and only 10
cents to Mattoon, 116 miles farther. The rate from New York to Ogden was
$4.65 per hundred, and only $2.25 per hundred from New York to San
Francisco. The car-load rate on the Northern Pacific was $200 from New
York to Portland and just twice as much to a number of points from 100
to 125 miles east of Portland. The Chicago, Burlington and Quincy hauled
stock from points beyond the Missouri River to Chicago for $30 per
car-load, while it exacted $70 per car in Southwestern Iowa for a much
shorter haul.
To what extent local discrimination has been carried by railroad
companies is well illustrated by the following incident: A nurseryman
residing at Atlantic, Iowa, a station on the Chicago, Rock Island and
Pacific Railroad, 60 miles east of Council Bluffs, bought a car-load of
grapevines at Fredonia, New York. Finding that the through rate from
Fredonia to Council Bluffs, plus the local rate from the latter place to
Atlantic, was less than the rate for the direct shipment from Fredonia
to Atlantic, he caused the car to be consigned to Council Bluffs,
intending to have it thence hauled back to Atlantic. Being short of
stock at the time the train containing his car passed through his town
on its way to Council Bluffs, the consignee prevailed upon the station
agent to set out his car. In due time he received a request from the
general office of the railroad to pay an amount equal to the rate per
car-load from Council Bluffs to Atlantic. The request was promptly
complied with by the appreciative nurseryman, who after all had been
saved an annoying delay by the courtesy of the company's agent.
An infinite number of similar discriminations might be cited. They all
show the same violation of the fundamental principles of justice and
equity, the same despotical assertion of the power of the railroads to
regulate the commerce of the country as the caprice or selfish interests
of their managers might direct.
Discriminations between commodities, or, as they might also be called,
discriminations in classification, are probably the most common of
unjust railroad practices. For the purpose of establishing as near as
may be uniform rules in all matters pertaining to rates, the various
roads operating in a certain territory usually form traffic
associations. The general freight agents of the roads that are members
of the association in turn form a select body known as the rate
committee. These committees of freight agents have for more than twenty
years constituted the supreme authority in all matters pertaining to
freight classification. The trunk line classification recognizes six
regular and two special classes, and every article known to commerce is
placed in one of these classes. One whom Providence has not favored with
the mysterious wisdom of a general freight agent might suppose that
considerations of bulk, weight, insurance and similar factors formed a
basis of railroad classification. Nothing, however, is farther from the
truth. Freight charges, when permitted to be fixed by railroad
companies, are invariably such as the traffic will bear, and freight
classifications are arranged on this principle, provided competition by
water, rail or other land transportation does not demand a modification.
It is, as a rule, not to the advantage of a railroad to entirely starve
out any commercial or industrial concern along its line. Hence tariffs
are scarcely ever made entirely prohibitory. Railroads proceed here upon
the principle of the robber knight of mediæval times, who simply
plundered the wayfaring trader to such an extent as to reduce his
profits to a minimum. He never stripped him, for by doing so he would
have prevented his return and would have destroyed his own source of
revenue. In like manner a railroad will never annihilate any weak branch
of business along its line, nor will it, if it is in its power, permit
any business to prosper without paying to it heavy tributes out of its
profits. Every commodity is therefore made to pay a transportation tax
based chiefly on its value and the profit which it yields, and all
classifications are prepared with this object in view.
The protection which, through exceptionally low rates, is extended by
the railroad companies to certain industries, may not be objectionable
_per se_, but the question arises whether the railroad companies or the
people should exercise the right to determine when and where such
protection is necessary. Moreover, to tax one branch of commerce for the
benefits bestowed upon another is a practice of extremely doubtful
propriety, and the power to do so should certainly never be conferred
upon a private corporation. When customs laws are proposed in Congress
ample opportunity is given to the representatives of the various
industries of the country to be heard upon the subject. No hasty step is
taken. Members of Congress have every opportunity to ascertain the
sentiment of their constituents, through the public press, petitions and
private correspondence. The subject is discussed in all its phases, both
in the committee-rooms and upon the floors of both houses of Congress.
Every detail is fully considered, and many compromises are often
necessary to secure for a bill the support of the majority. When it
finally passes it represents the will of the people, or at least the
will of their legal representatives, who may be expected to know their
wants and are accountable to them for their acts. Freight
classifications, however, while they are fully as far-reaching as
customs laws, are made by a few freight agents meeting in secret
session, listening to no advice and acknowledging no higher authority.
It is claimed by the railroad men that it is to the interest of railroad
companies to do justice to all, and that the best classification for
the largest number of people is also the best for the roads. If this be
true, it is difficult to see why railroads should fail to consult their
patrons in the arrangement of their freight classifications. Intelligent
shippers may certainly be supposed to know as well as the railroad
companies what classification is to their common interest. Railroad
managers are naturally despotical. They do not wish and do not tolerate
any outside interference with what they obstinately term their private
business. Even if the general policy of the companies designed the
greatest good to the greatest number, the opportunities and temptations
of their agents to pursue selfish ends or take advantage of individuals
in the preparation or application of their tariffs are such that in the
practical execution the evil will always outweigh the good.
It is not within the scope of the present inquiry to review in detail
the various classifications in force, or to point out the unjust
features. The author will confine himself to showing by a few
characteristic examples that the power now in the hands of the railroad
companies to classify the various commodities of commerce for the
purpose of rating is greatly abused and is a potent means of railroad
extortion. And that it may not be charged that abuses have been cited
which are a thing of the past, the examples will chiefly be taken from
cases which have come before the Interstate Commission for adjudication.
A complaint was filed with the commission in 1887 by T. J. Reynolds
against the Western New York and Pennsylvania Railroad Company, from
which it appeared that that company charged a greater price for the
transportation of railroad ties from points in the State of Pennsylvania
to points in the State of New York than was charged at the same time
for the transportation of lumber between the same points. The commission
held that this was a case of unjustifiable discrimination and ordered
the company to place railroad ties in the same class with other rough
lumber. Many Western roads for years have been guilty of the same
discrimination. The reasons for such a policy are obvious. A high tariff
on railroad ties prevents their being shipped, depreciates their market
price at home, to the sole benefit of the discriminating company, which
is thus enabled to buy ties at a low price. Prohibitory rates on ties
and rails are also often maintained by railroad companies to either
delay or render more costly the construction of new lines which threaten
to become their competitors. The Union Pacific Railroad Company several
years ago even went so far as to make prohibitory rates on steel rails
intended for the construction of a road which promised to become a
competitor of one of its connecting lines.
From another case decided by the Interstate Commerce Commission it
appeared that the Lake Shore and Michigan Southern Railway Company
charged for blocks intended for wagon-hubs, and upon which only so much
labor had been expended as was necessary to put them in condition, a
higher rate than for lumber, claiming that such blocks were unfinished
wagon material and were therefore, as articles of manufacture, subject
to higher charges than raw material. The commission justly held that
these blocks were as much to be regarded as raw material as the boards
from which wagon-boxes are made.
In the classification of the Southern Railway and Steamship Association
pearline was placed in the fourth class, with a rate of 73 cents per
hundred pounds, and common soap in the sixth class, with a rate of 49
cents per hundred pounds. This latter article, when shipped by large
manufacturers, enjoyed besides a special rate of 33 cents per
hundredweight. Pearline and soap are competitive; there is no
appreciable difference between them as regards the cost of
transportation; but one commands a higher price in the market than the
other, and upon this fact solely did the railroad company base its
alleged right to levy upon pearline a transportation tax 120 per cent.
in excess of that levied upon soap, though the service rendered by the
company was the same in either case. The commission held that the
discrimination made by the "special rate" of the Southern Railway and
Steamship Association between pearline and common soap was unjust, and
ordered that it be discontinued and that, with common soap in the sixth
class, pearline be placed in the fifth.
For years the rate from Indianapolis to New York was the same for corn
as for its direct products, such as ground corn, cracked corn, corn
meal, hominy and corn feed. Such a tariff made it possible for Western
mills to compete with similar mills that had been established in the
East, since a discrimination of 5 per cent. was sufficient to absorb
three or four times the profits of any Western mill. It was shown by the
evidence produced that the actual cost of transportation was
substantially the same for direct corn products as for the raw corn. The
only defense which the railroad company could make for this
discrimination was that in the carriage of raw corn they had to meet
lake competition. The weakness of this argument will be perceived when
it is remembered that Indianapolis is 154 miles from the nearest
lake-shipping point. There is but little doubt that this discrimination
was made by the railroad company because it was to its interest to haul
the raw corn from the West to the East and to return it in altered
form. Railroads care, as a rule, little for a waste of force, if such
waste is to their own advantage.
In another case brought before the commission in 1889 it was shown that
the "Official Classification" placed common soap in carload lots in
Class V, while such articles as coffee, pickles, salted and smoked fish
in boxes or packages, rice, starch in barrels or boxes, sugar, cereal
line and cracked wheat are placed in Class VI. The chief reply of the
railroad companies to this complaint was that soap was justly placed in
Class V because the components from which it is in part made stood in
Class V.
In another case it was shown that one kind of soap was burdened with a
higher transportation tax than another, irrespective even of cost,
because one had been advertised as toilet and the other as laundry soap.
The principle of charging what the traffic will bear is well illustrated
by the relative rates on patent medicines and ale and beer, as
maintained by the Official Classification.
In a complaint made by a prominent manufacturer of proprietary medicines
against the New York Central and other roads, it was shown that the
complainant's products were shipped at owner's risk, and that they were
in bulk and intrinsic value similar to ale and beer, but that in spite
of these analogies the former were rated as first-class and the latter
as third-class goods, simply because they retailed at a higher price.
Another unwarrantable discrimination is that in favor of live stock and
against dressed beef. While Mr. Fink, the commissioner of the Trunk Line
Pool, himself admitted that the cost of carrying dressed beef from
Chicago to New York was only 6-1/4 cents per 100 pounds in excess of
the cost of hauling live stock, the trunk lines maintained on dressed
beef a rate 75 per cent. higher than that on live cattle. The railroad
companies asserted that this was due to those people in the East whose
living depended on the live-stock interest. The railroads have in this
assumed a paternalism which would not be tolerated even in the
Government. To protect the East, railroads will not permit the West to
engage in new industries.
The position which the Interstate Commerce Commission has assumed in
interpreting the rights of shippers under the law which railroad
companies are bound to respect in the preparation of their tariff sheets
and classifications cannot but be most gratifying to the people. In a
decision relating to the classification and rates for car-loads and less
than car-loads, filed March 14, 1890, the commission laid down the
following rules for the guidance of railroad companies:
"1. Classification of freight for transportation purposes is
in terms recognized by the act to regulate commerce, and is
therefore lawful. It is also a valuable convenience both to
shippers and carriers.
"2. A classification of freight designating different
classes for car-load quantities and for less than car-load
quantities for transportation at a lower rate in car-loads
than in less than car-loads is not in contravention of the
act to regulate commerce. The circumstances and conditions
of the transportation in respect to the work done by the
carrier and the revenue earned are dissimilar, and may
justify a reasonable difference in rate. The public
interests are subserved by car-load classification of
property that, on account of the volume transported to reach
markets or supply the demands of trade throughout the
country, legitimately or usually moves in such quantities.
"3. Carriers are not at liberty to classify property as a
basis of transportation rates and impose charges for its
carriage with exclusive regard to their own interests, but
they must respect the interests of those who may have
occasion to employ their services, and conform their charges
to the rules of relative equality and justice which the act
prescribes.
"4. Cost of service is an important element in fixing
transportation charges and entitled to fair consideration,
but is not alone controlling nor so applied in practice by
carriers, and the value of the service to the property
carried is an essential factor to be recognized in
connection with other considerations. The public interests
are not to be subordinated to those of carriers, and require
proper regard for the value of the service in the
apportionment of all charges upon traffic.
"5. A difference in rates upon car-loads and less than
car-loads of the same merchandise, between the same points
of carriage, so wide as to be destructive to competition
between large and small dealers, especially upon articles of
general and necessary use, and which, under existing
conditions of trade furnish a large volume of business to
carriers, is unjust and violates the provisions and
principles of the act.
"6. A difference in rate for a solid car-load of one kind of
freight from one consignor to one consignee, and a carload
quantity from the same point of shipment to the same
destination, consisting of like freight or freight of like
character, from more than one consignor to one consignee or
from one consignor to more than one consignee, is not
justified by the difference in cost of handling.
"7. Under the official classification the articles known in
trade as grocery articles are so classified as to
discriminate unjustly in rates between car-loads and less
than car-loads upon many articles, and a revision of the
classification and rates to correct unjust differences and
give these respective modes of shipment more relatively
reasonable rates is necessary and is so ordered."
The efforts which the commission has made to bring about a uniform
classification throughout the country are in the right direction, while
the results of its labor are not yet satisfactory.
In their fifth annual report, the Commissioners, after giving an account
of their efforts and the shuffling and double-dealing of the railroad
companies with them upon this matter of uniform classification, said:
"Its conviction remains unchanged that the necessities of
commerce require that the existing classifications be
consolidated, and that this result should be accomplished as
speedily as may be found practicable; and it does not feel
justified in asking for the further efforts of the carriers
the same measure of indulgence which from time to time it
has heretofore suggested should be extended to them, and
which was thought to be required in the public interest.
"The commission can not but think that if legislation to
that end be enacted by Congress the carriers will speedily
consummate the reform already begun in this direction. It is
therefore recommended that an act be passed requiring the
adoption within one year from the date of its passage of a
uniform classification of freight by all the carriers,
subject to the act to regulate commerce, and providing that
if the same be not adopted within the time limited, either
this commission or some other public authority be required
to adopt and enforce a uniform classification."
The present confusion which exists in the classification and rates of
the seventeen hundred railroad organizations of the country makes it
difficult for the commission to do justice to all interests and
localities. With the adoption of a uniform classification it is to be
hoped that in time many of the present inequalities will be adjusted,
especially if an intelligent public sentiment upon the subject of
railroad regulation is maintained. A prominent railroad manager in the
East, whose devotion to corporate interest is only equaled by his
political ambition, has recently made repeated efforts to convince the
people that railroad abuses are things of the past and that, if any such
abuses still linger in isolated districts, they are simply unavoidable
exceptions to the rule which will soon have to yield to the general
spirit of fairness and amity for which, in his opinion, the railroads
have of late been distinguished. He reasons that the law has fulfilled
its mission, that the railroads have reformed, and that it now behooves
the people to relent and to extend to the much persecuted corporations
the hand of friendship and good will. The postprandial eloquence of this
gentleman has often suavely intimated that the repeal of the Interstate
Commerce Act would be the most opportune recognition of restored
confidence.
Still bolder champions of the railroad cause do not hesitate to demand
the repeal of the law. It is not likely that the sophistry of railroad
hirelings will triumph over the practical logic of an intelligent
public. No law, be it ever so wise, can in the space of a few years
correct all the abuses which half a century of unbridled railroad
domination has developed. Yet, since both the friends and the enemies of
the law agree that it has been partially successful in its operation, it
should be continued and improved to keep it in harmony with new
conditions and a progressive public sentiment. It is claimed by railroad
managers that the adoption of a uniform classification will remove the
only vestige of discrimination still left. This is not true, for by far
the largest number of complaints that have recently been brought before
the Interstate Commerce Commission charged personal and local
discrimination independent of any question of classification.
It is shown by the reports of the commission that discriminations are
still practiced by various companies, that annual passes are still
illegally issued to bribe or appease men of influence, that discounts
are still given to favor shippers under various pretexts, that some
large railroad centers still enjoy more favorable rates than smaller
towns, and that the long and short haul clause of the Interstate
Commerce Act is still violated by railroad companies. There are besides
these scores of other devices in vogue among railroad managers to
subvert the principles of the common law. No doubt discriminations are
now much less frequent, and are possibly the exception where but a few
years ago they were the rule, but the fact that such abuses still exist
is a strong argument for the retention of the law as well as for the
necessity of continued vigilance on the part of the people and those
especially charged with the execution of the laws. The railroad acts of
Congress and the various States ask nothing of common carriers but just
and equitable treatment for all their patrons. If this is freely
accorded, these laws are no burden to the railroads. If, on the other
hand, there is a tendency on the part of the railroads to resort to
subterfuges and evasions, the wholesome restraint of the statute is
absolutely necessary for the protection of the shipper.
The repeal of the Interstate Commerce Law, or the adoption of such
amendments as are demanded by railroad men, would be interpreted by them
as an abandonment of all its principles and would inaugurate an era of
unprecedented railroad oppression. History ever repeats itself.
Unchecked license will always lead to arrogance and despotism, and any
power which is long permitted to defy the state will in time control it.
It is not likely that the people of the United States can be induced to
demonstrate to the world that democratic government is incapable of
profiting in the dear school of experience.
Our railroad legislation contains no principle that is not found in the
common law. Its maxims are our birthright and will be the birthright of
our children and children's children, and while railroad companies may
be able in the future, as they have been in the past, to violate the law
temporarily with impunity, they will never be able to prevail upon the
American people to abandon the policy of railroad reform which the
passage of the Interstate Commerce Law inaugurated.
The Interstate Commerce Commissioners say in their sixth annual report:
"Whoever will read the report of the special committee of
the United States Senate, commonly called the 'Cullom
Committee,' will be astounded at the magnitude and extent of
railroad abuses brought to light by their investigation.
Those unfamiliar with the facts made public at that time can
hardly believe the outrages which were proven to exist and
the manifold devices by which the most flagrant injustice
was perpetrated. A single illustration will furnish a better
reminder than extended comment.
"It appears from that report that the Standard Oil Company,
in one instance at least, boldly demanded from a certain
railroad that its shipments should be carried for 10 cents a
barrel; that all other shippers should be charged 35 cents a
barrel on the same article, and that 25 cents of the 35 paid
by such other shippers should be handed over by the railroad
to the Standard Oil Company, and the penalty threatened for
non-compliance with this impudent extortion was a withdrawal
of its entire business.
"The foregoing statements but imperfectly describe the
situation which existed when the Interstate Commerce Law was
enacted. In any reasonable view of the case it was too much
to expect that the common and long continued abuses of
railroad management could be corrected in less than half a
dozen years, or that the first scheme of legislative
regulation would prove adequate to that end. It would be
contrary to all experience if so great and radical a reform
could be thus speedily accomplished, or if the initial
statute should be found sufficient to bring it about. The
law was the outgrowth of an aroused and determined public
sentiment, which, while united in demanding Government
interference, was divided and uncertain as to the best
methods of affording relief. Like all attempts in a new
field of legislation, the statute was a compromise between
divergent theories and conflicting interests. It was
scarcely possible that it should be so complete and
comprehensive at the outset as to require no alteration or
amendment. Those who are familiar with the practices which
obtained prior to the passage of this law and contrast them
with the methods and conditions now existing will accord to
the present statute great influence in the direction of
necessary reforms and a high degree of usefulness in
promoting the public interest.
"Whoever will candidly examine the reports of the commission
from year to year, and thus become acquainted with the work
which has been done and is now going on, will have no doubt
of the potential value of this enactment in correcting
public sentiment, restraining injustice and enforcing the
principle of reasonable charges and equal treatment.
Imperfections and weaknesses which could not be anticipated
at the time of its passage have since been disclosed by the
effort to give it effective administration. The test of
experience, so far from condemning the policy of public
regulation, has established its importance and intensified
its necessity. The very respects in which the existing law
has failed to meet public expectation point out the
advantages and demonstrate the utility of Government
supervision.
"Moreover, it may be fairly claimed that much greater
benefits would have been realized had the statute as enacted
expressed the evident purpose of those who framed it, and
received a construction according to its apparent import. It
is not too much to say that judicial interpretation has
limited its scope and ascribed to it an intent not
contemplated when it was passed. If its supposed meaning, as
understood at the time of its passage, had been upheld by
the courts, it is believed that its operation would have
been much more effective and its usefulness greatly
increased. So far as failure has attended the efforts to
give it proper administration, that failure can be mainly
attributed to differences between its apparent meaning and
the judicial interpretation which some of its provisions
have received; and the commission is of the opinion that if
the present law could be so altered as to express clearly
and beyond doubt what it was evidently intended to express
at the time of its enactment, it would prove, even without
other amendment, an instrumentality of the highest value in
removing the evils against which it is aimed.
"The specific instances in which the statute has received
judicial construction, and the limitations upon its scope
and meaning which the courts have imposed, will be alluded
to at greater length in another part of this report.
"It seems proper, however, to observe in this connection
that the effect of these decisions in weakening the law and
preventing its enforcement has been greatly exaggerated. The
impression has been created in many directions that judicial
construction has invalidated the essential feature of the
statute and condemned the general principle which lies at
its foundation. That impression cannot be too speedily
corrected, for nothing has been decided which permits such
an inference. On the contrary, neither the power of the
national legislature to regulate the transportation of
interstate commerce nor the general policy of the existing
law has been questioned by any tribunal."
Probably no law in the United States has ever before been so fiercely
attacked at all of its vital points as has this law. It is not strange
that among the great number of National and State courts the railroad
companies have found occasionally a judge ready and willing to assist
them in breaking it down, but upon the whole the judiciary has been
disposed to co-operate with other departments of the Government in their
efforts to secure effective regulation of the transportation business.
CHAPTER VI.
STOCK AND BOND INFLATION.
The complaint is frequently heard from railroad men that our freight
rates are too low, and in support of it the statement is usually made
that the greater part of the railroad stocks of the United States pays
dividends considerably smaller than the average interest realized by
capitalists on money loaned or invested in other enterprises.
This statement may be true, and yet it is valueless as an argument for
higher rates. It may be admitted that the dividends declared upon the
face values of railroad stocks are quite moderate, but it is a fact too
well authenticated to be contradicted that railroad securities represent
to a considerable extent only fictitious capital. The public concedes
that liberal returns should be allowed to railroad companies on money
actually invested, but it naturally objects to being taxed for the
purpose of making dividends on watered stock. The evil referred to is a
serious one, and has contributed much to the general demand for railroad
reform. Most of the early roads of this country were built for the
accommodation of local traffic. They were constructed and managed by
business men upon business principles. The stock issued by the companies
was in most cases paid for in full and was not unfrequently sufficient
for the completion of the entire road, and no incumbrance was permitted
by the owners to be placed upon the property. These enterprises as a
rule proved very profitable. One of the first roads running west of
Chicago will serve as an illustration. The Galena and Chicago Union
Railroad Company paid a 10 per cent. dividend within a year after being
opened to traffic, and gradually increased its dividends to 15, 20 and
22 per cent. During the first two years of the road's operation its
expenses were only 38-1/2 per cent. of its earnings. During the second
year the company, after paying a 15 per cent. dividend, diminished its
debt nearly $60,000 and increased its surplus $11,700. In 1856 the road
had a length of 232 miles, on which the gross earnings amounted to
$2,315,787. This revenue exceeded the estimate made by the company's
officers the year previous by $300,000. In his annual report for 1856
the president of the company said: "This result shows an _increased
surplus_ of $65,000, after paying 22 per cent. in dividends and all
expenses and interests chargeable to income account." The report also
shows that expensive improvements, such as large permanent bridges and
stone culverts, displacing as a rule wooden ones, were charged to
current expenses.
The financial success of railroads soon attracted the cupidity of
financial adventurers--men of great energy, but small means--whose aim
was to secure the greatest possible returns with the least possible
outlay of money. With the introduction of these elements into railroad
circles the era of speculation commenced. Take the line just referred
to. In 1852 the average number of miles operated was 62, and the year
following, 90. But while the number of miles operated increased less
than 50 per cent., the capital stock of the company grew from $444,193
to $1,362,559, and its debt from $60,145 to $542,287. The capitalization
of the road was thereby increased from $8,000 to $21,000 per mile, and
this was done for the purpose of making the capital appear adequate to
its earnings. Nearly all railroads became in time the foot-balls of
shrewd manipulators. They were bonded before they were constructed, and
often for more than the value of the completed road. Stocks at the best
only represented nominal values and were given as premiums to the
bondholders or promoters of the road.
But the science of stock-watering did not reach its fullest development
until during the period of railroad consolidation. Fictitious values
were now created as often as a new consolidation took place. Watered
stocks and bonds were watered again and again, until they represented
little more than a purely imaginary capital upon the basis of which
dividends might be declared. Take the case of the New York Central and
Hudson River Railroad companies, which consolidated in 1869 with a
capital of $103,110,137.31. The former of these roads was organized in
1853 by the consolidation of ten smaller roads connecting the cities of
Albany and Buffalo. The capital stock of these companies amounted to
$20,799,800, of which $16,852,870 was claimed to have been paid in.
Their funded debt was $2,497,526. It is impossible at this day to
ascertain the original cost of all these roads, but it is certain that
the above sums represent about three times the amount actually expended
for their construction.
One of the roads entering into the consolidation was the Utica and
Schenectady. It was 78 miles long and formed about one-fourth of the
consolidated line. It had the heaviest grading and rock-cutting, was the
best-equipped and undoubtedly the most expensive, in proportion to its
extent, of the ten roads out of which the New York Central was created.
The original cost of this line was $2,000,000. Bonds were never issued
by the company. The line was profitable from the very beginning, paid
regularly ten per cent. dividends,--the limit to which railroad
companies were then restricted,--and had a large surplus, which it
expended mainly for improvements. No assessment was ever made on the
stock beyond the $1,500,000 which was originally paid in by the
shareholders and upon which they had drawn regular and liberal
dividends. Taking the original cost of this line as a basis, it is but
fair to presume that the entire line from Albany to Buffalo, covering a
distance of 297 miles, did not cost to exceed $6,000,000. These roads,
however, entered into the consolidation with a capital stock of
$15,274,800 and a bonded indebtedness of $1,696,326.
Estimating the cost of the branches upon the same basis upon which we
have estimated that of the main line, we shall find that the total
original cost of the consolidated lines cannot have exceeded $8,000,000.
The Mohawk Valley road was put in at $2,000,000 and the Syracuse and
Utica direct at $600,000, though the roads only existed on paper and did
not represent any value whatever. The Schenectady and Troy road, which
went into the consolidation with $650,000 stock and $90,000 bonds, had
been bought for less than $100,000 two months previous to the
consolidation.
It will thus be seen that already nearly one-third of the stocks and
bonds of the consolidated companies was water. The consolidation
agreement fixed the capital stock of the New York Central at $23,085,600
and its funded debt at $11,564,033.62, increasing the stock over
$2,000,000, and the bonded debt over $9,000,000. The latter was more
than quadrupled, and $8,000,000 worth of bonds were, under the name of
consolidation certificates, given as a present to the stockholders of
the new road. The capital stock of the New York Central grew steadily up
to the time of its consolidation with the Hudson River road, when it was
$28,795,000. All improvements made during this time were paid for out of
its surplus earnings, with the single exception of the Athens branch,
for which the company issued $2,000,000 of its stock.
The gross earnings of the New York Central in 1854 were $5,000,000, and
its net earnings $2,830,000. In 1863 its gross earnings were in round
numbers $10,000,000, and in 1869 they reached $15,000,000. The dividends
paid during that year amounted to $4,300,000, and the interest to
$894,000. In view of the fact that the bonded indebtedness of the road
was from two to three million dollars more than the original cost, this
dividend of 15 per cent. upon a wholly fictitious capital must be
regarded as an unwarranted tribute levied upon the commerce of the
country. But we shall soon see that in railroad hydraulics, as well as
in other branches of human industry, success stimulates to still greater
energy.
The Hudson River Railroad Company was organized in 1847. It extended
from New York City to East Albany and was 144 miles long. There are no
data extant upon which could be based a reliable estimate of its
original cost. Estimating it upon the basis of that of the Utica and
Schenectady, we should have to place it somewhat below $3,000,000. While
such an estimate may be too low, the amount of its funded indebtedness
in 1851, which was $5,640,000, probably more than covers the amount
actually expended in the construction of the road. In 1851 the capital
stock of the Hudson River road was $4,000,000. In 1853 the funded debt
had increased to $7,000,000, and in 1862 to $9,000,000. In 1869 the
bonded indebtedness had decreased to $4,309,000, but the capital stock
had grown to over $16,000,000. Between 1853 and 1869 the company
increased its stock and bonded indebtedness nearly $11,000,000, while
the assessments paid by its stock and bondholders during this time did
not exceed $1,000,000. Improvements were made, but these were chiefly
paid for out of the surplus earnings of the road. It has been shown by
experts that $6,640,000 is a high estimate of the actual original cost
of the Hudson River road to its stock-and bondholders, and that
securities to the amount of more than $13,000,000 represented surplus
earnings and water. At the time of the consolidation of the Hudson River
and New York Central railroads the capital stock of the two roads had
grown to $44,800,000. Under the consolidation agreement the stock was
fixed at $45,000,000. The new company also assumed all the bonded and
other indebtedness of both roads. If the consolidation manipulators had
paused here, the capital of the new company would have been somewhat
less than $60,000,000, or more than three times the cost of the
property. But the road was, under existing rates, capable of earning
dividends on a much larger capital, and this emergency was met by the
issuance of consolidation certificates to the amount of $45,000,000. The
total capital of the road was thus increased to and made to pay
dividends on over $103,000,000, while the total cost of the road and its
equipment, as claimed by the company in 1870, was less than $60,000,000,
their estimate being based upon assumed consolidation values and the
expenditures made from surplus earnings. During the same year the gross
earnings of the company were $22,363,320, and their net earnings
$8,295,240. In 1880 the gross earnings had increased to $33,175,913,
and the net earnings to $15,326,019. The company was able to declare in
that year 11.82 per cent. dividend on its $89,500,000 of fictitious
stock. In 1890 its gross earnings were $37,008,403, or $26,050 per mile,
while its total net earnings were $12,516,273. The gross earnings have
largely increased during the years 1891 and 1892. It is safe to say that
$2,000,000 per annum would pay very liberal interest and dividends on
the amount of money expended upon the construction of the New York
Central and Hudson River Railroad from the proceeds of its bonds and
stocks. By the creation of fictitious values the managers of the company
have attempted to impose an exorbitant tax upon the commerce and travel
of the country for all time to come. The Government guarantees an
inventor a monopoly only for a limited space of time, upon the
expiration of which his invention becomes the common property of the
people; but railroad managers endeavor to collect, under the protection
of our laws, an exorbitant royalty from our people forever.
The case of the New York Central and Hudson River Railroad Company is
only one of the innumerable instances of stock watering in the history
of American railroads. Indeed, it can be shown that stock-watering
reached a still higher degree of development in the case of the Erie
road. It has been demonstrated that the actual original cost to the
stock-and bondholders of the New York Central Railroad Company, which
was, with its branch lines, 593 miles long, did not, including the
Athens branch, exceed $10,000,000. Its cost to its owners, in 1869,
including the bonuses, premiums, commissions and fictitious equalization
values of several transfers, was reported by them to be only
$37,600,000, or about $63,400 per mile. At about the same time the main
stem of the Erie Railway, extending from New York to Dunkirk, a distance
of 459 miles, was represented by a capital of $108,807,687, or $237,000
per mile. Considering the inferiority of this road to the New York
Central, we are forced to the conclusion that nearly 85 per cent. of the
capital of the road represented water, or, in other words, that the
commerce of the United States was taxed to pay dividends on about
$90,000,000 of watered securities. In 1863 the Erie Railroad had
outstanding $11,437,500 of common stock. In 1864 this had been increased
to $15,693,000, in 1868 to $37,765,000, and in 1869 to $70,000,000. Not
one-tenth of this enormous increase of capital was ever expended on the
property of the road. The stock was sold at from 20 to 40 cents on the
dollar, and the proceeds disappeared in the hands of its managers. To
what extent this freebootery was carried will probably never be known.
An idea of the rottenness of the Erie management may be had from the
fact that the courts at one time ordered its president to restore to the
company $9,000,000 of diverted securities, which order was complied
with. Vast private fortunes were amassed by nearly all the men who
directed the affairs of the road, and the mismanagement became in time
so notorious that the legislature of the State of New York was appealed
to, to remove the directors of the road for the protection of its
stockholders, and to reduce the capital stock of the company to the
amount actually paid for it. This movement failed, however, because it
was opposed by the very stockholders whose interests were supposed to
have suffered by directorial mismanagement. They preferred to continue
to draw dividends on the face value of stocks which they had purchased
at 20 cents on the dollar. The capitalization of the company has since
been increased to $163,679,825, and it is by no means a secret among
those familiar with railroad values that the bonded indebtedness of the
Erie road represents alone many millions more than the total amount that
was ever invested in the property.
The principal competitor for through traffic of the two companies whose
financial operations we have just reviewed is the Pennsylvania Central
Company. It has often been asserted by the managers and friends of this
company that its capital is free from water; but this is not true. In
1864 a dividend of $4,130,760 was made out of the surplus earnings of
the road. This dividend was payable in capital stock and was equal to 30
per cent. of the then outstanding capital. Similar surplus dividends,
each equal to 5 per cent. of the company's outstanding stock, were
declared in 1867 and 1868. The people were thus taxed to pay dividends
on a capitalized surplus which had been derived from excessive charges
previously imposed on them. I shall not attempt here to determine
whether the capital represented by the Pennsylvania Railroad Company has
been honestly invested. A committee of Congress has expressed the
opinion that the capitalization of its main line exceeds the amount of
the actual cost of the property by more than eleven million dollars.
There is, however, a system of inflation practiced by the Pennsylvania
Railroad Company which is simply a new form of bond and stock watering.
More than one-half of the capital of this company has been invested in
the stocks and bonds of other corporations. In 1891 the amount so
invested was $154,319,240, and the income derived from it $4,852,181.
This does not only cause the stocks and bonds of certain companies to be
counted twice, but exacts a double tax from the commerce of the
country, interests and dividends upon the same capital being paid both
to the bond- and stockholders of the Pennsylvania Central and to the
bond-and stockholders of the roads in whose securities it has made
investments. The income of the company is thus swelled far beyond the
amount which the traffic reports indicate. It will be seen that, to
perpetuate extortionate rates, this process of manifolding securities
might be continued indefinitely.
The cost to its stock-and bondholders of the Baltimore and Chicago line
of the Baltimore and Ohio Railroad, which has a length of 795 miles, was
estimated by the company's officers at about $57,000,000. The actual
cost of this road, owing to its expensive mountain grades, was probably
greater than that of any of the other through lines between the
sea-coast and Chicago, but there can be no doubt that the capitalization
of this road represents from one-half to one-third pure water. At the
time of the completion of this road to Chicago the surplus earnings of
the company, after the payment of interest and dividends, amounted to
over $29,000,000. This had been charged to "profit and loss" and used in
the construction of branch lines. Thus an amount equal to more than half
of the reported cost of this line had at the time of its completion been
returned to its owners in other railroad values.
The Select Senate Committee on Transportation Routes to the Seaboard in
1874 estimated the excess of the capital over actual cost of the Erie
road, from New York to Dunkirk, at $68,807,000; that of the New York,
Lake Shore and Michigan Southern line to Chicago at $115,188,137, and
that of the Pennsylvania and Fort Wayne line to Chicago at $11,290,374.
If this estimate was correct the entire over-capitalization of these
lines, on which the commerce between the West and the East was forced to
pay a dividend of 8 and 10 per cent. per annum, was no less than
$195,000,000. The committee assumed the actual cost of these roads to be
$182,000,000, or about $78,000 per mile. They based their estimate upon
the cost of the main branch of the Baltimore and Ohio, as reported by
their officers, supposing it to represent the actual outlay made by its
stock-and bondholders. Various revelations which have since been made to
the public, as to the real cost of railway construction, justify the
belief that the estimated cost of $78,000 per mile for those roads is
far too high. Mr. Henry Poor, several years ago, estimated the average
cost of the roads of the United States at $30,000 a mile. Making
allowance on one hand for Mr. Poor's tendency to favor the railroad side
of the question, and on the other hand for the more expensive grades,
double tracks and better terminal facilities of these trunk lines,
$50,000 per mile may be considered a fair estimate of their average
cost. Upon this basis the total cost of the three lines in question
would amount to $116,450,000, and the excess of their capital over
actual cost would be the enormous sum of $261,000,000, or 325 per cent.
of their actual cost, and probably not less than 400 per cent. of the
original cost to their stock-and bondholders. The capital of these
companies has since been considerably increased, to enable their
managers to increase their dividends, and with it the tax levied upon
the commerce of the country.
These are only a few of the many instances of stock watering that might
be mentioned. In fact, there are to-day very few railroads in the United
States that are entirely free from it. It is a notorious fact that the
stock of a large number of railroad companies represents little or no
value, having either been sold at a mere nominal price or been donated
as a premium or bonus to those who purchased a large amount of the
company's bonds. In recommending, in his December, 1891, annual message,
Government aid for the Nicaragua Canal, President Harrison said: "But if
its bonds are to be marketed at heavy discounts and every bond sold is
to be accompanied by a gift of stock, as has come to be expected by
investors in such enterprises, the traffic will be seriously burdened to
pay interest and dividends." It is not difficult to surmise to what
enterprises the President referred. It has for many years been a
well-settled principle among railroad incorporators that no larger
assessments should be made upon the stockholders than is necessary to
float the company's bonds. A company, for instance, is organized with a
capital stock of, say, $1,000,000. Five per cent. of this sum, or
$50,000, is paid into defray preliminary expenses. The road is then
bonded for perhaps $2,000,000, but as the bonds are sold for only 80 per
cent. of their face value and as the incorporators allow themselves 5
per cent. for the negotiation of the bonds, only $1,500,000 is realized
for the construction of the road. The incorporators now vote to
themselves a contract to construct the road for $1,500,000 and at once
sublet it to a contractor who is ready and anxious to build the road for
$1,200,000. The incorporators thus realize $1,000,000 worth of stock, a
portion of which is unloaded upon unsophisticated investors, and
$300,000 in cash, at an outlay of $50,000; and the road, which cost
$1,200,000, is made to pay interest and dividends on a total capital of
$3,000,000, and this is subsequently watered indefinitely if the road
proves profitable or a consolidation with some other road justifies the
belief that its earning capacity might be increased. Nor is this an
overdrawn picture. On the contrary, instances might be cited where only
one-half of one per cent. of the company's stock was paid in by the
shareholders.
In the days of inflation such transactions did not seem to seriously
affect railroad securities. Even when they were no longer a secret to
the public, stocks and bonds sold readily, because, owing to the large
earnings of the roads, this class of investments was unusually
productive.
In 1868 the earnings of the railroads of Massachusetts averaged $15,400
a mile, and were equal to 38 per cent. of the total reported cost of all
the lines of the State. The Chicago, Burlington and Quincy earned
$15,386 per mile in 1867, and paid a 15 per cent. dividend. Its stocks
were quoted 100 per cent. above par. In 1867 the Lake Shore Railroad
earned more than 50 per cent., and the Terre Haute and Indianapolis even
as much as 57.2 per cent. of the amount of its cost. Previous to the war
the inflation of railroad securities was, as a rule, confined to the
stock. Where roads were bonded for more than the cost of construction it
was, with but very few exceptions, done to make their capital to
correspond with their earning capacity, or rather to divert public
attention from the fact that the rates in force had outlived their
reasonableness. It was reserved to the Union Pacific and the Central
Pacific companies to bond their roads from the beginning to an amount
equal to twice their actual cost, or, in other words, to virtually
receive them as a present from the Federal Government, bond them for all
they were worth, and, in addition, issue stock to an amount largely in
excess of the cost of construction, and then try to earn interest and
dividends on the whole amount of securities issued. The history of
these companies forms so interesting and instructive a chapter in the
railroad annals of America that a short synopsis of it may not seem out
of place here.
The charter of the Union Pacific Railroad Company was granted by
Congress on the first day of July, 1862. Shortly after the beginning of
the War of the Rebellion it was made to appear to the country that a
transcontinental road was a national necessity; that without it we could
not hope to retain long the Pacific Coast. It was also very plausibly
argued that the political benefits to be derived by the country from the
construction of such a road, as well as its great length and
extraordinary cost, made it the duty of the nation to aid liberally its
enterprising and patriotic promoters in the prosecution of their
gigantic task. In those stirring times few people were inclined to
question the motives of those who advocated what appeared to be
patriotic measures, or to be penurious in the expenditure of public
funds when the public weal seemed to demand such expenditure.
The Union Pacific Railroad charter, which in substance was passed by
Congress as it had been drafted by the promoters of the enterprise, gave
to the new company the right of way through the public lands, and
authorized it to take, from the lands adjacent to the line of its road,
earth, stone, timber and other materials for its construction. It
further granted to the company every alternate section of land to the
amount of five alternate sections per mile on each side of its line,
excepting only those lands to which preëmption or homestead claims
attached at the time when the line of the road should be definitely
fixed. In addition to these donations the United States issued to the
company subsidy bonds in an amount equal to $16,000 per mile for the
distance from the Missouri River to the eastern line of the Rocky
Mountains, $48,000 per mile for a distance of 150 miles through the
Rocky Mountains, and $32,000 per mile from the western base of the Rocky
Mountains to the terminus of the road. Similar franchises were at the
same time given to the Central Pacific Railroad Company, a corporation
which had previously been chartered by the State of California. Besides
its grant of right of way, land, timber, etc., this company received
subsidy bonds at the rate of $16,000 a mile for a distance of 7.18 miles
east of Sacramento, of $48,000 a mile for 150 miles through the Sierra
Nevada, and of $32,000 a mile for the distance from the eastern base of
that mountain range to its junction with the Union Pacific. The charters
of the two companies provided that, to secure the repayment to the
United States of the amount of those bonds, they should _ipso facto_
constitute a first mortgage on the entire lines of the road, together
with their rolling stock, fixtures and other property. The franchises
and donations thus granted by Congress were most valuable; in fact, the
latter were alone sufficient to build and equip the roads. In spite,
however, of the liberal grants and in spite of the urgent necessity of
the roads in those years of national trial, both of these enterprises
made very slow progress. Their promoters were men of small means, and
the capitalists to whom they appealed for help failed to realize the
value of the franchises. No doubt when these men first engaged in their
cause they expected to encounter serious obstacles in Congress,
supposing that that august body would consider the proposed measure with
much deliberation and to act upon it with still more circumspection.
Their success greatly surprised them. They made the discovery that
members of Congress could be imposed upon as easily as private
citizens, and when they fully realized how readily their demands had
been granted, they were greatly provoked at themselves because they had
not asked for more.
According to a story told by my old friend Mr. J. O. Crosby, an
experienced member of the brotherhood of tramps late one afternoon
chanced to stroll into the city of Alton. Having no visible means of
support, he was picked up by the police and brought before the Mayor to
give an account of himself and to be dealt with as that dignitary might
see fit. The tramp, a printer by profession, and by no means a tyro in
meeting such emergencies, so managed to impress the Mayor with his
superior accomplishments that the latter concluded it would be a good
investment, both for himself and the city over which he presided, to
offer the genial stranger a contribution to his traveling fund, upon the
condition that he would no longer than absolutely necessary molest the
city with his presence. He accordingly told the intercepted tourist that
while it had been for years the policy of the city and its officials to
entertain all tramps found within the limits of Alton for thirty days at
the city jail in exchange for a fair amount of labor, he would, in
consideration of the apparent fact that he was of better metal than the
average tramp, make an exception in his case, and would, even at the
risk of being censured for it by his constituents, hand over to him five
dollars from the municipal funds if he would agree to leave the city
early next morning. The tramp gladly accepted the proposition,
replenished his empty purse with the proffered bounty and withdrew from
the City Hall, to take a stroll through Main Street. The city seemed to
him as prosperous as the Mayor had shown himself liberal. It occurred to
the itinerant typographer that its treasury would not have been the
worse off for a ten-dollar levy, and he hastily returned to the Mayor's
office to plead for a larger donation. The Mayor, not disposed to argue
the question, handed him another five-dollar bill and improved the
opportunity to remind him of his previous promise and to give expression
to the hope that as a gentleman of honor he would now discharge his
obligation. The tramp fairly overwhelmed His Honor with assurances of
good faith and bade him an affectionate good-by. The next rising sun
found him on his onward journey. His route led through Alton on the
Hill, a portion of the city which he had not seen before. He viewed with
surprise the many fine residences and other evidences of opulence which
this part of the city contained. He passed on in a pensive mood until he
reached the summit of the hill, which commanded a fine view of the
entire city. Here he turned to cast a farewell glance over the town
ruled over by the most generous mayor that it had ever been his
privilege to meet. As he beheld before him the fine homes and beautiful
yards, and below in the valley the lofty church-steeples, the many
school-houses, the massive business blocks, the long and well-paved
streets and the spacious and shady parks, an expression of mingled
surprise and disappointment stole over his face. He thrice slapped his
wrinkled brow and then hurriedly retraced his steps down the hill. When
the chief magistrate of Alton came to his office that morning, he met
the irrepressible tramp anxiously waiting for him at the door. "Mr.
Mayor," said the wily extortioner, "I acted very hastily yesterday when
I accepted your second proposition. You have here a much larger town
than I ever supposed. I have been constrained to take our last agreement
into reconsideration, and I shall not leave this point until you add
another five dollars to your consideration. You can certainly better
afford to do that than to throw away thirty days' board and the ten
dollars which you have already paid me besides."
The diplomacy of the Union Pacific and Central Pacific railway companies
was the same as that of the Alton tramp. They had found Congress as
generous as the tramp had found the Mayor of Alton, and now reproached
themselves for their modesty and resolved to bring the pliability of
Congress to a severer test. They again appeared before that body in 1864
and asked that their charter be so amended as to grant to them ten
alternate sections instead of five on each side of the road, and also
all the iron and coal found within ten miles of their track, which had
previously been reserved by Congress. And in addition to this they asked
that they be authorized to issue their own mortgage bonds on their
respective roads to an amount equal to the bonds of the United States,
and that the lien of the United States bonds be made subordinate to the
lien created by the companies' bonds. By the act of Congress, July 2,
1864, all these demands were granted, and the two companies were thus
virtually presented with their roads and were at the same time given
permission to mortgage this gift of the people and divide the proceeds
among their shareholders, many of whom had received their stock chiefly
in consideration of their influence in and out of Congress. The
contribution of the United States to these companies on account of their
main lines has not been far from $80,000,000, of which over $52,000,000
was paid in bonds, and the remainder in lands, which aggregated about
23,000,000 acres. The whole line from Council Bluffs to Sacramento is
1,780 miles long. It will thus be seen that the national contribution
was about $45,000 per mile, besides the right of way and all timber,
iron and coal found within ten miles of the road. There is no doubt that
this contribution was equal to, if it did not exceed, the actual cost of
the road. There has been an erroneous impression abroad which has
likened the Pacific road to those wonderful and very expensive lines
which cross the Andes and the Alps. Those who have not crossed the
continent can hardly believe that the construction of this line was
neither more difficult nor more expensive than that of any of the
numerous railroads crossing the mountain ranges of the East, but such is
the fact.
Starting from Omaha, the Union Pacific follows for nearly 500 miles, or
almost half of its entire length, the valley of the Platte River. A
better route for a railroad cannot be found upon the western continent.
There are between Omaha and Cheyenne but three bridges worthy of the
name. The Platte Valley is almost straight, rising toward the west at a
nearly uniform rate of about 10 feet to the mile. Grading was
practically unnecessary, and the work of construction consisted of
little more than the laying of the ties and track. From the base of the
mountains at Cheyenne to their summit is a distance of about thirty-two
miles, the difference in altitude between the two points being less than
2,200 feet. The average grade is therefore about 68 feet to the mile,
and nowhere are the grades heavier than 80 feet to the mile. There are
heavier grades than these in the prairie State of Iowa, and the mountain
grades of a number of Eastern roads exceed those of the Union Pacific by
from 30 to 40 feet to the mile. The rise is, if not uniform, at least
gradual, and the construction of even this portion of the road required,
therefore, neither great engineering skill nor any unusual expenditure
of money. The road now crosses a plateau which extends almost to the
terminus of the Union Pacific at Ogden, and a very large portion of this
is as favorable for a roadbed as the average railroad territory of the
country.
The route of the Central Pacific presented to the engineer no great
obstacles between Ogden and the State line of California, the only
elevation of any note to be surmounted being the Humboldt Mountains in
Nevada. Their highest point, Humboldt Wells, is 221 miles west of Ogden,
and has an elevation of 5,650 feet above the level of the sea, while
that of Ogden is 4,320 feet. Upon an average the grades of this portion
of the road do not differ from those found in the Mississippi Valley.
The portion of the Central Pacific Railroad which traverses the Sierra
Nevada is the most expensive of the whole line, but the cost of
construction did not, even on this division, exceed the amount
contributed for it by the Federal Government; for the statement is made
upon good authority that a few of the leading promoters of the road
built the first western section of twenty miles with their own capital,
of less than $200,000, and a loan from the city of Sacramento and Placer
County, amounting to $550,000, and then drew $848,000 Government
subsidy, or more than enough to build the second section and draw
another installment of the subsidy; and that they repeated the operation
until the whole line was completed. These men were in such haste to
realize the profits which their undertaking promised them that they did
not even take sufficient time to make a proper survey of their line. Had
they done so, a great saving, both in the construction and in the
subsequent operation of the road, might have been effected. It is now
well known that a route could have been found through the Sierra Nevada
Mountains, not far distant from the route chosen, which would have saved
800 feet in elevation and at least 25 per cent. in the expense of
grading.
It is certainly safe to say that if less than forty thousand dollars a
mile was sufficient to construct the road through the Sierra Nevadas the
Federal contribution of $50,000,000 for the entire line, from Omaha to
San Francisco, left, after the completion, a respectable surplus, either
to the companies or those of their members who had the construction
contract, and that the $75,000,000 of capital stock and the $55,000,000
of first mortgage bonds which the two companies issued were a gigantic
dividend to the stockholders, for which, practically, no consideration
was given.
The companies might well have been satisfied with the Government's
generosity, but their success in imposing upon Congress stimulated their
greed. The act of 1864 provided that the charge for Government
transportation over these roads should be applied to the liquidation of
its bonds, and that after the completion of the lines five per cent. of
their net earnings should likewise be so applied. When the Secretary of
the Treasury, under the law, refused to pay them the amount earned by
Government transportation, and in addition to this demanded the five per
cent. of their net earnings in liquidation of their debt, the companies
applied to Congress to again amend their charters so as to relieve them
for the time being from any direct payment of either principal or
interest of the Government bonds, and to make it the duty of the
Secretary of the Treasury to pay to the companies in money one-half of
the compensation allowed to them by law for services performed for the
Government. And again Congress responded to their demands, granting
them, by a rider to the army appropriation bill, passed March 3, 1871,
all the relief asked for. Owing to the policy of the managers of the
Pacific line to pay as little of the interest on the Government subsidy
debt as is absolutely necessary to prevent foreclosure proceedings, the
unpaid interest has accumulated until it now almost equals the amount of
the original indebtedness. The last report of the Commissioner of
Railroads shows that the total indebtedness, principal and interest, to
the United States of the Pacific railroad companies, was $114,490,000 on
July 1, 1892. The Commissioner seems to be of the opinion that the Union
Pacific Company will not be able to pay the subsidy bonds at maturity,
and he urges that some step be taken in the matter by Congress, whether
it be to extend the loan, which will mature within the next six years,
or to sell the road. The managers of the Pacific roads and their friends
ask an extension of the Government subsidy bonds for fifty years, and a
reduction of interest from 6 to 2 per cent. If Congress continues to be
servile to these interests, the Pacific railroad lobby will secure just
such legislation as they demand.
At the time the Pacific roads were built the people of the United States
had no adequate knowledge of the topography of the Territories, and the
promoters of the road for a while found it a difficult task to convince
capitalists that the investment would be a safe one. That they knew the
value of the projected road was shown by the contest between the Central
Pacific and the Union Pacific for mileage. For a distance of over 200
miles the two companies graded roads side by side in contest for the
Government subsidy.
The promoters were even disappointed in the cost of the roads, as Mr.
Sidney Dillon states in an article published in the August number of
_Scribner's Magazine_, 1892, in which he says:
"At the end of 1867 the road was completed to the top of the
mountains and nearly half way to Salt Lake City. The cost of
building over the mountains was so much less than we had
expected that the construction company found itself with a
surplus from the proceeds of the subsidy bonds. This was
imprudently distributed in dividends."
The United States Government could parallel to-day the line of either
road for less than the amount of its first mortgage bonds, and its
subsidy bonds are therefore nearly worthless.
Mr. Clews, in his "Twenty-Eight Years in Wall Street," says:
"After the Thurman bill had been sustained by the Supreme
Court Mr. Gould had a plan to build a road from Omaha to
Ogden, just outside the right of way of the Union Pacific,
and give that road back to the Government. It would give
others 'a chance to walk.' The Government tried to squeeze
more out of the turnip than was in it. For $15,000,000 a
road could be built where it had cost the Union Pacific
$75,000,000."
It may be admitted that the Pacific roads, even at an extravagant cost,
have proved a good investment for the country, yet their history
reflects severely on the statesmanship of those members of Congress
whose duty it was to properly protect the interests of the nation at
that time. They were unequal to their task.
The Great Northern Railway Company has just completed its road to the
Pacific Coast. Its line is very direct, and it has unusually light
curvature and low grades, which will enable it to be operated more
cheaply than any Pacific line yet constructed. Much of its route is
through a rich and productive country, insuring to it a heavy local
business.
The following statistics concerning it are given in the _Railway Age_:
Total mileage, December 18, 1890 2,850
Average bonded debt per mile $18,636 75
Average stock per mile 7,015 67
Total 25,652 42
Interest charges per mile 1,005 76
Dividend charges per mile 420 94
A comparison of these figures with those corresponding of other
transcontinental lines is instructive, and is commended to Congressmen
who have to deal with the Union Pacific and Central Pacific questions.
Stock and bond inflation, it may confidently be asserted, has created
from five to six thousand millions of dollars of fictitious railroad
capital. In 1890 the average liabilities of the railroads in the United
States, including the capital stock and the funded and unfunded debt,
were $63,600 per mile. According to Mr. Poor's estimate of the average
cost of American railroads per mile, more than 50 per cent. of this vast
sum is pure water. But, as has been stated before, Mr. Poor is partial
to the railroad interest, and his estimate of $30,000 a mile is too high
for the time at which it was made. Furthermore, railroad building has
since then been materially cheapened. Tens of thousands of miles of road
have been built in recent years that did not cost to exceed $10,000 a
mile. Very recently the Union Pacific Railroad Company proved, before
the Board of Equalization at Salt Lake City, by the testimony of
engineers, that the average cost per mile of the Utah Central line was
only $7,298.20, itemized as follows:
Engineering $ 300 00
Grading 5-ft. fill, 18,480 yds. 2,310 00
Ties, 2,640, at 30 cts. 792 00
Rails, 82 tons 1,845 00
Splices 12 00
Bolts 24 00
Spikes 142 20
Track-laying 600 00
Bridges 200 00
Station-building 100 00
Fences 150 00
Right of way 720 00
---------
$7,298 20
In a recent article Mr. C. Wood Davis states that "many auxiliary lines
have been built at costs ranging from $8,000 to $15,000 per mile, and
capitalized at two, three, four, and even five times their cost, as in
the case of the 107 miles of the Kansas Midland, costing, including a
small equipment, but $10,200 per mile, of which 30 per cent. was
furnished by the municipalities along its line. Yet, with construction
profits and other devices, this road shows a capitalization of $53,000
per mile."
And that "the Missouri Pacific line from Eldora to McPherson, Kansas, a
comparatively expensive prairie road, being located across the line of
drainage, cost much less than $10,000 per mile, as have thousands of
miles of other prairie roads."
It is safe to say that $25,000 is a liberal estimate of the average cost
per mile of American roads to the stock-and bondholders, and that their
capitalization represents $38,000 of water per mile. The total net
earnings of the railroads of the country were $341,666,639 in 1890, and
$356,227,883 in 1891, upon an actual investment of only about
$4,250,000,000. This is a return of about 8-1/2 per cent. and shows the
force of Mr. Poor's statement that, if the water were squeezed out of
railroad securities, no better-paying investment could be found in the
country.
We often see references to the fact that no dividends are paid upon a
large portion of railroad stocks, but there is no reason why dividends
should be paid upon many of them, as they represent no capital whatever
that has gone into the road. It is probable that not to exceed ten cents
on the dollar upon an average was originally paid for these stocks, and
the $80,000,000 distributed annually as dividends upon them does not
vary much from fifteen to twenty-five per cent. upon the amount actually
invested in them.
CHAPTER VII.
COMBINATIONS.
It is the favorite argument of railroad men, and the writer must confess
that he himself formerly believed, that if all legal restraints were
removed from railroad business, the laws of trade would regulate it more
successfully and more satisfactorily, both to the railroad companies and
their patrons, than the wisest statutes could ever regulate it. To give
force to their argument, they cite the old Democratic maxim that that
State is governed best which is ruled the least. They also assert that
it is the province of the State to guarantee to each of its citizens
industrial freedom; to permit him to transact any legitimate business
according to his best judgment; to buy and to sell where and at what
price he pleases; in short, to earn without restriction the reward of
his intelligence and his industry. They further contend that under a
free government the law of supply and demand should be allowed free
sway, and that he who buys or sells transportation should not be
hampered in his transactions any more than the grocer and his customer.
The reply to this is that, while the grocer is a natural person, the
railroad company is an artificial person, and that, while the business
of the former is purely private, that of the latter is quasi-public. The
grocer must rely solely upon his personal rights and private resources,
but the railroad company accepts from the State the franchises which
enable it to do business. And yet, if the public had any assurance that
the laws of trade would regulate both kinds of business alike, it is
not likely that the State would distinguish between the two. They claim
that their business is like other private business, and therefore they
should be let alone; that competition can be relied upon to correct
abuses; and where competition does actually exist they forget, and then
claim that their business is not like other private business, and they
should be allowed to make pools and combinations, because in their
business competition is ruinous. Experience has certainly demonstrated
that competition is only possible where combination is impossible. Where
the same commodity is supplied by a large number of individuals, there
is but little danger for the public from those who supply it, for an
agreement among many cannot easily be effected; and even if an
understanding could be reached, it would not long be satisfactory to all
parties. Disagreements would arise which would end in the dissolution of
the combination. Where, however, the number of competitors is small,
agreements can be easily effected and successfully maintained.
It is doubtful whether there is at present any interest in the
commercial world which has a greater tendency to monopoly and
combination than the railroad interest. There are in the United States
some 40,000 railroad stations. Not more than 4,000 of these are
junctions of two or more roads. At 90 per cent. of these stations
shippers are therefore confined to one line of railroad, and are, in
absence of State regulation, compelled to pay for transportation
whatever price the companies may be disposed to charge, subject only to
such restrictions as the proximity of competing points may impose. If
competition obtained at all points where two or more roads meet, many
railroad companies could not afford to charge excessive rates at
non-competitive points along their lines of road, for such a policy
would slowly but surely drive a large volume of their legitimate
business to rival roads, to whose interest it would be to encourage by
every means in their power such diversion of traffic. Railroads early
recognized this fact and took steps to enable each line to control its
local business. The first combinations among railroad companies to
control prices at competitive points were rather crude; in fact, much
cruder than the first Granger legislation. They were simple agreements
among the various roads touching a common point to maintain certain
fixed rates. But while each road was anxious to have the rates agreed
upon maintained by all of its rivals, it cared but little about
maintaining its own good faith, and it improved every opportunity to get
business at reduced rates so long as it could reasonably hope to escape
detection. As soon as any of the competing roads, through the
falling-off of its business, became convinced that it was the victim of
overreaching rivals, it retaliated by offering still lower rates to
close-tongued shippers. This tricky rivalry would be continued until the
animosity engendered by it would lead to an open rupture, and what
railroad men are pleased to term a rate war would follow. As the
schedule rates had before been unreasonably high, so they became now
unreasonably low. Hostilities would be continued until all belligerents
became exhausted and manifested a disposition to negotiate a treaty of
peace. The former high rates would then be restored; the compact was
carried out for a short time, to be again violated and finally annulled.
These rate agreements were in vogue in New England before the War of the
Rebellion and gradually found their way to the Middle States and the
West. Wherever they were tried they were violated, until even among the
most unsophisticated of freight agents a rate agreement was looked upon
as a farce.
The statement is often made by railroad managers that excesses in
railroad competition are the result of the peculiar conditions of their
business, which has heavy fixed charges on one hand and a fickle
patronage on the other; that the uncertainty of through business compels
them to rely upon the local business for such revenue as is necessary to
meet these fixed charges; and that, inasmuch as their trains _must_ run,
and any through freight hauled by them is so much business taken from
the enemy, they can better afford to take it at any price than to have
one of their competitors take it.
It is difficult to see why this reasoning should not be applied to other
branches of business; for instance, to milling. The mill-owner, like the
railroad company, has heavy fixed charges. He has to earn the interest
on his capital, he has to keep his mill in repair, he now and then has
to meet the demands of the times and purchase improved appliances, and
he has to keep a certain number of employes, whether business is brisk
or slack. He might, therefore, if he saw fit to employ the logic of
railroad managers, earn revenue enough to meet his fixed charges from
the business which his regular customers give him, and then do any
business coming from beyond this circle at any price rather than
surrender it to a rival.
It will readily be conceded that any enterprise conducted on such
principles could, at the best, flourish only temporarily, for it would
soon encounter difficulties from two sources. Its local customers, thus
discriminated against, would withdraw their patronage, while its
competitors, finding their territory encroached upon, would, in
self-defense, offer still better terms to the public to regain their
lost customers. Such ruinous competition, if long persisted in, must
necessarily cripple, if it does not bankrupt, a majority of those who
engage in it. It is fortunately as rare in industrial and commercial
circles as it is common among public carriers.
This difference can easily be accounted for. Where there are a large
number of competitors the prices of the commodities supplied by them are
leveled down until they reach a point where they will afford only a
reasonable margin of profit, and beyond which they will cease to be
profitable, and will therefore cease to be supplied until the
equilibrium is again established. Where, however, the number of
competitors is small, the price of the commodities supplied by them
will, by agreement, for a time at least, be maintained at a point where
it affords considerable more than a reasonable profit. Here the large
gain presents to the various competitors such a temptation to outstrip
their rivals and increase their business at the expense of good faith,
that but few, if any, of them will, in the long run, resist it. The
tendency to underbid rivals will always be strong where profits are
large, and it may safely be asserted that efforts to maintain, through
combinations, excessive rates are the most fruitful source of ruinous
competition.
In time railroad managers became convinced that, unless it was possible
to radically reform railroad ethics, rate agreements could never be
relied upon for the maintenance of excessive rates at competing points.
The combined roads found it an easy matter to agree upon excessive
rates, but were powerless to enforce them. Experience convinced their
managers that to make their tariffs effective it was necessary to
deprive individual roads of the power or the inducement to cut below the
agreed rates. Their ingenuity in time developed a system which promised
to remove from individual roads every temptation to take business at
less than schedule prices. This device consists in a division of
railroad business and is commonly called a pool. There are various ways
in which such a division is made. Either the traffic is divided among
the various companies meeting at a common point, or each road is allowed
to carry all freights that it may receive, and then the earnings of the
different roads are divided, each road being paid the actual cost of
such service as it has performed. There is still a third pooling
arrangement, consisting in a division of territory, but this has been
found less satisfactory and is now but rarely resorted to.
It is said that the first regular pool organized in the United States
was the Chicago-Omaha pool, formed in 1870 by the Chicago, Burlington
and Quincy, the Chicago, Rock Island and Pacific, and the Chicago and
Northwestern railroad companies, then the only three lines connecting
the cities of Chicago and Omaha. This pool, which was subsequently
joined by other lines, made an equal division of the traffic, and was so
well organized that it lasted fourteen years "without a break." The
abuses practiced by the companies belonging to this pool were one of the
chief causes of the Granger movement in Iowa. It is indeed doubtful
whether any other railroad combination ever maintained itself longer or
pursued its ends with greater pertinacity than this pool. Another pool
of national notoriety was the Southern Railway and Steamship
Association, which was organized, though at first under a different
name, in the State of Georgia, in 1875. It was probably the first money
pool formed in the United States. Each member was awarded a certain
percentage of the total business between the various competitive points
along its line. If a company carried more than its share, it was
compelled to turn over the receipts from such additional traffic to its
rivals, which paid it a nominal price for carriage. This allowance was
always made so low that there was no inducement for any company to seek
to carry more than its allotment. The pool had its own executive,
legislative and judicial departments, and it enforced its decrees with
an iron hand. It maintained a strong centralized government, and
rebellious members had but little mercy to expect from it. It provided
that if any officer or representative of any company should authorize or
promise, directly or indirectly, any variation from established tariffs,
he should be discharged from the service, with the reason stated. The
strong sentiment which we to-day find in the South in favor of State
control of railways is the direct result of the many evils which this
powerful pool introduced into the railway business of that section of
the country.
Other pools followed, as the Southwestern Association, organized in
1876, to control the traffic between Chicago and St. Louis, and the
Minnesota and the Colorado pools. Within a few years railroad pools
covered the whole country. All pursued the same object, viz., the
control of rates at competitive points, which enabled the companies to
maintain excessive schedule rates at local points.
Between 1875 and 1880 the pooling system rapidly spread all over the
Union. Wherever competition promised to regulate rates by the
application of the law of supply and demand, the pool was resorted to as
the never-failing remedy to preserve dividends on watered stock. As long
as lake and canal navigation controlled the carriage of heavy freights
between Chicago and New York by means of rates so low that railroads
found it, or at least thought it, impossible to compete with them in the
transportation of agricultural products during the greater part of the
year, railroad pools between Chicago and New York could not be
successfully maintained. In 1873 the railroads transported only about 30
per cent. of this kind of freight from the West to Eastern ports.
Owing, however, to the rapid decrease of the cost of transportation,
railroad companies from this time on were enabled to encroach rapidly
upon the business of water routes, so that in 1876 they carried over 52
per cent. of the entire volume of agricultural products that were moved
from the West to the East. As long as these products were carried almost
entirely by water from lake ports to the East, New York, as the terminus
of this route, enjoyed decided advantages over the other Atlantic ports.
When, however, the railroads commenced to successfully compete with the
water routes in the transportation of these commodities, a considerable
share of this business was diverted to Boston, Philadelphia and
Baltimore, and it soon became apparent that these ports, in some
respects, enjoyed advantages for the export trade not possessed by New
York. It was, therefore, not surprising that the business men of these
cities, together with the railroads terminating in them, made every
effort to come in for their share of the traffic which was drifting away
from New York.
Competition between the New York Central and the Pennsylvania Railroad
for the Western through traffic dated back as far as 1869, the year in
which both systems secured, through consolidation with connecting roads,
through lines to Chicago. Rates fell in one year from $1.80 to 25 cents
per hundred pounds. After a time the managers of the two companies met,
and schedule rates were restored. Rates were, at least outwardly,
maintained until the Baltimore and Ohio and the Erie system entered
Chicago, and the Grand Trunk made connections with Milwaukee and other
lake points, and thus disturbed through rates. All efforts to maintain
the level of the old tariffs, through agreements, proved now fruitless,
for both the Baltimore and Ohio and the Grand Trunk found it to their
interest to pursue independent policies, and refused to have their hands
tied by an agreement with roads that were interested in continuing, if
possible, the commercial supremacy of New York.
Rate skirmishing finally developed into open war in 1876, when
fourth-class rates between Chicago and the Atlantic fell as low as 16
cents per hundred. This rate, however, was eclipsed in July, 1878, when
wheat was carried from Chicago to New York for 10 cents per hundred. The
existing conditions left no doubt in the minds of those familiar with
railroad tactics that this war was simply the precursor of a gigantic
combination between the trunk lines. An unsuccessful attempt to effect
such a combination had been made before. In 1874 the managers of the
Erie, Pennsylvania and New York Central met at Saratoga for the purpose
of devising means for the suppression of competition in the trunk line
traffic. This meeting, however, known in railroad history as the
Saratoga Conference, was the first step toward the organization of a
trunk line pool, although the conference did not lead to any immediate
results, the Grand Trunk and the Baltimore and Ohio refusing to be bound
by its decision. It was certainly no easy task to devise means to bring
about an effective and permanent combination among five large through
lines with greatly conflicting interests.
So far pools had never failed to suppress competition wherever they were
organized. But in the past pools had, almost without exception, only
attempted to control rates between common points. They accomplished
their object by a division of the entire traffic or earnings from the
traffic between common points. The schedule rates remained the same for
all. But the traffic of the trunk lines brought a new factor into the
problem. Here the rival routes did not terminate at the same points. It
was contended by the Baltimore and Ohio that, whatever might be the
facilities of Baltimore for exporting agricultural products, that port
was at a disadvantage as compared with the more northern ports on
account of the longer voyage and higher ocean rates to Liverpool, and
that it could therefore not enter into a combination with the roads
leading directly to New York and Philadelphia upon equal terms, since
this would divert its legitimate share of the through business to those
ports. The Grand Trunk, on the other hand, refused to enter the
combination because, not having any direct Chicago connection, it feared
that the enforcement of pool rates would materially diminish the volume
of its business. As yet the railroad wiseacres did not seem to be equal
to the emergency, and matters drifted along in the old channel. The rate
war of 1876 gradually brought about an understanding among the
belligerents. The competing roads accepted the terms offered, and with
this a new principle entered into the science of pooling. Rates between
Chicago and Baltimore were fixed somewhat lower than those between
Chicago and Philadelphia, and in turn Philadelphia was allowed a small
advantage over New York. This concession was made to equalize the
difference in the ocean rates of the competing ports. These equalizing
or--to use railroad nomenclature--differential rates were subsequently
granted by pools to such roads as, on account of some disadvantage,
could not compete with other members of the pool on equal terms. Thus
the longest route was usually permitted to charge the lowest, and the
shortest route the highest rate. This practice is in conformity with the
principle of charging whatever the traffic will bear, but it is
certainly devoid of every consideration of justice and equity. If the
longer line can afford to carry freight at rates lower than schedule
prices, no further proof is needed under ordinary circumstances that the
regular schedule rates of the shorter line are exorbitant.
The concession of differential rates settled, at least temporarily, the
difficulties that had arisen out of the east-bound traffic of the trunk
lines. This arrangement did not, however, in any way affect the traffic
moving in the opposite direction. The volume of west-bound freight is
very much larger at New York than at any other of the Atlantic ports. In
order to get its share of the business, each trunk line maintained an
office in New York. These offices eagerly solicited business for their
respective roads, and the freights which they received for
transportation to the West would be forwarded either directly or by a
circuitous route; but, the longer the route, the lower as a rule was the
compensation asked for the service. Under these circumstances
competition was brisk, and the profits realized were far from satisfying
the cupidity of the competing lines. It was apparent to their managers
that the competition in the west-bound traffic was similar to that
formerly existing between Chicago and Mississippi and Missouri River
points, which had promptly yielded to pools. The temporary adjustment of
the more perplexing questions which had arisen out of the east-bound
traffic now paved the way for a pooling arrangement for the west-bound
freight. The Southern Pool, under the management of Albert Fink, had
long attracted the attention of the trunk line managers. Its system of
dividing the traffic, of reporting to a central office and of hearing
and deciding complaints had enabled it to exert an almost absolute
control over its members, to compel them to make honest returns and to
prevent rupture and rebellion. It was believed that a pool of the trunk
lines could not be effective or permanent unless organized upon the
Southern basis and presided over by a trunk expert. Accordingly, when in
1877 an agreement for the pooling of the west-bound traffic was reached
by the trunk lines, Mr. Fink was tendered the position of pool
commissioner. Under the agreement reached the total tonnage of the
west-bound business was divided in such a way that the Erie and New York
Central roads each received 33 per cent., the Pennsylvania 25 per cent.,
and the Baltimore and Ohio 9 per cent. of it. If any road received more
freight than was allotted to it by the pool, it delivered such surplus
to the pool, or rather to such a road as the pool commissioner
designated as not having received its allotment. The success of this
pool from a railroad point of view made the trunk lines anxious to
organize a similar pool for the whole east-bound traffic. It was
proposed to control by such a combination the rates on all the
east-bound traffic of the Northwest, by making Chicago the pooling
center, fixing for it a schedule of rates and making the rates of all
the railroad centers in the West and Northwest dependent upon it. The
combination was to comprise more than forty companies, controlling over
25,000 miles of road. The scheme was tried for three months in 1878,
but proved a failure, owing to the fact that nearly all of the many
diverging interests sought their own advantage. The Eastern and Western
trunk line pools were, through the efforts of their commissioner,
successfully maintained, though even their harmony was occasionally
marred by a short war precipitated by such members as would think
themselves entitled to larger shares of the spoils. But a readjustment
would invariably follow, and the expenditures of the war would be taxed
up to the public.
After the failure of the gigantic Western pool which had been organized
under the protectorate of the trunk lines, the companies which had
composed it formed such local combinations as their individual interests
dictated. It is doubtful whether during the five years immediately
preceding the passage of the Interstate Commerce Law there was any
junction of two or more roads in the United States which, except during
the period of an occasional railroad war, had any competition in the
transportation business. As has been shown before, discriminations
without number were practiced between places and persons; goods were not
unfrequently carried at a loss; but the general public was, as a rule,
compelled to pay what the traffic would bear, or rather what the pooling
roads thought it could bear.
It is claimed by railroad managers that pools are the only effective
contrivances for checking ruinous competition among railroad carriers,
and that they are therefore justifiable as a means of self-protection.
This might perhaps be a valid argument if any attack were made upon the
railroads which encroached upon their rights or endangered their
existence, but if railroad companies are disposed to cut each other's
throats, the public should not be made to pay the penalty of their
depravity. As long as schedule rates are unreasonably high, railroads
will be tempted to offer to certain shippers low secret rates; but as
soon as all rates have been leveled down to a point where they will
yield only a fair profit with good management, the inducement to cut
below them is largely taken away. Pools, far from being a remedy for the
evils of excessive competition, will in the end only aggravate the
disease which they attempt to cure. The high rates which they maintain
attract the attention of speculative men and lead to the construction of
rival roads. While the traffic remains the same, the proceeds must then
be divided among a larger number of carriers. Thus the construction of
unnecessary roads, which has often been the subject of bitter complaint
on the part of the older roads, is chargeable directly to their wrong
policies.
One of the principal objections to industrial and commercial
combinations is that they paralyze trade. Competition stimulates every
competitor to offer the best at the lowest possible price. This
increases the demand for the commodity, and both the producer and the
consumer are in the end benefited by the operation of this law. On the
other hand, combinations, or, what is the same, monopolies, increase the
price, remove the stimulus to excellence, and reduce the demand, and
thereby affect injuriously the producer and consumer alike. Competition
in the railway service would mean an improved service and lower rates
and would speedily be followed by a large increase of business.
Another serious objection to pooling is that it invariably leads to
periodic wars, which unsettle all business, and but too often introduce
into legitimate trade the element of chance. These wars give, moreover,
to designing railroad managers an opportunity to enrich themselves by
stock speculations at the expense of the stockholders, whose interests
they use as a football for the accomplishment of their selfish ends.
When rates are reduced to a right level, and are properly adjusted, and
are equal to all, even railroad men will find no necessity for pools.
The desire for such a combination is a desire to impose upon somebody,
or some locality, or the public at large. The proposition to give legal
sanction to pools, made by railroad managers, is preposterous; and even
a pool to be approved by the Interstate Commerce Commission is out of
the question, as it would cause the railroads to increase their efforts
to control the appointment of the commission. However honest it may look
on its face, however plausible may be the arguments produced in its
favor, it should not be permitted.
There is no doubt but under the proposed pooling arrangement railroad
interests, watered stocks and all, would be cared for, but there is
every reason to believe that public interests would not be properly
protected.
So long as servility by a member of the Interstate Commerce Commission
to railroad influences serves as a stepping-stone to a high position in
the employ of railroad combinations, with a salary of three or four
times that of an Interstate Commerce Commissioner, so long will it be
unsafe to permit such powers to be vested in that commission.
Pooling by railroads should not be permitted, if permitted at all, so
long as representatives of speculative interests have a voice in their
management, and not until all fictitious valuations are altogether
banished from the equation, and until the roads are brought under
complete Government control. There is no more necessity for pools among
railroads than there is among merchants and manufacturers. The capital
actually invested in railroads is now receiving larger returns than
investments in other lines of business, and their incomes are increasing
from year to year.
Every pooling combination of railroad companies for the maintenance of
rates is a violation of common law. From time immemorial the law has
stamped as a conspiracy any agreement between individuals to support
each other in an undertaking to injure public trade. The Interstate
Commerce Act reasserts this principle, and provides penalties for the
maintenance of such combinations among railroad companies. If, in spite
of this act, the evil still exists, it is no argument against the merits
of the law, but it does prove that the machinery provided for its
enforcement is insufficient. That railroad companies can be made to
respect the law there can be no doubt; but much cannot be accomplished
unless the people fully realize the magnitude of the undertaking and
vest the Government with sufficient power to cope with an organized
force whose total annual revenue is nearly three times as large as that
of the United States. The discussion of the question how this may be
done will be reserved for a subsequent chapter.
CHAPTER VIII.
RAILROADS IN POLITICS.
The question might be asked how the railroad companies for many years in
succession have been able to prevent State control and pursue a policy
so detrimental to the best interests of the public. One might think that
in a republic where the people are the source of all power, and where
all officers are directly or indirectly selected by the people to carry
out their wishes and to administer the government in their interest, a
coterie of men bent on pecuniary gain would not be permitted to subvert
those principles of the common law and public economy which from time
immemorial have been the recognized anchors of the liberty of the
Anglo-Saxon race.
The statement that under a free government it is possible for a few to
suppress the many might almost sound absurd to a monarchist, and yet is
it true that for the past twenty-five years the public affairs of this
country have been unduly controlled by a few hundred railroad managers.
To perpetuate without molestation their unjust practices and prevent any
approach to an assertion of the principle of State control of railroad
transportation, railroad managers have secured, wherever possible, the
co-operation of public officials, and, in fact, of every semi-public and
private agency capable of affecting public opinion. Their great wealth
and power has made it possible for them to influence to a greater or
less extent every department of the National and State governments.
Their influence extends from the township assessor's office to the
national capital, from the publisher of the small cross-roads paper to
the editorial staff of the metropolitan daily. It is felt in every
caucus, in every nominating convention and at every election. Typical
railroad men draw no party lines, advocate no principles, and take
little interest in any but their own cause; they are, as Mr. Gould
expressed it, Democrats in Democratic and Republicans in Republican
districts. The large means at the command of railroad companies, their
favors, their vast armies of employes and attorneys and their almost
equally large force of special retainers are freely employed to carry
into execution their political designs, and the standard of ethics
recognized by railroad managers in these exploits is an exceedingly low
one.
It is a settled principle of these men that, if they can prevent it, no
person not known to be friendly to their cause must be placed into any
public office where he might have an opportunity to aid or injure their
interests. The records of the various candidates of the principal
parties for city, county, State and national offices are therefore
carefully canvassed previous to the primaries, the most acceptable among
the candidates of each party are selected as the railroad candidates,
and the local representatives of the railroad interest in each party are
instructed to use all means in their power to secure their nomination.
If none but candidates who are servile to the railroad interest are
nominated by the principal parties, the election is permitted to take
its own course, for, whichever side is successful, the railroad interest
is safe. If, however, there is reason to believe that a nominee is not
as devoted to their interests as the nominee of an opposing party, the
latter is sure to receive at the polls whatever support railroad
influence can give him. That a public official elected by the grace of a
railroad manager is but too apt to become a tool in his hands needs no
proof. Both gratitude and fear tie the average politician to the
powerful forces which can control his political destiny.
The railroad manager, on the other hand, always kindly remembers his
officeholding friends as long as they are loyal and in a position to
serve him. Before the enactment of the Interstate Commerce Act there was
every year a wholesale distribution of railroad passes among public
officeholders and other prominent politicians. The pass was the token of
the continued good will of the railroad dignitaries as the withholding
of the "courtesy" was a certain indication of their displeasure. If the
officeholder had personal or political friends whom he desired to have
recognized, an intimation of this desire was generally sufficient to
have the pass privilege even extended to them. And yet these favors were
not bestowed indiscriminately. Thus the pass credit of a county official
was more limited than that of an officer of the State, and the latter
class were again rated according to their influence and rank.
Furthermore, while annual passes were thus freely distributed among one
class of officials, others could obtain them only by making special
application for them. Members of the legislature would not unfrequently
receive their supply of railroad passes before their certificates of
election were issued, but legislative committee clerks and employes in
the various departments of the State government were required to satisfy
the railroad authorities that they were in a position to aid or to
injure the railroad cause before their names were placed on the list of
persons "entitled to the courtesy".
Of course the judiciary, as a coördinate branch of the government, could
not well be slighted. Indeed, previous to the enactment of the
Interstate Commerce Law, a judge would have regarded it an affront if he
had not been furnished with passes by the various companies operating
railroads in his district. It appears that the law has not entirely
corrected this abuse, for only about two years ago the Chicago _News_
made the discovery that nearly every judge in the city of Chicago
traveled on passes. It is strange to what extent the pass often debased
the judiciary. It was not unfrequent for judges to solicit passes for
family and friends, and instances might be named where they demanded
them in a wholesale way.
The impudent demands were usually honored by the railroad authorities,
who reasoned that they could better afford to bear the shameless
effrontery of the ermined extortioner than the damage which might result
to them from adverse decisions.
A railroad pass, when presented by a public official or even by any
public man, is now, in nine cases out of ten, a certificate of dishonor
and a token of servility, and is so recognized by railroad officials.
What equivalent railroad companies expect for the pass "courtesy" is
well illustrated by the experience of an Iowa judge. This gentleman, who
had been on the bench for years and always had been favored with passes
by the various companies operating lines in his district, at the
beginning of a new year failed to receive the customary pass from a
leading road. Meeting its chief attorney, he took occasion to call his
attention to what he supposed to have been an oversight on the part of
the officer charged with the distribution of the passes. The attorney
seemed to take in the situation at once. "Judge," said he, "did you not
recently decide an important case against our company?" "And was my
decision," replied the Judge, "not in accordance with law as well as
with justice?" The attorney did not answer this question, but in the
course of a few days the Judge received the desired pass. A few months
later it again became the Judge's unpleasant duty to render a decision
adverse to the same company. This second act of judicial independence
was not forgiven, and the next time he presented his pass it was
unceremoniously taken up by the conductor in the presence of a large
number of passengers, and he was required to pay his fare.
Employes, while engaged in the legitimate business of their companies,
should, of course, be transported free, but a great many persons receive
passes and are classed as employes who never render any legitimate
service for the company giving the pass, and by far the greater portion
of passes are not granted from pure motives, but are given for the
purpose of corrupting their holders. It arouses antagonism, because as a
rule passes are given to people who are fully able to pay their fare and
are denied to those who are least able to pay it. The passenger who pays
his fare and then finds that a large number of his fellow-passengers
travel on passes realizes that he is compelled to pay a higher fare that
others may be carried free. He feels that he is unjustly discriminated
against, and wonders why such discrimination is tolerated in a country
whose institutions are founded upon the very principle of equal rights
to all. A good anecdote is related which well illustrates this feeling.
A farmer and a lawyer occupied the same seat in a railroad car. When the
conductor came the farmer presented his ticket, and the lawyer a pass.
The farmer's features did not conceal his disgust when he discovered
that his seat-mate was a deadhead. The lawyer, trying to assuage the
indignation of the observing granger, said to him: "My friend, you
travel very cheaply on this road." "I think so myself," replied the
farmer, "considering the fact that I have to pay fare for both of us."
But what must be a passenger's surprise when he finds that the judge who
to-morrow is to preside at the trial of a case in which the railroad
company is a party to-day accepts free transportation at its hands. A
judge may scorn the charge that he is influenced by a railroad pass, but
his fellow-passenger who has paid his fare cannot understand why the
railroad company should give passes to one class of people and refuse
them to others, if it does not consider one more than others to be in a
position to reciprocate its favors.
In their endeavor to win over the courts, however, the railroads do by
no means confine their attention to the judges. They are well aware that
a biased jury is often more useful to them than a biased judge, and
efforts are made by them to contaminate juries, or at least prejudice
them in their favor. A prominent Iowa attorney, the legal and political
factotum of a large railroad corporation, for years made it a practice
to supply jurors with passes. In one instance, when it was shown in
court by the opposing counsel that all jurors in the case on trial had
accepted passes from the railroad company which was the defendant in the
case, the judge found himself compelled to discharge the whole jury. The
argument made by this counsel, in support of his motion that the jury be
discharged, was certainly to the point. He showed that in order to have
an equal chance for justice it would be necessary for his client to give
each juror at least fifty dollars to offset the bribes given to them by
the railroad company.
That it has always been the policy of railroad managers to propitiate
the judiciary is a fact too generally known among public men to admit of
contradiction. If a judge owes his nomination or election to railroad
influences, railroad managers feel that they have in this a guarantee of
loyalty. If, however, he acquires the ermine in spite of railroad
opposition, every effort is made to conciliate the new dispenser of the
laws. The bestowal of unusual favors, flattery, simulated friendship and
a thousand other strategies are brought into requisition to capture the
wayward jurist. If he proves docile, if his decisions improve with time
and show a gradual appreciation of the particular sacredness of
corporate rights, the railroad manager will even forgive him his former
heresy and rally to his support in the future. But if he asserts his
convictions, if he attempts to discharge the duties of his responsible
office without fear or favor, if he can neither be corrupted nor
intimidated, all available railroad forces will be marshaled against him
in the future.
It cannot be surprising that, under such circumstances, there always has
been a tendency among judges to be conservative and to give the
railroads the benefit of the doubt in their decisions. Judges well know
that railroad companies appeal almost invariably when the decision of a
lower court is adverse to them, but private citizens only in exceptional
cases. They also know that railroads never forgive adverse decisions,
whether right or wrong, while private citizens, as a rule, accept the
decision of the court as justice, and do not hold the judge responsible
for its being adverse to them. Our judiciary is, and probably always has
been, as incorruptible as the judiciary of any country in the world; but
our judges are made of no better material than our legislative or
executive officers. Weak men, in all stations, are influenced by wealth
and power, and weak judges can always be found who will be led or forced
from the path of duty so long as corrupt men are permitted to manage
railroads and to remain in possession of a power only inferior to that
of an autocratic ruler.
The influence which railroads exert extends from the lowest to the
highest court of the land. Federal courts have more than once been
successfully appealed to to give legal sanction to the perpetuation of
gigantic frauds, or to frustrate attempts made by the individual States
to place restrictions upon roads operated within their respective
borders. Twenty years ago a Federal judge aided Mr. Gould in his
notorious Erie transactions, and in more recent years a Federal circuit
judge in the West threw the property of the Wabash Railroad Company,
upon the application of its own directors, into the hands of receivers
selected by its former managers without the knowledge or notice of its
creditors, and issued orders for the management of the property which
greatly discriminated in favor of certain bondholders and were so
manifestly unjust that Judge Gresham, before whom the case was
subsequently brought, did not hesitate to say to them that "the boldness
of this scheme to aid the purchasing committee, by denying equal right
to all bondholders secured by the same mortgages, is equaled only by its
injustice." At the same time one of the counsel for the dissenting
bondholders characterized these strange orders as "the highwayman's
clutch on our throat, the robber's demand, 'Your money or your life.'"
The decision which the Supreme Court of the United States rendered in
the Granger cases in 1876, affirming the right of a State to control
railroad charges for the transportation of passengers and freight wholly
within the State, was a serious disappointment to railroad men, for it
was the first step toward wresting from them the power to arbitrarily
control the commerce of the country. Ever since that time it has been
their determined purpose to bring about, if possible, a reconstruction
of the Federal Supreme Court, in order to secure a reversal or
modification of the Granger decision. In the case of Peik vs. Chicago,
94th U. S., 176, the Supreme Court laid down the following broad
principle of law: "Where property has been clothed with the public
interest, the legislature may fix a limit to that which shall in law be
reasonable for its use. This limit binds the courts as well as the
people. If it has been improperly fixed, the legislature, not the
courts, must be appealed to for a change." In one of the Granger cases
the same court used the following language: "We know that this is a
power which may be abused, but that is no argument against its
existence. For protection against abuses by legislatures, the people
must resort to the polls."
Fourteen years later, in the case of C. M. & St. P. R. Co. vs. Minn.,
decided in October, 1890, the same court rendered a decision so
indefinite that the lawyers differed much in their opinions as to its
meaning, and it appears that the members of the court who made the
decision also differed in their opinions as to the meaning of the
decision; for Justice Bradley said in his dissenting opinion, in which
Justice Gray and Justice Lamar concurred, that the decision practically
overruled Munn vs. Illinois; but the same court, in a case entitled Budd
vs. New York, submitted in October, 1891, and decision rendered February
29, 1892, and opinion delivered by Justice Blatchford, in referring to
the Minnesota case, after quoting the above statement from Justice
Bradley, said: "But the opinion of the court did not say so, nor did it
refer to Munn vs. Illinois, and we are of opinion that the decision in
that case is, as will be hereafter shown, quite distinguishable from the
present case."
It is thus apparent that this court has adhered to the decision in Munn
vs. Illinois, and to the doctrines announced in the opinion of the court
in that case, and those doctrines have since been repeatedly enforced in
the decisions of the courts of the States.
Judge Brewer, whose zeal for the defense of corporate interests seems to
amount almost to a craze, dissented. He said: "I dissent from the
opinion and judgment in these cases. The main proposition upon which
they rest is, in my judgment, radically unsound. It is the doctrine of
Munn vs. Illinois reaffirmed. The paternal theory of government is to me
odious. Justice Field and Justice Brown concur with me in this dissent."
It should be remembered that Justices Brewer and Brown were both
appointed to the Supreme bench by President Harrison.
We have every reason to believe that, unless the people of the United
States are on the alert, as railroad managers always are, there is, with
further changes in the personnel of the court, danger of its deviating
from the sound principles of law laid down in its decision in the
Granger cases. Railroad attorneys have repeatedly been raised to seats
in the highest tribunal in the land. So great is the power of the
railroad interests, and so persistent are they in their demands, that,
unless a strong public sentiment records its protest, their candidates
for appointive offices are but too apt to be successful. Representatives
of the railroads sit in the Congress of the United States, others are
members of the national campaign committees of both of the great
political parties, others control the politics of the States, and their
influence reaches to the White House, whether its occupant is aware of
it or not. Other interests in the past have succeeded in securing the
appointment of biased men as judges of the Supreme Court who afterwards
could always be relied upon to render decisions in their favor. Will the
people profit by their experience, or will they be indifferent to the
danger which surrounds them, until nothing short of a political upheaval
can restore to them these rights of sovereignty, of which they have so
insidiously been deprived?
Human gratitude is such that even high-minded men who, through the
influence of the railroad interest, have been placed upon the Federal
bench, find it impossible to divest themselves of all bias when called
upon to decide a case in which their benefactors are interested. Such is
the human mind that, when clouded by prejudice, it will forever be blind
to its own fault. Even the members of so high a tribunal as the
Electoral Commission which decided the presidential contest between
Hayes and Tilden could not divest themselves of their prejudices; each
one, Republican or Democrat, voted for the candidate of the party with
which he had cast his political fortune.
Last January, in an address delivered before the New York State Bar
Association at Albany, Mr. Justice Brewer reminded his hearers that the
rights of the railroads "stand as secure in the eye and in the custody
of the law as the purposes of justice in the thought of God." And
further on they were told that "there are to-day $11,000,000,000
invested in railroad property, whose owners in this country number less
than two million persons. Can it be that whether that immense sum shall
earn a dollar or bring the slightest recompense to those who have
invested perhaps their all in that business, and are thus aiding in the
development of the country, depends wholly upon the whim and greed of
that great majority of sixty millions who do not own a dollar? It may be
said that that majority will not be so foolish, selfish and cruel as to
strip that property of its earning capacity. I say that so long as
constitutional guarantees lift on American soil their buttresses and
bulwarks against wrong, and so long as the American judiciary breathes
the free air of courage, it cannot."
Unfortunately judicial buttresses and bulwarks have not always been
lifted against wrong. Judge Taney, like Brewer, supposed that it was
left at his time for his court to preserve the peace and provide for the
safety of the nation; but history has shown that we cannot depend upon
that high tribunal for safety when it is controlled by weak or
inefficient men.
When we consider what "that great majority" has done for this country in
the past, and is doing for it at the present time, and especially when
we contrast its sense of justice and right with the weakness and
inability of some of its public servants, does it not seem to be a
little presumptuous for them to assume that "the danger is from the
multitudes--the majority, with whom is the power," and that, were it not
for their superior wisdom and patriotic action, this great government of
the people, by the people and for the people would be a failure?
Mr. Lincoln never feared "the whim and greed" of "that great majority,"
but he had at all times implicit confidence in the great mass of the
people, and they in return had full confidence that no temptation of
wealth or power was sufficient to seduce his integrity.
We cannot dismiss this subject without referring to a stratagem which
railroads have in the past repeatedly resorted to for the purpose of
removing from the bench judges of independent minds whom they found it
impossible to control. This stratagem consists of a well-disguised
bribe, by which a Federal judge is changed into a railroad attorney with
a princely salary. The railroad thus gets rid of an undesirable judge
and gains a desirable solicitor at a price at which they could well have
afforded to pension the judge.
The following is a copy of a broker's circular letter sent to prominent
bankers of Iowa, and shows that even the Clerk of the United States
Court is not overlooked:
"----, June 30th, 1892.
"Mr. ----,
"We offer, subject to sale at par and interest, note $2,500.
Date, July 5th, 1892. Time, six months; rate, 6 per cent.
Payable where desired. Maker, ---- Endorser, Judge ---- Mr.
----, the maker, is clerk of the United States Circuit Court
at ---- Judge ---- the well known attorney of the ---- and
---- Railway Co., of ----, stated to us to be worth $150,000
to $200,000. Can you use it?"
While railroad managers rely upon servile courts as a last resort to
defeat the will of the sovereign people, they are far from losing sight
of the importance of controlling the legislative branch of the
government. By preventing what they are pleased to call unfriendly
legislation they are more likely to prevent friction with public
opinion, and they avoid at the same time the risk of permanently
prejudicing their cause by an adverse opinion upon a constitutional
question which they may find it necessary to raise in order to nullify a
legislative act. There are three distinct means employed by them to
control legislative action. First, the election to legislative offices
of men who are, for some personal reason, adherents to the railroad
cause. Second, the delusion, or even corruption, of weak or unscrupulous
members of legislative bodies. Third, the employment of professional and
incidental lobbyists and the subsidizing of newspapers, or their
representatives, for the purpose of influencing members of legislative
bodies and their constituencies.
There are probably in every legislative body a number of members who are
in some way or other connected with railroad corporations. No doubt, a
majority of these are personally irreproachable and even so high-minded
as to always postpone private for public interest; yet there are also
those whose political advancement was brought about by railroad managers
for the very purpose of having in the legislative body servile members
who could always be relied upon to serve their corporate masters.
Nevertheless, were railroad interests restricted to the votes of these
men for their support, the public would probably have no cause for alarm
on account of the presence of railroad representatives in legislative
bodies, but, as many other interests seek favorable legislation,
railroad men are often enabled to gain support for their cause by a
corrupt bargain for votes, and it is thus possible for them to double,
triple, and even quadruple, their original strength, by a policy of
reciprocity.
As in Congress and State legislatures, so these representatives of the
railroads may be found in our city councils. The leaders of the
railroads in Congress and in the legislatures of the various States
usually rely upon discretion for obtaining their end, but railroad
aldermen with but few exceptions seek to demonstrate their loyalty to
the cause to which they are committed by a zealous advocacy of extreme
measures, and will not unfrequently even gain their end through the most
unscrupulous combinations. If their votes, together with such support as
they obtain by making trades, are not sufficient to carry out or defeat
a measure which the railroad interests may favor or oppose, even more
questionable means are employed to gain a sufficient number of votes to
command a majority.
Outright bribery is probably the means least often employed by
corporations to carry their measures. While it may be true that the vote
of every weak and unscrupulous legislator is a subject of barter, money
is not often the compensation for which it is obtained. It is the policy
of the political corruption committees of corporations to ascertain the
weakness and wants of every man whose services they are likely to need,
and to attack him, if his surrender should be essential to their
victory, at his weakest point. Men with political ambition are
encouraged to aspire to preferment and are assured of corporate support
to bring it about. Briefless lawyers are promised corporate business or
salaried attorneyships. Those in financial straits are accommodated with
loans. Vain men are flattered and given newspaper notoriety. Others are
given passes for their families and their friends. Shippers are given
advantages in rates over their competitors; in fact, every legislator
disposed to barter his vote away receives for it compensation which
combines the maximum of desirability with the minimum of violence to his
self-respect.
Those who attempt to influence or control legislative bodies in behalf
of interested parties are collectively called the lobby. As a rule, the
lobby consists of prominent politicians likely to have influence with
members of their own party; of men of good address and easy conscience,
familiar alike with the subject under consideration and legislative
procedure, and last, but not least, of confidential agents authorized
and prepared to enter into secret negotiations with venal members. The
lobby which represents the railroad companies at legislative sessions is
usually the largest, the most sagacious and the most unscrupulous of
all. Its work is systematic and thorough, its methods are unscrupulous
and its resources great. Yet all the members of a legislative body
cannot be bribed, either by money, or position, or favors. Some of them
will not vote for any proposed measure unless they can be convinced that
it is for the public welfare. These legislators, if their votes are
needed, are turned over to the persuasive eloquence of those members of
the lobby who, apparently, have come to the capital moved by a patriotic
impulse to set erring legislators right on public questions. Their
familiarity with public matters, their success in public life, their
high standing in political circles, their apparent disinterestedness and
their plausible arguments all combine to give them great influence over
new and inexperienced members. In extreme cases influential constituents
of doubtful members are sent for at the last moment to labor with their
representatives, and to assure them that the sentiment of their
districts is in favor of the measure advocated by the railroads.
Telegrams pour in upon the unsuspecting members. Petitions in favor of
the proposed measure are also hastily circulated among the more
unsophisticated constituents of members sensitive to public opinion, and
are then presented to them as an unmistakable indication of the popular
will, although the total number of signers forms a very small percentage
of the total number of voters of the districts in which these petitions
were circulated. A common method employed by the railroad lobby in Iowa
has been to arouse, by ingenious arguments, the prejudices of the people
of one part of the State against those of another, or of one class
against those of another class; for instance, the East against the West,
or that portion of the State the least supplied with railroad facilities
against that which is best supplied; or the river cities against the
interior cities; or the country people against the city people; or the
farmer against the merchant, and always artfully keeping in view the
opportunity to utilize one side or the other in their own interest.
Another powerful reinforcement of the railroad lobby is not unfrequently
a subsidized press and its correspondents. The party organs at the
capital are especially selected to defend as sound measures, either from
a partisan or non-partisan standpoint, legislation of questionable
propriety desired by the railroads. When such measures are advocated by
party organs, partisan members, either from fear or prejudice, are apt
to "fall into line," and then to rely upon these organs to defend their
action. Editors, reporters and correspondents are even retained as
active lobbyists and give the railroad managers' cause the benefit of
their prestige. To such an extent has the abuse of the press been
carried that a considerable number of its unworthy representatives look
upon railroad subsidies as legitimate perquisites which they will exact
through blackmailing and other means of compulsion if they are not
offered. A case may be cited here to illustrate their mode of operation,
as well as the ethics of railroad lobbies. During one of the sessions of
the Iowa legislature a newspaper correspondent came in possession of
some information which reflected severely on the railroad lobby. He made
his information the subject of a spicy article and showed it to a
friend who stood close to the gentleman chiefly implicated, with the
remark that nothing but a hundred dollar bill would prevent the
transmission of the article by the evening mail to the paper which he
represented. Before sundown the stipulated price for the correspondent's
silence was paid, and an enemy was turned into a friend.
Professor Bryce says of the American lobby system: "All legislative
bodies which control important pecuniary interests are as sure to have a
lobby as an army to have its camp followers. Where the body is, there
will the vultures be gathered together." To such an extent is the lobby
abuse carried that some large corporations select their regular
solicitors more for their qualifications as lobbyists than for their
legal lore. It is a common remark among lawyers that a great company in
Chicago pays a third-class lawyer, who has the reputation of being a
first-class lobbyist, an extravagant salary and calls him general
solicitor, while it relies upon other lawyers to attend to its important
legal business. The readiness of members of the bar to serve wealthy
corporations is fast bringing the legal profession of America into
disrepute abroad. The author just quoted, in speaking of its moral
standard, says: "But I am bound to add that some judicious American
observers hold that the last thirty years have witnessed a certain
decadence in the bar of the great cities. They say that the growth of
enormously rich and powerful corporations, willing to pay vast sums for
questionable services, has seduced the virtue of some counsel whose
eminence makes their example important, and that in a few States the
degradation of the bench has led to secret understandings between judges
and counsel for the perversion of justice."
There are, of course, able and honorable attorneys employed by railroad
companies, but often railroad lawyers are selected more for their
political influence, tact and ingenuity than for legal ability, and, as
a rule, the political lawyer receives much better compensation for his
services than does the lawyer who attends strictly to legitimate legal
work.
The danger from railroad corporations lies in their great wealth,
controlled by so few persons, and the want of publicity in their
business. Were they required to render accounts of their expenditures to
the public, legislative corruption funds would soon be numbered with the
defunct abuses of railroad corporations, and, with bribes wanting in the
balance of legislative equivalents, the representatives of the people
could be trusted to enact laws just alike to the corporations and the
public, while asserting the right of the people to control the public
highway and to make it subservient to the welfare of the many instead of
the enrichment of the few. A wise law regulating lobbies exists in
Massachusetts. Every lobbyist is required to register, as soon as he
appears at the Capitol, to state in whose interest and in what capacity
he attends the legislative session, to keep a faithful account of his
expenses and to file a copy of the same with the Secretary of State.
Were a similar law enacted and enforced by every State legislature, as
well as by Congress, the power of railroad lobbies would be curtailed.
Railroad managers never do things by halves. Well realizing that it is
in the power of a fearless executive, by his veto, to render futile the
achievements of a costly lobby and to injure or benefit their interests
by pursuing an aggressive or conservative policy in the enforcement of
the laws, they never fail to make their influence felt in the selection
of a chief magistrate, either of the Nation or of an individual State.
No delegate, with their permission, ever attends a national convention,
Republican or Democratic, if he is not known to favor the selection of a
man as the presidential candidate of his party whose conservatism in all
matters pertaining to railroad interests is well established. At these
conventions the railroad companies are always represented, and their
representatives do not hesitate to inform the delegates that this or
that candidate is not acceptable to their corporations and cannot
receive their support at the polls. During the Chicago convention of
1888 the statement was openly made that two of the Western candidates
lost Eastern support because they were not acceptable to a prominent New
York delegate who had come to Chicago in a threefold capacity--that of a
delegate, a presidential possibility, and special representative of one
of the most powerful railroad interests in the country. This same man
appeared again last year at the Minneapolis convention as chief
organizer of the forces of a leading candidate. His counterpart was in
attendance at the Chicago convention looking after the same interests
there.
It is the boast of prominent railroad men that their influence elected
President Garfield, and the statement has been made upon good authority
that "not until a few days before the election did the Garfield managers
feel secure," and that "when the secret history of that campaign comes
to be written it will be seen that Jay Gould had more influence upon the
election than Grant and Conkling." It cannot be said that railroad
managers, as a class, have often openly supported a presidential
candidate. This may be due to the fact that with the uncertainty which
has for years attended national politics they deem it the part of
discretion to pretend friendship for either party and then shout with
the victor. In conformity with this policy, a well-known New York
railroad millionaire has for years made large and secret contributions
to the campaign funds of both political parties. He thereby places both
parties under political obligations, and believes his interests safe,
whichever turn the political wheel may take. After the contest he is
usually the first to congratulate the successful candidate. In the
national campaign of 1884 this railroad king completely outwitted a
prominent Western politician and member of the Republican national
campaign committee who has always prided himself on his political
sagacity. This gentleman had taken it upon himself to enlist the rich
and powerful New Yorker in the Republican cause, and to obtain from him,
as a token of his sincerity, a large contribution to the Blaine campaign
fund. He succeeded, at least so far as the contribution was concerned;
but when the struggle was over and the opposition, in the exuberance of
joy over their victory, told tales out of school, he was not a little
chagrined to find that the managers of the Cleveland campaign had
received from the astute railroad millionaire a campaign contribution
twice as large as that which he had obtained from him. The diatribes
which for weeks after the election filled the columns of his paper
reflected in every line the injured pride of the outwitted general.
Judging from the laxity with which the railroad laws have been enforced
in a considerable number of States, their executive departments are as
much under the influence of railroad managers as are the legislative
departments of others. This cannot be surprising to those who know how
often governors of States are nominated and elected through railroad
influences, and what efforts are made by corporations to humor servile
and to propitiate independent executives. The time is not far remote
when nearly every delegate to a State convention had free transportation
for the round trip. This transportation was furnished to delegates by
railroad managers through their local attorneys, or through favored
candidates and their confidants. It was only offered to those who were
supposed to be friendly to candidates approved by the railroad managers;
and as free passage was looked upon as the legitimate perquisite of a
delegate, but few persons could be induced to attend a State convention
and pay their fare. As a consequence, the railroad managers found it too
often an easy matter to dictate the nomination of candidates.
Since the adoption of the Interstate Commerce Law convention passes, as
such, have largely disappeared; but many a prominent politician in going
to and returning from political conventions travels as a railroad
employe, though the only service which he renders to the railroad
companies consists in manipulating conventions in their favor. If all
the railroad candidates--and the companies usually take the precaution
to support more than one candidate--are defeated in the convention of
one party, and a railroad candidate is nominated by the other party, the
latter is certain to receive at the polls every vote which railroad and
allied corporate influence can command.
One might suppose that an attempt would at least be made to hide from
the general public the interference of such a power with the politics of
a State; but railroad managers seem to rely for success as much upon
intimidating political parties as upon gaining the good will of
individual citizens. To influence party action, the boast has in recent
years repeatedly and boldly been made in Iowa that 30,000 railroad
employes would vote as a unit against any party or individual daring to
legislate or otherwise take official action against their demands, and
forgetting that, with the same means used in opposition to them, a few
hundred thousand farmers and business men could be easily organized to
oppose them. Unscrupulous employers often endeavor to control the votes
of their employes. This is particularly true of railroad companies, and
they use many ingenious plans to accomplish it. In the Northwest, and
especially in Iowa, they have for several years organized their employes
as a political force for the purpose of defeating such candidates for
State offices as were known to favor State control of the transportation
business. They have even paid the expenses of the organization, although
they have made every effort to make it appear as if the movement was a
voluntary one on the part of their employes. They are employing this
method in Texas and other States at the present time, in opposition to
the effort that is being made by the people to secure just and
reasonable treatment from the railroads.
That the chief executive of a State should be influenced in the
discharge of his official duties by such favors as passes, the freedom
of the dining- and sleeping-car, by the free use of a special car, or
even a special train, one is loath to believe; yet it is a fact, and
especially during political campaigns, that such favors are frequently
offered to, and accepted by, the highest executive officers, and it is
equally true that many of these officers often connive at the continued
and defiant violations of law by railroad officials. While the men who
manage large railroad interests do not always possess that wisdom which
popular reverence attributes to them, they certainly possess great
cunning, and expend much of their artfulness in efforts to win over
scrupulous, and to render still more servile unscrupulous executives.
The general railroad diplomate never omits to pay homage to the man in
power, to flatter him, to impress him with the political influence of
his company, to intimate plainly that, as it has been in the past, so it
will be in the future its determined policy to reward its friends and to
punish its enemies. If the executive proves intractable, if he can
neither be flattered, nor coaxed, nor bribed into submission, he does
not hesitate to resort to intimidation to accomplish his purpose. This
is by no means a rare occurrence. There are few public men who, if
determined to do their duty, have not been subjected to railroad insult
and intimidation. The author may be permitted to give an instance from
his personal experience. Soon after his inauguration as Governor of Iowa
a general officer of one of the oldest and strongest Western railroads
called at his office and importuned him with unreasonable requests. When
he found that he had utterly failed to impress the author with his
arguments, he left abruptly, with the curt remark that these matters
could be settled on election day, and he emphasized his statement by
slamming the door behind him.
A servile railroad press has always been ready to misrepresent and
malign executive officers who have refused to acknowledge any higher
authority than the law, the expressed public will and their own
conception of duty. This abuse has even been carried so far that the
editorial columns of leading dailies have been prostituted by the
insertion of malicious tirades written by railroad managers and railroad
attorneys; and the fact that public opinion has not been more seriously
influenced by these venal sheets must be solely attributed to the good
judgment and safe instinct of the masses of the people.
However persistently railway organs deny it, it is a matter of general
notoriety that railway officials take an active part in political
campaigns. Hundreds of communications might be produced to show their
work in Iowa, but the following two letters, written by a prominent
railroad manager to an associate, will suffice for the purpose. It will
be noticed that one was written before and the other after election.
Comments upon their contents are unnecessary:
"----, Iowa, Nov. 2nd, 1888.
"DEAR SIR: I have just discovered this P. M. that the
Central Committee have sent electrotypes to all the
printing offices in the State of the State ticket, with
the names of the Railway Commissioners and Supreme Judge
in so small a space as to make it very difficult, if not
impossible, to write in the names. I am having slips made
with Commissioners' names and Judge written on them, and
they will be sent to all agents, not later than to-morrow,
to paste over the printed names on the ticket, and thus
beat this scheme. Have you seen any tickets yet? And what
do you think of this plan?
"Yours truly, "----"
"----, Iowa, Nov. 11, 1888.
"DEAR SIR: Repeating the old and time-honored saying:
'We have met the enemy and we are theirs.' The Democratic
Granger and the largely increased Republican vote was too
much for us. Many friends voted with the railway men, but
to no purpose. The comparison between Granger and Smyth
will tell more than anything else the strength of the
railway vote. But we are badly used up, and may as well
take our dose.
"Yours truly, "----"
While the result of this election was indeed a bad dose for speculating
railway managers, it is the opinion of the masses and of railway
stockholders, who are more interested in the general welfare of the
roads than in speculation in their stocks, that the dose was well
administered, and should be repeated whenever the necessity for it may
again arise.
It is probably true that railroad managers have lost much of their
former influence in politics. As their means of corruption have become
generally known they have become less effective. The public is more on
the alert, and corrupt politicians often find themselves unable to carry
out their discreditable compacts.
But it is unreasonable to expect the evil to cease until the cause is
removed. The trouble is inherent in the system, and the fault is there
more than in the men who manage the business, and not till the great
power exercised by them is restrained within proper limits will the evil
disappear. All this can be accomplished when there shall be established
a most thorough and efficient system of State and National control over
the railroad business of the whole country.
CHAPTER X.
RAILROAD LITERATURE.
The cause of the railroad manager has never been without time-servers.
Not to speak of those newspaper editors who, for some consideration or
another, defend every policy and every practice inaugurated or approved
by railroad authorities, there has always been a school of literati who
felt it their duty to enlighten, from a railroad standpoint, their
fellow-men by book or pamphlet upon the transportation question, to
correct what they supposed to be false impressions, and to round up with
an apology or defense for the railroad manager, who is invariably
represented by them as the most abused and at the same time most
patriotic and most progressive man of the age.
The benefits derived from the railroad are great. It has been an
important factor in the development of our country's resources and the
advancement of our civilization. Its value is fully appreciated, but
there is no reason why the men who have utilized the inventions of
Stephenson and others, and have grown rich by doing so, should be
eulogized any more than those who are ministering to the wants of the
public by the use of the Hoe printing press, McCormick's reaper,
Whitney's cotton gin, or any of the thousands of other modern
inventions.
These authors doubtless are prompted by various motives. Some have been
educated in the railroad school and are therefore blind to railroad
evils. Others naturally worship plutocrats, because they hold the
opinion that capital is entitled to a larger reward than brains and
muscle, for the reason that the latter is more plentiful than the
former.
But there is a third class of railroad authors, who, there is reason to
believe, enter the literary arena in defense of railroad evils not
solely for the love they bear the cause, but as the paid advocates of a
class of men who feel that their cause is in need of a strong defense at
the bar of public sentiment. It would be difficult to account in any
other way for the extravagant statements and one-sided arguments made by
this class of writers. Yet railroad literature has not confined itself
to the retrospective field. Its scope has grown with the significance of
its contributors. In more than one instance have men at the head of
large railroad corporations, influenced by temporary interest, become
the authors of documents containing assertions and prophecies highly
pathetic at the time, but subsequently shown to be so replete with
falsehoods and absurdities that few railroad managers would to-day be
willing to father them. Thus Alexander Mitchell, the late president of
the Chicago, Milwaukee and St. Paul Railroad Company, addressed on the
28th of April, 1874, shortly after the passage of the Wisconsin Granger
Law, a letter to Governor Taylor, containing the following passages:
"That it [the Wisconsin law] has effectually destroyed all
future railroad enterprises, no one who is acquainted with
its effect in money centers will for a moment doubt.... The
whole amount received on the investment [Chicago, Milwaukee
and St. Paul Railroad] for interest and cash and stock
dividends, amounts to only six per cent. per annum of the
actual cost of the property. I submit to your Excellency,
and through you to the people of the State, whether this is
more than a fair and reasonable return for the capital
invested in these improvements. Is it not far below such
reasonable amount? The best and most careful economists
admit that no less than ten per cent. per annum should be
allowed on such investments.... The directors of this
company have at all times had a due regard to the interests
of the public, and a desire to furnish transportation at the
lowest possible figures, and, although not receiving a fair
and reasonable return on their investments, they have for
the last four years prior to 1873 steadily reduced their
rates of freight and passengers from year to year, as will
be seen from the following tables, showing the charge for
freight per mile, and the average per mile for passengers
for each year, from 1868 to 1873 inclusive:
Charges per ton Average passenger rate
per mile--cents. per mile--cents.
1864 .04
1868 .03 40-100 .03 86-100
1869 .03 10-100 .03 92-100
1870 .02 82-109 .03 85-100
1871 .02 54-100 .03 75-100
1872 .02 43-100 .03 54-100
1873 .02 50-100 .03 42-100
"The law in question proposes to reduce our passenger rates
twenty-five per cent. and our freight rates about the same,
thus deducting from our present tariff about twenty-five per
cent. of our gross earnings.... This act, as we have seen,
proposes to take from us twenty-five per cent. of our
passenger and freight earnings, and the additional tax of
one per cent. of our gross earnings, all of which is
equivalent to taking from us twenty-six per cent. of our
gross earnings. Therefore, deducting this amount, equal to
twenty-six per cent. of our entire gross earnings, from
thirty-three per cent., our average net earnings on
business, would leave us only seven per cent. of our gross
earnings as the entire net earnings of the road, out of
which must be paid the interest on the bonds and the
dividends to our stockholders. It is therefore manifest that
this law will take from us over three-fourths of the net
income received under our present tariff.... The board of
directors have caused this act to be carefully examined and
considered by their own counsel, and by some of the most
eminent jurists in the land, and after such examination they
are unanimous in their opinion that it is unconstitutional
and void.... The board of directors are trustees of this
property, and are bound faithfully to discharge their trust,
and to the best of their ability to protect it from
spoliation and ruin. They have sought the advice of able
counsel, and, after mature consideration, believe it their
duty to disregard so much of said law as attempts
arbitrarily to fix rates of compensation for freight and
passengers.... Being fully conscious that the enforcement of
this law will ruin the property of the company, and feeling
assured of the correctness of the opinions of the eminent
counsel who have examined the question, the directors feel
compelled to disregard the provisions of the law so far as
it fixes a tariff of rates for the company, until the courts
have finally passed upon the question of its validity."
The letter was at the time regarded by railroad men as a very strong
document, and the railroad journals were filled with lengthy editorials
in praise of the soundness of the doctrines and arguments which it
contained. The disinterested of the enlightened portion of the community
even then realized that the "eminent jurists" whom the company had
consulted were hired attorneys and greatly biased in their views as to
the constitutional rights of corporations, and that President Mitchell
on his part had painted by far too dark a picture of the situation. It
is now quite generally admitted that many of Mr. Mitchell's statements
were as false as his counsel's interpretation of the Constitution and
the law was erroneous. From the assertions made in this letter one is
led to infer that the then stock-and bondholders of the Milwaukee road
had paid in full every dollar of the capitalized value of the road, and
that they derived from their investment an income of only about six per
cent. on the money actually invested by them. The cost of the entire
Chicago and Milwaukee system in Wisconsin was stated in the letter as
being $38,000 per mile. It is not likely that this line of road ever
cost to exceed $25,000 a mile, or that those who then owned the road
paid much more than two-thirds of its actual cost for it. The road, as
the letter itself admits, was bought at sheriff's sale, and no mercy
whatever was shown to the farmers who had mortgaged their farms to aid
the railroad company in raising funds for the construction of its line.
The letter contains other misstatements equally grave. Mr. A. B.
Stickney, the president of the Chicago, St. Paul and Kansas City
Railroad, in his recent excellent work, "The Railway Problem," reviews
Mr. Mitchell's letter as follows:
"Mr. Mitchell states the average rate per mile in 1873 for
passengers at 3.42 cents. It was well understood that this
was an average rate received from those passengers who paid
anything, and that, had the average rate been obtained by
using as a divisor the total number of paying passengers
plus the number of those who rode free the average would
have been much below three cents, the price fixed by the
law, and consequently, if the company would collect the
legal rate from all alike and abolish the free list, its
revenues from the passenger business would be increased
rather than decreased. If the same test is applied to the
freight rates it becomes equally evident that this statute
did not reduce the rates in Wisconsin below the average rate
of 2.50 cents per ton per mile, which, according to Mr.
Mitchell's statement, was the average for the year 1873. For
proof, it may be stated that the law classified freight into
four general classes, to be designated as first, second,
third and fourth classes, and into seven special classes, to
be designated as D, E, F, G, H, I and J. The rates on the
four general classes were made the same as were 'charged
for carrying freights in said four general classes on said
railroads on the first day of June, 1873,' and the rate per
ton per mile was fixed at certain rates for the first
twenty-five miles, a less for the second twenty-five miles,
and a fixed rate per mile after, as follows:
1st 25 Miles 2nd 25 Miles. All Over 50 Miles.
D 4-4/5 cents 3-1/5 cents 1 3/5 cents.
E Same as class above.
F 4 cents 2 cents 1 cent.
G 3-1/5 cents 2 cents 1 cent.
H 4 cents 2-4/5 cents 1-3/5 cents.
I 4-2/5 cents 2-2/5 cents 1-1/5 cents.
J 3-1/5 cents 2-2/5 cents 1 cent.
"When it is considered, in connection with these figures,
that the four general classes were left by the legislature
under the same tariffs as had been enforced by the
companies, and, as a rule, first class is three times the
rate of class D, and third and fourth class materially
higher, the evidence seems conclusive that the rates fixed
by law would produce an average materially higher than the
average of the whole year, stated by Mr. Mitchell at 2-1/2
cents. It seems also probable that, had the rates fixed by
this law been applied to the whole business of the line, the
interstate as well as the State traffic, it would still have
produced a larger average. The latter of course is the
proper test. There are little inaccuracies in the material
facts as stated by Mr. Mitchell which were pointed out at
once. For example: In his tabulated statement of passenger
earnings per mile, averaging the gross earnings from
transportation of passengers who paid any fare, and omitting
the large number who went free, the rate is stated at 3
42-100 cents per mile; then he says: 'The law in question
proposes to reduce our passenger rate twenty-five per
cent.,' which would have reduced the rate to 2.57 cents per
mile, while, the rate fixed by the law complained of was
three cents per mile. Then Mr. Mitchell proceeds: 'And our
freight rates about the same; thus deducting from our
present tariff about twenty-five per cent. of our gross
earnings.' It was immediately pointed out that the law only
applied to strictly State business; that is, to traffic
that originated and ended in the State of Wisconsin. All
other traffic was interstate commerce, and could not be
controlled by State legislation. The volume of business
which would be affected by the law would therefore be
comparatively small--estimated at not over ten per cent., of
the total traffic of the line. Hence, if the rates fixed by
the law were twenty-five per cent. less than the rates the
company had been in the habit of collecting (which was
denied), it could not possibly have 'deducted from its
present tariff' more than two and one-half per cent.,
instead of twenty-five per cent. as stated by Mr. Mitchell.
"It was claimed that the facts were, that the Chicago,
Milwaukee and St. Paul Company, in its efforts to bankrupt
the Lake Superior and Mississippi Company, had many of its
interstate rates so low that it had resulted in loss, and
that its other rates had been made unreasonably high in
order to recoup this loss, and that the State of Wisconsin
was compelled to pay a part of the expense of the
transportation of favored sections of the State of
Minnesota."
All through the Granger contests the railways have weakened the force of
their arguments by their misrepresentation of facts and by their
extravagant predictions of ruin. The companies were continually
proclaiming: 'If this or that is done, it will ruin us; it will ruin the
State,' when, in fact, a road cannot be mentioned that has suffered from
State legislation. Nineteen years ago no railroad manager could have
written what Mr. Stickney writes to-day, and few railroad managers would
write to-day what Mr. Mitchell wrote then. And yet, such is the change
which public sentiment is undergoing upon these questions, that the
utterances of many of our present railroad authors will appear as absurd
a few years hence as Mr. Mitchell's letter of nineteen years ago appears
to us now.
Many railroad attorneys have since been guilty of resorting to the
sophistry employed by President Mitchell in that strange letter which he
addressed to the Governor of Wisconsin. Even so distinguished a
gentleman as Hon. James W. McDill, now a member of the Interstate
Commerce Commission, made in 1888, as a member of a railroad lobby, the
following remarkable statements before the Railroad Committee of the
General Assembly of Iowa, in a speech opposing a proposed reduction of
the passenger rate of first-class roads from three to two cents per
mile:
"The proposition, if confined to the first-class roads of
Iowa, proposes a one-third reduction of their revenues from
passenger business.... We have earned in Iowa by first-class
roads annually about $13,000,000, and a reduction of one
cent, or from a rate of three cents to two, will reduce
their revenues about $5,000,000 a year.... Thus it is seen
that it is proposed to take from the revenues of a part of
the railroads of Iowa, annually, almost as much as all the
railroads of Iowa have paid for taxes in nine years
($6,549,505.84)."
Mr. McDill was a member of the Iowa Railroad Commission for several
years. He may, therefore, be presumed to have known that the State of
Iowa could not, and did not propose to, regulate interstate traffic, and
that the thirteen million dollars railroad revenue to which he referred
was derived both from interstate and State traffic; that the latter was
only about one-fourth of the former, and that therefore the proposed
reduction on the basis of schedule rates would have cut down the net
revenue of the roads only about one million instead of five million
dollars. But Mr. McDill himself states that the average rate earned by
all the railroads of the United States was, for the year 1886, only
2.181 cents per passenger per mile. It certainly was not over 2-1/2
cents per mile for the first-class roads of Iowa. Thus the proposed
reduction, instead of being one cent per mile, as stated by Mr. McDill,
was only one-half cent per mile; and it only applied to the local
business of the first-class roads. In other words, the bill under
consideration, had it been enacted into law, would have caused a
reduction of 20 per cent. on about 25 per cent. of the total revenue
from passenger business of the first-class roads, or of five per cent.
on their total income from passenger traffic in the State of Iowa. It
will be noticed that Mr. McDill in his calculation made no allowance
whatever for the increase of business which would have followed such a
reduction. The gain from this source would probably have greatly
exceeded the loss due to this small reduction in the fare. In the same
address Mr. McDill made many other equally fallacious statements.
One of the most devoted advocates of the interests of railroad managers
is Marshall M. Kirkman. He is the author of a number of books and
pamphlets upon railway subjects, among them a pamphlet entitled "The
Relation of the Railroads of the United States to the People and the
Commercial and Financial Interests of the Country."
Mr. Kirkman introduces his subject with the following rather remarkable
statement:
"I shall show that while the railways of the United States
are designated as monopolies, they are not so in fact.
Accused of disregarding the interests of the community, I
will show that they are abnormally sensitive to their
obligations in this direction. While legislatures claim the
right to fix rates, I shall show that the abnormal
conditions under which the railway system has grown up and
its chaotic nature render the exercise of such a privilege
impossible. I will show that while it is assumed that rates
may be fixed arbitrarily, they must, on the contrary, be
based on natural causes, the competition of carriers, their
necessities and the rivalries of conflicting markets and
trade centers; conditions manifestly impossible to determine
or regulate in advance, and therefore beyond the control of
legislation.... While a division of business (by pooling) is
thought to be contrary to the interests of the people, I
shall show that it is the legitimate fruit of indiscriminate
railway building and offers the only escape from the
conditions such practice engenders. I shall show that, while
it is assumed that rates may be based progressively or
otherwise on distance, the enforcement of such a principle
would restrict the source of supply, and, in so far as this
was the case, render great markets or centers of industry
impossible."
Speaking of the importance of the railroad, Mr. Kirkman says:
"Superseding every other form of inland conveyance, it determines the
location of business centers, and vitalizes by its presence, or blasts
by its absence." He contends that rigid and scrutinizing supervision
should be exercised by the Government over the location of railroads,
and that only such lines should be permitted to be built as afford
reasonable grounds for profitable enterprise. "It should be," he says,
"an axiom in our day that a government that permits or encourages the
construction of two railways where one would suffice is, to the extent
that it does this, a public nuisance." Mr. Kirkman here makes it the
duty of the Government to arbitrarily meddle with railroad affairs. He
would give the Government the power to determine when and where an
additional railroad is needed, and to prohibit the construction of any
new road that has not the Government sanction. The interests of a
thousand towns might suffer for want of adequate transportation
facilities, individuals and communities might be anxious to build their
own lines for the development of local resources, but all railroad
enterprise is doomed to a standstill until a conservative governmental
commission has been entirely satisfied that a prospected road will pay
and not deprive existing roads of any part of their revenue. There can
be no doubt that if such a policy were ever adopted in America, few
roads would be built without having first passed the ordeal of a legal
injunction, and many a prospected road, though greatly needed, would
remain unbuilt because its promoters would be discouraged by the delay
and cost of litigation.
But while this author is perfectly willing to trust the Government with
the great responsibility of prohibiting the construction of proposed
roads, he is not willing to have it exercise the power to determine what
are reasonable rates. He tries to sustain his objection by the following
argument: "The fixing of rates upon a railroad is as delicate a process
as that of determining the pulse of a sick man. They cannot be
determined abstractly, or in advance of the wants of business, but must
be adjusted from hour to hour to conform to its fluctuations. Five
thousand men find active employment in the United States in connection
with the important duty of making rates. Each case requires particular
investigation and involves, in many instances, prolonged study and
research. The duty requires men of marked experience and capacity. They
and men like them are the silent, unseen power that moves great
enterprises of every nation. In the case of railroads we may enumerate
those having official positions, but the experts from whom the official
heads derive information and assistance cannot be classified. They
comprise a vast army of experienced and able men familiar with railway
traffic and quick to respond to its requirements. Such a body of men
could not be organized by a government, or, if organized, would rapidly
deteriorate under conditions so unfavorable for their support and
development. Whatever authority exercises the duty of fixing rates must
take up the subject in the same methodical way and, acting through
skilled agents, pursue its inquiries and determine its results with the
same experience, minute care and _conscientious regard_ for the
technical requirements of business that the railway companies observe.
No government can possess the facilities for perfecting so vast and
intricate an organization and at the same time render it responsive to
the public good. The labor is too great and the responsibility too
remote. It could not move with sufficient quickness to respond to the
actual requirements of trade, and too many restrictions would
necessarily govern its actions. For these and other equally important
reasons governments must always be satisfied to restrict their offices
in this direction."
Speaking of the men who are commonly termed railroad magnates, Mr.
Kirkman says: "They alone possess the needed administrative ability that
the situation demands. They not only provide largely the capital, but
they discover the fields wherein it may be used most advantageously.
They are the advance guard of all great enterprises, the natural leaders
of men. They are an integral part of the country, a necessary and
valuable element, without which its natural resources would avail
little." This is a very strong statement in the face of the fact that
but very few of the class of men to whom Mr. Kirkman refers ever built a
line of road. They have usually found it more profitable to "gobble"
roads already built than to construct new lines.
According to this author the public have no reason to complain of
railroads; on the contrary, the latter have always been the victims of
public persecution, and "every species of folly, every conceivable
device of malice, the impossible requirements of ignorance, the selfish
cunning of personal interests, the ravings of demagogues, the
disappointments, envies, prejudices and jealousies of mankind have each
in turn and in unison sought to injure the railway interest."
But probably the most extravagant passage in the whole treatise is the
one referring to special rates, which he calls "the foundation and
buttress of business," without which it could not be carried on. He
expresses the opinion that without the continued and intelligent use of
such rates "our cities would soon be as destitute of manufactories as
one of the bridle paths of Afghanistan," and then continues: "The
special rate of carriers is like the delicate fluid that anoints and
lubricates the joints of the human body. It is an essential oil. Without
it the wheels of commerce would cease and we should quickly revert to
the period when the stage-coach and the overland teamster fixed the
limits of commerce and the stature of cities."
The most recent and probably the most radical of Mr. Kirkman's books is
"Railway Rates and Government Control." It would lead us too far from
our subject to enter into a discussion of Mr. Kirkman's errors; in fact,
it might prove an endless task. Suffice it to say that in discussing his
subject he revels in such phrases as: "Subject too vast to be
comprehended." "Acts of agrarian legislation and foolish manifestations
of disappointment and hate." "The rabble will avail itself of every
excuse to pass laws that would, under other circumstances, be called
robberies." "Ignorance and demagogism." "Government interference, the
panacea of cranks and schemers." "Only understood by the few." "These
people are as sincere as they are ignorant." "Governments have no
commercial sense." "Those who condemn them are not so dishonest as
ignorant, and not so malicious as foolish." "Silly people." "Justice and
common honesty are systematically denied [the railroads]." "Legal means
of plundering them." "The intelligence and facilities of Government are
but one step above the barbarian." "Those who use railroads should pay
for them," etc., etc.
Mr. Kirkman's argument is in substance: Rate-making is a difficult
subject. The people are too ignorant to understand it. Those who carry
on the Government are for the most part fools and demagogues, and are
utterly unfit to do justice to such a task. Railroad men are wise and
just, and neither the people nor the Government should meddle with the
railroad business. In order to place a true estimate upon Mr. Kirkman's
utterances, one should remember that he is a railroad employe as well as
the patentee and vendor of a number of railroad account forms which are
extensively used by railroad companies.
The Chicago _Tribune_, in reviewing this last literary production of Mr.
Kirkman, says:
"The great fault of Mr. Kirkman's statements is that they
are often so general in character as to be both true and
false at the same time.... He does not seem to comprehend
the nature of the railroad, or to perceive the danger of
allowing a railroad to exercise its powers uncontrolled. He
denies the State's right to interfere with any
discriminations which a railway corporation chooses to
adopt. He would allow railways to fix whatever charges they
please for long hauls and short hauls.... Mr. Kirkman does
not adduce a single fact in support of these remarkable
views. He simply says: 'Railroads cannot, if they would,
maintain any inequitable local tariff.' This is not
argument, it is simply assertion. Every one who has learned
the alphabet of this question knows that railways have been
exceedingly unjust wherever competition or the law did not
restrict their powers. If this were the proper place for it
we would give the author instances of this injustice by the
hundred, and almost any book on the subject refers to such
cases by the thousand.... When confronted with the facts
substantiating such charges the author answers the argument
by exclaiming: 'But how absurd! But how untrue! Our
commercial morals are equal to the highest in the world....'
Scarcely an assertion can be taken without qualification.
The author fairly revels in half-truths.... The book may
have its merits, but they are too modest to reveal
themselves."
It is a failing of mankind to take for truth without further
investigation any assertion that has often been reiterated. Most people
are prone to believe that an assertion made by a thousand hearsay
witnesses is true, overlooking the possibility of their drawing from a
common false source. But it is surprising that an author like Prof.
Arthur T. Hadley should fall into such an error. In his otherwise
excellent work, "Railroad Transportation, Its History and Its Laws," Mr.
Hadley bases a number of his deductions upon false premises advanced by
railroad managers, and arrives at conclusions which appear strange when
their source is considered. In the chapter on railroad legislation
Professor Hadley says: "But a more powerful force than the authority of
the courts was working against the Granger system of regulation. The
laws of trade could not be violated with impunity. The effects were most
sharply felt in Wisconsin. The law reducing railroad rates to the basis
which competitive points enjoyed left nothing to pay fixed charges. In
the second year of its operation, no Wisconsin road paid a dividend;
only four paid interest on their bonds. Railroad construction had come
to a standstill. Even the facilities of existing roads could not be kept
up. Foreign capital refused to invest in Wisconsin; the development of
the State was sharply checked; the very men who had most favored the law
found themselves heavy losers.... By the time the Supreme Court
published the Granger decisions, the fight had been settled, not by
constitutional limitations, but by industrial ones."
These statements are either utterly untrue or greatly misleading. Mr.
Hadley ought to know that the railroad companies in the Granger States
never complied with the letter, much less with the spirit of the law.
Whenever they made an apparent effort to live up to it they only did so
to make it odious. Rates were never reduced by the legislature to the
basis previously enjoyed by competitive points, but merely to the
average charge which had obtained before the passage of the law. As a
rule the railroad revenues increased. If any companies failed to earn
enough to pay fixed charges it was simply because they were determined
not to do so. A non-payment of dividends did not injure the managers,
but simply other stockholders of the road. A permanent establishment of
the principle of non-discrimination, on the other hand, would have
benefited stockholders, while prejudicing the speculative interest which
managers had in the roads. Railroad construction came, after the
financial panic of 1873, to a practical standstill throughout the United
States; and if the Granger States did not get their share of the very
small total increase during the five years following the panic, it was
due solely to a conspiracy on the part of the railroad managers to
misrepresent and pervert the legislation of these States. The laws, as
has already been stated, were finally repealed, not because the people
had tired of them or regarded them unwise or unjust, but because it was
hoped that the commissioner system would prove more efficient. It was
offered as a compromise measure and was accepted as such by the railroad
managers, who, in their eagerness to rid themselves of the restrictions
imposed by the Granger laws, gave every assurance of complete submission
to the requirements of the proposed legislation.
Mr. Hadley even goes so far as to defend railroad pools. "Unluckily," he
says, "we place these combinations outside of the protection of the law,
and by giving them this precarious and almost illegal character we tempt
them to seek present gain, even at the sacrifice of their own future
interests. We regard them, and we let them regard themselves, as a means
of momentary profit and speculation, instead of recognizing them as
responsible public agencies of lasting influence and importance." We can
partially account for this author's defense of pooling when we are
informed that he accepts it as an axiom that "combination does not
produce arbitrary results any more than competition produces beneficent
ones." Referring to railroad profits, Mr. Hadley says: "The statement
that corporations make too much money is scarcely borne out by the
facts. The average return of the railroads of this country is only four
per cent., the bondholders receiving an average of four and a half per
cent., the stockholders of two and a half per cent. True, much of the
stock is water, not representing any capital actually expended; but,
even making allowance for this, it is hardly probable that the roads are
earning more than five per cent. on the total investment. This assumes
an average cost of $45,000 per mile, implying that about half of the
stock and one-sixth of the bonds are water." Mr. Hadley would probably
have come much nearer the truth if he had assumed three-fourths of the
stock and one-fourth of the bonds to be water. Even Mr. Poor, who
certainly cannot be accused by railroad men of being inimical to their
interests, places the average cost of the railroads of this country no
higher than at $30,000 per mile; and this estimate, it should be
remembered, includes the value of the large donations made to railroad
companies by the public. With a full understanding of all the
circumstances, Mr. Poor said of railroad investments several years ago
that if the water were taken out of them no class of investments in this
country would pay as well. In the face of this statement Mr. Hadley
would do well to revise his figures.
We find, however, in Prof. Hadley's book also eminently sound views,
like the following: "If the object of a railroad manager is simply to
pay as large a dividend as possible for the current year, he can best do
it by squeezing his local tariff, of which he is sure, and securing
through traffic at the expense of other roads by specially low rates;
that is, by a policy of heavy discrimination. But the permanent effect
of such a policy is to destroy the local trade, which gives a road its
best and surest custom, and to build up a trade which can go by another
route whenever it pleases. The permanent effect of such a policy is
ruinous to the railroad as well as the local shipper." And he continues:
"By securing publicity of management you do much to prevent the
permanent interests of the railroads from being sacrificed to temporary
ones. By protecting the permanent interests of the public you enlist the
stockholders and the best class of railroad managers on the side of
sound policy."
Edward Atkinson, in an essay entitled "The Railway, the Farmer and the
Public," endeavors to prove that the farmers have no cause for
complaining against the railroad, because rates of transportation have
been greatly reduced during the past twenty years. Speaking of the
reductions made in freight rates in the State of New York, he says: "Had
the rate of 1870 been charged on the tariff of 1883 the sum would have
been at 1.7016 cents on 9,286,216,628 tons, carried one mile,
$158,014,262; the actual charge was $83,464,919, making a difference of
$74,549,343 saved on one year's traffic on the lines reported in New
York." It either did not occur to Mr. Atkinson, or, if it did occur to
him, he failed to mention it, that these freight reductions were forced
upon the railroads chiefly by water competition, and that if the
railroad companies had not saved these seventy-four million dollars for
the people, the canal lines, always subject to competition, would have
saved a large part of it. With equal propriety might it be said that the
railroads, by meeting canal competition, saved for themselves in the
year mentioned a goodly share of their gross earnings. Such reasoning is
absurd, and it is high time that the bubble of an argument so often used
by railroad advocates be pricked. As Mr. Atkinson has introduced the
farmer, let us apply his rule to him. There was a time when the farmer
sold his corn for a dollar a bushel. To-day he sells it for thirty
cents. He therefore saves to the people of this country, on
2,000,000,000 bushels, the enormous sum of $1,400,000,000. There is
scarcely an industry in existence to which this argument does not apply
with equal force. Mr. Atkinson virtually admits that railroads charge
all the traffic will bear when he says: "The charge which can be put
upon the wheat of Dakota or Iowa for moving it to market is fixed by the
price at which East Indian wheat can be sold in Market Lane." He is
opposed to the Interstate Commerce Law, which he regards as "obnoxious
measures of national interference and futile attempts to control this
great work." He would rely chiefly upon the publicity of accounts made
by railway officers, as secured by the private publication of Poor's
Railway Manual, for all needed regulation, but concedes the
establishment of a figurehead commission, concluding his remarks upon
the subject as follows: "A commission which may bring public opinion to
bear upon railway corporations may well be established, and there the
work of the legislator may well cease." When we consider the powerful
agencies employed by railroads to create public sentiment in their favor
we can well understand the inefficiency of such a milk-and-water method
of control.
One of the most radical books ever published at the instigation of
railroad managers appeared in 1888, under the title "The People and the
Railways." Its author is Appleton Morgan, who attempts to "allay the
animosity towards the railway interests" as shown in Mr. James F.
Hudson's book, "The Railways and the Republic." The means which Mr.
Morgan chooses are not well calculated to accomplish his purpose, for
the masses of the people prefer in such a controversy arguments to
ridicule and sarcasm, weapons of literary warfare to which this author
resorts altogether too freely. Mr. Morgan's opinion as to the benefits
of centralized wealth and trade combinations differs greatly from that
held by the great majority of the American people. He says: "The fact,
the truth is, that (however it may be in other countries) the
accumulation of wealth and centralization of commerce in great
combinations has never, in the United States, been a source of
oppression or of poverty to the non-capitalist or wage-worker." There is
scarcely an evil in railroad management which Mr. Morgan does not
defend. Pools, construction companies, rebates, discriminations and
over-capitalization all find favor in Mr. Morgan's eye. "Rebates and
discriminations," he says, "are neither peculiar to railways nor
dangerous to the 'Republic.' They are as necessary and as harmless to
the farmer as is the chromo which the seamstress or the shop girl gets
with her quarter-pound of tea from the small tea merchant, and no more
dangerous to the latter than are the aforesaid chromos to the small
recipients." Pools and combinations receive an unusually large share of
Mr. Morgan's attention. A few selections from his effusions in their
favor may be given here, viz.:
"These pools are the legitimate and necessary results of the
rechartering over and over again of railway companies to transact
business between the same points by paralleling each other. So long as
the people in their legislatures will thus charter parallel lines
serving identical points--thus dividing territory they once granted
entire--it is not exactly clear how they can complain if the lines built
(by money invested, if not on the good faith of the people, at least in
reliance upon an undivided business) combine to save themselves from
bankruptcy." And again: "Against the inequality of their own rates and
the hardship of the long and short haul (in other words, against the
discrimination of nature and of physical laws) no less than against the
peril of bankruptcy and the consequent speculative tendency of their
stocks (after which may come the wrecking, the watering, and the vast
individual fortunes), the railways of this republic have endeavored, by
establishment of pool commissions, to defend both the public and
themselves.... The honest administration of railways for all interests,
the payment of their fixed charges, the solvency of their securities,
the faithful and valuable performance of their duties as carriers, can
be conserved in but one way--by living tariffs, such as the pools once
guaranteed."
In the following passage this author denies to the State the right to
regulate rates: "Granting that they [the railroads] must carry freights
for the public in such a way as not to injure either the public or the
freight in the carrying, most emphatically (it seems to me) it does not
follow that they must add to the value of the freights they carry by
charging only such rates as the public or the owners of the freight
insist on."
But Mr. Morgan's indignation rises to the highest pitch in his
discussion of the Interstate Commerce Act. He fears that it will cause
the downfall of our liberties and sees in the background the Venetian
Bridge of Sighs and the French Bastille. He asks: "Why should for any
public reasons--for any reason of public safety--the Interstate Commerce
Law have come to stay?" He then berates the act as follows: "To begin
with, the present act abounds in punishments for and prohibitions
against an industry chartered by the people, but nowhere extends to that
industry a morsel of approval or protection. It bristles with penalties,
legal, equitable, penal, and as for contempt, against railway companies,
but nowhere alludes to any possible case in which a railway company
might, by accident, be in the right, and the patron, customer, passenger
or shipper in the wrong.... The constitutions of civilized nations, for
the last few centuries at least, have provided that not even guilt
should be punished except by due process of law, and have uniformly
refused to set even that due process in motion except upon a complaint
of grievance. But the Interstate Commerce Law denies the one and does
away with the necessity for the other. That statute provides that the
commission it creates shall proceed 'in such manner and by such means as
it shall deem proper,' or 'on its own motion,' and that 'no complaint
shall at any time be dismissed because of the absence of direct damage
to the complainant.' Even the Venetian council often provided for a
certain and described hole in the wall through which the anonymous
bringers of charges should thrust their accusations. Even the court of
star chamber was known to dismiss inquisitions when it found that no
wrong had been done. But the statute of interstate commerce appears to
issue _lettres de cachet_ against anything in the shape of a railway
company--to scatter them broadcast, and to invite any one who happens to
have leisure to fill them out, by inserting the name of a railway
company. It says to the bystander: 'Drop us a postal card, or mention to
any of our commissioners, or to a mutual friend, the name of any railway
company of which you may have heard, and so give us jurisdiction to
inquire if that company may have by chance omitted to dot an i or cross
a t in its ledgers, or whether any one of its hundreds of thousands of
agents--in the rush of a day's business, or in a shipper's hurry to
catch a train--may have named a rate not on the schedule then being
prepared at headquarters, or charged a sixpence less than some other
agent 250 miles down the line may have accepted a week ago for what
might turn out to be a fraction more mileage service in the same general
direction. No particular form is necessary. Drop in to luncheon with our
commission any day between twelve and one, and mention the name of a
railway company. The railway company may have done you no damage, nor
grieved you in any way; just mention the railroad, and we will take
jurisdiction of its private (or quasi-public) affairs. Or, if you don't
happen to have time to mention it, we will take jurisdiction anyhow, 'of
our own motion,' of any railway company whose name we find in the
Official Gazette. It really does not matter which; any one will do."
This is a fair example of the literature on the Interstate Commerce Law
paid for by railroad men.
Mr. Stickney, although a railroad president, takes an entirely different
view of the situation. He considers the law inadequate to bring about
the reforms needed. He says: "This enormous business is now in the
control of several hundred petty chieftains, who are practically
independent sovereigns, exercising functions and prerogatives in
defiance of the laws, and practically denying their amenability to the
laws of the country. If the Government would seek to bring them to terms
and compel them to recognize and obey the laws, it must use the means
necessary to accomplish the end. It must have executive officers
sufficient in number as well as armed with an adequate power and dignity
to command their respect.... The power conferred upon them [the
Interstate Commerce Commission] to enforce their judicial orders is the
power 'to scold.' The penalties of the law which the courts are in power
to impose are certainly severe, but the law has been operated for about
four years without any convictions, and yet no well-informed person is
ignorant of the fact that the law has not been obeyed. The president of
a large system is said to have remarked that 'if all who had offended
against the law were convicted there would not be jails enough in the
United States to hold them.' It is evident that the Government has not
provided adequate machinery for enforcing the law."
Mr. Stickney is correct in his statement that adequate machinery for
enforcement of the law has not been provided, but he does not give
sufficient credit to the law or the commission. While much work remains
to be done, much progress has been made.
He is of the opinion that the public welfare would be furthered if the
National Government assumed the sole control of railroads. He gives his
reasons for the change which he proposes, as follows:
"There are many reasons besides these in the interest of
uniformity which make it desirable to transfer the entire
control of this important matter to the regulation of the
Nation. First, because of its constitution and more extended
sessions, Congress is able to consider the subject with
greater deliberation, and therefore with more intelligence,
than can a legislature composed of members who, as a rule,
hold their office for but one short session of about sixty
days' duration. There would also be removed from local
legislation a fruitful source of corruption, which is
gradually sapping the foundations of public morality.... In
the second place, the problem of regulating railway tolls
and managing railways is essentially and practically
indivisible, by State lines or otherwise, and therefore it
is not clear but that whenever the question may come before
the courts it may be held that the authority of Congress to
deal with interstate traffic carries with it, as a necessary
and inseparable part of the subject, to regulate the traffic
which is now assumed to be controlled by the several States.
The courts have held that the States have authority to
regulate strictly State traffic in the absence of
Congressional action, but their decisions do not preclude
the doctrine that Congress may have exclusive jurisdiction
whenever it may choose to exercise the authority. There is a
line of reasoning which would lead to that conclusion. It
may be that many will not care to follow the lead of the
writer as to the measure of aggregate net revenue which
railway companies are entitled to collect in tolls, but it
is evident that before the tolls can be intelligently
determined some measure of such aggregate revenue must be
ascertained. The question would then arise, what proportion
must be levied upon State and interstate traffic
respectively? If the State should refuse to levy its share
(and how could such share be ascertained?), then more than
its share would have to be levied on interstate traffic, and
thus the State by indirection would be able to do what the
Constitution prohibits. Of course, when the Constitution was
adopted railways and railway traffic were unknown. But it
was a similar question which brought the thirteen original
States together into one nation, under the present
Constitution. At least the first movement toward amending
the original Articles of Confederation was to give Congress
enlarged power over the subject of commerce."
In reply to this it may be said that it will be an unfortunate day for
the States when they surrender the power to control their home affairs.
Differences between State and interstate rates could easily be adjusted
by the National and State commissions and by the courts. It certainly
ought not to be difficult for such tribunals to see that a rate which is
made higher or lower, as it may be for State or interstate traffic, is
wrong.
Mr. Stickney has fallen into the error common to railroad men in
believing that lower rates of transportation will not prevail in the
future. There are many reasons why it is probable that they will be
lower. Present rates are highly profitable on well located lines.
Labor-saving inventions will increase, and roads will be built and
operated more cheaply. Lines will be located with lower grades, lighter
curvature and more directness. Business will increase largely, and the
ratio of expenses will decrease. Steel will be improved in quality and
will be substituted for iron. A heavier rail and more permanent roadway
will be used. Rates of interest will rule lower, and there will be much
more economy in superintending. Extravagant salaries to favorites will
be reduced, and sinecures and parasites will be cut off from the
payrolls. Lower wages are inevitable as our population becomes more
dense.
A very interesting and instructive author upon railroad subjects is
Charles Francis Adams, Jr., ex-president of the Union Pacific Railroad
and formerly a member of the Board of Railroad Commissioners of the
State of Massachusetts. After twenty years' constant association with
railroad men, Mr. Adams should certainly know the character of his
quondam colleagues. In his book, "Railroads, Their Origin and Problems,"
he says of them: "Lawlessness and violence among themselves [_i. e._,
the various railroad systems], the continual effort of each member to
protect itself and to secure the advantage over others, have, as they
usually do, bred a general spirit of distrust, bad faith and cunning,
until railroad officials have become hardly better than a race of
horse-jockeys on a large scale. There are notable exceptions to this
statement, but, taken as a whole, the tone among them is indisputably
low. There is none of that steady confidence in each other, that easy
good faith, that _esprit du corps_, upon which alone system and order
can rest. On the contrary, the leading idea in the mind of the active
railroad agent is that some one is always cheating him, or that he is
never getting his share in something. If he enters into an agreement,
his life is passed in watching the other parties to it, lest by some
cunning device they keep it in form and break it in spirit. Peace is
with him always a condition of semi-warfare, while honor for its own
sake and good faith apart from self-interest are, in a business point of
view, symptoms of youth and a defective education." And again, in an
address delivered before the Commercial Club of Boston in December,
1888, Mr. Adams expressed his opinion concerning the average railroad
manager of to-day as follows: "That the general railroad situation of
the country is at present unsatisfactory is apparent. Stockholders are
complaining; directors are bewildered; bankers are frightened. Yet that
the Interstate Commerce Act is in the main responsible for all these
results, remains to be proved. In my opinion, the difficulty is far more
deep-seated and radical. In plain words, it does not lie in any act of
legislation, State or National; and it does lie in the covetousness,
want of good faith and low moral tone of those in whose hands the
management of the railroad system now is; in a word, in the absence
among men of any high standard of commercial honor. These are strong
words, and yet, as the result of a personal experience stretching over
nearly twenty years, I make bold to say they are not so strong as the
occasion would justify. The railroad system of this country, especially
of the regions west of Chicago, is to-day managed on principles
which--unless a change of heart occurs, and that soon--must inevitably
lead to financial disaster of the most serious kind. There is among the
lines composing that system an utter disregard of those fundamental
ideas of truth, fair play and fair dealing which lies at the foundation,
not only of the Christian faith, but of civilization itself. With them
there is but one rule--that, many years ago, put by Wordsworth into the
mouth of Rob Roy:
"'The simple rule, the good old plan,
That he shall take who has the power,
And he shall keep who can.'"
As regards the causes of the Granger movement, Mr. Adams says, in the
work above mentioned: "That it [the Granger episode] did not originate
without cause has already been pointed out. It is quite safe to go
further, and to say that the movement was a necessary one, and through
its results has made a solution of the railroad problem possible in this
country. At the time that movement took shape the railroad corporations
were in fact rapidly assuming a position which could not be tolerated.
Corporations, owning and operating the highways of commerce, claimed for
themselves a species of immunity from the control of the law-making
power. When laws were passed with a view to their regulation they
received them in a way which was at once arrogant and singularly
injudicious. The officers entrusted with the execution of those laws
they contemptuously ignored. Sheltering themselves behind the Dartmouth
College decision, they practically undertook to set even public opinion
at defiance. Indeed, there can be no doubt that those representing these
corporations had at this juncture not only become fully educated up to
the idea that the gross inequalities and ruinous discriminations to
which in their business they were accustomed were necessary incidents to
it which afforded no just ground of complaint to any one, but they also
thought that any attempt to rectify them was a gross outrage on the
elementary principles both of common sense and of constitutional law. In
other words, they had thoroughly got it into their heads that they, as
common carriers, were in no way bound to afford equal facilities to all,
and, indeed, that it was in the last degree absurd and unreasonable to
expect them to do so. The Granger method was probably as good a method
of approaching men in this frame of mind as could have been devised."
Speaking of the educational value of railroad competition, Mr. Adams
says: "Undoubtedly the fierce struggles between rival corporations
which marked the history of railroad development, both here and in
England, were very prominent factors in the work of forcing the systems
of the two countries up to their present degree of efficiency. Railroad
competition has been a great educator for railroad men. It has not only
taught them how much they could do, but also how very cheaply they could
do it. Under the strong stimulus of rivalry they have done not only what
they declared were impossibilities, but what they really believed to be
such."
Mr. Adams has, from his long association with railroad managers, imbibed
one heresy which is in strange discord with the general soundness of his
opinions. He holds that the railroad system was left to develop upon a
false basis, inasmuch as the American people relied for protecting the
community from abuses upon general laws authorizing the freest possible
railroad construction everywhere and by any one. It can therefore not be
surprising that Mr. Adams is an advocate of the legalized pool. He is of
the opinion that secret combinations among railroads, inasmuch as they
always have existed, always will exist as long as the railroad system
continues as it now is. Hence he proposes to legalize a practice which
the law cannot prevent, and by so doing to enable the railroads to
confederate themselves in a manner which shall be at once both public
and responsible. The reply might be made that there are many other
conspiracies which the law cannot always prevent, but that this is no
reason why conspiracies should be legalized. If pools and other railroad
abuses had, since the beginning of the railroad era, been treated as
crimes and misdemeanors, and punished as such by the imposition of heavy
fines, few people would to-day be ready to offer apologies for them. If
the time shall ever come when pools must be legalized it will be time
for railroad control equivalent to Government ownership.
Among the more recent writers upon railroad subjects is W. D. Dabney,
late chairman of the Committee on Railways and Internal Navigation in
the Legislature of Virginia. Mr. Dabney favors State control, and is, on
the whole, friendly to the Interstate Commerce Act. He sees danger in
the pool, but inclines to the belief that the public benefit derived
from the pooling system outweighs the danger of public detriment from
its existence. The following is his chief argument for a legalized pool:
"Perhaps, so long as railroad companies continue to enjoy an absolute
monopoly of transportation over their own lines, so that free
competition is restricted in its operation to a comparatively few
favored points, it may be worthy of serious consideration whether it
would not be better to legalize than to prohibit pooling, taking care to
put the whole matter under strict public supervision and control. The
companies would then be left comparatively free to bring their local
rates into something like harmony with the long-distance rates, and
should they fail to do so where the needs of the local community and
their revenues make it proper to be done, then it is the function of
public regulation to compel it to be done."
Of the Interstate Commerce Act Mr. Dabney says: "The legislation
recently enacted by Congress for the regulation of commerce by railway
is the result of more careful and intelligent deliberation perhaps than
any other measure of similar character, and it is not unlikely that the
legislation of many of the States will sooner or later be conformed to
it."
He speaks at some length of the drift toward railroad centralization. A
few extracts from this passage may be here given: "That the tendency
towards the unification and consolidation of different and competitive
lines has been decidedly increased by the anti-pooling and the long and
short haul sections of the Interstate Commerce Law can hardly be
doubted.... The modern device of the 'trust' as a means of unifying
industrial interests and eliminating competition had not yet been
applied in the field of railroad transportation.... The scheme of trust
here briefly outlined would probably require for its successful
operation the concurrence of the entire stockholding interest of each
company embraced in it; and herein, it seems likely, will be found the
chief difficulty in perfecting such a scheme. Should it ever be
perfected, a far more stringent public supervision and control of the
railroad transportation of the country will be demanded."
Another author, Charles Whitney Baker, associate editor of the
_Engineering News_, suggests in his book, "Monopolies and the People," a
plan for the reorganization of our railroad system, to remedy the evils
of monopoly which are at present connected with railroad management. The
following quotation from his work outlines the system proposed: "Let the
Government acquire the title of the franchise, permanent way and real
estate of all the railway lines in the country. Let a few corporations
be organized under Government auspices, and let each, by the terms of
its charter, receive a perpetual lease of all the railway lines built,
or to be built, within a given territory. Let the territory of each of
these corporations be so large, and so planned with regard to its
neighbors, that there shall be, so far as possible, no competition
between them. For instance, one corporation would operate all the lines
south of the Ohio and east of the Mississippi River; another all lines
east of the Hudson and of Lake Champlain, etc. Let the terms of rental
of these lines be about 3-1/4 per cent. on the road's actual 'present
cost' (the sum of money it would cost to rebuild it entirely at present
prices of material and labor), less a due allowance for depreciation.
The corporations would be obliged to keep the property in as good
condition as when received, and would own absolutely all their
rolling-stock, machinery, etc." The proposed reform measures, it must be
admitted, are very good in theory, but their practical application is
unfortunately entirely out of the question under our system of
government.
Mr. John M. Bonham is the author of a recent work entitled "Railway
Secrecy and Trusts." This writer, upon the whole, takes advanced ground
in dealing with the question of railroad reform. He deems the present
interstate legislation inadequate to correct all the graver railroad
evils, expressing his views upon this subject as follows:
"Railway construction continues to increase in the United
States with immense rapidity. Concurrent with this increase,
and notwithstanding all the efforts that have been made at
restraint, the aggressions upon political and industrial
rights increase also. Nor is it likely that without more
rigorous control than is now exercised these aggressions
will be any less active than they are to-day. It is coming
to be pretty generally realized that the Interstate Commerce
legislation has not fulfilled the expectation of its
friends. But this is a frequent trait of tentative
legislation. It is not reasonable to expect that the first
efforts to solve a problem the factors of which are so
hidden and complex will be followed by complete success."
Concerning the changes needed to make Government regulation in the
United States more effective, he says:
"A reform which would deal with an elaborate system of evil
cannot, therefore, be confined to treating consequences,
the separate instances of the system. There must be a power
which can go behind these and grapple with causes. There
must, therefore, be something more than a court. There must
be a commission, a department of government which will
provide organized supervision and inspection against which
the quasi-public corporation can claim no privacy as
inviolable. Such a department must be clothed with the power
to ascertain precisely where and how the evils of the
present methods originate, and when these are ascertained it
must be able to apply the remedy at the source of evil. The
remedial force must be of a preventive kind."
A few grave misstatements of historical facts greatly mar Mr. Bonham's
book. He makes, for instance, the following statement:
"Following this came restrictive legislation, which, in some
instances, was so unreasonable as to make any railway
management impossible. Some of the Granger legislation, and
especially that of Iowa, was of this character, as were also
some of the earlier efforts to secure Congressional
legislation."
It was left to Mr. Bonham to discover that legislation ever made
railroad management impossible in Iowa. The General Assembly of Iowa
passed at two different times railroad laws that were greatly obnoxious
to railroad managers. In 1874 it passed a maximum tariff act which, at
the urgent solicitation of the railroad forces, was repealed four years
later; and in 1888 it passed an act containing the principles of the
Interstate Commerce Act and in addition authorizing the Board of
Railroad Commissioners to fix _prima facie_ rates. Strange as it may
seem to Mr. Bonham and other people inclined to believe without
investigation the statements of railroad men, the earnings of the Iowa
roads greatly increased immediately after the enactment of the so-called
Granger laws in 1874, as the following table will show:
Year. Miles of Railroad. Gross Receipts.
1871 2,850 $12,395,826
1872 3,642 14,534,408
1873 3,728 15,430,619
1874 3,765 15,568,907
1875 3,823 18,422,587
1876 3,938 17,221,032
1877 4,075 20,714,496
1878 4,157 21,294,275
When the Granger law was repealed in 1878, the railroads were earning
$1,000 per mile more than they were earning when the law was enacted.
The present railroad law, which was passed in 1888, and has also been
the subject of extreme criticism on the part of railroad organs, has had
the same beneficial effect. The law, owing to the obstacles thrown in
its way by the railroad managers, did not become operative until 1889.
From July 1st, 1889, to June 30th, 1892, the gross railroad earnings of
the Iowa roads, which for three years had been at a standstill,
increased and were over $7,000,000 more in 1892 than they had been any
year previous to 1889, as will be seen from the table below:
Gross Railroad Earnings in Iowa.
1886-87 $37,539,730
1887-88 37,295,586
1888-89 37,469,276
1889-90 41,318,133
1890-91 43,102,399
1891-92 44,540,000
The net earnings per mile of the Iowa roads were $1,421.91 in the year
1888-89, and $1,821.37 the year following. The total net earnings of all
Iowa roads during the year ending June 30th, 1891, were $14,463,106,
against $11,861,310 during the year ending June 30th, 1889, and were
still greater for the year ending June 30, 1892. No further vindication
of the Iowa law is necessary. These figures show plainly that the
lowering and equalizing of the rates not only increased the roads'
business and income, but also their net earnings. And it must be
remembered that the reports showing these facts were made by the
railroad companies and were certainly not made with any intention of
prejudicing the cause of the railroad manager.
James F. Hudson, the author of "The Railways and the Republic," is a
very exhaustive and instructive writer upon the subject of railroad
abuses. His material is well selected, and the subject ably presented.
To the assertion of railroad managers, that railroad regulation
injuriously affects the value of railroad property, he makes the
following reply:
"Suppose that it were true, as these jurists and writers
claim, that by the assertion of the public right to regulate
the railways the value of their property is decreased, are
there no other property rights involved? Do railway
investments form the only property in the land which
requires the protection of the law? Are we to understand
these judgments and their indorsers to mean that because
railroad property will depreciate if certain principles of
justice prevail, therefore justice is to be set aside for
the benefit of railway property? If the magnitude of
interests involved is to be of weight in deciding such
questions, let us put against 'the hundreds of millions' of
railway property on the one side the thousands of millions
of private property on the other. Railway regulation,
according to a writer in the _Princeton Review_, is
'confiscation of railroad property;' but this puts wholly
out of the question the idea of private property which is
rendered possible by leaving unchecked the power of the
railways over commerce and manufactures through the
manipulation of freight rates. Of the two parties in
interest the shippers represent far greater property
interests than the carriers, although the latter, by their
organization, are more powerful. I have yet to hear of a
single case where restrictive railway legislation has
seriously damaged the honest valuation of any railway. I
have yet to learn of any seriously proposed scheme of
regulation that has proposed to cut down railway profits
below a fair dividend on capital actually invested. But the
entire Nation knows of one notorious case in which the
discriminating policy of the leading railways of the country
has resulted in the wholesale confiscation of private
property for the benefit of a favored corporation."
Concerning the inconsistency presented by the plea of railroad managers
for a legalized pool, Mr. Hudson says:
"It has been argued for years that the subject is so
delicate and vast that it must not be touched by legislation
in the public interest. To protect the rights of the
ordinary shipper against the favorite of the railway would
so hamper the operations of trade, it has been repeated
times without number, as to take away the independence of
the railways and destroy the freedom of competition. Yet,
after years of argument that Government has no
constitutional power to interfere with the railways, and of
demonstration that all such interference must be ill-advised
and injurious, the railway logic comes to the surprising
climax of appealing to legislation for the aid of the law in
upholding their efforts to prevent competition."
Mr. Hudson maintains that if the pool were legalized it would only be a
means of swelling railroad earnings. He says:
"If the pool would maintain equitable rates its success
might be desired, but what guarantee is there that the
complete establishment of its power would make such rates?
Its very character, the functions of the men who control its
policy, and its avowed object of swelling the earnings of
railways by artificial methods, forbid such an expectation.
Make the success of the pool absolute, so that it can work
without fear of competition, and its rates will be uniform,
but of such a character that their uniformity will be a
public grievance and burden.... A grave effect of this
policy, though not easily calculable, is the ability it
gives to railway officials to control the prices of stocks,
and the temptation to enhance their fortunes by so doing....
It is a heavy indictment against the pooling system that it
gives power to avaricious and unscrupulous men in railway
management to enrich themselves at the cost of shareholders
and investors, both by forming combinations and by exciting
disputes or ruptures in them."
The question whether the common law does not protect the public
sufficiently is well answered by Mr. Hudson as follows:
"The common law is sufficient in theory, but it has failed
in practice.... In practice, legal remedies against railway
injustice can be applied to the courts only by fighting the
railways at such disadvantages that the ordinary business
man will never undertake it except in desperate cases. Every
advantage of strength and position is with the railways....
This [the railroad] power has kept courts in its pay; it
defies the principles of common law and nullifies the
constitutional provisions of a dozen States; it has many
representatives in Congress and unnumbered seats in the
State legislatures. No ordinary body of men can permanently
resist it."
But the remedy which Mr. Hudson proposes for the correction of railroad
evils is one of doubtful efficacy. It is this:
"Legislation should restore the character of public highways
to the railways by securing to all persons the right to run
trains over their track under proper regulations, and by
defining the distinction between the proprietorship and
maintenance of the railway and the business of common
carriers."
While it is admitted that the opening of the railroads to the free use
of competing carriers is not necessarily impractical from a technical
point of view, it cannot be admitted that the proposed remedy would cure
the evil. There would certainly be nothing to hinder carrying companies
forming a trust which might prove more dangerous to the interests of
shippers than are to-day the combinations of the railroad companies.
Mr. Hudson devotes a chapter to the railroad power in politics, and
shows how corporations, through their wealth, have secured the greatest
and most responsible offices in the executive, legislative and judiciary
departments of the Government. Speaking of their influence in the
Supreme Court of the United States, he says:
"The assertion that Jay Gould paid $100,000 to the
Republican campaign fund in 1880, in return for which Judge
Stanley Mathews was nominated to the Supreme Bench, is
denied as a political slander; but the fact remains that
this brilliant advocate of the railway theories of law has
been placed in the high tribunal, and that his presence
there together with Justice Field, long a judicial advocate
of the corporations, is expected to protect the railways in
future against such constructions of law as the Granger
decisions."
An English writer, Mr. J.S. Jeans, presents, in his "Railway Problems,"
a great deal that is of interest to American readers. The statistical
data of his work are especially interesting. We learn that the United
Kingdom has nearly twenty railroad employes per mile of road operated,
to less than five in the United States, and that the average number of
employes per £1,000 ($4,850) of gross earnings is on the railroads of
the United Kingdom 5.4 to only about half as many in the United States.
We further learn that the average earnings per train mile in America are
over 25 per cent. higher than they are in the United Kingdom, and exceed
those of most European countries.
Of the remarkable increase in number and the profitableness of the
third-class passenger traffic in England Mr. Jeans says:
"There has hitherto been a great lack of knowledge in this
country as to the extent to which the different classes of
passenger traffic yield adequate profit to the railroad
companies. English passenger traffic differs from that of
most other countries in this respect, that the chief
companies attach third-class carriages to almost every
train. The accommodation provided for third-class passengers
in England is also much superior to what is found in other
countries where there is the same distinction of classes.
The effect of those two distinguishing features of the
English railway system is that third-class carriages are
much more and first-class carriages much less utilized than
in other countries. The tendency appears to be towards an
increasing use of third-class, and a decreasing use of
first-class vehicles. But, all the same, the leading English
lines continue to provide a large proportion of first-class
accommodation in every train, and it is no unusual thing to
find the third-class carriages of express trains absolutely
full, while first-class carriages are almost empty. The
natural result is that third-class travel is a source of
profit, while first-class travel is not.... So far as
passenger traffic is a source of net profit, that profit is
contributed by the third-class. The total receipts from
passenger traffic in England and Wales amounted in 1885 to
£21,968,000. But if the average receipts per carriage over
the whole had been the same as in the case of the Midland
first-class vehicles, namely, £330, the total receipts from
passenger traffic would only have been about nine millions.
It is not necessary to be an expert in order to see that
traffic so conducted must be attended with a very serious
loss."
Of the stock-watering of American railroad companies Mr. Jeans says:
"It seldom happens that in the United States the cost of a
railway and its equivalent corresponds, as it ought to, to
the total capital expenditure. There is no country in the
world where the business of watering stocks is better
understood or carried out more systematically and on so
large a scale. For this reason there is liable to be a great
deal of error entertained in reference to the natural cost
of American lines."
There are many financial journals that are so closely identified with
the speculative interests of the country, and many railway papers that
depend so largely upon railway men for support, that railway managers
are never without a medium through which they can present their views to
the public. A systematic and concerted effort is also constantly made by
the railroads to pervert the press of the country at large. The great
city papers generally yield to their influences and enlist in their
service, and yet there are notable exceptions to this.
In speaking of the extravagant sums which the railroads paid to the
great dailies, ostensibly for advertising, but in fact for their good
will and other services, a railroad superintendent recently said that it
was an infamous outrage, and yet it was the best investment of money
that his company could make. The country papers have shown more
integrity in maintaining their independence, but the railroads are not
without their organs among them. It is not unfrequent to find some of
them defending railroad abuses with all the apparent zeal of a Wall
Street organ, and a glance at their columns often reminds one of Mr.
Lincoln's story of the Irishman and the pig. Mr. Lincoln defended an
Irishman against the charge of stealing a pig. After the testimony was
taken in court, Mr. Lincoln called his client aside and told him that
the testimony was so strong against him, and that the case was so clear,
that it was impossible for him to escape conviction, and he advised him
to plead guilty and throw himself on the mercy of the court. "No, Mr.
Lincoln," said Patrick, "you go back and make one of your great speeches
and swing your long arms and talk loud to the jury, and you will win
the case." Mr. Lincoln, in accordance with that disposition to
accommodate so strongly characteristic of him, did as he was directed by
his client, and to his great surprise the jury promptly brought in a
verdict of not guilty. After it was all over, Mr. Lincoln said: "Now,
Patrick, tell me why that jury acquitted you. I know that you stole the
pig, and my speech had nothing to do in securing your acquittal."
Patrick replied: "And sure, Mr. Lincoln, every one of those jurymen ate
a piece of the pig."
CHAPTER X.
RAILROAD LITERATURE--CONTINUED.
Railroad questions have become of such general interest that their
discussion has become a prominent factor of magazine literature. It is a
significant fact that these contributors are usually railroad men, and
under these circumstances an unbiased discussion of the questions at
issue is indeed a rare occurrence. It is but too frequently the sole
object of the contributor, and not unfrequently even of the publisher,
to create a public sentiment in favor of the unjust demands of railroad
managers.
During the last few years systematic efforts have been made by the
railroad interests to influence public opinion against the Interstate
Commerce Law and restrictive State legislation through the leading
magazines of the country. Mr. Sidney Dillon, president of the Union
Pacific Railroad, in an article which appeared in the April (1891)
number of the _North American Review_, under the title "The West and the
Railroads," endeavors to show that the West is indebted to the railroad
managers for nearly all of the blessings which its people enjoy, and
that therefore railroad legislation in the West is a symptom of rank
ingratitude. He prefaces his argument with the remark that the elder
portions of our commonwealth have already forgotten, and the younger
portions do not comprehend or appreciate, that but for the railroads
what we now style the Great West would be, except in the valley of the
Mississippi, an unknown and unproductive wilderness. He then argues
that, inasmuch as the railroads carry the wheat of Dakota and Minnesota
to the sea-coast, and bring those sections of our community into direct
relation with hungry and opulent Liverpool, the world should "thank the
railway for the opportunity to buy wheat, but none the less should the
West thank the railway for the opportunity to sell wheat." It does not
seem to occur to Mr. Dillon that the railway might, with equal
propriety, thank the world in general, and the Great West in particular,
for its opportunity to carry wheat.
We are also told that the railway has reclaimed from nature immense
tracts of land that were worthless except as to their possibilities,
which once seemed too vague and remote to be considered and are to-day
valuable; that it has changed the character of the soil as well as the
climate of the West, and we are almost given to understand that in many
respects it has assumed the functions of Providence. Mr. Dillon
generously admits, however, that railways have not been built from
philanthropic motives and that we find among railroad promoters and
contractors men of large fortunes. He then proceeds to reprimand the
States west of the Mississippi for their "ungrateful" legislation,
which, he says, interferes with the business of the railway, even to the
minutest detail, and always to its detriment. Such legislation
exasperates Mr. Dillon the more because it originated in States "which
happened to be the communities that owe their birth, existence and
prosperity to these very railways." Mr. Dillon then gives vent to his
wrath by the use of such terms as impertinence, ignorance and
demagogism. He holds that legislative enactments as to the rights and
liabilities of railway corporations are useless, "because the common law
has long since established these as pertaining to common carriers, and
the courts are open to redress all real grievances of the citizen." Upon
this theory we might as well dispense with the legislative department of
the Government, for there is no relation in the community to which the
principles of the common law can not be applied. Besides this, Mr.
Dillon entirely ignores the fact that the railway company is not only a
common carrier, but the keeper of the highway, and as such is subject to
Government control as much as the turnpike tollgate keeper or the
collector of customs. "Then as to prices." Mr. Dillon continues: "These
will always be taken care of by the great law of competition, which
obtains wherever any human service is to be performed for a pecuniary
consideration. That any railway, anywhere in a republic, should be a
monopoly, is not a supposable case."
Like the rest of railway men, Mr. Dillon excels in painting dark
pictures of railroad catastrophes. A sample production of his art is
here presented:
"One of the greatest dangers to the community in a republic
is this: that it is in the power of reckless, misguided or
designing men to procure the passage of statutes that are
ostensibly for the public interest and that may lead to
enormous injuries. Let us imagine for a moment that all
railways in the United States were at once annihilated. Such
a catastrophe is not, in itself, inconceivable; the
imagination can grasp it, but no imagination can picture the
infinite sufferings that would at once result to every man,
woman and child in the entire country. Now, every step taken
to impede or cripple the business and progress of our
railways is a step towards just such a catastrophe, and
therefore a destructive tendency."
Mr. Dillon, losing sight of all other interests, did not think that his
nonsensical mode of reasoning would apply equally well to them. Let us,
for instance, imagine for a moment that all of the farms of the United
States were at once annihilated. Can the imagination picture the
infinite sufferings that would at once result to every man, woman and
child in the whole country? Now, is not any step taken to impede or
cripple the business of farming a step towards just such a catastrophe,
and therefore of a destructive tendency? Mr. Dillon then avails himself
of an opportunity to give the people of the United States some
gratuitous advice when he says:
"We do not arrogate superior wisdom or intelligence to
ourselves when we suggest to the people of the United
States, and especially that portion of the country where
railroads have been the subject of what we consider to be
excessive legislation, that the rational mode of treating
any form of human industry that has for its object the
performance of desired and lawful service is to let it
alone, and that the railway is no exception to this
principle."
This is the very plea that Jefferson Davis made when he kindled the
flame of treason.
* * * * *
In the March, 1891, number of the _Forum_, Mr. W. M. Acworth discusses,
under the title "Railways under Government Control," the working of the
railway systems of the different nations. He holds that the management
of railroads which are the property of the State is, as a rule, greatly
inferior to the management of those roads which are the property of
private trading corporations; he assigns to the railway experts of
England and America the first places among the railway experts of the
world, and appears to attribute all the good in the railroad management
of these countries to the absence of State interference, and all the
evil in the management of the railroads of other countries to the fact
that such interference exists. He says of the railroads of England and
the United States:
"In speed and accommodation, in the energy which pushes
railways into remote districts, and in the skill which
creates a traffic where no traffic existed before, they
stand to-day in the front rank, as they have stood for the
last half century. To say that they are very far from
perfect is nothing; it is only to say that they are worked
by human agency. Their worst enemies will scarcely deny that
they are at least alive; so long as there is life there may
be growth, and we may hope to see them outgrow the faults of
their youth. The charge made against State railway systems
is that they are incapable of vigorous life. The old adage
which proclaimed that 'necessity is the mother of invention'
has been re-stated of late years as the law of the survival
of the fittest in the struggle for existence. If the
doctrine is true, the State railway system, relieved from
the necessity of struggle, must cease to be fit and will
fail to survive."
While it is not intended to enter here into a defense of a State railway
system, it may justly be questioned whether "the State railway system,
relieved from the necessity of struggle, must cease to be fit and will
fail to survive." The growth of the State system in Europe is in itself
a sufficient refutation of Mr. Acworth's theory. The mail service has
for several hundred years been a monopoly of the government; but, while
it is far from being perfect, it remains to be demonstrated that private
enterprise could give to the public a better service in the long run.
Mr. Acworth is an Englishman who in former years wrote many bitter
things concerning the abuses which he then thought he saw in the
management of the railroads of his native country, which, according to
his own statement, are, besides those of the United States, the only
roads in the world for whose regulation competition has been relied upon
in the past. Mr. Acworth has become a convert to the _laissez faire_
theory of dealing with railroads and now evinces an unusual, but perhaps
pardonable, zeal in the defense of his new position. In the preface to
his book, "The Railways of England," he says upon the subject:
"I have published before now not a few criticisms (which
were meant to be scathing) on English railways anonymously.
I find myself using, under my own name, the language of
almost unvarying panegyric. This is partly to be explained
by the plan of the book, which professes to set before the
reader those points on each line which best merit
description--its excellencies, therefore, rather than its
defects. Much more, however, is it due to a change of
opinion in the writer.... I have found in so many cases that
a satisfactory reply existed to my former criticisms, that I
have perhaps assumed that such an answer would be
forthcoming in all; and if I have taken up too much the
position of an apologist, where I should have been content
to be merely an observer, let me plead as my excuse that I
am only displaying the traditional zeal of the new-made
convert."
Prof. Hadley, of whose work, "Railroad Transportation, its History and
its Law," mention has been made above, contributed an article to the
April, 1891, number of the _Forum_, under the title "Railway Passenger
Rates." He endeavors to show that the high passenger rates of American
railroads are due solely to superior service. He says:
"Continental Europe pays two-thirds as much as America or
England and gets an inferior article. India pays still less
and gets still less. The difference is seen both in quality
and quantity of service. In India express trains rarely run
at a greater speed than 25 miles an hour. In Germany and
France their speed ranges from 25 to 35 miles an hour, and
only in exceptional instances is more than 40 miles an hour.
In the United States and in England the maximum speed rises
as high as 50, or, in exceptional instances, 60 miles an
hour. With regard to the comfort of the cars in different
countries, there is more room for difference of opinion;
but there can be no doubt that the average traveler in the
United States, or even in the English third-class car, fares
better than he would in the corresponding class on
continental railroads, and infinitely better than the bulk
of travelers in British India."
It may be admitted that upon the whole the speed of American and English
railroads is greater than that of continental roads, yet the difference
is much less than Mr. Hadley would make us believe. The fast trains of
the Berlin and Hamburg Railroad, according to Röll's "Railroad
Encyclopedia," make the distance of 179 miles in three hours and
forty-four minutes. The average speed is therefore 48 miles an hour.
There are but few lines in the United States whose regular express
trains run at a greater speed. The express trains of the Berlin and
Brunswick line make 45-1/2 miles an hour. Trains are run on the Vienna
and Buda-Pesth Railway at the rate of 42 miles an hour and on the Paris
and Calais Railway at a rate of over 40 miles an hour. Official reports
give the average speed of express trains in Northern Germany as 32.2
miles per hour, which is considerably more than the average speed of our
Western trains, upon which the rates charged are twice as high as those
charged by German roads. The average speed of the express trains in
England was 35.7 miles per hour in 1890, in the Netherlands 30.7 miles,
in France 30 miles, in Denmark and Southern Germany 28.8 miles and in
Austria 27.8 miles per hour. Accurate statistics showing the average
speed in America are not in existence, but it may well be questioned
whether the difference between the speed of American and European trains
is sufficient to justify upon that score any essential difference in the
rates. Mr. Hadley's statement that the average traveler in the United
States, or even in the English third class, fares better than he would
in the corresponding class on continental railroads, is far too sweeping
to be true. It is certain that the Belgian, German, Austrian or French
second-class coupes are much to be preferred to the smoking and emigrant
cars which in America are made to take their places.
To prove that much more work is demanded of American railroads than of
European railroads, Mr. Hadley presents the following table:
Annual Train
Miles run Service per
by Trains head of
Countries. Population. annually. Population.
United States (1889) 61,000,000 724,000.000 12
Great Britain (1889) 38,000,000 303,000,000 8
Germany (1889) 48,000,000 181,000,000 3-3/4
France (1888) 38,000,000 145,000,000 3-3/4
Austria-Hungary (1887) 40,000,000 66,000,000 1-2/3
India (1889) 200,000,000 51,000,000 0-1/4
And he adds: "These figures are for passenger trains and freight trains
together, as some countries do not give statistics of the two
separately; but the general results would be nearly the same if
passenger trains alone could be considered. The figures show that, for
every man, woman and child, a train is run twelve miles annually in the
United States, in Great Britain eight miles, in Germany or France a
little less than four miles, in Austria not much more than a mile and a
half, and in British India less than a quarter of a mile."
This statement, even if correct, is certainly misleading. No allowance
is made for the greater distances and the greater average haul in
America, and none for our bulky raw products, which require more car
room than the manufactured goods predominating as freight in Europe.
If Mr. Hadley's statement of miles run by trains annually is used in
connection with Mr. Poor's statement showing the length, for 1889, of
the railroads of the countries given in the above table, it can be shown
that the average number of trains run annually per mile is considerably
less here than in Europe:
Length of Average Number
Railroad Miles run of Trains
in miles by Trains per mile per
Countries. (1889). annually. annum.
United States 161,396 724,000,000 4,485
Great Britain 19,930 303,000,000 15,203
Germany 25,360 181,000,000 7,137
France 21,910 145,000,000 6,618
Austria-Hungary 15,990 66,000,000 4,127
It is seen that while the average number of trains run per mile per
annum is only 4,485 in the United States, it is 6,618 in France, 7,137
in Germany, and 15,203 in Great Britain. In Austria-Hungary it is
somewhat less than here. It is not claimed that this is in every respect
a fair argument; but it is at least as fair as Mr. Hadley's. As has been
stated before, the average earnings per train mile are larger in the
United States than in most nations, and, excepting Sweden, railway
capital has the highest gross earnings of any nation in the world; and
when Mr. Hadley bases his argument in favor of higher rates for American
railroads than for those of Europe upon the claim that the latter secure
larger train loads, he simply reasons from false premises.
Mr. Hadley then continues:
"But why cannot our railroad men, with our present train
service, secure larger loads by making lower rates, and give
us cheap service as well as plenty of it? Why cannot we
secure two good things instead of one? For two reasons:
First, because it is not certain that low rates will be
followed by greatly increased travel; second, because such
increased travel would not be so economical to handle in
America as it is in Europe. It is wrong to assume that,
because reductions of charges in Europe have increased travel
enormously, they would have a proportionate effect in America
and a corresponding advantage in American railroad economy.
It is a somewhat significant fact that second-class trains at
reduced rates have been extremely successful in Europe and
not at all so in America. Other things being equal, the
American public would be glad to have its travel at lower
fares; but it cares more for comfort and speed, and for being
able to travel at its own times, than for a slight difference
in charge. The assumption so frequently made, that a
reduction in fares would cause an enormous increase in travel
in this country, is for the most part a pure assumption, not
borne out by the facts."
The great increase in business which has everywhere followed reductions
in postage rates, telegraph rates and street-car fares, as well as
railroad rates, sufficiently refutes the assertion that it is not
certain that low rates would be followed by greatly increased travel. If
the second class has not been as successful here as in Europe this is
solely due to the fact that the American railroad companies have
systematically discouraged second-class travel by forcing passengers
into filthy and over-crowded cars. The statement that increased travel
would not be so economical to handle in America as in Europe scarcely
needs a reply. If, as Prof. Hadley says, the American public demand more
frequent trains than the people of Europe, and if these frequent trains
are not at present profitable to our railroad companies, it would seem
to be plainly to their interest to hold out every inducement to the
public to increase travel and thus fill their trains.
Mr. Hadley does not aid his argument when, referring to the Hungarian
zone system, he says: "The importance of the zone system in Austria and
in Hungary lies in the fact that its adoption was accompanied by a great
reduction in rates. The unit rate for slow, third-class trains, which
had previously been nearly a cent and a half a mile, was reduced to less
than one cent.... The use of railroads under the new system, though
vastly greater than it was before, is vastly less than that of a
well-managed American road at American rates." Mr. Hadley inadvertently
presents here one of the very best reasons why our passenger rates
should be reduced.
The fact is, railroad men are opposed, and always have been opposed, to
reduction of rates, and to all progressive movements that require
increased expenditures or threaten to temporarily reduce their revenues.
When the introduction of the zone system was first advocated in Hungary
it was opposed by just such men and just such arguments.
No one can contradict the following facts, viz.: That the average cost
of European roads is much greater than that of American roads; that the
number of railroad employes per mile is much greater there than here;
that much larger sums are expended for repairing and improving the
roads, and that therefore the lives of passengers are much safer in
Europe than in America; and that the average speed and corresponding
accommodations of European trains, and especially those of England,
Germany, France and Austria-Hungary, compare quite favorably with the
average speed and corresponding accommodations of our roads. It is,
under these circumstances, absurd to claim that the higher prices
charged by American roads are due to the greater cost of service.
Mr. Hadley's labors as a railroad author have, it seems, greatly
increased his corporation bias. In an address which he delivered before
the American Bankers' Association at New Orleans in November, 1891, upon
the subject of "Recent Railroad Legislation and its Effects upon the
Finances of the Country," he made a number of assertions which ill
comport with the fairness of a public statistician or the wisdom of a
Yale professor. After a few introductory remarks, Prof. Hadley made the
following statement:
"Every one knows that railroad property has fallen in value since the
passage of the Interstate Commerce Act four years and a half ago; few
have made any accurate estimate of the amount of that fall. Let us take
the stock of the leading railroad systems centering in Chicago as a
type. Here we find an aggregate shrinkage of over $60,000,000, or more
than one-quarter of the par value of the stocks.
Par Value. Price. Shrinkage.
Apr. 4, Nov. 4,
1887. 1891.
C., M. & St. P. $30,904,261 93 75 $5,560,000
" " Preferred 21,555,900 122 119 647,000
C. & N. W. 31,365,900 121 116 1,568,000
" " Preferred 22,325,454 148 139 2,009,000
C., R. I. & P. 41,960,000 126 82 18,462,000
C., B. & Q. 77,540,500 140 98 32,567,000
----------- ----------
Total. $225,651,000 $60,815,000"
The table shows that fifty-one million of these sixty million dollars
are the shrinkage of the Chicago, Rock Island and Pacific and the
Chicago, Burlington and Quincy stocks. It is surprising that Prof.
Hadley should be ignorant of the real causes of this depreciation, which
are known to nearly every Granger in the West. In 1887 the Chicago, Rock
Island and Pacific Railroad Company owned 1,121 miles of road, only 172
of which were outside of the States of Illinois and Iowa. In 1891 the
same company owned 2,725 miles of road, with 1,776 miles outside of
Illinois and Iowa and scattered through Missouri, Kansas, Nebraska,
Colorado, Indian Territory and Oklahoma. In Kansas alone the Rock Island
system grew from two miles in 1887 to 1,059 miles in 1891. In other
words, to a little over a thousand miles of _good_ road the company's
managers added nearly 2,000 miles of poor road and a proportionate
amount of new stock, and the depreciation in the company's stock which
followed was no greater than one should have expected under such
circumstances. The managers of the Rock Island and the promoters of
these new lines found the transactions to their advantage, while the
original stockholders of the company had to bear the imposition, as
hundreds of thousands of railroad stockholders had done before them. But
neither the law of Congress nor that of any State was to blame for this
depreciation of the Rock Island stock.
Since 1891, railroad stocks have advanced on an average at least twenty
per cent., and during the last sixty days have declined about
twenty-five per cent., although there has been no essential change in
interstate or State legislation. It is certainly as fair to call the
advance the ultimate result of restrictive railroad legislation as to
attribute to that legislation the shrinkage above referred to. Extensive
speculations similar to those just mentioned were, during the same
period, indulged in by the managers of the C., B. & Q. Railroad Company
and its protegé, the C., B. & N., who, in addition to this, greatly
injured their road in 1888 by the unjust provocation of the engineers'
strike. So destructive were this strike and its consequences to the
company's business that it is difficult to account for the motives of
those who provoked and stubbornly prolonged it except upon the theory
that it played an important role in their stock manipulations.
But the recent legislation of a considerable number of States has, in
Prof. Hadley's opinion, been still more detrimental to railroad
interests than that of Congress. He says;
"In the second place, the legislatures of several States,
stimulated by the example of Congress, hastened to pass in
imitation, of the Interstate Commerce Act, laws which, in
many instances, went far beyond their model in point of
stringency. Examples are furnished by the statutes of Iowa,
Maryland, Minnesota and South Carolina in 1887-88; of
Florida in 1888-89, and of no less than thirteen States in
1889-90, viz.: Georgia, Iowa, Kentucky, Massachusetts,
Mississippi, New Hampshire, New Jersey, North Dakota, Ohio,
Rhode Island, South Dakota, Virginia, Wyoming; as well as by
the recently adopted Constitution of Kentucky. The
legislation of 1890-91 shows a slight reaction against the
movement of the three years previous.
"In two respects the State legislatures went quite beyond
the scope of the Interstate Commerce Act. They tried to
prescribe safety appliances to the operating department, and
rates to the traffic department. Of the first of these
groups little need be said, except that as a rule they have
failed to accomplish any great progress toward the result in
view, and have in some instances actually hindered such
progress. The attempt at prescribing rates was more serious.
It involved a return to the methods of the Granger
legislation, fifteen years earlier, which had operated so
disastrously upon the railroads and the public alike. The
system of commissioners with powers to make schedules which
should be at least _prima facie_ evidence of reasonable
rates had, during the intervening period, never been wholly
abandoned; but the powers thus conferred had been sparingly
exercised. It was either left unused, as was generally the
case in the North from 1877 to 1887, or the schedule rates
were put so high as not to interfere with good railroad
economy, of which examples are seen in Georgia and other
parts of the South. But from the year 1887 onward there was
a pressure upon the Commissioners to make schedules, and to
make them low; and lest these boards should not be able to
reflect the popular feeling directly enough, they were, in
some instances, no longer to be appointed by the Governor,
but elected by popular vote. The law which was most severely
applied and attracted most public attention was that of
Iowa.... The agitation against the railroads has many points
in common with the land agitation in Ireland. Absentee
ownership is at the bottom of the trouble in either case.
Property is owned in one place and used in another, and the
users, not satisfied with the conditions of use, insist on
taking the business direction into their own hands. They
claim the right to fix rates in Iowa for the same general
reasons by which they claim the right to fix rents in
Ireland."
It must be presumed that Mr. Hadley is ignorant of the fact that under
the Iowa Commissioners' tariff the gross earnings of the Iowa railroads
increased $7,000,000, or more than 17 per cent., in about three years,
and their net revenue increased in proportion. Never have the railroads
or the people of Iowa enjoyed a healthier prosperity than they do at
present. It is true that the State of Iowa denies to the railroad
companies the right to charge what they please; but this claim does not
prevent them from doing justice to the absentee owner of railroad
property. That absentee owners of property are disposed to take undue
advantage of those who use it is illustrated in the very case which Mr.
Hadley cites. So flagrant was the injustice done by the English landlord
to the Irish tenant that the English Parliament was constrained to
interfere and correct it.
Mr. Hadley says further:
"It is seen in Iowa to-day, where, as a result of radical
legislation with regard to rates, railroad construction has
almost entirely ceased, the average for the years 1888-90
being less than fifty miles."
Now Professor Hadley hails from the State of Connecticut, where
railroads are permitted to make their own tariffs and where legislators
are supposed not to be hostile to them. According to Poor's Manual, that
State had 1,004.02 miles of railroad in 1888, and just 2.52 miles more
in 1891, while Iowa had 8,364 miles in 1888, 8,436 in 1891, and 8,505
miles on January 1, 1893. Will Mr. Hadley please explain why railroad
construction has ceased in Connecticut? Iowa has one mile of railroad
for every 227 inhabitants, and Connecticut has one for every 741
inhabitants, although the per capita valuation is $473 in the latter,
and only $273 in the former State. Nor have other Eastern States done
much better than Connecticut. During the three years 1888-1891 there
were built 74 miles of railroad in New Hampshire, 50 in Vermont, 23 in
Massachusetts and 9 in Rhode Island. Iowa has an area of 56,000 square
miles and a population of 1,911,896, an assessed valuation of
$520,000,000; New England has an area of 66,400 square miles, a
population of 4,700,745, and an assessed valuation of $3,500,000,000.
Yet Iowa has 1,576 miles of railroad more than all the New England
States together. She has a railroad net as close as that of the Empire
State, having one mile of road to about 6-1/2 miles of territory,
although the population of that State is three times as dense as hers.
Nevertheless, railroad construction is at present active in Iowa,
several lines of road are in the process of construction at the present
writing, and there is every indication of still greater activity in the
near future. The _Railway Age_ of March 17, 1893, in a detailed list of
new lines projected or under construction in the United States, gives
for Connecticut only 32 miles, while it gives for Iowa 930 miles.
Mr. Hadley continues:
"It is seen to some extent in the Northwest as a whole. At
the close of the year 1887 the States included by Henry V.
Poor in the Central, Northern and Northwestern groups had
25,040 miles of road, while those of the South Atlantic,
Gulf and Mississippi Valley had but 24,567. To-day this
relation is reversed: the Northwest has but 27,294 miles,
while the South has 30,696."
Had Mr. Hadley taken the pains to look up the population of these groups
he would have found that the "South" is fully three times as populous as
the "Northwest," and that therefore his figures prove nothing beyond the
fact that at the present rate of gain the railroad facilities of the
South will in a quarter of a century be equal to those of the Northwest
to-day.
But the argument is weak in another respect. The State in the Southern
group that made by far the greatest gain in railroad mileage during the
period mentioned by Mr. Hadley is Georgia, which gained about 1,000
miles in three years, yet that State prescribed rates for railroad
companies six years before Iowa did, and has for many years exerted a
more thorough control over her railroads than perhaps any other State in
the Union. The smallest increase is in West Virginia, which during the
period given gained an average of only 69 miles per annum; and yet in
West Virginia railroads charge their own rates and usually have their
own way.
Finally Prof. Hadley says:
"Where are we to find the limit to such unwise action? The
United States Supreme Court can do something and has shown a
disposition to do something. In the Minnesota cases it
repudiated the doctrine of uncontrolled rights on the part
of the legislature to make rates, as emphatically as it
repudiated the doctrine of uncontrolled rights on the part
of agents of the corporation in the Granger cases, twelve
years before."
It is evident that Mr. Hadley is as much mistaken in his interpretation
of the decision of the court as he has been in his other assertions, as
will be seen from the following extract from Judge Blatchford's opinion
in Budd vs. New York, in which he says, "The main question involved is
whether this court will adhere to its decision in Munn vs. Illinois."
The court first quoted from the opinion of Judge Andrew of the Court of
Appeals of New York, as follows: "The opinion further said that the
criticism to which the case of Munn vs. Illinois had been subjected
proceeded mainly upon a limited and strict construction and definition
of the police power; that there was little reason, under our system of
government, for placing a close and narrow interpretation on the police
power, or restricting its scope so as to hamper the legislative power in
dealing with the varying necessities of society and the new
circumstances as they arise calling for legislative intervention in the
public interest; and that no serious invasion of constitutional
guarantees by the legislature could withstand for a long time the
searching influence of public opinion, which was sure to come sooner or
later to the side of law, order and justice, however it might have been
swayed for a time by passion or prejudice or whatever aberrations might
have marked its course."
Judge Blatchford then said: "We regard these views, which we have
referred to as announced by the Court of Appeals of New York, so far as
they support the validity of the statute in question, as sound and
just.... We must regard the principle maintained in Munn vs. Illinois as
firmly established."
General Horace Porter has made a contribution to the railway rate
literature by an article which appeared in the December, 1891, number
of the _North American Review_. Unfortunately many of the General's
statements are either false or misleading. Thus, in a table which he
presents for the purpose of comparing the passenger rates of Europe with
those of the United States, he gives the regular first-class schedule
rates for the United Kingdom, France and Germany and the average
earnings per passenger per mile for this country. That this is an unfair
comparison needs no further argument, especially when it is remembered
that in Europe from 85 to 90 per cent, of all passengers are carried in
the third class at a regular rate averaging about 1-1/2 cents per mile,
and that considerable reductions are made for excursion, commutation and
return tickets.
But General Porter says concerning American rates:
"When we take into consideration the excursion and the
commutation rates, we find first-class passengers carried as
low as half a cent a mile."
Now the question arises whether American railway companies carry
passengers at such rates with or without loss to themselves. If they are
carried at a loss, an injustice is done to the regular passengers, whose
fare must not only make up the loss, but yield a larger profit than
would otherwise be necessary. If, on the other hand, a rate of half a
cent a mile can be made remunerative, there is certainly no justice in
maintaining rates five and six times as large on well-patronized lines.
General Porter places stress upon our superior accommodations in the way
of lighting, ventilation, ice-water, lavatories, and free carriage of
baggage, etc., and then adds:
"In this connection we must also recollect that the cost of
fuel, wages and all construction materials is considerably
higher here than in Europe, while the population from which
the railways derive their support is much more sparse; the
United States having 166,000 miles of railway with a
population of 63,000,000, while Europe has only 135,000
miles with a population of 335,000,000."
We grant the point which the General makes on ventilation, ice-water,
etc.; but, to make the comparison a fair one, he should also have
referred to the much greater cost of European roads, to their much
greater number of employes per mile, to the much shorter haul, to the
higher price of their fuel, to the superiority of their roadbed and the
greater security of their passengers. Moreover, whether the railroads of
a country are profitable or not cannot be ascertained by merely
comparing miles of road with square miles of territory and number of
inhabitants. British India has a population of 275,000,000 and only
about 16,000 miles of railroad, and yet her roads are scarcely as
profitable as our own. China has 3,000,000 and Asia has about 4,000,000
people to every mile of railroad, but so far their railroads have proved
no bonanza. The question is not how many people there are to each mile
of railroad, but rather to what extent the railroad is used by the
people. The amount of freight carried annually by the railways of the
United States is about 680,000,000 tons, or 85,000,000,000 ton miles,
and the number of passengers carried is about 535,000,000, representing
an aggregate of travel of nearly 13,000,000,000 miles. This shows an
average of 1,300 tons of freight carried one mile, and 200 miles
traveled annually for each inhabitant of the nation, and a greater use
of railway facilities than that of any other country in the world. The
income of the railroads per capita is $17 in the United States, $11 in
the United Kingdom, $5 in Germany, $4 in France, and still less in
Italy, Austria and Russia. The average freight haul is 63 miles in
Europe and 120 miles in the United States; the average passenger haul 15
miles in Europe and 24 miles in the United States. It has already been
shown that the average earnings per train mile are also larger here than
there. Röll's Encyclopedia of Railroads for 1892 shows that in France
the average rate for all traffic for the year 1888 was for passengers
1.45 cents per mile, and for freight 1.14 cents per ton per kilometer,
and that the nation had also received by way of free or reduced rates on
Government business during that year benefits to the amount of
$59,000,000. Large reductions have been made during the past year in
passenger rates.
The General indulges in making the stereotyped railroad charge that "the
legislatures of several of the States have enacted laws to effect a
reduction of rates, the literal obedience to some of which would amount
to the practical confiscation of railway property."
The General or any of his friends cannot name a road that was ever
confiscated by legislation, or even seriously injured. It is a fact that
the very legislation of which railroad managers so bitterly complain has
had a beneficial influence on railroad earnings. Thus, in Iowa, where,
according to the testimony of railroad men, Grangerism has reigned
supreme during the past few years, railroad earnings increased between
1889 and 1892 from $37,000,000 to $44,000,000, or more than 18 per cent.
Still better results could have been secured if the railroad managers
had been in sympathy with the law. There is no doubt that they would
gladly suffer, or rather have their companies suffer, a loss of revenue,
if this would lead to a repeal of the laws and restore to them the power
to manipulate rates for their own purposes.
But the General comes to the main point of his article when he
complains against "the unreasonable requirements and restrictions of the
Interstate Commerce Law." He says:
"Principal among these are what is known as the 'long and
short haul clause,' which prohibits railway companies from
receiving any greater compensation in the aggregate for a
shorter than for a longer haul over the same line in the
same direction, the shorter being included within the longer
distance; and the anti-pooling clause, which prevents
railway companies from entering into any agreement with each
other for an apportionment of joint earnings."
If we carefully examine the railroad literature of the last four years,
we find that it has concentrated its efforts toward the creation of
public sentiment in favor of the repeal of these two clauses of the
Interstate Commerce Law. Railroad men are well aware of the fact that,
with these two clauses stricken out, the Interstate Commerce Law would
be practically valueless, and in clamoring for their repeal they evince
a persistency worthy of a better cause. The practices which these
clauses aim to prohibit cannot be defended upon any consideration of
justice and equity, and it is folly to expect the American people to
sacrifice their convictions of right to the selfish interest of a
comparatively small number of persons interested in the manipulation of
railroad stocks.
The July, 1891, number of the _Forum_ contains an article on the
operation of the Interstate Commerce Law from the pen of Aldace F.
Walker, formerly a member of the Interstate Commerce Commission, and now
commissioner of the Western Traffic Association. Mr. Walker evidently
belongs to the old school of railroad men, who have not yet accepted the
Granger decision. Referring to it, he says:
"This decision was not unanimous, and the reasoning
presented was not so convincing as to command universal
acceptance. It was at once challenged by the corporations,
and has been from time to time attacked in the same
tribunal; it has not yet been withdrawn, but it has been
materially modified, notably in a case from Minnesota,
decided in 1890, when it was established that there is a
limit beyond which the State cannot go in reducing railway
rates, which limit would be passed in case a State should
attempt to deprive a corporation of its property, without
due process of law, by fixing rates too low to permit of a
fair remuneration for its use. A large debatable ground yet
remains open, with a possibility that the position of the
railway in Federal jurisprudence may eventually be radically
modified."
The passage quoted clearly indicates that railroad men expect better
things of the court in the future, but Mr. Walker is much mistaken in
supposing the court materially modified the Granger decision, as will be
seen by referring to the case of Budd vs. the State of New York, decided
in February, 1892, by the same court.
Mr. Walker, unlike Mr. Depew, candidly admits the former universality of
the evil of discrimination. He says:
"In order to secure traffic, a railway official felt called
upon to underbid his rival. He gave the shipper a private
rate, a rebate, a free pass--anything in the shape of a
concession or a favor. The land was honeycombed with special
arrangements of innumerable forms, all secret, because
otherwise they would have been useless, and all forced upon
the carriers by the exigencies of unbridled competition.
Many shippers became wealthy from such gains. Others were
envious of like success. At last the public sense of justice
demanded a reform."
And Mr. Walker's candor rises to a still higher pitch when he admits
that the ingenuity of railroad managers has found ways to evade the
Interstate Commerce Law. The following passage from the Commissioner's
article will, no doubt, be a great surprise to such law-abiding and
confiding managers as Mr. Depew:
"There was nothing in the law specifically forbidding the
payment of 'commissions,' and it was found that the routing
of business might be secured by a slight expenditure of that
nature to a shipper's friend. Other kindred devices were
suggested, some new, some old; the payment of rent, clerk
hire, dock charges, elevator fees, drayage, the allowance of
exaggerated claims, free transportation within some single
State--a hundred ingenious forms of evading the plain
requirements of the law were said to be in use. The
demoralization was not by any means confined to the minor
roads. Shippers were ready to give information to other
lines concerning concessions which were offered them, and to
state the sum required to control their patronage. A freight
agent, thus appealed to, at first perhaps might let the
business go, but when the matter became more serious and he
saw one large shipper after another seeking a less desirable
route, he was very apt to throw up his hands and fall in
with the procession."
Mr. Walker is very severe on the Interstate Commerce Act, which, he
says, might in its present form "well be entitled, 'An act to promote
railway bankruptcies and consolidations by driving weak roads out of
competitive business.'" To remedy the evil which, in his opinion, the
act causes, he favors the granting of differentials by the stronger to
the weaker roads. Such a device is simply a species of pool under a less
offensive name. Its manifest object is to maintain rates through a
conspiracy of rival railroads. Mr. Walker admits this when he says:
"It operates in practice to affect a distribution of the
traffic somewhat roughly, giving rise to frequent
dissensions and bickerings over the 'differentials' which
are allowed; but after all it has enabled the trunk lines
usually to secure a better maintenance of tariff rates and a
better observance of the provisions of the law against
private rebates and discriminations than has been
attainable in other sections of the country where different
conditions make such an arrangement impracticable. It
vividly illustrates, however, the necessity of some plan by
which common business may be divided."
This problem, which apparently causes so much perplexity to railroad
managers, would soon be solved if railroad abuses were done away with.
So long as these abuses exist and rates are maintained by artificial
means there will be bickering and strife for business which legitimately
belongs to others. Mr. Walker then bewails the proscription of the pool,
saying:
"It may be stated without fear of contradiction that if the
carriers had been left free to make arrangements among
themselves upon which each line might rely for eventually
receiving in some form a fair share of competitive traffic,
the temptation for secret rate-cutting would have been in
great measure removed and the country would have been spared
most of the traffic disturbances and illegitimate
contrivances for buying business which have since been
periodically rife."
This argument amounts to this, that, rather than place a law upon our
statute books which reckless railroad managers might be strongly tempted
to violate, they should be permitted to combine and control the highways
and levy _ad libitum_ upon the commerce of the country. It is a most
preposterous proposition.
The article especially condemns the long and short haul clause of the
law. That this clause is injurious to the commerce of the country is,
however, not obvious from his reasoning. Mr. Walker makes the statement
that this clause of the law "has removed from many jobbing centers
important advantages which they previously had, and has enabled interior
communities, formerly of little apparent consequence, to deal directly
with distant markets." If he means by this that this feature of the law
has equalized shipping throughout the country, he is doubtless right. If
he wishes us to infer, however, that it prevents the railroad companies
from doing substantial justice to all, he presumes altogether too much
upon the credulity of his readers.
Another article from the same author appeared under the title
"Unregulated Competition Self-destructive," in the December, 1891,
number of the same periodical. He commences his article with an inquiry
into the pedigree and merit of the time-honored proverb, "Competition is
the life of trade," and arrives at the conclusion that the phrase is
fatherless and insignificant. He says:
"'Competition is the life of trade;' 'Competition is the
death of trade;' one phrase is as true as the other. For all
that appears, it was a toss-up which of the two should
become current as the expression of the general thought."
It is its general recognition that gives a truth a proverb's currency.
Mr. Walker sneers at a disagreeable proverb because, like the majority
of his colleagues, he holds the masses in contempt. He gives his
estimate of popular intelligence in the following words:
"Unfortunately most men do not think worthily, or do not
think at all; they are ruled by phrases, and they catch the
crude ideas of others as they fly."
Mr. Walker's whole argument is one in favor of the legalization of the
pool, though he carefully avoids the word which grates so harshly on the
American ear. He makes the broad statement, without offering the least
proof in support of it, that measures have been everywhere adopted "to
subdue and ameliorate the evil results of inordinate and excessive
competitive strife," and then he asks:
"Has not the time come for a reversal of the legislative
attitude? Would it not be well for Congress, State
legislatures and the judiciary to cease their futile
attempts to maintain unqualified freedom of competition, and
substitute therefore a recognition of the right of every
industry to combine under proper supervision, and to make
agreements for the maintenance of just and reasonable
prices, the prevention of the enormous wastage consequent
upon warlike conditions, and the preservation of existing
institutions through the years to come?"
Mr. Walker then proceeds to make the bold prediction that revolution and
anarchy will follow if the demands of the railroad corporations are not
complied with, saying:
"Unless this course is adopted a social convulsion may
fairly be apprehended, forced by the universal and necessary
repudiation of existing laws and rules of decision, and by
the general formation of combinations without their pale."
This is a strange threat indeed, and unworthy of a man who has held as
great a public trust as Mr. Walker has. The article also contains the
statement that combinations do not extinguish competition. "They
regulate it," says Mr. Walker, "with more or less efficiency, and they
often go so far as to suspend its operation in respect to one or more
important features of the strife; for example, the price paid or the
time consumed. But as long as the employer or the purchaser has a
choice, so long there is competition." Here is a sample of Mr. Walker's
irony, for the choice which the shipper has under the pool is simply
Hobson's choice.
Mr. Walker has also an article in the August, 1892, number of the
_Forum_, the substance of which is to show that organizations among
railroad companies, like the Western Traffic Association, are necessary
for the purpose of restraining competition among them. He holds that
such competition as exists in almost all other lines of business "is
radically vicious to all interests, however pleasant and desirable it
may seem to self-styled anti-monopolists," and that "it is a calamity
not only to the owners of the roads, but to the public also."
According to his statement, the Traffic Association is simply a little
innocent and inoffensive organization whose duty it is only to maintain
rates, and he sees nothing wrong in allowing a few representatives of
corporations to meet in secret and discuss, scheme and levy such a tax
upon the commerce of this country as may suit their convenience; and he
regrets that their attempts are "hampered by legislation which forbids
the formation of pools." In other words, he proposes to have the case in
court decided by a jury made up entirely of the parties at interest in
the case. This piece of effrontery is about on a par with the average
argument of this class of pleaders.
Suppose we apply the same rule to other classes. Take the farmers, for
instance. Let them have an organization for the purpose of maintaining
rates, with their representatives meeting in secret and fixing the price
of their produce and asking the Government to enforce their orders,
pools and edicts, so as to afford them relief from selling corn at ten
cents per bushel, beef and pork at a dollar and a half per hundred, and
hay at two dollars per ton, and their other produce at proportionate
rates. Who would condemn such an organization more severely than the
advocates of the Traffic Association? They never find terms sufficiently
expressive with which to condemn the Farmers' Alliance and other kindred
associations, which are organized solely for the purpose of lawfully
correcting existing abuses and of forming a wholesome public sentiment.
It is evident that some progress is being made upon this question, as
Mr. Walker admits that "the fortunes which have been made are seen to
have been the result of dealings in stocks and in titles, the
consequences of which, if involving wrong, are rightly charged against
the lax legislation which has made such operations possible." "Every
person seeking for the services of a common carrier is entitled to know
that he is charged no more than his neighbor who obtains the same
service under the same conditions." "The theory that any unjust
discrimination or unjust preference or advantage in respect to
individuals, communities or descriptions of traffic must be suppressed
by the State, has become firmly lodged in legislation." This improvement
in the sentiment of railroad men is gratifying.
This gentleman, as has already been stated, was for several years a
member of the Interstate Commerce Commission, a board created by
Congress for the special purpose of enforcing the law which he so
unreservedly condemns. No doubt Mr. Walker performed the duties of his
office as he understood them; but if he held then the views which he
holds now, his work must have been a hindrance rather than a help to the
commission.
Among financial journals, so many of which are devoted to the support of
vicious and demoralizing methods, and are ever ready to defend whatever
is bad in corporation management, it is refreshing to find occasionally
one that exposes abuses and favors the earning of legitimate dividends,
and it is a pleasure to quote the following from the June number, 1892,
of the _Banker's Magazine_:
"There are two widely differing theories concerning the
management of railroads in this country; one theory is that
profits should be acquired from fluctuations in the stock,
and the other is that the profits should be acquired in the
old-fashioned way, by performing a useful service and
receiving a reward therefor, to be divided among the
stockholders in the way of a dividend. These two theories
are so different in their practical operation that they give
rise to the most diverse consequences. Of course, many
railroads are not dividend-earning, and with these the
profits to the managers and those who are allied with them
must come from stock fluctuations and from whatever sucking
arrangements can be devised whereby their vitality or
sustenance can be acquired by the favored few who are in
control. Unfortunately, there are many railroads in this
condition, the history of which is too well known to require
description. Once in control, the way is easy to retain it
and to make money by a thousand devices which ingenious and
unscrupulous managers are constantly planning and putting
into operation.
"The consequences of the other theory are as different, both
to the corporate property and to the public, as can be
imagined. When a railroad is properly managed and earning
dividends, a policy of development is adopted, having for
its end the natural expansion of the property in harmony
with the growth of the country, the needs of business and
the desires of the people. The fruits of such a policy may
not be apparent at once, but they inevitably come, and, when
they are reaped, are enjoyed and appreciated by all. Only by
such a policy can our roads ever become great, commanding
the confidence of the people, and fulfilling their highest
uses; in short, only by such a policy can a railroad be
brought to a high degree of perfection.
"The difference is clearly seen by contrasting a road of
this character with one that is run by the Wall Street
method for stock-jobbing purposes. By this method dividends
are not regarded as of so much consequence to investors as
an instrument or argument for affecting the value of the
stock. In other words, if a dividend is earned and paid at
all, it is chiefly as an instrument or agency for
stock-jobbing purposes, and not because the road is managed
primarily for this purpose. Furthermore, dividends, too
often, are disregarded altogether, as well as any policy of
permanent improvement or of general development. The
cardinal idea always is, how can the road be maintained and
manipulated so as to cause the largest variations in the
stock and the most money for the managers?
"Too many managers, as is well known, have made great sums
for themselves and built additions long in advance of their
means, and have seriously crippled their corporations by so
doing. But they have made fortunes for themselves. What the
great majority of mankind consider is the immediate present,
and not the future.
"It is undoubtedly a hard thing for those who are conducting
their corporations in an honest and able manner, for the
benefit of their owners, to keep still while their enemies
are pounding them and glorifying those who are managing
their corporations for personal and corrupt ends; but all
cheap and false practices must finally lead to disaster. We
hear a great deal of this kind of thing nowadays. One of the
evil effects of speculation and newspaper reading is, that
people have got in the way of not thinking much for
themselves; of regarding as truth whatever is printed, and
of not opening their eyes wide enough to discover the
shallowness of the reasonings and falsehoods that are put
forth at the behests of speculators, or of those who are
managing corporations for speculative purposes. The American
people have had an amazing experience in losses from
following advice thus plentifully and freely given;
nevertheless, there seem to be persons left who are willing
to listen and fall into the old ways and be trapped, as so
many others have been in the past. There is a considerable
class, having means and nothing to do, who perhaps might
just as well lose their money in poker, railroad or grain
speculation as in any other way, for this furnishes about
the only source of amusement to them; but, after all, there
is no reason why railroads should be managed so exclusively
for the amusement of this class. The time is coming, and
probably is not far off, when they will get enough of it;
and railroad investors will conclude that dividends for
themselves are better than profits for speculators; and when
they do, all stock-jobbing managers will be consigned to the
limbo which is their proper destination."
This magazine is edited by Mr. Albert S. Bolles, author of several
excellent financial works. We are much indebted to him for the sound
banking system which we now have, and which has contributed so largely
to the unexampled prosperity which this country has enjoyed for the last
thirty years.
Our national banking system illustrates well how service able the
corporation may be to a people when its use is restricted by wholesome
laws to the performance of its proper functions.
The old United States Bank was organized for practically the same
purposes as our present national banks, but for lack of proper
restrictions its use was soon perverted to ignoble purposes. The bank
managers showed so much partiality in the distribution of their favors
and accommodations, and meddled in politics to such an extent, that the
people became disgusted with it, and a renewal of its charter was
refused.
Mr. Clay clearly saw how dangerous a great money power might become to
our country, and, in opposing the extension of the bank's charter, said:
"The power to charter companies is one of the most exalted
attributes of sovereignty. In the exercise of this gigantic
power we have seen an East India Company created, which is
in itself a sovereignty, which has subverted empires and set
up new dynasties, and has not only made war, but war against
its legitimate sovereign! Under the influence of this power
we have seen rise a South Sea Company, and a Mississippi
Company, that distracted and convulsed all Europe, and
menaced a total overthrow of all credit and confidence, and
universal bankruptcy."
Can we afford to ignore the lessons of history?
Mr. Henry Clews makes some spicy and pertinent observations on railroad
men's methods in an article which recently appeared in the _Railway
Age_. Mr. Clews seems to have but little confidence in the average
railroad director. He advises stockholders to exercise constant
vigilance and defensive conservatism, "lest they become the instruments
by which unscrupulous and crafty directors work out schemes that are in
reality nothing but frauds or robbery." And then he adds:
"In estimating corporate acts we must never forget that,
while the best of men will bear watching as to their
individual dealings with others, they need to be doubly
watched when they sit around a corporation board and vote as
to transactions in respect of which none of them can be
called to personal account. Temptations attack with enormous
force when the gains are prospectively great and the risk of
penalty inappreciable or non-existent."
Mr. Clews also tells us how roads are wrecked by their boards of
directors. "In one case," he says, "the stock of a leading railway,
which in 1880 sold at 174, in 1884 sold at 22-1/2, and in 1885 at 22.
This vast shrinkage of value was not owing to panic or to stringency of
money, nor did it arise from a diminution of traffic on the original
line; but it was because consolidation had been pushed to an extreme by
the directors of the corporation, so much so that the entire system
yielded no dividends; a fleet and useful animal had been loaded down
with dead wood and rubbish till he could scarcely crawl; barren acres
had been added to an originally fruitful farm until the whole estate
could hardly pay taxes; a mass of rotten apples had been thrown into the
measure with sound fruit, and buyers refused the whole as a mere heap
of corruption. And it was generally believed that the men who
perpetrated this mischief under the names of 'construction,' 'requisite
consolidation,' 'absorption of necessary branches,' etc., had made a
great deal of money by it and had not made it honestly. But it was all
done pursuant to legal forms and by boards of directors, so that the
defrauded stockholders were without remedy."
Mr. Clews then gives us a more detailed account of the way in which
branch roads are built and absorbed, viz.:
"Given a useful, well constructed, dividend-paying road, a
body of people with some capital and political influence,
aided by some of the directors of this prosperous line;
construct a branch road to some outside point; the more
important such point the better, but that is of small
consequence. The road gets itself built; it is bonded for
more than it cost, and it cost twice as much as it ought,
since the constructors were all together in the ring and
have favored each other. Then the capital stock is fixed at
so much, and this is mostly distributed among the
constructors. The road then, swelled to a fictitious price
of three or four to one, and not worth anything to start
with, is ripe for absorption and consolidation. Its
directors and those of the main line meet, confer and vote
the measure through. They all profit by it, more or less,
but their profits are enormously in excess of the trifling
losses due to the shrinkage of values of the shares of the
main line. A director of the main line may perhaps lose
$20,000 on a thousand shares, but what is this when compared
to a gain of hundreds of thousands in his holdings of the
branch road, whose liabilities are assumed by his victimized
corporation? And such a director would not be equal to the
demands of his covetousness if he had not sold thousands of
shares short, in anticipation of the fall which the
transactions of himself and his associates were inevitably
bound to produce."
Mr. Clews concludes his article with the following passage:
"The profits realized on the speculative constructions are
enormous and have constituted the chief source of the
phenomenal fortunes piled up by our railroad millionaires
within the last twenty years. It is no exaggeration to
characterize these transactions as direct frauds upon the
public. They may not be such in a sense recognized by the
law, for legislation has strangely neglected to provide
against their perpetration; but morally they are nothing
less, for they are essentially deceptive and unjust, and
involve an oppressive taxation of the public at large for
the benefit of a few individuals who have given no
equivalent for what they get. The result of this system is
that, on the average, the railroads of the country are
capitalized at probably fully 50 per cent. in excess of
their actual cost. The managers of the roads claim the right
to earn dividends upon this fictitious capital, and it is
their constant effort to accomplish that object. So far as
they succeed they exercise an utterly unjust taxation upon
the public by exacting a compensation in excess of a fair
return upon the capital actually invested. This unjust
exaction amounts to a direct charge and burden on the trade
of the country which limits the ability of the American
producer and merchant to compete with those of foreign
nations and checks the development of our vast natural
resources. In a country of 'magnificent distances' like ours
the cost of transportation is one of the foremost factors
affecting the capacity for progress; and the artificial
enhancement of freight and passenger rates due to this false
capitalization has been a far more serious bar to our
material development than public opinion has yet realized.
The hundreds of millions of wealth so suddenly accumulated
by our railroad monarchs is the measure of this iniquitous
taxation, this perverted distribution of wealth. This
creation of a powerful aristocracy of wealth, which
originated in a diseased system of finance, must ultimately
become a source of very serious social and political
disorder. The descendants of the mushroom millionaires of
the present generation will consolidate into a broad and
almost omnipotent money power, whose sympathies and
influence will conflict with our political institutions at
every point of contact. They will exercise a vast control
over the larger organizations and movements of capital;
monopolies will seek protection under their wing, and by the
ascendancy which wealth always confers they will steadily
broaden their grasp upon the legislation, the banking and
commerce of the nation."
These are strong words, but they come from a man whose thirty years'
experience in Wall Street enables him to speak intelligently upon this
subject and who certainly cannot be accused of being prejudiced against
railroad men or corporate investments. In a recent number of his _Weekly
Financial Review_ Mr. Clews said of the railroad stock market:
"Judgment passes for little in estimating the future of many
securities, for the market is almost wholly under the
control of comparatively few persons, whose operations must
inevitably influence the value of thousands of millions of
stocks and bonds. Never in the history of Wall Street was
the value of such an enormous aggregation of securities so
absolutely under the control of so small a circle as at this
time. Such a state of affairs cannot be considered
satisfactory; hence not only is speculation likely to be
unhealthily stimulated, but the future of these combinations
gives birth to a variety of uncertainties which, while they
may elevate prices, will certainly not add to their
stability."
If the silly claim of railroad men, that Western people do not invest in
railroad securities on account of their unprofitableness, needed any
answer, the above words would furnish it.
The May, 1893, number of the _North American Review_ contains an article
entitled "A Railway Party in Politics," by Mr. H. P. Robinson, editor of
the _Railway Age_. Mr. Robinson belongs to that class of reformers who
can see but one side of a question, and only a short-sighted view of
that. He is as zealous as a new convert, and is expert, in the ward
politician's way, in defense of the worst abuses practiced by railway
men. He says:
"That the right to 'regulate' the railways, which is vested
in the State, has now been carried in the West to a point
not only beyond the bounds of justice, but beyond its
constitutional limits, and that it would soon be impossible
for any railway company in the West to keep out of
bankruptcy unless some vigorous and concerted action were
taken to arouse public opinion, and to compel a modification
of the present policy.
"It is easy to see how much strength such a party, if
formed, would possess. According to the reports of the
Interstate Commerce Commission there were in the immediate
employ of the railways of the United States a year and a
half ago 749,301 men, all or nearly all voters, which number
has now, it may be assumed, been increased to about 800,000.
There are, in addition, about one million and a quarter
shareholders in the railway properties of the country; and
in other trades and industries immediately dependent upon
the railways for their support there are estimated to be
engaged, as principals or employes, over one million voters
more. These three classes united would give at once a massed
voting strength of some three millions of voters. There are
also, in the smaller towns especially, and at points where
railway shops are located, all over the country, a number of
persons, small tradesmen, boarding-house keepers, etc., who
are dependent for their livelihood on the patronage of
railway employes, and whose vote could unquestionably be
cast in harmony with any concerted employes' movement.
Moreover, unlike most new parties, this party would be at no
loss for the sinews of war or for the means of organization.
The men whom it would include form even now almost a
disciplined army. With them co-operation is already a habit.
While the financial backing and the commercial and physical
strength of which the party would find itself possessed from
its birth would be practically unlimited....
"For the present it seems to them better to believe that the
people--those people who are not railway men--are acting now
only in ignorance, and that as soon as they see the truth
they will, by their own instinctive sense of justice,
re-mould their opinions and their policy without political
coercion.
"At the same time there has already come into existence in
some of the Western States a movement which has its
significance and its practical influence. This is what is
called the Railway Employes' Club movement. It started in
Minnesota, at a small meeting of railway employes held in
Minneapolis in 1888. From that meeting the movement grew,
and made a certain feeble effort, not entirely unsuccessful,
to influence the State election in the fall of that year. By
the State election of 1890 the movement had grown and was
better organized, and the Employes' Club did exercise
considerable influence in the election of certain of the
State officers and certain members of the State legislature
in that year.
"From Minnesota the movement spread to Iowa, and there is no
contradiction of the fact that the railway employes' vote
was one of the strongest forces in the State election of the
fall of 1891. It also overflowed into Kansas, Nebraska,
Missouri and Texas. Had the election of last November been
normal it is probable that the effect of the Railway
Employes' Club vote would have been as visible in two or
three of those States then as it had been in Iowa in the
preceding year. But in the deluge which occurred all trace
of the smaller streams and currents was obliterated. Had the
members of the clubs not taken the precaution to do
considerable work in the local nominating conventions of
both parties they would be compelled to confess that their
campaign of 1892 was a failure....
"So far the clubs have admitted and will admit of no
negotiations with the State committees of other parties.
They hold their own meetings and decide for themselves that
such and such a candidate is inimical to their interests as
railway employes, and such and such a man is their friend.
Then they go to the polls and vote--voting in the main
their normal party ticket, scratching only a man here and a
man there, their attention being chiefly centered upon
members of the boards of railroad commissioners and of the
State legislatures.
"In Minnesota in 1890 their weight was thrown chiefly in
favor of Republicans. In Iowa in 1891 it was given to
Democrats. In all States the men whom they oppose are those
who have made themselves conspicuous as 'Granger' and
anti-railway politicians. The keynote of the movement and
the one plank in the platform of the clubs is that the
extreme anti-railroad legislation of late years has reduced
the earnings of the companies to a point at which they are
unable any longer to keep full forces on their payrolls or
to pay such wages as they should, and that by this
legislation the railway employes are necessarily the
immediate sufferers....
"A railway party is therefore already in existence.... And
moreover, though accidentally only, it is working forcibly
in behalf of railway interests as a whole....
"Meanwhile Mr. A. F. Walker, the chairman of the Joint
Committee of the Trunk Line and Central Traffic
Associations, prophesies that if things go on as they are
going now, before long 'the managers of the railways will be
chiefly receivers.' In the year 1891 receivers were
appointed for twenty-six companies in the United States,
representing $84,479,000 of capital, and twenty-one
companies, with 3,223 miles of road, with a capitalization
of $186,000,000, were sold under foreclosure.
"It is doubtful whether the result which Mr. Walker
foretells would be regarded as a calamity by the 'uninformed
public opinion of the West.' That Minnesota railroad
commissioner was quite sure of the public applause before he
made his classic declaration that he proposed to 'shake the
railroads over hell' before he had done with them, and the
Governor of Iowa, who announced that he did not care if
'every d--d railroad in the State went into bankruptcy'
before the expiration of his term of office, knew that the
sentiment would have the sympathies of his constituents.
This attitude of the Western mind is, of course, largely
explained by the fact that the people of the West do not as
a rule own railway securities. In two States (the only two
in the West in which, so far as I am aware, the figures have
been compiled) out of 27,645 stockholders in the lines
within the State borders only 359 are residents of the
States. If the other 27,286 were also residents of these
States (that is to say, if 27,286 of the present residents
were also stockholders in the railways), it is probable that
the ferocity of the public opinion in these States against
railways would be materially modified."
It is evident that Mr. Robinson has not been as successful in organizing
small tradesmen, boarding-house keepers, employes and shareholders into
a new party as he contemplated, notwithstanding "it was at no loss for
the sinews of war."
He attempts to show that this movement originated with the employes, but
it is too well known that the employes who organized the movement were
under pay of the railroad companies and received their instructions from
the railroad managers. The statement which Mr. Robinson attributes to
the Governor of Iowa undoubtedly originated in the mind of one who is
laboring to modify the ferocity of "the uninformed public opinion of the
West." No Governor of Iowa ever made any such statement, nor ever
entertained any such sentiment. It is a sheer fabrication.
There are a number of standard text-books of law which are indispensable
to the student of railroad questions desiring to go back to first
principles. Only a few of them can be mentioned here.
I. F. Redfield, in his "Law of Railways," says concerning the necessity
for railroad supervision:
"Railways being a species of highway, and in practice
monopolizing the entire traffic, both of travel and
transportation, in the country, it is just and necessary and
indispensable to the public security that a strict
legislative control over the subject should be constantly
exercised."
Regarding the original character of the railway as a common highway,
Redfield says:
"The Railways Clauses Consolidation Act provides, in detail,
for the use of railways by all persons who may choose to put
carriages thereon, upon the payment of the tolls demandable,
subject to the provisions of the statute and the regulations
of the company. The view originally taken of railways in
England evidently was to treat them as a common highway,
open to all who might choose to put carriages thereon. But
in practice it is found necessary for the safety of the
traffic that it should be exclusively under the control of
the company, and hence no use is, in fact, made of the
railway by others."
As to the questionable financial expedients so frequently resorted to in
building American railways, this author says:
"This is not the place, nor are we disposed, to read a
homily upon the wisdom of legislative grants, or the
moralities of moneyed speculations in stocks on the exchange
or elsewhere. But it would seem that legislation upon this
subject should be conducted with sufficient deliberation and
firmness so as not to invest such incorporations with such
unlimited powers as to operate as a net to catch the unwary,
or as a gulf in which to bury out of sight the most
disastrous results to private fortunes, which has justly
rendered American investments, taken as a whole, a reproach
wherever the name has traveled."
The opinion is expressed in this work that under certain circumstances
railroad securities should be aided by State credit, and is supported by
the following argument:
"Here we have no national funded stock in convenient sums
for small investment, and which, being sure, is really a
great blessing to the mass of those who wish to invest
moderate sums as a protection against age or calamity. In
those countries where such opportunities exist, it removes
all temptation to invest small sums in these enterprises,
which, however necessary for the public, such small owners
can but poorly afford to aid in carrying forward, and which
consequently should in justice either be guaranteed or owned
by the State, or at all events aided by State credit, when
they become indispensable for the public convenience."
Upon the subject of eminent domain Redfield says:
"That railways are but improved highways, and are of such
public use as to justify the exercise of the right of
eminent domain, by the sovereign, in their construction, is
now almost universally conceded."
Kent says in his "Commentaries on American Law":
"The right of eminent domain, or inherent sovereign power,
gives to the legislature the control of private property for
public uses, _and for public uses only_.... So, lands
adjoining New York canals were made liable to be assumed for
the public use, so far as was necessary for the great object
of the canals.... In these and other instances which might
be enumerated, the interest of the public is deemed
paramount to that of any private individual; and yet, even
here, the constitutions of the United States and of most of
the States of the Union have imposed a great and valuable
check upon the exercise of legislative power, by declaring
that private property should not be taken for public use
without just compensation.... It undoubtedly must rest, as a
general rule, in the wisdom of the legislature to determine
when public uses require the assumption of private property;
but if they should take it for a purpose not of a public
nature, as if the legislature should take the property of A
and give it to B, or if they should vacate a grant of
property, or of a franchise, under the pretext of some
public use or service, such cases would be gross abuses of
their discretion, and fraudulent attacks on private right,
and the law would clearly be unconstitutional and void."
Concerning the construction of corporate powers Kent lays down the
following rule:
"The modern doctrine is to consider corporations as having
such powers as are specifically granted by the act of
incorporation, or as are necessary for the purpose of
carrying into effect the powers expressly granted, and as
having no other. The Supreme Court of the United States
declared this obvious doctrine, and it has been repeated in
the decisions of the State courts. No rule of law comes with
a more reasonable application, considering how lavishly
charter privileges have been granted. As corporations are
the mere creatures of law, established for special purposes,
and derive all their powers from the acts creating them, it
is perfectly just and proper that they should be obliged
strictly to show their authority for the business they
assume, and be confined in their operations to the mode and
manner and subject matter prescribed."
As to the duties of common carriers he says:
"As they hold themselves to the world as common carriers for
a reasonable compensation, they assume to do and are bound
to do what is required of them in the course of their
employment, if they have the requisite convenience to carry
and are offered a reasonable and customary price; and if
they refuse without just ground, they are liable to an
action."
Judge Cooley, in his very able work, "Constitutional Limitations,"
refers to the so-called vested rights of corporations and the abuse
growing out of them as follows:
"It is under the protection of the decision in the Dartmouth
College case that the most enormous and threatening powers
in our country have been created, some of the great and
wealthy corporations actually having greater influence in
the country at large, and upon the legislation of the
country, than the States to which they owe their corporate
existence. Every privilege granted or right conferred--no
matter by what means or on what pretense--being made
inviolable by the Constitution, the Government is
frequently found stripped of its authority in very important
particulars, by unwise, careless or corrupt legislation; and
a clause of the Federal Constitution whose purpose was to
preclude the repudiation of debts and just contracts
protects and perpetuates the evil."
The late President Garfield, in one of his legislative speeches, called
attention to the fact that Chief Justice Marshall pronounced the
decision in the Dartmouth College case ten years before the steam
railway was born, and then said:
"I have ventured to criticise the judicial application of
the Dartmouth College case, and I venture the further
opinion that some features of that decision, as applied to
the railway and similar corporations, must give way under
the new elements which time has added to the problem."
Charles Fisk Beach, Jr., in his recent work entitled "Commentaries on
the Law of Private Corporations," well defines what constitutes
dedication to a public use. He says:
"Whenever any person pursues a public calling and sustains
such relations to the public that the people must of
necessity deal with him, and are under a moral duress to
submit to his terms if he is unrestrained by law, then, in
order to prevent extortion and an abuse of his position, the
price he may charge for his services may be regulated by
law. When private property is affected with a public
interest it ceases to be _juris privati_ only. This was said
by Lord Chief Justice Hale more than three hundred years ago
in his treatise _De Portibus Maris_, and has been accepted
without objection as an essential element in the law of
property ever since."
Treating of the fiduciary position of directors and officers of
corporations, the same author says:
"The directors, officers and agents of a corporation are
held to the general rule of law resting 'upon our great
moral obligation to refrain from placing ourselves in
relations which ordinarily excite a conflict between
self-interest and integrity.' The directors and officers
are the agents of the company, and while acting in that
capacity for it cannot deal with themselves to the detriment
of the corporation. All contracts of that character are
voidable at the option of the corporation."
And further he says:
"A director whose personal interests are adverse to those of
the corporation has no right to act as a director. As soon
as he finds he has personal interests which are in conflict
with those of the company he ought to resign."
T. Carl Spelling, in his treatise on "The Law of Private Corporations,"
says of pooling arrangements:
"Courts long ago exercised jurisdiction to regulate rates of
_quasi_ public corporations, and on the same principle will
refuse to enforce pooling contracts between railroad and gas
companies. Such contracts are void as against public
policy.... There is substantial harmony between the English
and American definitions of monopoly, the two countries
agreeing that contracts entered into by and between two or
more corporations, the necessary result of whose performance
will crush and destroy competition, are illegal."
Upon the subject of eminent domain Mr. Spelling remarks:
"That the legislature may thus select any agency it sees fit
for the exercise of eminent domain, and also that it may
determine what purposes shall be deemed public, are
propositions too deeply rooted in the jurisprudence of this
country to admit now of doubt or discussion. Making an
application of this doctrine to railway operations,
conceding it to be settled that these facilities for travel
and commerce are a public necessity, if the legislature,
reflecting the public sentiment, decide that the general
benefit is better promoted by their construction through
individuals or corporations than by the State itself, it
would clearly be pressing a constitutional maxim to an
absurd extreme if it were to be held that the public
necessity should be only provided for in the way which is
least consistent with the public interest.... The power of
eminent domain being an inherent element of sovereignty, it
cannot be divested out of the State or abridged by contract
or treaty so as to bind future legislatures. Nor can the
right be divested by private contract."
Concerning State control of corporations the same author says:
"The subordination of all private interests to the purposes
of government, subject only to the condition that the object
to be accomplished shall be one in which the public has an
interest, is no longer an open question. In its general
bearing this principle is too well settled and uniformly
recognized--underlying the adjudications by courts of all
cases involving constitutional provisions--to require more
than a mere statement."
And again he says:
"Nor is it longer necessary to seek a justification of the
common practice of regulating the rates of charges and
general management of railroads on the ground that they have
received valuable franchises of a public nature and had
important powers of sovereign character conferred upon them.
That may be an important political consideration, and as
such may strengthen the argument in favor of the right; but
the right itself rests upon firmer ground, and upon other
considerations than that of pecuniary consideration derived
from the State. The State may regulate their business, not
because they are corporations, nor yet because they are
corporations of a particular kind, but because they, like
the individuals of which they are composed, are subject to
the laws which say that when one devotes his property to a
use in which the public has an interest, he in effect grants
to the public an interest in that use, and must submit to be
controlled by the public for the common good to the extent
of the interest he has thus created."
CHAPTER XI.
RAILROADS AND RAILROAD LEGISLATION IN IOWA.
The first survey for a railroad in the State of Iowa was made in the
fall of 1852. The proposed road had its initial point at Davenport and
followed a westerly course. It was practically an extension of the
Chicago and Rock Island Railroad, which was then being built between
Chicago and the Mississippi River. On the 22d day of December, 1852, the
Mississippi and Missouri Railroad Company was formed, its object being
to build, maintain and operate a railroad from Davenport to Council
Bluffs. The articles of association were acknowledged before John F.
Dillon, notary public, and filed for record in the office of the
Recorder of Scott County, on the 26th of January, 1853, and in the
office of the Secretary of State on the first day of February following.
In 1853 the Mississippi and Missouri Railroad Company entered into an
agreement with the Railroad Bridge Company of Illinois for the
construction and maintenance of a bridge over the Mississippi at Rock
Island. The work was commenced in the fall of that year, and the bridge
was completed on April 21, 1856, it being then the only bridge spanning
the Mississippi River. The first division of the Mississippi and
Missouri Railroad, extending from Davenport to Iowa City, was completed
on the first of January, 1856, and was formally opened two days later. A
branch line to Muscatine was completed shortly thereafter. On the first
day of July the State of Iowa had in all sixty-seven miles of railroad,
bonded at $14,925 a mile, which at that time probably represented the
total cost of construction. The earnings of these sixty-seven miles of
road during the six months following July 1, 1856, amounted to $184,193,
or $2,749 per mile, which was equal to an annual income of about $5,500
per mile.
On the 15th of May, 1856, Congress granted to the State of Iowa certain
lands for the purpose of "aiding in the construction of railroads from
Burlington, on the Mississippi River, to a point on the Missouri River
near the mouth of the Platte River; from the city of Davenport, Iowa, by
way of Iowa City and Fort Des Moines, to Council Bluffs; from Lyons City
northwesterly to a point of intersection with the main line of the Iowa
Central Air Line Railroad near Maquoketa, thence on said line running as
near as practical to the forty-second parallel across the State; and
from the city of Dubuque to the Missouri River near Sioux City." The
grant comprised the alternate sections designated by odd numbers and
lying within six miles from each of the proposed roads. Provision was
also made for indemnity for all lands covered by the grant which were
already sold or otherwise disposed of.
The wisdom of the land-grant policy has been questioned. When these
grants were made it was believed by many that railroads would not and
could not be built in the West without such aid. While others did not
share this opinion, they at least supposed that land grants would
greatly stimulate railroad enterprise and lead to the early construction
of the lines thus favored.
The land grant of the Mississippi and Missouri Railroad was a mere
donation for that part of the line which was already completed at the
time the grant was made; and the extension of this line, as well as the
construction of the other lines to which the grant applied, was not
made as fast as had been anticipated. The price of all Government lands
lying outside of the land-grant belts was $1.25 per acre. To reimburse
the public treasury for the loss resulting from these grants, the price
of lands situated within the land-grant belts was advanced to $2.50 per
acre, practically compelling the purchasers of the even-numbered
sections of land, instead of the Government, to make the donation to the
railroads, it being supposed that the benefits resulting to those
regions from the immediate construction of railroads would
correspondingly enhance the value of the alternate sections of land
reserved by the Government. Designing men soon saw the advantages which
the situation offered. They combined with their friends to organize
companies for the construction of the land-grant roads, built a small
portion of the proposed line, to hold the grant, and then awaited
further developments, or rather the settlement of the country beyond.
There are those who believe that the doubling of the price of Government
land within the belt of the proposed land-grant roads greatly retarded
immigration and with it the construction of roads. They hold that, had
no grant whatever been made to any railroad company and had equal
competition in railroad construction been permitted, the Iowa through
lines, instead of following, would have led, the tide of immigration.
It has been seen that in 1856 the Mississippi and Missouri Railroad was
completed as far as Iowa City. On the second day of June of that year
its Board of Directors asked the Governor of the State to convene the
General Assembly in extra session, to consider the disposition which
should be made of the recent Congressional grant. This urgency might
lead one to suppose that the company was anxious to extend its line at
the earliest opportunity. The General Assembly was convened, and the
land given to the State by Congress for the purpose of aiding in the
construction of a railroad from Davenport to Council Bluffs was given to
the Mississippi and Missouri Railroad Company. The act was approved by
the Governor on July 14, 1856, and three days later the company
"assented to and accepted the grant." It then executed mortgage after
mortgage, and built a branch line through quite a populous territory,
from Muscatine to Washington, but the main line made very slow progress.
In 1865 the bonded debt of the company amounted to $6,851,754, although
the line was completed only to Kellogg, in Jasper County, about forty
miles east of Des Moines. In spite of the fact that the cost of
operating the road had from the beginning varied but little from 60 per
cent. of its gross receipts, its president, in a circular letter to the
stock-and bondholders, dated October 20th, 1865, made the statement that
the company was "driven to the necessity of selling the road or
reorganizing." In 1866 suit was brought in the Circuit Court of the
United States for the District of Iowa for the foreclosure of the
company's mortgages, and a decree of foreclosure was entered on the 11th
day of May of that year. The property was sold on the 9th day of July
following at Davenport, and was purchased by the Chicago, Rock Island
and Pacific Railroad Company, which was incorporated in this State a few
weeks previous to the sale, for the purpose of acquiring the railroads
built by the Mississippi and Missouri Railroad Company with all its
appurtenant property, "and all the rights, privileges and franchises
granted by the act of Congress of May 15th, 1856, to the State of Iowa,
and by the State of Iowa granted to the said Mississippi and Missouri
Railroad Company, and when so acquired to maintain and operate the said
railroad." It is a significant fact that all the corporators of the new
company, except one, were directors of the bankrupt company. On the 20th
of August, 1866, the Chicago, Rock Island and Pacific Company of the
State of Iowa consolidated with the Chicago, Rock Island and Pacific
Railroad Company of Illinois, and conveyed all its property, powers and
franchises to the consolidated company. The validity of the
consolidation was questioned by a large number of stock-and bondholders,
and the courts were appealed to to issue injunctions restraining the
consolidated company from extending its line or expending any money
obtained through the sale of its securities. In this predicament the
company turned to the Iowa legislature for protection. Anxious to secure
the early completion of the road, the Twelfth General Assembly, by an
act approved February 11th, 1868, recognized the consolidated company,
and resumed and granted to it "all right or interest" which the State
had in the lands previously granted to the Mississippi and Missouri
Railroad Company. The act expressly provided, however, that the Chicago,
Rock Island and Pacific Railway Company should "at all times be subject
to such rules, regulations and rates of tariff for transportation of
freight and passengers as may from time to time be enacted and provided
for by the General Assembly of the State of Iowa," and that if the
company should neglect to comply with any of the requirements of the
act, it should forfeit to the State all its franchises and corporate
rights acquired by or under the laws of the State, and all lands granted
to aid in the construction of its road. The line was completed to
Council Bluffs in June, 1869.
The lands in aid of the construction of a railroad running across the
State, as nearly as practicable along the forty-second parallel, were
granted by the General Assembly to the Iowa Central Air Line on the 14th
of July, 1856, but as this company failed to fulfill the conditions of
its grant, it was, on the 17th of March, 1860, transferred to the Cedar
Rapids and Missouri River Railroad Company. This company completed the
road to Marshalltown in 1862, to Nevada in 1864, to Boone in 1865, and
to Council Bluffs in the fall of 1867.
The Burlington and Missouri River road reached the Missouri River but a
few months later. Ten years after this company had received its grant,
its line had only been completed as far as Albia, in Monroe County. In
1867 the road was built little more than half across the State. But it
managed not to be far behind its two rivals on the north in reaching the
Missouri River.
At first sight it might seem as if these companies had all at once
become awake to their obligations. When it is remembered, however, that
in 1869 the junction of the Union Pacific and Central Pacific railroads
was effected, and thus a continuous line across the continent formed,
the conclusion lies near that the haste with which the three Iowa
land-grant roads were completed was simply the result of a strife for
the large amount of through business which the completion of the Pacific
route promised to bring to them.
No such inducement existed for the Dubuque and Sioux City Company, and
twelve years after receiving its grant it had not yet built half of its
line. In his message to the Twelfth General Assembly, delivered January
14, 1868, Governor Stone said: "Under the provisions of the act adopted
by the General Assembly, at its extra session (in July, 1856), this (the
Dubuque and Sioux City) company became the beneficiary of the grant
designed to secure the construction of a railroad leading from Dubuque
to Sioux City, and this valuable donation was accepted from the State,
with all the terms and conditions imposed. A large portion of this grant
has already been absorbed by the company, in various ways, by pretended
sales and incumbrances. This road has been constructed to Iowa Falls, a
distance of 143 miles from Dubuque, but I am unable to discover any
reliable evidence of earnest intention on the part of this company to
construct the line to its terminal point on the Missouri River."
The Governor further recommended that the General Assembly pass an act
resuming the control over these lands. At about the same time an
agreement was effected between the Iowa Falls and Sioux City Railroad
Company (which was organized in the fall of 1867) and the Dubuque and
Sioux City Railroad Company, by which the latter transferred to the
former its land grant for the unfinished portion of the Dubuque and
Sioux City road. This agreement was confirmed by the General Assembly,
through an act approved April 7, 1868. The road was completed to Fort
Dodge in August, 1869, and to Sioux City a year or two later. The entire
line was then leased to the Illinois Central.
The land grant to this line of road embraced over 1,000,000 acres of the
finest lands of the State. We can appreciate the magnitude of this
donation when we consider that, had these lands been sold at only $8 per
acre, the proceeds would have paid the whole expense of building and
equipping the road from Dubuque to Sioux City. The lands granted to the
C., R. I. & P. R. R. were sold at an average price of over $8 per acre,
and those of the B. & M. at over $12 per acre.
Among the other important land grants is that made to the McGregor
Western Railroad Company. This company was the successor of the
McGregor, St. Peters and Missouri River Railroad Company, which was
organized in 1857 for the purpose of constructing a railroad from
McGregor to the Missouri River. The construction of the road was
commenced in 1857 at McGregor. Large local subscriptions were taken
along the proposed line, the writer being one of the subscribers. Work
was continued the next year until much of the heavy grading had been
done, when the road was allowed to go through the process of
foreclosure, like many other roads built in the West at that time. The
old stock was completely wiped out, and new owners came into possession
of the property, reorganizing under the name of the McGregor Western
Railway Company. Nearly all the early investments of Iowa people were
thus confiscated by the same class of men who now cry out loudly against
confiscatory measures. By an act of Congress approved May 12, 1864, the
State of Iowa was granted, for the use and benefit of the McGregor
Western Railroad Company, every alternate section of land designated by
odd numbers for ten sections in width on each side of the proposed road.
The act contained the condition that in the event of the failure of said
McGregor Western Railroad Company to build twenty miles of said road
during each and every year from the date of its acceptance of the grant
the State might resume the grant and so dispose of it as to secure the
completion of the road in question. The McGregor Western Railroad
Company failing to comply with the conditions of the grant, the General
Assembly on the 27th day of February, 1868, resumed the lands and on the
31st day of March of the same year regranted them to the McGregor and
Sioux City Railway Company. The act specially provided that the company
accepting the grant "shall at all times be subject to such rules,
regulations and rates of tariff for the transportation of freight and
passengers as may from time to time be enacted and provided for by the
General Assembly of the State of Iowa, and further subject to the
conditions, limitations, restrictions and provisions contained in this
act and in the acts of Congress granting said lands to the State of
Iowa." It also contained the condition that at least twenty miles of
road should be built by the company every year and that the whole road
should be completed to the intersection of the then proposed railway
from Sioux City to the Minnesota State line by the first day of
December, 1875.
The McGregor and Sioux City Railway Company also failing to comply with
the terms of the grant, the lands were again resumed by the General
Assembly on March 15th, 1876, and regranted to the McGregor and Missouri
River Railroad Company upon the condition that it complete the road to
the intersection of the Sioux City and St. Paul Railroad on or before
the first day of December, 1877.
But the State found itself again disappointed, and two years later the
General Assembly for the third and last time resumed its grant and then
conferred it upon the Chicago, Milwaukee and St. Paul Railway Company
upon the express conditions that it complete the road to Spencer on or
before the first day of January, 1879, and to Sheldon within a year
thereafter, and that the road should at all times be subject to State
control. The road was completed to Sheldon without delay, and on the
30th of November, 1878, the Governor of the State certified to the
Secretary of the Interior that the Chicago, Milwaukee and St. Paul
Railway Company had completed its road from Algona to Sheldon in
compliance with the conditions of the original grant and the laws of the
State.
It thus took over twenty years to complete this road. Ten years after
its construction had commenced it had only reached Calmar in Winneshiek
County. In 1869 the road was completed to Clear Lake and in 1870 to
Algona. This point remained its terminus until it passed into the hands
of the Chicago, Milwaukee and St. Paul Railway Company.
The State of Iowa has not derived that benefit from the large land
grants made to its railroads which her people had a right to expect. In
spite of these grants roads were built only when there was reason to
believe that they would be immediately profitable to their owners. The
land grants enriched the promoters of these enterprises much more than
they did the State in whose interest the grants were presumed to be
made. As a rule they enabled scheming men to hold the selected territory
until a railroad through it promised to be a safe and profitable
investment, and to avoid the payment of taxes on their millions of acres
of land, which in the meantime became very valuable. Other roads were
built at an early day without Government aid. They were pushed forward
by the current of immigration until the threatened competition of roads
favored by these grants checked their progress. The Chicago, Iowa and
Nebraska road may be cited as a fair illustration. It was projected on
the 26th of January, 1856, in the town of Clinton, to be built from
Clinton to the Missouri River via Cedar Rapids. It was opened to De Witt
in 1858 and completed to Cedar Rapids the following year. The road was
82-1/2 miles long and was built entirely with private means, receiving
neither legislative aid nor local subsidy. It is more than probable
that this road would at an early day have been completed to the Missouri
River, had it not feared the rivalry of the subsidized Cedar Rapids and
Missouri road.
The total number of acres of land granted by Congress to aid the
construction of Iowa roads is 4,069,942. A fair idea of the value of
these lands may be obtained from the fact that the Chicago, Rock Island
and Pacific Railroad Company sold over half a million acres of its lands
at an average of $8.68 per acre, and the Chicago Burlington and Quincy
sold nearly 350,000 acres at an average of $12.17 per acre.
But land grants form only a small part of the public and private
donations which have been made to Iowa roads. Including the railroad
taxes voted by counties, townships and municipalities, the grants of
rights of way and depot sites and public and private gifts in money,
these roads have received subsidies amounting to more than $50,000,000,
or enough to build 40 per cent. of all the roads of the State. There is
no doubt that the contributions of the public toward the construction of
the railroads of Iowa is several times as large as the actual
contributions of their stockholders for that purpose.
The people of Iowa were from the first very favorably disposed towards
railroads. Every inducement was held out to railroad builders to come
here and help to multiply the tracks for the iron horse. They came and
brought with them many abuses which since the first introduction of
railroads had gradually been developed in other States.
The contrast between the old and the new mode of transportation was so
great, and the public appreciated so highly the superior conveniences
afforded by the latter, that for years the abuses practiced by the early
railroads were scarcely noticed, or, if they did attract the attention
of the public, they appeared more like necessary features of the new
system of transportation than like abuses. The evil gradually increased,
but for years no attempt was made to check its growth. The railroad
managers construed this failure of the people to interfere with, or even
protest against, their unjust practices as a quasi-sanction of their
course, and soon claimed to do by right what they had formerly done by
sufferance. The evils increased until the patience of the people finally
became exhausted.
While the State thus for years dealt very leniently with the railroad
companies, the laws of Iowa had from the beginning of railroad building
emphasized the principle of State control. This principle was asserted
in the very first railroad act ever passed in the State. Section 14 of
chapter I. of the acts of the extra session of the Fifth General
Assembly, regranting to the various railroad companies the lands granted
to the State by Congress for railroad purposes, provides that "railroad
companies accepting the provisions of this act shall at all times be
subject to such rules and regulations as may from time to time be
enacted and provided for by the General Assembly of Iowa...." In 1866 an
attempt was made in the General Assembly to regulate rates, but the
Attorney-General, to whom the question of constitutionality was
submitted, held in his opinion that it was not in the power of the
legislature to prescribe rates for railroad companies. This opinion
provoked much indignation among the people of the State, and led to the
expression of a sound public opinion by legislative acts which could not
be misunderstood.
When the Twelfth General Assembly (in 1868) regranted to the Chicago,
Rock Island and Pacific Railroad Company the lands originally granted
to the Mississippi and Missouri Company, it only did so upon the
condition that "said railroad company, accepting the provisions of this
act, shall at all times be subject to such rules, regulations and rates
of tariff for transportation of freight and passengers as may from time
to time be enacted and provided for by the General Assembly of the State
of Iowa...." The same restricting clause, known as the Doud Amendment,
was added to all other land grant acts passed by the Twelfth and
subsequent General Assemblies, and the various companies willingly and
gladly accepted it.
The abuses of which the people of Iowa complained were far from being
confined to their State. They were practiced throughout the Northwest,
and the demand for reform was as loud in Minnesota, Wisconsin and
Illinois as it was in Iowa. In 1871 laws were passed in Illinois and
Minnesota fixing maximum charges for the transportation of freight and
passengers and prohibiting discriminations. The railroads claimed that a
State did not have the right to prescribe rates and refused to be bound
by these laws. Instead of modifying their policy, they became daily more
arrogant. Discriminations which had before been practiced under the veil
of secrecy, or which had been defended by railroad managers as
exceptions to the general rule made necessary by a peculiar combination
of circumstances wholly beyond their control, were now openly and
defiantly practiced by several of the larger roads. The Chicago,
Milwaukee and St. Paul Railroad Company, in its effort to annihilate a
rival, went so far as to openly announce to the public its intention to
entirely disregard distance as a factor in rate-making. It gradually
became the general rule to wage war against rivals at competitive
points and to "recoup" by charging excessive rates at non-competitive
points. Every encouragement was thus given by the railroads to the
Granger movement, which spread in less than two years over the whole
Northwest.
In the fall of 1873 Iowa elected a Granger legislature, like Minnesota,
Wisconsin and Illinois. The wildest predictions were made by railroad
men as to the extremes to which the Granger legislature would go, but it
confined itself to enacting a law establishing an official
classification and fixing maximum rates for all railroad companies. The
law was approved March 23, 1874, and went into effect on the 4th of July
following. This law in no case compelled companies to carry freight at a
lower rate than they had voluntarily carried it in the past. Many of the
rates in force at the time of the passage of the act were considerably
lower than the corresponding maximum rates fixed by the legislature. The
average rates fixed by the law were higher than the rates at which the
railroads had previously carried a large portion of corresponding
freight. The revenues of the road were not even curtailed by this law;
on the contrary, by equalizing rates, _i. e._, by leveling up the rates
given to favored places and favored individuals and leveling down the
exorbitant rates exacted from the public at non-competitive points, the
railroad companies were enabled to effect an increase in their total
revenue.
The Granger law remained in force until 1878. Its constitutionality was
tested by the railroad companies in the Supreme Court of the United
States, but this high tribunal held that rate-making was a legislative
and not a judicial function, that it was within the province of the
State legislature to prescribe rates for the transportation of
passengers and freight wholly within the State, and that for protection
against abuses by legislatures the people must resort to the polls, and
not to the courts.
The Granger laws have been and are still severely criticised by those
opposed to the principle of State control and by the ignorant. It is
nevertheless true that those laws were moderate, just and reasonably
well adapted to remedy the evils of which the public complained. It has
been the policy of most railroad men to attack them as crude, intensely
radical and socialistic. The obloquy heaped upon them was the work of
designing men who desired to continue their impositions upon the people.
Mr. Charles Francis Adams, however, admits that the Granger method was
probably as good a method as could have been devised of approaching men
who had thoroughly got it into their heads that they, as common
carriers, were in no way bound to afford equal facilities to all, and,
indeed, that it was in the last degree absurd and unreasonable to expect
them to do so.
The Iowa law was imperfect in detail, and yet its enactment proved one
of the greatest legislative achievements in the history of the State. It
demonstrated to the people their ability to correct by earnestness and
perseverance the most far-reaching public abuses and led to an emphatic
judicial declaration of the common-law principle that railroads are
highways and as such are subject to any legislative control which may be
deemed necessary for the public welfare.
Defeated in the courts, the railroad managers now endeavored to make
odious the new law which deprived them of the power to manipulate
railroad interests to their personal advantage. By complying with only
part of its letter and none of its spirit, they contrived to create
hardships for certain interests and localities. Instead of charging in
all cases reasonable rates, as the spirit of the law demanded, they
would frequently charge the maximum rates permitted under the law, and
when they by this practice succeeded in damaging certain interests, they
would point to the Granger law as the source of all existing railroad
evils. So, likewise, when they were asked by their patrons to reduce a
high rate, they would plead the legislative schedule in excuse of their
failure to comply with the request. When the legislature of 1878
convened, the railroad managers appeared before it and pleaded
submissively for a repeal of the Granger law and the establishment of a
commissioner system. They claimed that they were ready and willing to
submit to all reasonable regulation, but that a maximum tariff law was
prejudicial both to the best interests of the roads and those of the
public. They further asserted that the people had grown tired of this
manner of regulating railroad charges and earnestly desired a change of
policy; that the interference of the State with the railroad business
had injuriously affected certain industrial interests and had greatly
retarded railroad construction by driving capital and promoters of
railroad enterprises from the State. These statements would indeed have
argued strongly in favor of a repeal of the law if they had been based
on facts. There had been, however, no expression of public
dissatisfaction during the campaign preceding the session of the General
Assembly. There were doubtless individuals and even communities to whom
the law had been made so odious that they felt they had but little to
lose by a change, but the masses of the people believed that the law was
based upon just principles and desired its perfection rather than its
repeal. As to the claim that railroad construction had been checked by
hostile legislation, statistics prove that during the five years
following the great panic of 1873 Iowa fared no worse in this respect
than her sister States east, west or south.
The arguments produced by the railroad managers no doubt influenced some
members of the General Assembly; by far the greater number of them,
however, realised that the failure of the law to bring the expected
relief was not due so much to its own imperfections as to the absence of
a power to enforce it. The writer, with others, was convinced that a
strong and conscientious commission would be a much more potent agency
to secure reasonable rates for the shipper than a maximum tariff law
without proper provisions for its efficient enforcement; they, in short,
preferred a commission without a tariff law to a tariff law without a
commission. The question became the subject of many animated debates in
both houses of the General Assembly, but the commissioner system at last
prevailed. The act establishing a Board of Railroad Commissioners, and
defining their duties, was approved on the 23rd of March, 1878, and went
into force a few days later. The act empowered the commission to
exercise a general supervision over all railroads operated in the State,
to inquire into any neglect or violation of the laws of the State by any
railroad corporation or its officers or employes, to examine the books
and documents of any corporation, to investigate complaints of shippers
that unreasonable charges had been made by railroad companies, and to
modify any charge which they might deem unreasonable. It was also made
the commissioners' duty to make an annual report to the Governor
disclosing the working of the railroad system in the State, the officers
of each company being required to make annual returns to the board for
this purpose.
Though the enactment of this law was a surprise to the people, they
accepted it in good cheer, and determined to give it an honest trial.
The law was extensive in its scope and stringent for that time, and, if
strictly enforced in letter and in spirit, promised to be, and would
have been, entirely sufficient for the thorough control of railroad
corporations.
Nevertheless, in the course of time it became apparent that either the
law had not lodged sufficient authority in the commission or the
commission did not make use of the authority which the law had given
them. In spite of the commission, the railroad companies maintained
pools and charged extortionate and discriminating rates, in direct
violation of the law. It is true the commissioners righted many a wrong.
In investigating the complaints of shippers against railroad companies
they often rendered valuable services to those who had neither the means
nor the inclination to prosecute their rights in the courts of law; but
as they held that they could only pass upon individual charges, and did
not have the power to revise the companies' tariffs, the companies were
virtually in a position to become guilty of more extortions in one day
than the commission could investigate in a year. Moreover, the railroad
company might be ordered by the commission to return an overcharge to a
certain shipper, but this did not prevent it from continuing the
excessive charge. If the overcharged shipper again wanted relief it was
his privilege to again apply to the commission, and to continue this
tedious process until either his or the commissioners' patience became
exhausted. The people soon found that the new system of control was
almost as inadequate as that which it had displaced. Some attributed the
weakness of the commission to its personnel, others to the law. There
is no doubt that the commission might have accomplished more than it
did.
It was hoped by some that as the commission gained in experience it
would gain in influence, and that railroad evils would gradually
diminish. But they were disappointed in their expectations. Every year
seemed to add to the grievances of the public. Success greatly
emboldened the railway companies. Discriminations seemed to increase in
number and gravity. At many points in the western part of the State
freight rates to Chicago were from 50 to 75 per cent. higher than from
points in Kansas and Nebraska. A car of wheat hauled only across the
State paid twice as much freight as another hauled twice the distance
from its point of origin to Chicago. Minnesota flour was hauled a
distance of 300 miles for a less rate than Iowa flour was carried 100
miles. Certain merchants received from the railroad companies a discount
of 50 per cent. on all their freights and were thus enabled to undersell
all their competitors. The rate on coal in carload lots from Cleveland,
Lucas County, to Glenwood was $1.80 per ton, and from the same point to
Council Bluffs only $1.25, although the latter was about thirty miles
longer haul. Innumerable cases of this kind could be cited. There was
not a town or interest in the State that did not feel the influence of
these unjust practices. Many of the rates complained against, it is
true, were beyond the direct control of the State commission, but there
was an impression among well-informed shippers that if the commission
had the power to fix local rates and exercised it judiciously, the
railroad companies would soon find it to their interest to be as
reasonable in making through rates for Iowans as they expected the
commission, to be in prescribing local tariffs.
The demand of the people for more equitable rates and a more thorough
control of the railroad business increased from year to year. Repeated
attempts were made in the General Assembly to secure the passage of an
act looking to that end, but, owing to shrewd manipulations on the part
of the railroad lobby, every attempt was defeated. There always was, of
course, a large number of members who represented districts not well
supplied with railroad facilities. These, as a rule, honestly opposed
restrictive legislation, believing that such legislation would check
building, and that, on the other hand, competition could be relied upon
to correct abuses. Of those members who had less positive convictions
many were retained as railroad attorneys and were thus made serviceable
to the companies. Other members with political ambition were nattered or
intimidated into subjection, and bribes in disguise, such as passes and
special rates, were not unfrequently resorted to to strengthen the
railroad following in both houses of the General Assembly.
Railroad corruption did not pause here. It is a notorious fact that
large sums of money were paid to venal papers of both parties in
consideration of an agreement on their part to defend transportation
abuses and exert their influence against progressive railroad
legislation. The vilest means were often resorted to by these sheets to
obtain their end. Public men who had the courage to avow their
opposition to existing railroad abuses or to favor a more perfect system
of State control of railways were misrepresented, ridiculed, traduced
and denounced as demagogues and socialists by hypocritical editors, who
prostituted their political influence as long as they enjoyed railroad
stipends, and who at intervals became converts to the cause of the
people for the purpose of extorting from the railroad companies a new
and increased subsidy. But truth can not long be suppressed. The masses
of the people may be imposed upon for a time, but even the shrewdest
rogue will eventually be compelled to surrender. In time even rather
unsophisticated voters learned to place a true estimate upon the motives
of the editors, whose policy, as one of them expressed it in the
author's presence, was "controlled by the counting-room."
Railroad politicians gradually lost their influence, and the symptoms of
public discontent greatly increased. In the political campaign of 1887
State control of railroads became one of the main issues. Both of the
great political parties in their platforms had declared themselves very
emphatically in favor of such legislation as would bring railroad
corporations under complete State control, and with very few exceptions
the various legislative districts had nominated only such men as
candidates for legislative offices as were known to be in thorough
accord with the masses of the people upon the railroad question.
The election resulted in an even more complete defeat of the railroad
forces than had been generally anticipated. Yet no hasty step was taken
when the General Assembly convened. A large number of bills
contemplating railroad reforms in various ways were introduced, but the
material presented was carefully sifted by the railroad committees and a
committee bill was framed which incorporated the best features of them
all. The committees listened patiently for weeks to the arguments of the
representatives of both the railroads and the shippers.
Never before had so formidable a railroad lobby assembled at the State
Capitol. The danger signal had been raised, and not only were the great
political manipulators of the State called into requisition, but experts
from adjoining States joined them in besieging the legislature. The
dogs of war were let loose from all quarters. A legion of hirelings were
zealous to show their servility and loyalty to their lords. The daily
and weekly papers of the State in the service of railroad companies
teemed with arguments from the pens of railroad attorneys, and their
columns were profusely supplemented with editorials copied from
prominent corporation papers like the New York _Tribune_, New York
_Times_, New York _World_, Albany _Evening Argus_, Boston _Advertiser_,
and others from various parts of the country.
These papers, attempting to disguise the motives that prompted them to
come to the defense of the Wall Street interest, affected the position
of disinterested and impartial observers. They condemned the proposed
measures as wild and socialistic, and they painted in dark colors the
disasters to railroad property, the injustice to its owners, and
misfortunes to the people of Iowa, that would follow their adoption.
Especially did they bewail the losses that would fall upon the widows
and orphans who had confidingly invested all of their hard earnings in
this property.
They never uttered a word of condemnation, but entirely ignored or
defended the abuses by which the stockholders were robbed at one end of
the line and the patrons were imposed on at the other.
Many of these papers were notified that their statements were altogether
erroneous, but they would not admit a line to their columns in relation
to the matter that indicated any other disposition than complete
subserviency to the interests of Wall Street.
There were, however, an unusual number of strong men in this General
Assembly, and this extraordinary display of railroad forces only tended
to impress more strongly upon them the necessity of curbing the railroad
power, and their best energies were concentrated upon the subject, with
a firm determination to deal with it in a manner dictated by reason and
experience.
So well did the bill which was finally adopted by the committee reflect
the general sentiment of the members of the General Assembly that not a
single vote was cast against it in either house upon its final passage.
Since the adjustment of business under this law, there has been less
friction between the people and the railroads than before for thirty
years, and so satisfactory has it proved to all that no one, not even a
railroad man, has to this day asked the legislature to repeal the law or
any part of it. The act contains no new principle of railroad control.
By far the greater part of its provisions were taken from the old law.
Nearly every one of its features may be found either in the Interstate
Commerce Act or upon the statute books of other States. It provides that
charges must be reasonable and just, that no undue preference or
advantage shall be given to any railroad patron, and that equal
facilities for interchange of traffic shall be given to all roads; it
prohibits pooling, a greater charge for a shorter than longer haul, the
shorter or any portion of it being included in the longer, and
discrimination against any shipping point. It requires that schedules of
rates and fares shall be printed and kept for public inspection, and
that no advance shall be made in rates or fares once established except
after ten days' public notice; and it empowers the Board of Railroad
Commissioners to make and revise schedules for railroads, the rates
contained in such schedules to be received and held in all suits as
_prima facie_ reasonable maximum rates. The act further provides
penalties and means of enforcement.
It must not be supposed that by the passage of this act the legislature
disclaimed the right to fix absolute rates; it simply chose this
expedient because in the present tentative stage of rate regulation it
seemed most efficient.
There has been much misunderstanding concerning the Iowa law. Many
suppose that the Iowa commissioners have power to make confiscatory
rates for the railroads, while in fact they can only name maximum rates
which shall be deemed and taken in all courts of the State as _prima
facie_ evidence that they are reasonable and just maximum rates until
the railroads show that they are not. They are at liberty to go into
court any day and show this, if they are able. They are, however,
careful not to undertake it, for no one knows better than they do that
the rates fixed by the commissioners are liberal for the railroads.
There are nine States, besides Iowa, in which the power to fix rates has
been conferred upon railroad commissioners. This feature of the law was
therefore far from being a novel one, yet no provision of the act was,
previous to its passage, so furiously opposed, or subsequent to it so
stubbornly resisted as this. Railroad managers realized that a surrender
of the right to make their own rates was virtually a surrender of the
power to practice abuses.
Soon after the passage of the law the commissioners commenced the work
of preparing schedules of the rates for the roads. They endeavored to do
justice to both the railroad companies and their patrons by affording a
fair compensation to the former and at the same time giving relief to
the depressed interests represented by the latter. Their rates were not
as low as the special rates that had at various times been granted to
favorite shippers, but were a fair average of the various rates in vogue
at the time. While the schedule was under consideration, the railroad
managers were given frequent hearings, in which they endeavored to
impress their views upon the commissioners and to obtain many important
concessions, which they urged as essential to the welfare of the
railroad interests. Their views guided the commission to such an extent
that it was generally supposed that the schedule as finally adopted
would be accepted by the railroad companies without protest.
The schedule of the Iowa commission has been sharply criticised by Mr.
Stickney in his "Railway Problem." He finds in it inconsistencies and
confusion, due, as he charges, to faulty mathematics. But it is claimed
by the commission, and Mr. Stickney should know, that whenever
mathematics were ignored in the construction of the schedule it was done
at the earnest and persistent solicitation of the railroad managers,
who, it seems, were more interested in maintaining their interstate
rates than in the consistency of the Iowa schedule.
The rates were published, as required by law, and June 28, 1888, was
fixed as the day on which they were to take effect. A few days previous
to this date the companies asked that the taking effect of the new
tariff be postponed a week. When this request was granted by the
chairman of the commission, the railroad managers took advantage of the
courtesy by enjoining the commissioners in the Federal court from
enforcing it.
Several months later the commissioners modified their schedule by the
adoption of the Western Classification. Again the railroad managers
asked the court for an injunction, but this time met with a refusal.
After many suits for penalties had been instituted against them, and
many more threatened, they adopted the new schedule, but endeavored to
inaugurate a policy of retaliation by reducing their train service and
discharging a large number of employes, and in many ingenious ways
continued their seditious course with a determination characteristic of
a band of insurrectionists. But the impetus which railroad traffic
received under the operation of the commissioners' schedule was such
that they soon found it necessary to restore to the service its former
efficiency.
The Railroad Commissioners' report shows that while the number of
employes was 24,642, and their yearly compensation was $14,212,500 in
1889, in 1892 there were 30,492 employes, and their yearly compensation
$18,070,915.
The increase in both the gross and net earnings of Iowa lines has been
remarkable, as shown in the following table gathered from the
commissioners' reports:
Gross Earnings, Net Earnings,
Year. Total. Total. Per Mile.
1888-89 $37,369,276 $11,861,310 $1,421
1889-90 41,318,133 12,798,430 1,522
1890-91 43,102,399 14,463,106 1,720
1891-92 44,540,000 14,945,000 1,777
It was claimed by railroad men that the effect of Iowa legislation would
be particularly disastrous to her local roads, which had no opportunity
to make up on through business the losses incurred in the local traffic.
The Burlington, Cedar Rapids and Northern was particularly cited as a
line which would have to go into bankruptcy under the new law. Its
earnings commenced to increase, however, immediately after the adoption
of the commissioners' schedule, and at the end of the first year they
were large enough to change this line from a Class "C" to a Class "B"
road. They continued to increase, and in 1891 its gross earnings on
substantially the same mileage were 36 per cent, and its net earnings 64
per cent. larger than they had been in 1888. The increase continued and
enabled the company to make a dividend to its stockholders February 1,
1893, it being the first dividend ever made by the company. It is a good
illustration of what the Iowa law has done for weak railroads. It has
again changed class and is now a Class "A" road.
It is seen that the fears, or rather the pretended fears of the railroad
managers, that the legislature of Iowa would bankrupt her railroads,
were entirely groundless. As a result of the law railroads have been
able to increase their gross earnings as well as their profits. They
have been enabled to give employment to a larger number of men, and
there has been no occasion for them to carry out the dishonest threat to
decrease the wages of their employes. Had it not been for their
increased earnings in Iowa, the losses recently sustained in other
States by several of the through lines would have made it impossible for
them to declare the dividends which they did.
Under her beneficial railroad policy Iowa has prospered wonderfully, and
her railroads have been more prosperous than when they were allowed to
have their own way. The commissioners' tariff has made jobbing and
manufacturing profitable where it was unprofitable before. It has added
to our industries and our commerce, and has made new business for the
people as well as the railroads. It has contributed to the increase in
the value of our farms and factories and their products, and the time
will come when wise railroad managers, like the majority of former
slaveholders of the South, would not resurrect the past if they could.
In fact, honorable managers now acknowledge that they would not if they
could.
The railroad companies are at present making a systematic effort to
weaken the Iowa commission, but if they should succeed in doing so, the
people, under our system of electing the commissioners, can readily
correct the evil.
Other States have much experience similar to that of Iowa. Nebraska has
just adopted a maximum tariff law for the control of her roads. It will,
of course, be resisted by the railroad managers of that State.
The State of Texas is not so productive in proportion, but is much
greater in extent than Iowa, and upon the whole resembles it much in its
prominent characteristics. Both are thrifty, progressive States, with no
large commercial or manufacturing centers where their people can easily
organize to protect their financial interests.
The people of Texas endured patiently the abuses so prevalent in
railroad management until a few years since they enacted a railroad law
similar to that of Iowa. The Wall Street managers of the Texas railroads
are at the present time using all of their familiar methods to influence
the people of that State to repeal their law. The following letter
serves to show the spirit with which they are approached:
"23 BROAD STREET,
NEW YORK, November 30, 1891.
James B. Simpson, Esq., Dallas, Tex.
"DEAR SIR: Yours of the 26th is received and contents
carefully noted. Very likely you have valuable franchises,
or what would be valuable in almost any other state than
Texas; but while there are many places in Texas where we
would like to build some railroads--mostly short ones--we
cannot do anything so long as the disposition exists that
now seems to in Texas; that is, to do all the harm they
can do this kind of property, and I think my views are
shared by all people who have money to invest. No one is
disposed to create property which, after being created, is
not to be controlled by its ownership. Of course, we all
expect to be subject to the police regulations and to pay
the taxes of any State even as other property, but whenever
anything is done beyond that it checks this kind of
improvement, and where it approaches so near confiscation as
the sentiment of Texas tends it entirely prevents capital
from being invested.
"I think there is no road in Texas that is to-day earning
its operating and fixed charges. Every road, I think, has
been or is in the hands of a receiver, excepting our great
east and west line, which is supported by business going
entirely through the State, which business could also be
sent another way, and would be so sent, excepting that we
believe the people of Texas will some time take a sober
second thought and treat the railroads as they do other
kinds of property. When that time comes I shall be ready to
talk to you about your franchises, if it comes in my day,
and I believe it will, as I think no other people are
suffering from an unwise policy persistently pursued as are
the people of your State.
"Yours truly,
C. P. HUNTINGTON."
"Now, in the name of all the gods at once,
Upon what meat doth this our Cæsar feed,
That he hath grown so great?"
It was but a few years ago when this Mr. Huntington was keeping a small
retail store in the city of Sacramento, and he exhibited then no greater
ability, except perhaps that he was a little more venturesome, than
thousands of others engaged in the same occupation; subsequently he
engaged, with several others, in the Central Pacific Railroad scheme,
and received from the bounties of our generous Government as his share
of the profits in that enterprise several million dollars, which sum has
ever since been continually swelled by the exercise of a power scarcely
inferior to the power of taxing the property of the Pacific Coast. He
has been so successful for years in manipulating Congressmen and State
legislatures and shaping the policies of States that he now considers it
impertinent and short-sighted for a people to take steps to limit his
levies upon them. It is to be hoped that the boycotting and intimidating
methods resorted to will have no more effect upon the people of that
State than they had on the people of Iowa.
Iowa is the queen among the States of the Union. No other State has so
little waste land or is so productive. Her annual output of staple
products amounts to hundreds of millions of dollars in value. Her people
are intelligent, progressive and just. None are governed more by the
precepts of the golden rule, or are more disposed to render unto Cæsar
the things that are Cæsar's. She can well be proud of the progress she
has made in State control of railroads. Let no backward step be taken.
CHAPTER XII.
THE INTERSTATE COMMERCE ACT.
The Constitution of the United States was adopted nearly fifty years
before the locomotive made its appearance. Had the steam railroad been
in existence in 1787 and been as important an agency of commerce as it
is to-day, there is every reason to believe that the railroad question
would have received the special attention of the framers of that
instrument. It is a well-known fact that the "new and more perfect
government" had its origin in the necessities of commerce, and while the
future exigencies of trade were beyond the reach of the most speculative
mind, the provisions of the Constitution relating to the subject of
interstate commerce were made broad and far-reaching. Section 8 of
Article I. of the Constitution provides that "the Congress shall have
power ... to regulate commerce with foreign nations, and among the
several States, and with the Indian tribes ... and to make all laws
which shall be necessary and proper for carrying into execution the
foregoing powers and all other powers vested by this Constitution in the
Government of the United States, or in any department or officer
thereof."
If any doubt ever existed as to the import of the phrase "to regulate
commerce," it has been entirely removed by the decisions of the Supreme
Court. In the Passenger cases, 7 Howard, 416, the court said:
"Commerce consists in selling the superfluity; in purchasing
articles of necessity, as well productions as manufactures;
in buying from one nation and selling to another, or _in
transporting the merchandise_ from the seller to the buyer
to gain the freight."
And again, in the Philadelphia and Reading Railroad vs. Pennsylvania,
the Supreme Court said:
"Beyond all question the transportation of freights or of
the subjects of commerce for the purpose of exchange or sale
is a constituent of commerce itself. This has never been
doubted, and probably the transportation of articles of
trade from one State to another was the prominent idea in
the minds of the framers of the Constitution when to
Congress was committed the power to regulate commerce among
the several States.... It would be absurd to suppose that
the transmission of the subjects of trade from the seller to
the buyer, or from the place of production to market, was
not contemplated, for without that there could be no
consummated trade with foreign nations or among the States."
Chief Justice Marshall, in Gibbons vs. Ogden, 9 Wheaten, 196, construed
the words "power to regulate" as follows:
"This power, like all others vested in Congress, is complete
in itself, may be exercised to its utmost extent, and
acknowledges no limitations other than are prescribed in the
Constitution."
It is a strange fact that during the first eighty years of the
Government's existence Congress did not exert its power to regulate the
conduct of common carriers engaged in interstate transportation. The
first act regulating such carriers was passed in July, 1866. It
authorized railroad companies chartered by the States to carry
passengers, freights, etc., "on their way from any State to another
State, and to receive compensation therefor, and to connect with roads
of other States so as to form continuous lines for transportation of the
same to the place of destination." The passage of this act, it should be
remembered, was urged by the railroad companies themselves. Seven years
later an act was passed providing that "no railway within the United
States, whose road forms any part of a line or road over which cattle,
sheep, swine or other animals shall be conveyed from one State to
another, or the owners or masters of steam, sailing or other vessels
carrying or transporting cattle, sheep or swine or other animals from
one State to another, shall confine the same in cars, boats or vessels
of any description for a longer period than twenty-eight consecutive
hours, without unloading the same for water, rest and feeding, for a
period of at least five consecutive hours, unless prevented from so
unloading by storm or accidental causes."
Every violation of this act was made punishable by a penalty of from
$100 to $500.
Though Congress had asserted the right to regulate commerce among the
States, it had made previous to 1873 very limited use of that power. In
the midst of the Granger movement the Senate of the United States passed
on the 26th day of March, 1873, the following resolution:
"_Resolved_, That the Select Committee on Transportation
Routes to the Seaboard be authorized to sit at such places
as they may designate during the recess, and to investigate
and report upon the subject of transportation between the
interior and the seaboard; that they have power to employ a
clerk and stenographer, and to send for persons and
papers...."
The committee, under the chairmanship of Mr. Windom, discharged their
duty with great fidelity, and submitted their report to the Senate
during its next regular session. They declared that the defects and
abuses of the then existing systems of transportation were insufficient
facilities, unfair discrimination and extortionate charges. As the
principal causes of such excessive rates they assigned stock watering,
capitalization of surplus earnings, construction rings, general
extravagance and corruption in railway management, and combinations and
consolidations of railway companies. The committee were of the opinion
that the promotion of competition would not permanently remedy the
existing evils, and laid it down as a general rule that competition
among railways ends in combination and in enhanced rates. As expedient
and practical remedies for the existing evils they recommended the
following measures:
1. Direct Congressional regulation of railway transportation, under the
power to regulate commerce among the several States.
2. Indirect regulation and promotion of competition, through the agency
of one or more lines of railway, to be owned and controlled by the
Government.
3. The improvement of natural water-ways and the construction of
artificial channels of water communication.
The report was accepted and considered, but there the matter rested, so
far as the practical results were concerned.
In 1878 Mr. John H. Reagan, of Texas, introduced in the House of
Representatives a bill for an act to regulate railroad companies engaged
in interstate commerce. This may be said to have been the first real
interstate commerce bill before Congress. It was a progressive, thorough
and well-planned measure, but failed to receive the approval of Congress
because a majority of its members considered it too radical a measure.
The bill contained many of the provisions of the present Interstate
Commerce Act, including the anti-pooling and the long and short haul
clauses; but instead of creating a commission it lodged in the courts,
both State and Federal, the power to enforce the law.
Other bills were introduced from year to year, but during a period of
nine years none of them drew sufficient votes to make it a law. Congress
may be said to have been divided into three camps upon the railroad
question, viz.: those who favored the system of regulation proposed by
Mr. Reagan, those who favored the commissioner system and those who were
opposed to every mode of Federal regulation of interstate commerce. In
the meantime, the inactivity of Congress caused considerable
restlessness among the people, and the demand for action became louder
every year. The issue entered into politics, and a number of Western
Congressmen owed their failure to be re-elected to their indifference or
enmity to Federal railroad legislation.
On March 21st, 1885, under authority of a resolution adopted by the
Senate of the United States, the President of the Senate appointed a
select committee to investigate and report upon the subject of the
regulation of the transportation of freight and passengers between the
several States by railroad and water routes. Senator Cullom, of
Illinois, became its chairman. The committee examined a large number of
witnesses, including railroad managers and shippers, addressed letters
to the railroad commissioners of the several States, to boards of trade,
chambers of commerce, State boards of agriculture, Patrons of Husbandry,
Farmers' Alliances, etc., and made every effort to obtain the opinions
of those who had given special attention to the transportation problem.
The report of the committee was submitted to the Senate on January 18,
1886. Concerning the abuses of railroad transportation it differed but
little from that of the Windom committee. The report declared publicity
to be the best remedy for unjust discrimination and recommended that
the posting of rates and public notice of all changes in tariffs be
required. It also recommended that a greater charge for a shorter than a
longer haul be made presumptive evidence of an unjust discrimination,
and that a national commission be established for the enforcement of any
laws that might be passed for the regulation of interstate commerce.
Upon the question of pooling the report stated:
"The committee does not deem it prudent to recommend the
prohibition of pooling, which has been urged by many
shippers, or the legalization of pooling compacts, as has
been suggested by many railroad officials and by others who
have studied the question.... The majority of the committee
are not disposed to endanger the success of the methods of
regulation proposed for the prevention of unjust
discrimination by recommending the prohibition of pooling,
but prefer to leave that subject for investigation by a
commission when the effects of the legislation herein
suggested shall have been developed and made apparent."
The report was accompanied by a bill representing "the substantially
unanimous judgment of the committee as to the regulations which are
believed to be expedient and necessary for the government and control of
the carriers engaged in interstate traffic."
The bill was before Congress for more than a year, receiving several
important amendments before its final passage in both houses. It was
approved by the President on the 4th day of February, 1887, and took
effect sixty days after its passage, except as to the provisions
relating to the appointment and organization of an Interstate Commerce
Commission, which took effect at once.
The act contains twenty-four sections, but is by no means cumbersome. It
is, in many respects, the most important piece of legislation that has
been had in Congress for the past twenty years. It applies to common
carriers engaged in the transportation of passengers or property wholly
by railroad, or partly by railroad and partly by water, when both are
used, under a common control, management or arrangement, for a
continuous carriage or shipment from one State or Territory of the
United States, or the District of Columbia, to any other State or
Territory in the United States or the District of Columbia, or from any
place in the United States to an adjacent foreign country, or from any
place in the United States through a foreign country to any other place
in the United States. It prohibits unjust and unreasonable charges,
special rates, rebates, drawbacks, undue or unreasonable preferences,
advantages, prejudices and disadvantages, as well as all discriminations
between connecting lines. It makes unlawful a less charge for a longer
than for a shorter haul over the same line, in the same direction, the
shorter being included within the longer distance, except when specially
authorized by the Interstate Commerce Commission. It prohibits pools,
requires schedules of freight rates and passenger fares to be kept in
all depots and stations, permits no advance in the rates, fares and
charges once established, except after ten days' public notice, and
makes it unlawful for common carriers to charge either more or less than
schedule rates.
It also requires them to file copies of all schedules, traffic contracts
and joint schedules with the Interstate Commerce Commission, as well as
to make them public when directed by the commission, and prohibits
combinations to prevent the carriage of freight from being continuous
from the place of shipment to the place of destination. It makes common
carriers liable for all damages to persons injured by violations of the
act, and specially provides that any court before which such a damage
suit may be pending may compel any director, officer, receiver, trustee
or agent of the defendant company to appear and testify in the case, and
that the claim that any such testimony or evidence may tend to criminate
the person giving such evidence shall not excuse such witness from
testifying, but that such evidence or testimony shall not be used
against such person on the trial of any criminal proceeding. It likewise
subjects such officers and employes of a railroad company as may be
guilty of aiding or abetting in violations of the act to fines not
exceeding $5,000 for each offense.
These provisions are covered by the first ten sections of the act.
Section 11 establishes the Interstate Commerce Commission, to be
composed of five commissioners appointed by the President by and with
the advice and consent of the Senate. It provides that the commissioners
first appointed shall continue in office for the term of two, three,
four, five and six years, respectively, from the first of January, 1887,
the term of each to be designated by the President, and that their
successors shall be appointed for terms of six years, except that any
person chosen to fill a vacancy shall be appointed only for the
unexpired term of the commissioner whom he shall succeed. No more than
three commissioners may be appointed from the same political party, and
the President has the power to remove any commissioner for inefficiency,
neglect of duty or malfeasance in office. Authority is given to the
commission to inquire into the management of the business of all common
carriers subject to the provisions of the act and to require the
attendance of witnesses and to invoke the aid of any court of the United
States for that purpose.
Section 13 authorizes any person, firm, corporation or association, any
mercantile, agricultural or manufacturing society, any body politic or
municipal organization to file complaints against any common carrier
subject to the provisions of the act, with the commission, whose duty it
is made to forward a statement of the charges to such common carrier and
call upon him to satisfy the complaint or answer the same in writing,
and to investigate the matters complained of, if the complaint is not
satisfied. The commission is also charged with the duty of making such
investigations at the request of State or territorial railroad
commissions and may even institute them at its own motion. Section 14
requires the commission to make a report in writing of any investigation
it may make and to enter it of record and furnish copies of it to the
complainant and the common carrier complained of. Section 15 makes it
the commissioners' duty, when it is found that any law cognizable by it
has been violated by a common carrier, to serve notice on such carrier
to desist from such violation and to make reparation for an injury found
to have been done. If any lawful order or requirement of the commission
is disobeyed by a common carrier, it becomes their duty and is lawful
for any company or person interested in such order to apply by petition
to the Circuit Court of the United States sitting in equity in the
judicial district in which the common carrier complained of has its
principal office, and the court has power to hear and determine the
matter speedily and without the formal pleadings and proceedings
applicable to ordinary suits, and to restrain the common carrier from
continuing such violation or disobedience. It is further provided by
this section that on such hearings the report of the commission shall be
accepted as _prima facie_ evidence.
Section 17 regulates the proceedings of the commission. A majority
constitute a quorum for the transaction of business. The commission may
from time to time make or amend rules for the regulation of proceedings
before it. Any party may appear before it and be heard in person or by
attorney, and every vote or official act of the commission must be
entered of record and its proceedings made public upon the request of
either party interested.
Section 19 provides that the principal office of the commission shall be
in Washington, but that for the convenience of the public it may hold
special sessions in any part of the United States.
Section 20 authorizes the commission to require annual reports from all
common carriers subject to the provisions of the act, to fix the time
and prescribe the manner in which such reports shall be made, and to
require from such carriers specific answers to all questions upon which
the commission may need information.
Section 21 excepts from the operation of the act the carriage of
property for the United States, State or municipal governments, or for
charitable purposes, or for fairs and expositions; also the issuance of
mileage, excursion and commutation tickets, the giving of reduced rates
to ministers of religion, the free carriage by a railroad company of its
own officers and employes, and the exchanging of passes or tickets among
the principal officers of railroad companies.
The sections not noticed are of minor importance, relating to annual
reports, salaries, appropriations of funds, etc.
The act was amended on March 2, 1889, but the amendments made did not
materially affect its principal provisions.
When the law was passed its friends well realized that its success would
greatly depend on the character of the commissioners whom it was
incumbent upon the President to appoint. It was feared that if the
railroad influence should control these appointments, the power to
suspend the long and short haul clause would be the chief and perhaps
the only power exercised by the commission. There was great danger that
the office of Interstate Commerce Commissioner might become a sinecure
for servile railroad lawyers, as similar State officers had been before,
and that a public trust might be turned into an additional corporation
agency for evil. The selection of the commissioners, and especially that
of Judge T. M. Cooley, of Michigan, was greatly to the credit of
President Cleveland. A man of unquestionable integrity, an eminent
jurist and close student of railroad affairs, Judge Cooley was
particularly well qualified for the office of chairman of the Interstate
Commerce Commission, which he occupied for nearly five years with signal
fitness, and from which he only retired to the sincere regret of the
American people. Under Judge Cooley's leadership the commission has been
more than a purely executive board. It was under the Constitution not in
the power of Congress to clothe the Interstate Commerce Commission with
full judicial authority without giving its members, like other Federal
judges, tenure for life, instead of a term of years. The inherent force
of the commission's decisions in its interpretation of the law made them
in many cases virtually the equivalent of judicial rulings.
A few of the most important decisions of the commission may be mentioned
here. Construing the long and short haul clause, they held that, in case
of complaint for violating this section of the act, "the burden of proof
is on the carrier to justify any departure from the general rule
described by the statute, by showing that the circumstances and
conditions are substantially dissimilar." They also decided that "when a
greater charge in the aggregate is made for the transportation of
passengers or the like kind of property for a shorter than a longer
distance over the same line in the same direction, the shorter being
included in the longer distance, it is not sufficient justification
therefor that the traffic which is subjected to such greater charge is
way or local traffic and that which is given the more favorable rates is
not; and that it is not "sufficient justification for such greater
charge that the short-haul traffic is more expensive to the carrier,
unless when the circumstances are such as to make it exceptionally
excessive, or the long-haul traffic exceptionally inexpensive, the
difference being extraordinary and susceptible of definite proof; nor
that the lesser charge on the longer haul has for its motive the
encouragement of manufactures or some other branch of industry, nor that
it is designed to build up business or trade centers."
Upon the question of publicity of the railroad business the commission
held that, as the books of the defendant carriers, as to rates charged,
facilities furnished and general movements of freight, are in the nature
of semi-public records, the officers and agents of defendant carriers
ought to give promptly to a complainant any statement of facts called
for, if such statement may probably have importance on the hearing.
Judge Brewer's opinion as to what constitutes a reasonable rate was
evidently not shared by Judge Cooley and his colleagues, for in the case
of the New Orleans Cotton Exchange vs. the Cincinnati, New Orleans and
Pacific Railway Company the commission decided that the fact that a
road earns but little more than operating expenses cannot be made to
justify grossly excessive rates, and that "wherever there are more roads
than the business at fair rates will remunerate, they must rely upon
future earnings for the return of investments and profits." In another
case the commission hold that "in fixing reasonable rates the
requirements of operating expenses, bonded debt, fixed charges and
dividend on capital stock from the total traffic are all to be
considered, but the claim that any particular rate is to be measured by
these as a fixed standard, below which the rate may not lawfully be
reduced, is one rightly subject to some qualifications, one of which is
that the obligations must be actual and in good faith."
The rules governing the proper construction of classification sheets
which the commission has laid down are founded upon common sense and
justice. They say:
"A classification sheet is put before the public for general
information; it is supposed to be expressed in plain terms
so that the ordinary business man can understand it and, in
connection with the rate sheets, determine for himself what
he can be lawfully charged for transportation. The persons
who prepare the classification have no more authority to
construe it than anybody else, and they must leave it to
speak for itself."
In defining what is legitimate traffic the commission made the following
decision:
"The transportation of traffic under circumstances and
conditions that force a low rate for its carriage or an
abandonment of the business, but which affords some revenue
above the cost of its movement, and works no material
injustice to other patrons of a carrier, is to be deemed
legitimate competition. When, however, its carriage is at a
loss and imposes a burden on like traffic at other points
and on other traffic, it is to be deemed destructive and
illegitimate competition."
It has been shown in a former chapter that the weaker oil refiners have
been discriminated against by the railroads, which permitted the
Standard Oil Company to use their own tank cars in the shipment of oil
and charge its competitors excessive rates for like shipments in
barrels. Complaint being made of this discrimination, the commission
held that it is properly the business of a carrier by railroad to supply
rolling stock for the freight he offers or proposes to carry, and that
"if the diversities and peculiarities of traffic are such that this is
not always practical, and the consignor is allowed to supply it for
himself, the carrier must not allow its own deficiencies in this
particular to be made the means of putting at unreasonable disadvantage
those who may use in the same traffic all the facilities which it
supplies."
A most important ruling of the commission is that relating to the pass
abuse. Complaint was made that the Boston and Maine Railroad Company
issued in the States of Maine, New Hampshire, Vermont and Massachusetts
free passes to certain classes of persons, among them "gentlemen long
eminent in the public service, higher officials of the States, prominent
officials of the United States, members of the legislative railroad
committees of the above named States, and persons whose good will was
claimed to be important to the defendant." The commission decided that
such a discrimination is unwarranted, that a carrier is bound to charge
equally to all persons, regardless of their relative individual standing
in the community, and that the words "under substantially similar
circumstances and conditions" relate to the nature and character of the
service rendered by the carrier, and not to the official, social or
business position of the passenger.
It is a notorious fact that the practice of issuing free passes to
public officials and other influential persons has been more or less
indulged in by nearly every railroad in the country up to the present
time. It is to be hoped that this ruling of the commission will be
enforced in such a manner as to put an end to this intolerable abuse.
The Interstate Commerce Commission has been equally efficient in its
administrative capacity. From the very first it called attention to the
great advantage of having one classification of freight throughout the
country, and it has since labored diligently to unify the various
classifications in use. As the commission in this undertaking is only
armed with the armor of moral suasion, it is a difficult task; but there
is little doubt that the accomplishment of this great reform is only a
question of a few years. Iniquities in classifications and rates are
constantly pointed out by the commission and corrected by the companies.
Moreover, the annual reports of the commission, not to mention its very
excellent statistical data, diffuse much useful information and dispel
many delusions. Thus the fourth annual report of the commission says:
"A stranger to the law might infer, from some public
addresses and pamphlets which have assumed to discuss this
subject, that the railroad companies were prohibited from
carrying the necessities of life over long distances at very
low rates, unless their rates on other subjects of
transportation for shorter distances were made to
correspond. Indeed, instances have been pointed out in which
it was said that certain articles of commerce could not now
be transported for long distances, because, by reason of
this provision, they would not bear the charges that must
under compulsion of law be imposed upon them. Among such
instances has been mentioned the granite industry of New
England, as to which it has been said that valuable
manufactories have ceased to be profitable because it has
now become impossible for the proprietors to obtain from
the railroad companies the nominal rates for the
transportation of their products which they formerly
enjoyed, since it is now, by the long and short haul clause,
made criminal for the companies to give such rates.
"A complaint of this nature is not to be met by argument,
because it is baseless in point of fact. The instance
mentioned may safely be assumed to be chosen rather from
regard to the need of an attack upon the law than from any
belief in the justice of its application. The prohibition of
the fourth section, so far as concerns this article of
commerce, or any other that can be named, will have no
application whatever until it is made to appear that
elsewhere upon the lines of the road conveying it there is
property of the same kind, for transportation by the same
carriers in the same direction, upon which the carriers are
disposed to making greater charges in the aggregate for the
shorter hauls.
"The wheat of the extreme West, it is also said, can no
longer have the nominal rates which were formerly made for
transportation to the seaboard, but this assertion is also
without point or applicability, unless it is shown that the
carriers are not only disposed to give such rates, but
propose to make up for the consequent losses to themselves
by the imposition of greater charges in the aggregate for
the carriage of the like grain when offered for carriage by
growers in the States nearer the seaboard. Nominal rates
impartially made as between shippers of like articles in the
same direction and under like circumstances and conditions
are as admissible now as they ever were."
The same report contains a rather pointed reply to Judge Brewer's ruling
in the Iowa rate cases, viz., that, "where the rates prescribed will not
pay some compensation to the owners, then it is the duty of the courts
to interfere and protect the companies from such rates," and that
compensation implies three things: "Payment of cost of service, interest
on bonds and then some dividends." The commission reviews this stupid
rule as follows:
"The effort has sometimes been made to indicate a rule which
must constitute the minimum of reduction in all cases, and
it has been said that rates must not be made so low that the
carriers would be left unable to pay interest on their
obligations and something by way of dividend to
stockholders, after maintaining the road in proper condition
and paying all running expenses. This comes nearer to a
suggestion of a rule of law for these cases than any other
that has come to the knowledge of the commission. But it is
so far from being a rule of law, that it is not even a rule
of policy, or a practical rule to which any name can be
given, and to which the carriers themselves or the public
authorities can conform their action. In the first place,
when we take into consideration the question of the
condition of roads and of equipment, the proper improvements
to be made, the new conveniences and appliances to be
considered and made use of, if deemed desirable, and the
innumerable questions that are involved in the matter of
running expenses, it is very obvious that there can be no
standard of expenses which the court can act upon and apply,
but that the whole field is one of judgment in the exercise
of a reasonable discretion by the managing powers or by the
public authorities in reviewing their action. It is to be
borne in mind that there are many roads in the country that
never have been and in all probability never will be able to
pay their obligations and to pay dividends, even the
slightest, to their stockholders.... If the rule suggested
is a correct one, and must be adhered to by the public
authorities, then it is entirely impossible that those who
operate these roads can prescribe excessive charges, since
it is impossible to fix any rates that would bring their
revenues up to the point of enabling them to pay any
dividends.... But the rule suggested would also be one under
which those roads would be entitled to charge the most
which, instead of being built with the money of the
stockholders themselves, had been constructed with money
borrowed; the larger the debt the higher being the rates
that would be legal. If a road were out of debt so that it
had no bonds to provide for, it must content itself with
such rates as would pay some dividend to its stockholders.
If the road were in debt, though it perhaps served the same
communities, it might be entitled to charge rates 50, or
possibly 100 per cent higher.... But over and beyond all
this the attempt to apply the rule suggested would be
absolutely futile for the reason that the rates prescribed
for one road would necessarily affect all others that either
directly or indirectly came in competition with it."
It is no exaggeration to say that the annual reports of the commission
stand unexcelled as dauntless, clear, concise and instructive public
documents. It may also be asserted that whatever success has so far
attended the Interstate Commerce Law, that success is in a great measure
due to the tact, courage and ability of the men who, in the past, have
been the guiding spirits of the commission.
Efforts will be made by railroad managers in the future, as they have
been made in the past, to weaken the commission by securing the
appointment of men servile to the railroad interest as members of that
body.
Mr. Depew says that "all railroad men are politicians, and active ones."
This is true as to manipulating managers and will continue to be so just
as long as we allow such extraordinary powers to be exercised by them.
The saloon men are politicians, and active ones. There is not a city or
town in this broad land that is not in danger of falling under their
sway unless their offensive efforts are resisted. The old United States
Bank managers were politicians, and active ones. They perverted the
trust reposed in their hands to such an extent that the indignation of
the people was aroused, and under the lead of a stern old patriot the
bank was swept out of existence. Shall we restrain corporation
management within proper limits and make corporations serve the public
welfare, or shall we let the abuses go on until the people, under the
lead of another Jackson, demand emphatically the application of some
remedy, for better or for worse? Perhaps Government ownership, perhaps
something else. Nations, like individuals, should profit by the
experience of the past.
The Interstate Commerce Commission, in their sixth annual report, say,
concerning the Interstate Commerce Law:
"It was scarcely possible that it should be so complete and
comprehensive at the outset as to require no alteration or
amendment. Those who are familiar with the practices which
obtained prior to the passage of this law, and contrast them
with the methods and conditions now existing, will accord to
the present statute great influence in the direction of
necessary reforms and a high degree of usefulness in
promoting the public interest.
"Whoever will candidly examine the reports of the commission
from year to year, and thus become acquainted with the work
which has been done and is now going on, will have no doubt
of the potential value of this enactment in correcting
public sentiment, restraining public injustice and enforcing
the principle of reasonable charges and equal treatment.
Imperfections and weaknesses which could not be anticipated
at the time of its passage have since been disclosed by the
effort to give it effective administration. The test of
experience, so far from condemning the policy of public
regulation, has established, its importance and intensified
its necessity. The very respects in which the existing law
has failed to meet public expectation point out the
advantages and demonstrate the utility of Government
supervision....
"Of this much we are convinced: The public demand for
Government regulation and the necessity for legal
protection against the encroachments of railroad
corporations have not been diminished by the experience of
the last six years. The act to regulate commerce was not
framed to meet a temporary emergency, nor in obedience to a
transient and spasmodic sentiment. The people will not
tolerate a return to the injustice and wrong-doing which
inevitably occurs when no correction is undertaken and no
regulation attempted. The evils of unrestricted management
will not be permanently endured, and legal remedies will
continue to be sought until they are amply provided. The
present statute, however crude and inadequate in many
respects, was the constitutional exercise of most important
powers and the legislative expression of a great and
wholesome principle. Its fundamental and pervading purpose
is to secure equality of treatment. It assumes that the
railroads are engaged in a public service, and requires that
service to be impartially performed. It asserts the right of
every citizen to use the agencies which the carrier provides
on equal terms with all his fellows, and finds an invasion
of that right in every unauthorized exemption from charges
commonly imposed.
"The railroad is justly regarded as a public facility which
every person may enjoy at pleasure, a common right to which
all are admitted and from which none are excluded. The
essence of this right is equality, and its enjoyment can be
complete only when it is secured on like conditions by all
who desire its benefits. The railroad exists by virtue of
authority proceeding from the State, and thus differs in its
essential nature from every form of private enterprise. The
carrier is invested with extraordinary powers, which are
delegated by the sovereign, and thereby performs a
governmental function. The favoritism, partiality and
exactions which the law was designed to prevent resulted, in
large measure, from a general misapprehension of the nature
of transportation and its vital relation to commercial and
industrial progress. So far from being a private possession,
it differs from every species of property, and is in no
sense a commodity. Its office is peculiar, for it is
essentially public. The railroad, therefore, can rightfully
do nothing which the State itself might not do if it
performed this public service through its own agents instead
of delegating it to corporations which it has created. The
large shipper is entitled to no advantage over his smaller
rival in respect of rates or accommodations, for the
compensation exacted in every case should be measured by the
same standard. To allow any exceptions to this fundamental
rule is to subvert the principle upon which free
institutions depend and substitute arbitrary caprice for
equality of right.
"The spirit of the law is opposed to usages so long
continued and so familiar that their unjust and demoralizing
character has not been clearly perceived, but it is a long
step towards such regulation of the agencies of
transportation as will make them equally available to all
without discrimination between individuals or communities.
It can hardly be the fault of those who are charged with its
administration if the beneficial aims of this statute have
not been fully attained and compliance with its provisions
not completely secured. A better understanding of its
purpose and an educated public sentiment, aided by the
needful amendments which experience suggests, will fully
vindicate the policy of Congress in undertaking to bring the
great transportation interests of the country into general
harmony with its requirements.
"It affords us gratification to add that many railroad
managers of the highest standing now concede the necessity
for Government regulation, and avow themselves in favor of
such further enactments as will make that regulation
effective."
CHAPTER XIII.
THE RATE QUESTION.
Railroad managers frequently make the assertion that the average freight
rates charged in the United States are lower than those usually charged
in European countries and that this fact is in itself sufficient proof
that they are too low. A comparison of the transportation problem of
Europe with our own will show this argument to be fallacious.
While from $25,000 to $30,000 a mile is a very liberal estimate of the
average cost of American roads, the average cost of European railroads,
owing to their expensive rights of way, substantial road-beds and heavy
grades, is probably not less than $75,000 per mile. British railway
companies have laid out for the purchase of land, for right of way and
depot accommodations an amount about equal to the entire average cost of
American roads for the same number of miles.
For instance, the Southeastern Company paid $20,000; the Manchester and
Leeds Company, $30,750, and the London, Birmingham and Great Western,
$31,500 per mile. The first Eastern Counties line paid even $60,000 per
mile for land through an agricultural district. As nearly as can be
ascertained, the average cost of the right of way of railroads was over
$20,000 for the United Kingdom. In Belgium the average cost of the right
of way was $11,000. It was lower, however, in the other countries of the
European continent.
The topography of the country through which the English railways are
built is such as necessitated enormous expenses for heavy embankments,
cuttings, viaducts, tunnels and bridges, and in some cases increased the
cost of the roads to fabulous sums. The Lancashire and Yorkshire Railway
actually cost $260,000 per mile for the whole of its 403 miles. European
roads have been built in a much more permanent manner and have terminal
facilities whose cost is far beyond any sum paid for such purposes in
this country. In Great Britain, moreover, the expenses of contests and
of procuring charters have been very great and have probably averaged
$3,000 per mile.
English railway men charge Americans with having indulged in
stock-watering to a greater extent than any other people in the world.
This is probably true, yet the English have not been dull students of
this art, and they are far from free of having indulged in this luxury.
Much of their railroad stock was issued in a wasteful manner and
represents no actual investment, and it is safe to say that from 30 to
40 per cent. of their present railroad capitalization is water.
If upon the above basis both European and American railroads are to
yield an interest of 4-1/2 per cent. on the actual investment, the
former will have to earn at least $2,250 per mile more than the latter,
and this difference equals about 50 per cent. of the average operating
expenses of American roads per mile. Labor is cheaper across the
Atlantic, but this difference is more than equalized by the employment
of a much larger number of men per mile, as the following table will
show:
Countries. No. of men employed Average wages Wages paid
per mile. per annum. per mile.
United Kingdom 18 $335 $6,000
Belgium 22 210 4,620
Russia 15 240 3,600
Germany 14 250 3,500
France 14 220 3,080
United States 5 555 2,625
The London and Northwestern Railway is 1,793 miles long and has over
55,000 employes, or over 30 per mile. The Lancashire and Yorkshire
Company employs over 42 per mile.
The train men of Europe work less hours and earn less per capita for
their employers than do the train men of this country. The average
annual gross earnings per employe on sixteen of the leading lines of
Great Britain, as shown by Mr. Jeans, appear to be $975 against $1,600
on fifteen leading lines of the United States, while the average net
earnings per employe are $465 on the British lines against $720 on the
American lines; making a difference in favor of this country of 70 per
cent. in gross earnings and 53 per cent. in net earnings. If American
labor is more expensive, it is also more efficient than labor is
elsewhere.
It must also be considered that the average haul in Europe is much less
than the average haul in the United States. It has always been
maintained by the railroad companies, and very justly, too, that the
terminal charges are as important a factor of freight rates as is the
cost of carriage. The terminal charges are the same for a
twenty-five-mile haul as for a thousand-mile haul; they form a
comparatively large part of the total charges for the former and a very
small part of the total charges for the latter. It is therefore
manifestly unjust to compare the rates per ton per mile of Europe with
those of the United States without making due allowance for the
difference in the length of their average hauls. All other things being
equal, a fair comparison between the freight rates of different
countries should be based upon hauls of equal length.
There is another consideration which should not be lost sight of. The
commodities in the United States which contribute principally to the
long haul are raw products. The universally low rates of these
commodities greatly lower the general average. In Europe, on the other
hand, manufactured goods predominate as long-haul freight, and based
upon increased risk and increased cost of carriage, considerably swell
the general average of freight charges. The railroads of the United
States also do more business per train mile than those of any other
country excepting perhaps Austria, Russia and India. This should
certainly enable them to do business for less than it is done by
transatlantic lines.
In addition to all this, a number of European countries, particularly
France, require their railroads to perform large services, such as the
carrying of the mails and the transportation of the officers and
employes of the Government, gratuitously, and to carry soldiers at
reduced rates.
Another factor in the equation should be considered. European roads are
built, equipped and all permanent improvements wholly made at the
expense of the stock- and bondholders, while in this country they are
partially constructed at the expense of the patrons of the road. In the
former case the capitalization of the road represents what has been paid
by the stock- and bondholders, and in the latter, not only what they
have paid, but large contributions paid from the income of the road and
from public and private donations.
It will thus be seen that railroad rates ought to be lower, and even
much lower, here than in Europe. If it _is_ true that the average rate
per ton per mile is lower in America than across the Atlantic, this is
chiefly due to the fact that water transportation has forced down
through (or long-haul) rates and has thus lowered the general average.
This reduction was by no means made voluntarily by the railway
companies, but was forced upon them. Where in the United States water
does not exist, as in local traffic, rates are usually much higher than
in Europe.
The reduction in freight rates was brought about by a number of
inventions which greatly lowered the cost of both the construction and
the operation of railways. Through the introduction of the steam shovel,
of the wheel-scraper, of improved rock-drills, and of other labor-saving
machines, as well as by a general improvement in the methods of grading,
the cost of grading has been reduced from 25 to 50 per cent., and
railroad bridges are now built at one-third of their former cost. Owing
to Bessemer's great invention, steel rails can at the present time be
bought for one-half of what iron rails cost ten or fifteen years ago,
and about one-third of the cost twenty years ago. According to David A.
Wells, the author of "Recent Economic Changes," the annual producing
capacity of a Bessemer converter was increased fourfold between 1873 and
1886, and four men can now make a given product of steel in the same
time and with less cost of material than it took ten men ten years ago
to accomplish. A ton of steel can now be made with 5,000 pounds of coal,
while it required twice that quantity in 1868. When it is considered
that rails and tires made of steel last three times as long as those
made of iron, permit greater speed, carry a much larger weight, and
require less repairs, the importance to the railroad interests of the
improvements made in the manufacture of steel can hardly be
overestimated. Similar reductions have been made in the car and machine
shops. An average train to-day probably costs no more than one-half as
much as it did twenty years ago. Mr. Wells, in the work just mentioned,
says:
"In 1870-'71 one of the leading railroads of the
Northwestern United States built 126 miles, which, with some
tunneling, was bonded for about $40,000 per mile. The same
road could now (1889) be constructed, with the payment of
higher wages to laborers of all classes, for about $20,000
per mile."
A great saving has also been made in the consumption of coal. Under
favorable circumstances a loaded freight car can now be propelled a mile
with one pound of coal. A similar economy of fuel has, through the
improvement of their engines, been effected in ocean steamers. The
invention of the compound engine has reduced the expense of running
about one-half, while it has doubled the room left for the cargo. The
statement has recently been made that a piece of coal half as large as a
walnut, when burned in the compound engine of a modern steamboat, drives
a ton of food and its proportion of the ship one mile on its way to a
foreign port.
Furthermore, the invention of the air-brake has materially reduced the
number of train men formerly necessary to safely manage a train, just as
the introduction of steam-hoisting and other machines, both upon docks
and vessels, has greatly decreased the number of men employed upon the
mercantile marine.
There is certainly much similarity between the railroad and the
steamboat as agencies of transportation. Whatever fuel and labor-saving
causes operate on one must necessarily operate upon the other. When we,
therefore, find that the ocean rates are only from one-third to
one-fourth of what they were thirty years ago, we are justly surprised
to see railroad rates maintained as high as they are. Operating expenses
have been greatly reduced and passenger travel has largely increased
during the past twenty years, but reductions corresponding in the
passenger rates of the United States have not been made.
It is, nevertheless, no easy matter always to determine what are
reasonable rates. It is easier to tell what rates are unreasonable.
Rates are unreasonable that bring an income in excess of sufficient to
keep the road in proper condition, to pay operating expenses, including
taxes and a fair rate of interest on the amount, not including
donations, actually invested in the road. The patrons of a road should
not be taxed to pay interest on their own donations, or on public
donations, to the road, as the donations were made for the benefit of
the public, and not for the benefit of private individuals. A rate which
may appear reasonable to the carrier is apt to be regarded as too high
by the shipper; and, again, one that seems reasonable to the shipper is
denounced as too low by the railroad man. Each is tempted to consult
only his own interests and to disregard the just claims of the other
side. Thus, while the shipper will claim that his rates ought to be low
enough to enable him to compete with other shippers more advantageously
located than he is, the railroad manager will demand a rate which would
enable him to declare high dividends on largely fictitious values. The
owners of roads which were built merely for purposes of speculation or
blackmailing insist on being permitted to charge exorbitant rates to
bring up their earnings to the level of those roads for whose
construction there was a legitimate demand.
It is a settled principle of common law that all rates must be
reasonable, but no uniform rule has as yet been adopted by which the
question of reasonableness is to be determined. The doctrine laid down
by Judge Brewer, that "where the rates prescribed will not pay some
compensation to the owners, then it is the duty of the courts to
interfere and protect the companies from such rates," and that
"compensation implies three things: cost of service, interest on bonds,
and then some dividends," is absurd. A question is never settled until
it is settled right, and this rule is certainly open to very serious
objections. A road may be bonded for several times its cost or its real
value, it may be managed with such recklessness or extravagance that its
operating expenses may be twice what they would be under a careful and
economical management, yet under this rule the shipper must pay the
premium which bond-watering and bad management command. The general
enforcement of such a rule would place the public at the mercy of
scheming railroad manipulators. No matter to what extent the business of
a road may increase, a reduction of rates can always be prevented by the
issue of new bonds and the doubling of the already lordly salaries of
its managers. Again, under the operation of this rule a road which
entirely suffices to do the business between two points may be
paralleled by another and the public be compelled to pay excessive rates
to maintain both. It might be said that the public cannot be forced to
patronize any road, that if it would not withdraw its patronage from the
old line, the new line would soon become bankrupt, and that in such an
event its owners, and not the public, would be the sufferers. This
argument may be met by the statement that, aside from the fact that
concerted action among a large number of people can never be secured,
few roads rely for their support solely upon local business, and that
any loss which the older road sustains from encroachments by its rival
upon its through traffic it is compelled to make up by raising its rates
upon its local business. It is the almost inevitable consequence when
one road is paralleled by another that the business which was
previously done by one road will be nearly equally divided between the
two, and under the rule laid down by Judge Brewer the public will be
called upon to pay the operating expenses and the interest on the bonds
of both, together with such dividends on the stock as the financiering
ability of their managers may secure. The better judgment seems to be
that to determine what are reasonable rates is not a question for
judicial adjudication.
The Interstate Commerce Commission, in their fourth annual report,
assert that "there can be no standard of expense which the courts can
act upon and apply, but that the whole field is one of judgment in the
exercise of a reasonable discretion by the managing powers, or by the
public authorities in reviewing their action." Their views upon this
subject are still more definitely stated in the following words
contained in the same report:
"An attempt is made to give authority to the courts to
interfere by the suggestion that property or charter
contract rights, or both, are involved in the matter of
fixing rates, and therefore that it is not possible the
conclusions of administrative boards should be final. This
is an endeavor, by the mere use of words, to confer
jurisdiction upon the courts where the substance is
altogether wanting. Property or contract rights are involved
in these cases precisely as they are in numerous other cases
of the exercise of power under the police authority of the
State, either by the State itself or by its municipalities."
These views cannot fail to commend themselves to any unprejudiced mind.
It is a well-established fact that all officials will, if permitted,
extend their jurisdiction, and judges are no exception to the rule. It
was therefore but natural that the courts should attempt to solve the
problem of railroad rates.
The attempt so far has been fruitless, nor will it be otherwise as long
as the courts persist in approaching with abstract legal maxims a
question which, above all things, requires the light of experience and
the exercise of sound discretion. The question of railroad rates will
never be satisfactorily settled until it is definitely referred to
expert administrative State and National boards empowered and prepared
to meet the many contingencies that will always arise in the
transportation business.
It is not difficult to account for the inability of the courts to
properly adjudicate the question of reasonable rates. The legislature,
or a board to which it has delegated its power, prescribes for a
railroad company a classification and tariff. The company claims that
the rates so fixed are unreasonably low and applies to the courts for
redress.
Now, if the rates were based upon the cost of service only, it might,
perhaps, be possible for a court to determine whether the prescribed
rates are adequate or not. But even in such a case the question would
arise whether the capitalization and the operating expenses of the road
are not excessive, and its determination would require expert knowledge
and sound discretion rather than legal lore. However, since the cost of
service is not the only, and with railroad men not even an essential,
factor in rate-making, it is evident that the rates upon single
commodities can not be reviewed upon their individual merits, but the
tariff must, in the judicial determination of the question whether it is
reasonable or not, be viewed as a whole. But as it is impossible to
foretell what effect a readjusted tariff would have on the revenues of a
road, even courts are forced to admit that an actual trial of the tariff
is necessary to establish its merits or demerits.
If the complaining company were as anxious to give the new tariff a fair
trial as it usually is to demonstrate to the satisfaction of the court
that it is devoid of every principle of justice, such a test might be
accepted by the public as a reliable basis of judicial procedure. But
railroad managers are not only striving to perpetuate their own high
rates, but to show to the public that freight tariffs not emanating from
a railroad company's office are of necessity crude and unjust to the
carrier. They know that if they should succeed in convincing the public
that administrative boards are incapable of dealing with that question,
they might for years to come be left in undisputed possession of the
power to make their own rates. This is certainly for the railroad
manager a prize worth contending for, and no sacrifice is too great for
him to make when there is any hope of ultimate victory. Being absolutely
uncontrolled in his action, he finds it an easy matter, by temporarily
diverting business from his line, by the increase of operating expenses
and by repressing growing industries, and in many other ways, to curtail
the business of his road and diminish its revenues. He can court losses
in a thousand different ways discernible neither to the courts nor the
general public. In short, it is in the power of any railroad manager to
manipulate such a trial in his own interest, and, if determined, to
obtain a verdict against any tariff not of his own making. This policy
was pursued by several Iowa roads subsequent to Judge Brewer's decision
that the alleged unreasonableness of the Iowa commissioners' tariff must
be established by an actual trial, and was persevered in until the suit
was withdrawn.
But even if the competency of the courts to properly determine such
questions were admitted, there would still exist one serious objection
to their jurisdiction. Courts necessarily move slowly, while all
differences arising between the public and the railways, and especially
those concerning rates of transportation, require prompt and decisive
action. There are no fixed conditions in commerce. It is a kaleidoscope
constantly presenting new phases. Competition at home and abroad, tariff
duties, the condition of the crops and a thousand other influences
affect it and may require a prompt readjustment of the tariff. So long
as railroad companies are permitted to resort to injunctions and effect
other delays rendered possible through the machinery of the courts, to
prevent for years the enforcement of tariffs prescribed by
administrative authorities, so long will the public be at their mercy.
So long as they have nothing to lose and everything to gain by a
judicial contest, it will be their policy to delay through the courts
the enforcement of any tariff, whether prescribed by legislature or by
an authorized commission, that falls below their standard. It is not to
be understood that the acts of railroad commissioners should never be
subject to a judicial view. If such boards clearly exceed their
authority or are otherwise guilty of maladministration, if they violate
constitutional rights, then railroad companies, if injured by their
acts, should be permitted to seek redress in the courts; but they should
not be permitted to nullify an official tariff by legal maneuvers. It is
clearly not within the province of the courts to make rates or to lay
down rules to be followed by those to whom the law has delegated the
power to make them, nor should the courts aid the railroads in any
attempt to nullify an official tariff that has been legally promulgated.
A tariff prepared by sworn and disinterested officials is more likely to
be just than one prepared by interested railroad men, and railroad
companies should be compelled to adopt it and continue it in use until
it is amended or revoked by legal authority.
Individual shippers are powerless as against strong corporations.
Railroads apply to the courts for what they are pleased to term redress,
and in the meantime refuse with impunity to accept an official tariff;
but the shipper has no protection: he must pay their rates or go out of
business. What reason can be assigned why the weaker should thus be
discriminated against? A promulgation of a tariff prepared by a
commission is equivalent to a declaration on the part of these officials
that the rates or some of the rates charged by the railroads are
unreasonably high. The railroad, in applying to the courts for
protection, claims that the tariff prescribed by the commission is
unreasonably low. Both tariffs are therefore impeached, one being that
of an interested private company, the other that of a disinterested
public board. It is evident that, even if the people should see fit to
give the courts jurisdiction in such controversies, one of these tariffs
must temporarily prevail pending the decision of the court, and sound
public policy and justice to the patrons of the road certainly require
that the official tariff be recognized by the courts and made to be
respected by the railroad company until it is proved to be unreasonable
and is set aside by lawful authority.
It is claimed by railroad men that they should be allowed to make their
own tariffs because rate-making is so intricate a subject that none but
railroad experts can do it justice. If this were so the courts would be
even less competent to review a schedule of rates than a State or
National commission would be to make one. Courts cannot be expected to
have expert knowledge in all matters that are likely to be brought
before them. They must rely upon the testimony of expert witnesses
whenever technical questions are involved in the determination of cases.
The identical sources of information from which courts draw are
accessible, or may be made accessible, to a commission, which has the
additional advantage that its members may be selected with special
reference to their fitness for the duties which they will be called upon
to perform and are expected to devote their whole time to the settlement
of questions arising in the transportation business. Such a commission
can practically be made a court with jurisdiction over all matters
connected with railroad business. The railroad manager, no doubt, is
thoroughly familiar with the wants and desires of his company; but it
may fairly be presumed that he is less familiar with the needs of the
public than a railroad commission whose members are in constant
communication with the people, patiently listen to the complaints of
shippers, court and receive suggestions as to needed changes in
classification and rates, and study the relative advantages of the
different sections and different interests of the State or the country
as regards transportation. A railroad freight agent, on the contrary, is
disposed to think that shippers ought to be satisfied with any rate
lower than those charged fifty years ago for carting or other crude
methods of transportation. He regards their views and suggestions as
chimerical and not worthy of any notice, and does not even hesitate to
inform them that rate-making is a branch of the railroad business wholly
beyond their comprehension, and ought not to be meddled with or even
inquired into by the public. The general freight agent is the employe of
a company which rates his usefulness solely by his ability to constantly
increase its revenues, and he invariably proceeds upon the theory that
the best tariff is that which comes nearest imposing upon each commodity
offered for carriage the maximum transportation tax that it will bear. A
man who entertains such opinions cannot be supposed to be able to do
justice to the shipper, and should not be permitted to act as arbitrator
in rate controversies between the public and the company whose employe
and advocate he is. Nor have we any reason to hope for a change in the
present tariff policy of railroads. History has sufficiently
demonstrated the fact that reforms must come from without. As long as
human nature remains as it is, railroad officials will, if permitted,
arrange tariffs in the interest of the men who give them employment, for
if they did otherwise their services would soon be dispensed with. A
freight tariff should be in the nature of a contract between the carrier
and the shipper, and the assent of both parties ought to be essential to
its validity. But as it is impracticable for all the parties interested
to meet for the purpose of effecting an agreement, the power to make
rates has in several States wisely been conferred upon railroad
commissioners, and there is a strong tendency in others to adopt the
same policy. Such boards have every opportunity to obtain any
information needed for the efficient and faithful discharge of their
duties. They can hear the representatives of the railroads as well as
those of the shippers, investigate carefully disputed points, summon
experts and witnesses, and obtain official information relating to
classifications and rates from every State in the Union, and, if
necessary, from every quarter of the civilized world. The assertion may
safely be made that, with experience, a commission acquires more expert
knowledge relating to the business of rate-making than a railroad
manager. If there is any mystery connected with the business of
rate-making which has so far been in the sole possession of railroad
men, it is to their interest to initiate the commissioners into their
profound secrets. It will be their privilege to enlighten the
commissioners as to the actual cost of their respective lines, the cost
of every branch of the railway service, and as to a thousand other
matters which the public has both a desire and a right to know. If,
after a schedule of rates has been prepared, and before it is
promulgated, railroad men can suggest any improvement in it, they should
have the privilege to do so; or if, after giving it a fair trial, they
should be prepared to show that any rate is unreasonably low and
injurious to them, their complaint should be carefully investigated,
and, if found well grounded, the wrong should at once be righted.
But the same privileges should be extended to shippers. Their rights and
their welfare should be guarded as sacredly as those of the railroad
companies. They should have the same opportunity to examine a proposed
schedule before its promulgation and protest against any feature of it
which they may regard prejudicial to their interests, and their
statements should receive the same consideration as is accorded to those
of representatives of the railroad companies. So, likewise, when
shippers prove to the satisfaction of the commission that a rate has
outlived its reasonableness, their complaints should at once be
investigated, and if their cause is found to be a just one, the tariff
should be so amended as to give them relief.
The labors of a board of railroad commissioners are onerous, and their
responsibility is great. No uniform rule can be laid down for their
guidance in the fixing of rates, yet there are a few fundamental
principles which should always be adhered to. The cost of service
should invariably be an important factor of a rate. Railroads should not
be compelled to carry any commodity for less than the actual cost of
moving it, nor should rates be fixed greatly in excess of such cost of
service. The carload should be the unit of wholesale shipments. Since it
costs the railroad company as much to move ten carloads of freight which
belong to one shipper as it costs to move ten carloads belonging to ten
shippers, no advantage beyond the general carload rate should be given
to the large shipper. The difference in the rates between shipments in
less than carload lots ought to be determined solely by the difference
in the cost of carriage and handling. Where shipments are made in
carload lots, the loading and unloading is usually done by the shipper
and consignee, cars are loaded to their full capacity, and no loading or
unloading of shipments at intermediate points is necessary. It is
therefore but just that the consignor and consignee should have the
benefit of the reduced cost of such shipments. Raw materials, and
especially coal and lumber and kindred articles, the transportation of
which requires neither an expensive rolling stock nor warehouse
accommodations nor speedy movement, and in which the risk of loss or
damage is insignificant, should be carried at the lowest rate possible.
Such a policy will tend to foster other interests, which will develop
business for the road and will build up remote sections of the country,
and will often enable railroads to carry large quantities of these
commodities at times when they would otherwise be nearly idle. There
should be a uniform classification throughout the country, based upon
considerations of justice and equity instead of railroad tradition. Such
articles should be classed together as resemble each other as concerns
bulk, weight and risk, or what is virtually the same, cost of carrying
and handling. It may be safely assumed that a rate which has been made
and used by railroad companies is remunerative. If it is claimed by
railroad men that it is not, the burden of proof should rest upon them.
A rate may also be considered remunerative to a road if other lines
similarly situated have voluntarily adopted it. A schedule finally must
be considered reasonable if it enables the company for which it is
prescribed to earn under efficient and economical management sufficient
to maintain its road in proper condition and a fair rate of interest
upon a fair valuation of its road. Property is never worth more than
what it can be duplicated for, and railroad property is no exception to
the rule. If there has been a depreciation in the property of a company,
it should not demand dividends upon values which no longer exist. Nor
can the same returns be conceded to railroad property as to private
capital. Its investment is permanent and well secured, if it is honestly
and intelligently made; and its dividends are net returns after the
payment of all expenses, including taxes, cost of management and
maintenance. The three per cent. bonds of the United States Government
find a ready sale at prices above par. Were there less speculation and
more honesty and stability in railroad management, railroad securities
yielding a revenue of from 2-1/2 to 4 per cent. on the actual investment
would be eagerly sought after by conservative capitalists.
Rate-making requires honesty of purpose, intelligence and discretion,
qualities as likely to be found among the servants of the people as
among those of corporations. A commission may err, but its errors are
not likely to prove as detrimental to the railroad companies as the
extortionate and discriminating rates imposed by railroad managers have
proved to the interests of the public. Railroad managers acknowledge no
obligation except that of earning dividends for their companies, while
the members of a railroad commission, on the contrary, are responsible
for their acts to the people, with us the source of all government and
all power. To question the justice and sincerity of the people, or to
deny the efficacy of such a control, is to deny the wisdom of popular
government.
Railroads might be permitted to reduce their rates below the official
tariff, but they should be required to give at least thirty days' notice
of such a change, to enable shippers to prepare for it. The companies
should not be permitted, however, to raise rates again without obtaining
the commissioners' consent and giving at least two months' notice of the
proposed advance. Sudden fluctuations in rates are a fruitful source of
disaster in those branches of business in which the cost of
transportation forms an important factor in the price of commodities,
and are as unjust and unwarrantable as would be fluctuations in import
duties. As long as they are tolerated there can be no reliable basis for
business calculations or contracts. There is little doubt that, were
such regulations enforced, railroad wars, so demoralizing to the
business of the country, would soon belong to the things of the past,
and a far-reaching assurance of future welfare would be given to the
commercial, manufacturing and all other legitimate interests of the
country. It should always be kept in view by the rate-making power that
the railroad company, like the gas company, the water company and the
street car company, is acting in the capacity of a public agent, and the
rate of compensation should be fixed by public authority.
CHAPTER XIV.
REMEDIES.
The railroad in America is still in its infancy, both as regards extent
of mileage and methods of operation. In 1860 the United States had in
round numbers 30,000 miles of road; in 1870 this number had increased to
53,000; in 1880 to 93,000, and in 1890 to 167,000. It will thus be seen
that the average increase during each of those three decades was nearly
80 per cent. Should this rate of increase continue during the next three
decades there would be in the present territory of the United States a
little over three hundred thousand miles in 1900, 550,000 miles in 1910
and close to one million miles in 1920, or about one mile of road for
every three miles of territory. It is not likely that the rate of
increase of the past will continue in the future; but even if this
should be reduced from 80 to 40 per cent. it would be less than
fifty-five years when the railroad mileage of the United States would
reach the million point.
Even this might seem an extravagant estimate, but it must be remembered
that there are already a number of States in the Union with a railroad
mileage closely approaching this proportion. The District of Columbia
has one mile of road for every 3.39 square miles of territory, New
Jersey for every 3.79, Massachusetts for every 3.96, and Connecticut for
every 4.96 square miles. Ohio, Pennsylvania, Rhode Island and Illinois
follow with one mile of railroad for every 5.14, 5.20, 5.57 and 5.59
square miles of territory, respectively, and Indiana, New York, Delaware
and Iowa are not far behind them.
It should also be borne in mind that many of the through lines have
double, some triple, and some even quadruple tracks, which, if taken
into the account, would increase the mileage much more; and still
railroad construction in most of these States is far from being at a
standstill. The United States will eventually be able to sustain a
closer net of railways than any country in Europe, and we may rest
assured that the time will come when the fertile prairie States of the
Northwest will have a mile of railroad for every square mile of
territory.
In view of the future magnitude of the transportation interest the
importance of placing its control and management early upon sound
principles should not be under-estimated. Abuses crept into railroad
management in the past, not because the men who controlled it were
necessarily worse than men engaged in other pursuits, but because the
States failed to provide adequate legislation for the control of this
new social and commercial force, and the license enjoyed by railroad men
gradually turned into serious evils what seemed at first only harmless
practices. It cannot be denied, however, that the absence of restraint
in time attracted to the business unscrupulous men whose sharp practices
frequently forced their colleagues of better conscience to do what their
sense of honor and justice condemned. These evils and abuses have
increased with the growth of the railroad system, and nothing short of
the sovereign power can now correct them. It is incumbent upon the state
not only to correct the evils of the past, but to base legislative
control of railroads upon principles so wise and so broad as to endure
for ages, permitting the unlimited growth of the system and at the same
time insuring commercial liberty and prosperity to the generations to
come.
As it is always easier to tear down than to build up, so it is likewise
easier to point out evils than it is to provide proper remedies for
their cure. Almost any one can criticise existing conditions, but it
requires wise and constructive statesmanship to propose practical
measures which will bring about desired improvement. The apparent
magnitude of the work of correcting the evils and abuses connected with
the transportation business, many of which have been in vogue for more
than a generation, has discouraged many from seriously undertaking it.
And yet we shall find the problem by no means a difficult one, if we
properly analyze it and go to the root of the evil. Prof. Bryce, in his
work "The American Commonwealth," refers to the fact that the people of
this country have been equal to the task of solving the gravest problems
which have been presented to them, and we need have no doubt of their
ability to solve the railroad problem. Railroad regulation does not
require the adoption of any new principle of law. If the common law is
rightly applied and provision is made for its strict and systematic
enforcement, it will meet every condition that is likely to arise in the
transportation business. It should always be remembered that the
railroad is an improved highway, and the principal reason for which it
is built is to accommodate the people and promote their welfare, and not
to serve the selfish ends of a few individuals, and that private
companies were permitted to build and operate it only because the State
believed that the public interests could best be served in this way.
It is one of the duties of the State to facilitate transportation by
establishing highways. These highways may be built by the State directly
or through municipalities or even private corporations. Thus, under
authority derived from the State, cities lay out, construct and
maintain streets within their limits. But these streets become public
and are always subject to State control. The same rule applies to
turnpikes and ferries. Although the State transfers to an individual or
a company its right to maintain a ferry or to build and maintain a
turnpike, and to compensate itself for its outlay by the collection of
tolls, the ferry and turnpike nevertheless remain highways, subject to
the control of the State.
The railroad partakes of two natures, that of a highway and that of a
common carrier. Railroad companies therefore enjoy the privileges and
assume the duties of both. The State justly exercises in behalf of such
companies the right of eminent domain, _i. e._, the right of the
sovereign to apply private property to public use; but it cannot
rightfully appropriate private property for private use, even if legal
compensation were to be made for it. It is only upon the theory that
railroads are highways, constructed for the public good and subject to
public control, that the State has authorized railroad companies to take
private property for their own use by paying for it a reasonable
compensation. A railroad may even take possession of and intersect a
public road for the purpose of carrying on its functions. But while the
sovereign may exercise the right of eminent domain, it cannot delegate
it to any individual or number of individuals, except to its agents,
performing its functions and being bound to comply with any rule which
may be prescribed for the public good. Under the common law the
individual is entitled to as full use of the railroad as he is of the
common highway. If he is not allowed to put on his own vehicle, this
restriction is simply due to the fact that the people believe that the
business can be done most safely, most economically and most
efficiently by one company or a limited number of companies operating
the road for a reasonable compensation. Nor does this restriction differ
materially from that which the law has placed upon the use of the common
road. Without legislative sanction no one has a right to put upon it a
team of elephants or a locomotive and train of cars, or other strange
motors, and thereby obstruct the public travel. These restrictions might
be removed by the legislative power, and there is also no doubt that
under the common law the State has the right to permit the independent
use of the railroad track by any person having motive power and cars
adapted to it. The persons and freight transported on the railroad are
taxed to maintain it, while in the case of the common road this tax is
placed upon the people and the adjoining property. How to collect the
tax necessary to sustain the road is simply a question of public policy,
and it cannot be collected in any case except with the expressed
permission of the State. If a company is permitted by the State to
operate a railroad it should only be permitted to collect such tolls as
are just and reasonable, and what is just and reasonable should be
determined by the sovereign State, and not by the operating company. The
railroads of the United States collect from our people in round numbers
a transportation tax of eleven hundred million dollars annually. This
tax is equal to a levy of $17 per head, or $85 per family; it is about
as large as all our other taxes combined. In the State of Iowa it
amounts to about $22 per head, or $110 per family, and is two and
one-half times as large as all the State, county, school and municipal
taxes collected within her borders.
When we consider how thoroughly other public charges are hedged about,
by careful restrictions and limitations, and with what caution the
amount to be collected is fixed after thorough public discussion, by
agents of the people selected by them to serve only for short periods,
and that those who collect and disburse the funds are under oath and
bonds for a faithful performance of their duty, is it not preposterous
to permit agents appointed by a few interested persons, and often
serving for a long term of years, without any responsibility to the
public, to fix the rate of this tax, and to collect and disburse the
immense sums levied for the support of these highways without any
supervision or restraint?
The Government might as well lease the post-office, waterways and the
collection of import duties to the highest bidder and permit the lessees
to reimburse themselves by the collection of such tolls as they might
see fit, without any governmental restraint whatever, their franchises
enabling the operating companies to tax each individual, each locality
and each letter, parcel or article as they saw fit. How long would the
people of this country endure such a condition of things? The collection
of taxes has been farmed out, but not by any civilized nation in modern
times. History shows that this system of taxation has always been
productive of the gravest abuses, and prejudicial to the public welfare.
As has already been shown, the railroad is an improved highway, and the
railroad company in operating it is doing a public business and not a
private business, and therefore it should be governed by rules
applicable to public business, and not such as are applicable to private
business. It is admitted by all that for the services which it performs
the operating company should receive a reasonable compensation; but to
say what a reasonable compensation is, how it shall be collected, and to
prescribe rules regulating the business of the public carrier, is
solely the right and the duty of the State. The people have never
permitted the rate of any other public charge to be fixed by the
beneficiary. Why, then, should privileges be conceded to one beneficiary
which are denied to all others?
The assertion is often made by railroad managers that railroad
transportation is a private business as much as any other branch of
commerce. It is not likely that these same managers would wish to have
their argument carried to its logical conclusion, for, should the courts
at any time take their view, they would be under the necessity of
declaring null and void all their charters, which were granted to them
upon the assumption that the railroad was a highway operated under the
authority and control of the State by private companies for the public
good. If, on the other hand, railroad managers are, for their own
protection, forced to recognize the public character of railroads, they
can no longer question the right of the State to so control their
business as the public good may demand. And this shows the absurdity of
the claim often made by railroad managers, that, as long as the rates
charged by them are reasonable, the State has no right to interfere with
their business, or, in other words, that they may discriminate between
individuals and localities, and that they may legally practice a
thousand other abuses as long as individual shippers find it beyond
their power to prove that they have been charged exorbitant rates.
Charles Fisk Beach, Jr., in his "Commentaries on the Law of Private
Corporations," lays it down as a general principle of law that "whenever
any person pursues a public calling and sustains such relations to the
public that the people must of necessity deal with him, and are under a
moral duress to submit to his terms if he is unrestrained by law, then,
in order to prevent extortion and an abuse of his position, the price he
may charge for his services may be regulated by law." And applying this
principle to common carriers, and especially railroads, this author
says:
"The sovereign has always assumed peculiar control over
common carriers as conducting a business in which the public
has an interest, and in the case of railway carriers an
additional basis of governmental control is grounded in the
extraordinary franchise of eminent domain conferred upon
these companies. For corporations engaged in carrying goods
for hire as common carriers have no right to discriminate in
freight rates in favor of one shipper, even when necessary
to secure his custom, if the discriminating rate will tend
to create a monopoly by excluding from their proper markets
the products of the competitors of the favored shipper."
If railroads had no obligations or advantages beyond those of other
common carriers, such as stage lines and steamship companies, their
discriminations might be less objectionable, but, as keepers of the
toll-gates of the public highways, they are no more at liberty to
regulate their own business regardless of the public welfare than were
their predecessors, the toll-collectors stationed along the public
turnpikes and canals. As such public tax-collectors they are bound to
give equal treatment to all persons and places.
Although the business of constructing and keeping in repair the turnpike
roads was, as a rule, left to private persons, and the promoters of such
enterprises were permitted to reimburse themselves for their outlay by
the collection of tolls, their schedules of tolls were prescribed by the
State and their business was placed under the supervision of public
officers, whose duty it was to see that neither extortion nor
discrimination was practiced in the collection of these tolls, and that
the private management of a public business did not become the source of
abuse. The State thus insisted upon exercising a restraining influence
over the business of turnpike companies because it realized the danger
of entrusting the management of a semi-public business to companies
organized solely for private gain, with officers responsible only to
their stockholders, who, under ordinary circumstances, could be relied
upon to measure the usefulness of an employe by his ability to
contribute to the increase of the annual dividends. It will scarcely be
claimed, even by railroad men, that since the days of turnpikes and
stage-coaches corporations have become more unselfish and their officers
less servile. The temptations have increased, while human frailty
remains the same.
Of course, if we consult the railroad managers as to the best policy to
be adopted for the future control of railroad companies, we shall be
informed that we have already gone too far in railroad legislation, that
nearly all the present evils of transportation of which the public and
the railroad companies complain may be traced to legislative
restrictions, and especially to certain features of the Interstate
Commerce Act. They reluctantly admit that this act has been instrumental
for good inasmuch as it has corrected some of the abuses that formerly
existed, but they insist that several of its provisions are too radical
and do infinitely more harm than good, both to the railroad companies
and the people; that these obnoxious provisions ought to be repealed,
and that under such restrictions as would still remain railroad
companies ought to be permitted to manage their own business. If we
inquire what modification of the Interstate Commerce Act the railroads
desire, we find that if the act were amended in conformity with their
wishes there would be little of it left that is of value. But the
features which are specially obnoxious to them are the long and short
haul and the anti-pooling clauses. They even go so far as to demand that
the Government should not only permit pooling, but should use its strong
arm to enforce all pooling contracts which railroad companies might see
fit to enter into. This means, in other words, that the Government
should enforce an agreement to restrict competition, which is made in
direct violation of the common law, and aid the companies in maintaining
such rates as they see fit to establish. If the railroad manager is
cross-examined and forced to confess the truth, he will have to admit
that what he really desires is freedom from all restraint, or, if public
opinion will not tolerate this, then only law enough in letter to
satisfy a public clamor and permit him to violate its spirit, and to
then trust to him and the future to bring it into disrepute and cause
its repeal.
Some shrewd managers have recently expressed a willingness to submit
their pooling arrangements to a public commission for approval, before
they should go into effect. This is objectionable on the ground that
they would then, more even than before, endeavor to control the making
of the commission. It is far safer to absolutely prohibit pooling and
all devices used as a substitute for it. No necessity for pooling
exists, and no good reason can be given why it should be permitted
unless complete government control is established.
State control of railroad transportation is as essential to the welfare
of the companies as it is to that of the public. The history of the past
twenty years has shown that railroad companies are utterly unable to
regulate their relations with each other. They either cannot arrive at
an understanding, and then the stronger companies resort to hostilities
to bring the weaker ones to their terms; or, when an agreement has been
reached among them, they find themselves unable to enforce it. Anarchy
then reigns supreme, until finally a truce is patched up, to be again
followed by evasions, defiance and "war." The nature of the railroad
business is in fact such that, in the absence of strict State control,
it is impossible for a conscientious manager to retain the business to
which his road is naturally entitled, and do full justice to both the
patrons and the stockholders of his road. Efforts have been made again
and again by railroad companies to regulate their affairs and adjust
their difficulties by resorting to pools, agreements, associations and
combinations, formed with all the ingenuity of which men are capable,
and supported by penalties and fines; but the unscrupulous railroad
manager has always found a way to violate or subvert the agreement.
There is a disposition among railroad companies to arrogate all the
powers of sovereignty. They want to make their own laws, impose fines
and declare war, and often go even so far as to openly defy the power of
the State that has given them their existence.
When railroad managers are shorn of the power to practice abuses, they
are at the same time deprived of the many advantages they now have to
speculate in railroad securities and enrich themselves at the expense of
the public and of other railroad stockholders. The great fortunes of
this country have been amassed within a few years, and chiefly from
manipulations of railroad property. If the people permit these practices
to go on without restraint but a few years more, the property of the
nation will be largely under the control of a few bold adventurers. The
great fortunes of Europe which it has required centuries to accumulate
are already outstripped by the "self-made" millionaires of this country.
However persistently railroad managers may assure the people that abuses
in the transportation business have been reduced to a minimum and that
more stringent legislation will be an evil, it is a fact that many of
the graver railroad abuses are still practiced and that much more
reformation is needed in railroad management, or in railroad
supervision, or in both, to make the railroad what it was designed to
be, a highway operated for the public and open to all upon equal and
equitable terms.
The virtual ruler of the United States is public opinion. It is the
power that controls the legislative as well as the executive and
judicial departments of the Government. Enactments of legislatures and
of Congress and decisions of the courts, even of the Supreme Court of
the United States, not in harmony with an intelligent and determined
public opinion, cannot endure, and executives not in accord with the
masses of the people cannot long retain public confidence or official
authority.
Under these circumstances no reform movement has any prospect of success
unless it is supported by public opinion. It should therefore be the
principal endeavor of all advocates of railroad reform to create public
opinion in favor of the measures proposed by them. With an intelligent
public on the alert, the Government may be relied upon to pursue a
healthy and progressive railroad policy. Unfortunately, there are times
when public opinion upon great questions is dormant, while pecuniary
interests, like the force of gravity, never suspend their action. To
arouse the masses at such times, we must rely largely upon an honest,
independent and courageous press, not influenced by gift or patronage.
Many plans have been proposed for a better control of railroads. Some of
these are merely theoretical; others have been tried in part, and a few
have been tried in their entirety, but under circumstances radically
different from those surrounding us. A system which may be well adapted
to a monarchy with a centralization of governmental powers would
probably prove a failure here, when brought in contact with the
principles of dual sovereignty and local rule. Unless a revolution
should change our system of government, a dual system of railroad
control will always be necessary in the United States; for it is not at
all likely that the individual States will ever voluntarily give up
their right to regulate commerce carried on within their respective
borders. On the other hand, the common welfare requires that the
commerce which is carried on between the States should not be hampered
by local interference, but should be regulated only by Congress. Our
experience as a nation has shown that such a quality of sovereignty is
not inconsistent with strength or efficiency, nor need it be productive
of rivalry or friction. The fact that a certain mode of railroad
management has been successful elsewhere is not sufficient proof that it
would be successful here, nor is the fact that it has not been
successful elsewhere sufficient proof that it would not be successful
here. The more the conditions which exist here resemble those under
which it was tested, the greater is the probability that it can be
adapted to our circumstances. Independent thought and action is an
essential element of progress, yet it is the part of wisdom to profit by
the speculation and experience of others.
The following are the principal methods that have been tried or proposed
for the control and management of railroads:
_1. Publicity of the railroad business._
It is held by some that the secrecy with which railroad business is at
present transacted is the source of all evils. It is contended that if
railroads were required to report to the public every item of income and
expenditure, discrimination and extortion, as well as bribery and
corrupt subsidizing, would soon cease. If the companies were compelled
to render an account of all receipts, special rates and drawbacks could
not safely be granted by railroad managers, or, if granted, would soon
lose their charm for recipients, for it would be but a short time until
others would demand and even exact the same privileges. An attorney
would, as a member of the legislature, be slow to accept a retaining fee
if the amount of such fee were made known to his constituents.
Publishers would hesitate to apply for railroad subsidies if the
companies were compelled to render periodically an itemized account of
such expenditures, and railroad companies would, under similar
circumstances, hesitate to pay subsidies, for the subsidized journal
would soon be without patrons. If the items annually expended upon
railroad lobbies were reported, these lobbies would soon be frowned, or
even hissed, out of legislative halls. There can be no doubt that full
and complete publicity in railroad business would correct a large number
of existing abuses, and it should therefore be insisted upon as one of
the first and essential features of railroad reform. It is questionable,
however, whether railroad managers are so sensitive to public opinion
that publicity could be relied upon as a cure for all railroad evils. To
what extent it is desirable to supplement publicity by other measures
of State control will be considered hereafter.
It will, of course, be urged by railroad managers that the State has no
right to pry into the privacy of their business and that they should be
guaranteed the same protection against intrusion that is enjoyed by
other branches of business. To this we must reply that not even banks or
insurance companies are permitted to conduct their business as private,
and that controlling the highway and levying a transportation tax upon
every article of commerce passing over it is essentially public business
and unquestionably subject to public control. Every citizen is as much
interested in it as he is in the transactions of the custom-house, or of
the public treasury, and any transaction of a railroad manager that
shuns public inspection can be set down as a public evil and should be
suppressed. It may safely be laid down as a general rule that the
refusal of a railroad company to give publicity to its transactions is
presumptive evidence of wrong. The people are not alone interested in
such publicity. Stockholders have likewise a right to be protected
against the sinister manipulations of dishonest managers, and publicity
furnishes them the best guarantee of honest management.
Stockholders should attend the meetings of their companies and should
obtain full knowledge of the management of their affairs. If they will
make thorough examination and get at bottom facts the chances are that
contracts will be found with owners of patents, white lines, blue lines,
refrigerator car lines, coal companies, ferry companies, manufacturing
companies, packing companies and other kindred organizations, by which
hundreds of millions of dollars are diverted from the treasuries of the
railroad companies to the pockets of influential persons connected with
the management of the roads.
It has recently come to light that the officers of a Pennsylvania
railroad company, during fifteen years, by some means of secret rebates
and other allowances, have taken about $100,000,000 out of the treasury
of the company and distributed it as largesses to about half a dozen
iron and steel establishments.
This is a method of getting wealthy at the expense of others not unknown
to many another great fortune accumulated in the last twenty years.
Railroad discriminations have been a fruitful source of those gross
inequalities in wealth distribution which now agitate society and call
people's parties and the like into existence. The modern millionaire
appears to be an entirely natural creation. Perhaps this money taken in
special rates from the Pennsylvania railroad's treasury, or, rather,
from the pockets of the road's other patrons, and of the men who may
have sought, without special rates, to compete with the favored ones in
their business, only to be crushed in financial ruin, will be spent in a
praiseworthy way, in accord with the principles of "the gospel of
wealth." What we need now is the gospel of distribution of facilities
for the accumulation of wealth, as well as the gospel of distribution of
great fortunes.
Whether inspired by a bull or a bear interest or neither, all will
concede the ability of Mr. Henry Clews to picture the evils of railroad
management; and his lack of generosity in accrediting ability or honesty
to legislators who are called upon to provide remedies for the wrongs
that he so well depicts will not deter me from indorsing the following
statement made by him in a magazine article which is pertinent to this
discussion:
"One great difficulty that present railroad legislators have
to contend with is the evil methods of railroad building and
extension. A great deal of the mileage of the last two years
has been premature, and doubtless for speculative purposes.
Most of it has been constructed, however, by old companies
who had good credit to float bonds and could raise all the
money required. Hence there has been but little financial
embarrassment arising from the too rapid construction. But
people are beginning to find out that a great deal of this
building has been in the interest of speculative directors
and their friends, who, for a mere song, had bought up
barren lands considered worthless because there was no means
of transportation. But these lands soon become immensely
valuable for sites of villages, towns and cities. The
construction companies, by which these roads were generally
built, raised the cost to the highest possible figures, in
order, I fear, to make dividends for the construction
stockholders. It is noteworthy that the directors connected
with these construction schemes have been exceedingly
prosperous, while the stockholders of the roads have grown
poor in an inverse ratio. The dividends of the latter have
disappeared. The new mileage, much of which, I apprehend,
has been made on this principle, was about twenty-one
thousand miles, which is greater than the entire mileage of
Great Britain. There should be additions to the Interstate
Law, or a special law regulating the methods of construction
companies, which are probably doing more to demoralize the
railroad system--and doing it very insidiously, too--than
any other factor connected with these great arteries of the
country's prosperity.
"Legislative reform is greatly needed in the matter of
railroad reports, especially for the safety of investors,
and to prevent speculative abuses among railroad officials
and their friends and favorites. There should be statements
issued annually, or perhaps more frequently, upon the truth
of which everybody might rely. These should be sworn
statements, and should bear the signatures of at least three
of the directors. These directors should be required to
call to their aid expert accountants, and should have placed
at their disposal all the books of the company or
corporation and all the other papers necessary to verify the
accuracy of their report. The correctness of the statement,
when issued, would then be a foregone conclusion, and an
investor in London, Paris or Berlin could buy or sell on his
own judgment, an experiment which, under existing
arrangements, might prove very costly. It is proverbial that
a railroad statement now is defective in the most essential
particulars, and, to put it mildly, usually covers a
multitude of sins. According to one plan approved by
railroad companies, the statement published to-day, for
instance, is made to show a surplus of many millions, but
there is nothing said about an open construction account to
which the surplus is debtor. On this favorable showing (with
this _suppressio veri_) the stock goes up and the insiders
quickly unload upon the investment public. The following
statement, which comes out six months later, shows that the
surplus has been used to settle the construction
indebtedness. The surplus has disappeared; consequently the
stock suffers a serious decline. Those who bought on the
strength of the large surplus sell out, on being informed of
its distribution. Then the inside sharks come forward again
and purchase at reduced prices, probably at a depreciation
of from ten to fifteen points or more, and keep their stock
until the next periodical appearance of the bogus surplus.
Thus the insiders grow rich, while the outsiders become
poor. The only remedy for this abuse is a sworn statement at
regular intervals, and if the directors should commit
perjury they would render themselves liable to State prison.
If a few of them should be tempted to fall into the trap,
and be made examples of in this way, nothing would do more
to work a speedy reform in this contemptible method of
book-keeping.
"I would also suggest a change in the character of the
directors. Those usually chosen for this office now are men
who have vast interests of their own, more than sufficient
to absorb their entire time and thoughts. They are selected
mainly on account of their high-sounding names, to give
tone to the corporation and solidify its credit, in order
that the lambs of speculation may have proper objects in
whom confidence can be reposed and no questions asked. The
management of the affairs of the corporation is frequently
intrusted to one man, who runs the business to suit his own
individual interests."
We can appreciate the force of the above remarks when we consider that
last year seventy-five companies realized a gross income of
$846,888,000, which is equal to about 80 per cent. of the total income
received by all of the railroads of the United States.
_2. Free competition upon all railroads._
Mr. Hudson, in his excellent work, "The Railways and the Republic,"
recommends the following remedy:
"Legislation should restore the character of public highways
to the railways, by securing to all persons the right to run
trains over their tracks upon proper regulations, and by
defining the distinction between the proprietorship and
maintenance of the railway and the business of common
carriers."
Mr. Hudson proposes to leave the track in the possession of its present
owners, but to permit any individual or company to run, upon the payment
of a fixed toll, trains and cars over it, under the control of a
train-dispatcher stationed at a central point. This train-dispatcher is
to be notified by telegraph of the movement of each train, and is to
give his orders to the officers in charge of each train, as to what
points they are to go, where to pass one train and where to wait for
another. Each transportation company is to own, load and forward its own
trains; it is to be required to run its regular train on schedule time
or to have it follow another train as an extra. They are to be liable to
their shippers as well as to the railway company for all damages caused
by their neglect, while the railroad company is to be held responsible
for the condition of its track. It will not be necessary to go into the
details of Mr. Hudson's plan. Suffice it to say that he proposes to
establish free competition in the railway business by making the use of
the railway track as free as that of the turnpike or canal, subject only
to such control on the part of the public train-dispatcher as the
paramount considerations of speed and safety may require.
The adoption of Mr. Hudson's plan would simply be a return to the first
principle of railroad transportation. It has already been shown that the
first English charters permitted the public to use their own vehicles
and motive power upon the railroad track, but that shippers and
independent carriers could not avail themselves of these provisions of
the early charters because it was in the power of the railroad companies
to make their tolls prohibitory. There is but little question as to the
practicability of Mr. Hudson's plan from a purely technical standpoint,
and its adoption might be advisable if it should be demonstrated that a
monopoly of the track is inconsistent with the operation of the railways
for the public good. It is seriously doubted, however, whether such
ideal competition as Mr. Hudson desires to bring about could be secured
except at the expense of true economy. Concentration, or, rather,
consolidation in the railroad business has, under proper legal
restriction, always resulted in a saving of operating expenses, and
usually in a reduction of rates. Any step in the opposite direction,
whatever other merits it may possess, is in the end not likely to give
lower rates. If it is a settled principle that railroads are only
entitled to a fair compensation for their services, it must be evident
that what would be a fair compensation for the same or similar services
to a large, well-organized, well-regulated and well-managed company
cannot be sufficient compensation to an individual carrier or a small
company, whose expenses will always be comparatively larger than those
of its better-equipped rival. Monopoly and extortion need not
necessarily be synonymous. In fact, States and municipalities in their
public works often prefer monopoly to competition as the cheaper of the
two. Nevertheless, should it ever be found that monopolies cannot be
reconciled with justice and economy, a return to the first principles of
railroading may become advisable.
_3. State ownership and management._
A number of European states, notably Prussia, France and Belgium, as
well as Australia, British India and the British colonies in Southern
Africa, have adopted government ownership of railroads. The motives
which led to this step in the various countries differ greatly. While in
Europe military and political considerations predominated, in Africa and
Australia it was more the want of private capital and energy which led
the government to engage in railroad enterprises. There has in most of
these states been a desire to avoid the evils usually connected with
private management. The experiment of state ownership and management of
railroads has been longest tried in Belgium, and with the best results.
With an excellent service the rates of the Belgian state roads are the
lowest in Europe. Their first-class passenger tariffs are, next to the
zone tariff recently adopted on the state roads of Hungary, the lowest
in the world, and are, for the same distance, lower than those of
American roads. In Prussia the state service, upon the whole, is also
superior to that of private companies, and is probably equal to the
public demand. In France the government only owns and operates less
important lines, but furnishes upon these a more efficient and cheaper
service than private companies would either be able or disposed to
furnish. The oft-repeated statement of those opposed to government
regulation to the contrary notwithstanding, government ownership and
management of railroads is a decided success in Europe, Mr. Jeans says
of state railroads:
"Notwithstanding the superior financial result, the lines
worked by the state are those kept in the best order, and
the working of which gives the greatest satisfaction to the
commercial world and the public in general as regards
regularity of conveyance, cheapness of transit and the
comfort of travelers."
It is difficult to see how any unbiased person can travel on any of the
state roads of Europe without coming to the same conclusion. State
management offers certainly some decided advantages to the public. Above
all, the business of the roads is not conducted for the pecuniary
advantage of a few, but for the common good. Commerce is not arbitrarily
disturbed to aid unscrupulous managers in their stock speculations. New
lines are not built for speculative purposes, but for the development of
the country. Rates are based more upon the cost of service than upon
what the traffic will bear, and the ultimate object of the state's
policy is not high profits, but a healthy growth of the country's
commerce, while the sole aim of a private company is to get the largest
revenue possible. The permanent way of the state road is kept in better
condition, the public safety and convenience being paramount
considerations. Rates are stable and uniform, instead of being
changeable and discriminating, and all persons and places are as equal
before the railroad tax collector as before the law. It may be laid down
as a general rule that under private management of railroads efforts
will be made to secure the highest rates possible, while it is the aim
of the Government to grant the lowest rates possible. Mr. Jeans proves
by statistics that the cost of maintenance of way is generally higher on
the state lines, and that traffic expenses are higher on the lines of
private companies. In commenting upon this difference he says:
"It might easily be contended, and even proved beyond all
doubt, that the first characteristic is a result of the
better condition in which the state keeps the permanent way;
and, so far as this is the case, the public convenience,
safety and general advantage are promoted.
"The highest range of traffic expenses on companies' lines
undoubtedly argues greater laxity of management, since, as
we have already shown, this is one of the most elastic of
items, and may be either very high or very low, according as
economy or extravagance is the prevailing system.... The
experience of Continental Europe points unmistakably to the
exercise of greater economy in state management."
Judge Dillon, of the United States Court, in his order appointing Hon.
J. B. Grinnell receiver for the Central Railroad of Iowa, in 1876, said:
"The railroads in the hands of the court--and in the circuit
there are eight or ten--have all been run with less expense,
and have made more money, than when they were operated by
the companies; and we hope and believe under your
supervision that this road will prove no exception, and that
the property will be worth more at the end of the
litigation."
Upon Mr. Grinnell's resignation, after nearly three years of service,
Judge Grant said, in asking for the discharge of his bondsmen:
"I concur entirely in the opinion of the State commissioners
that he has very much improved the condition of the road,
and he left it in far superior condition to that in which he
received it."
Yet Government ownership and management of railroads also has its
drawbacks. It is claimed by some that such management is more expensive
than that of lines owned by private companies. It has already been shown
that the permanent way is kept in better condition by the state than by
private corporations. In Russia, Germany, Austria-Hungary, France and
Italy the state expends from 15 to 30 per cent. more for the maintenance
of the permanent way than the private companies. It is perhaps also true
that the rank and file of railroad employes fare, on an average, better
under government than they do under private management; but, as an
offset to this, it should be remembered that quite a saving is effected
by the state in the salary account of general officers. The people will
not consent to pay the manager of a railroad line a salary six times as
large as that of a cabinet officer, and provide at the same time
sinecures for his sons, brothers, nephews and cousins.
It is furthermore claimed that, as government is organized, it cannot,
all other things being equal, respond to the demands of commerce as
promptly as private companies. This feature, however, may be an
advantage to the country at large rather than a detriment. But the
strongest argument that can be produced against state ownership of
railroads is that under a democratic form of government it might exert a
demoralizing influence in politics. The 1,700 railroad companies of the
United States have at present an army of about 800,000 employes. This
number is constantly increasing, and it is more than probable that
before the end of the present century it will have reached a million.
When it is considered what importance is at present attached to the
political influence of a hundred thousand Federal officers, it is not
surprising that conservative citizens should hesitate to add to the
ranks of these officeholders a six or seven times larger force.
Dangerous as the railroad influence now is in politics, it would be ten
times more dangerous if under a system of Government management
considerations of self-interest should induce a million railroad
employes to act as a political unit and political parties should vie
with each other in bidding for the railroad vote. Could our civil
service ever be so organized as to divest it entirely of political
power, state management of railroads might still offer the best solution
of the railroad problem.
Mr. T. B. Blackstone, president of the Chicago and Alton Railroad
Company, has recently created somewhat of a surprise by declaring in
favor of Government ownership of railroads. That Mr. Blackstone's
programme will eventually receive the approval of a large number of his
colleagues there can be but little doubt. With the people wide-awake
upon this subject, the opportunities for railroad speculation are
lessening, and the scheme to early unload the railroads of the country
on the Government at a highly inflated value speaks well for the
financial farsightedness of its author. Mr. Blackstone proposes to have
railroad stockholders do here what the former owners of the telegraph
did in Great Britain, _i. e._, dispose of their property to the
Government, at a price representing several times its original cost or
even several times the cost of duplication.
Mr. C. Wood Davis, formerly general freight and passenger agent of one
of the leading roads east from Chicago, is one of the best informed and
clearest-headed writers upon the railroad question. He has, after much
experience and long study, been converted to the advocacy of national
ownership as a solution of the railroad problem. In a recent article
published by the Arena Publishing Company, entitled "Should the Nation
own the Railways?" he presents the objections and advantages of national
ownership. He says:
"The objections to national ownership are many, that most
frequently advanced, and having the most force, being the
possibility that, by reason of its control of a vastly
increased number of civil servants, the party in possession
of the Federal administration at the time such ownership was
assumed would be able to perpetuate its power
indefinitely.... This objection would seem to be well taken,
and indicates serious and far-reaching results unless some
way can be devised to neutralize the political power of such
a vast addition to the official army.... In the military
service we have a body of men that exerts little or no
political power, as the moment a citizen enters the army he
divests himself of political functions; and it is not
hazardous to say that 700,000 capable and efficient men can
be found who, for the sake of employment, to be continued so
long as they are capable and well behaved, will forego the
right to take part in political affairs. If a sufficient
number of such men can be found, this objection would, by
proper legislation, be divested of all its force....
"2. That there would be constant political pressure to make
places for the strikers of the party in power, thus adding a
vast number of useless men to the force, and rendering it
progressively more difficult to effect a change in the
political complexion of the administration.
"That this objection has much less force than is claimed is
clear from the conduct of the postal department, which is
unquestionably a political adjunct of the administration;
yet but few useless men are employed, while its conduct of
the mail service is a model of efficiency after which the
corporate-managed railways might well pattern. Moreover, if
the railways are put under non-partisan control, this
objection will lose nearly, if not quite, all its force.
"3. That the service would be less efficient and cost more
than with continued corporate ownership. This appears to be
bare assertion, as from the very nature of the case there
can be no data outside those furnished by the
government-owned railways of the British colonies, and such
data negative these assertions; and the advocates of
national ownership are justified in asserting that such
ownership would materially lessen the cost, as any expert
can readily point out many ways in which the enormous costs
of corporate management would be lessened. With those
familiar with present methods, and not interested in their
perpetuation, this objection has no force whatever.
"4. That with constant political pressure unnecessary lines
would be built for political ends. This is also bare
assertion, although it is not impossible that such results
would follow; yet such has not been the case in the British
colonies where the governments have had control of
construction....
"5. That, with the amount of red tape that will be in use,
it will be impossible to secure the building of needed
lines. While such objection is inconsistent with the fourth,
it may have some force, but as the greater part of the
country is already provided with all the railways that will
be needed for a generation, it is not a very serious
objection even if it is as difficult as asserted to procure
the building of the new lines. It is not probable, however,
that the Government would refuse to build any line that
would clearly subserve public, convenience, the conduct of
the postal service negativing such a supposition....
"6. That lines built by the Government would cost much more
than if built by corporations. Possibly this would be true,
but they would be much better built and cost far less for
maintenance and betterments, and would represent no more
than actual cost; and such lines as the Kansas Midland,
costing but $10,200 per mile, would not, as now, be
capitalized at $53,024 per mile, nor would the president of
the Union Pacific (as does Sidney Dillon, in the _North
American Review_ for April) say that "a citizen, simply as
a citizen, commits an impertinence when he questions the
right of a corporation to capitalize its properties at any
sum whatever," as then there would be no Sidney Dillons who
would be presidents of corporations, pretending to own
railways built wholly from Government moneys and lands, and
who have never invested a dollar in the construction of a
property which they have now capitalized at the modest sum
of $106,000 per mile....
"7. That they are incapable of as progressive improvement as
are corporate-owned ones, and will not keep pace with the
progress of the nation in other respects; and in his _Forum_
article Mr. Acworth lays great stress upon this phase of the
question and argues that as a result the service would be
far less satisfactory.
"There may be force in this objection, but the evidence
points to an opposite conclusion. When the nation owns the
railways trains will run into union depots, the equipment
will become uniform and of the best character, and so
sufficient that the traffic in no part of the country would
have to wait while the worthless locomotives of some
bankrupt corporation were being patched up, nor would there
be the present difficulties in obtaining freight cars
growing out of the poverty of corporations which have been
plundered by the manipulators, and improvements would not be
hindered by the diverse ideas of the managers of various
lines in relation to the adoption of devices intended to
render life more secure or to add to the public
convenience.... Existing evidence all negatives Mr.
Acworth's postulate that "state railway systems are
incapable of vigorous life."
"8. An objection to national ownership which the writer has
not seen advanced is that States, counties, cities,
townships and school districts would lose some $27,000,000
of revenue derived from taxes upon railways. While this
would be a serious loss to some communities, there would be
compensating advantages for the public, as the cost of
transportation could be lessened in like measure.
"Many believe stringent laws, enforced by commissions
having judicial power, will serve the desired end, and the
writer was long hopeful of the efficacy of regulation by
State and National commissions; but close observation of
their endeavors and of the constant efforts--too often
successful--of the corporations to place their tools on such
commissions, and to evade all laws and regulations, have
convinced him that such control is and must continue to be
ineffective and that the only hope of just and impartial
treatment for railway users is to exercise the 'right of
eminent domain,' condemn the railways, and pay their owners
what it would cost to duplicate them; and in this connection
it may be well to state what valuations some of the
corporations place upon their properties.
"Some years since the Santa Fe filed in the counties on its
line a statement showing that at the then price of labor and
materials--rails were double the present price--their road
could be duplicated for $9,685 per mile, and, the materials
being much worn, the actual cash value of the road did not
exceed $7,725 per mile.
"In 1885 the superintendent of the St. Louis and Iron
Mountain Railway, before the Arkansas State Board of
Assessors, swore that he could duplicate such a railway for
$11,000 per mile, and yet Mr. Gould has managed to float its
securities, notwithstanding a capitalization of five times
that amount."
Among the advantages to be derived from Government ownership he names
the following:
"First would be the stability and practical uniformity of
rates, now impossible, as they are subject to change by
hundreds of officials, and are often made for the purpose of
enriching such officials....
"It would place the rate-making power in one body, with no
inducement to act otherwise than fairly and impartially, and
this would simplify the whole business and relegate an army
of traffic managers, general freight agents, soliciting
agents, brokers, scalpers and hordes of traffic association
officials to more useful callings, while relieving the
honest user of the railway of intolerable burdens.
"Under corporate control, railways and their officials have
taken possession of the majority of mines which furnish the
fuel so necessary to domestic and industrial life, and there
are few coal fields where they do not fix the price at which
so essential an article shall be sold, and the whole nation
is thus forced to pay undue tribute.
"Controlling rates and the distribution of cars, railway
officials have driven nearly all the mine owners, who have
not railways or railway officials for partners, to the wall.
"With the Government operating the railways, discriminations
would cease, as would individual and local oppression; and
we may be sure that an instant and absolute divorce would be
decreed between railways and their officials on one side,
and commercial enterprises of every name and kind on the
other.
"The failure to furnish equipment to do the business of the
tributary country promptly is one of the greater evils of
corporate administration, enabling officials to practice
most injurious and oppressive forms of discrimination, and
is one that neither Federal nor State commission pays much
attention to. With national ownership a sufficiency of cars
would be provided. On many roads the funds that should have
been devoted to furnishing the needed equipment, and which
the corporations contracted to provide when they accepted
their charters, have been divided as construction profits,
or, as in the case of the Santa Fe, Union Pacific, and many
others, diverted to the payment of unearned dividends, while
the public suffers from this failure to comply with charter
obligations.
"There would be such an adjustment of rates that traffic
would take the natural short route, and not, as under
corporate management, be sent around by the way of Robin
Hood's barn, when it might reach its destination by a route
but two-thirds as long, and thus save the unnecessary tax to
which the industries of the country are subjected. That
traffic can be sent by these roundabout routes at the same
or less rates than is charged by the shorter ones is _prima
facie_ evidence that rates are too high.
"There would be a great reduction in the number of men
employed in towns entered by more than one line. For
instance, take a town where there are three or more
railways, and we find three or more full-fledged staffs,
three or more expensive up-town freight and ticket offices,
three or more separate sets of all kinds of officials and
employes, and three or more separate depots and yards to be
maintained. Under Government control these staffs--except in
very large cities--would be reduced to one, and all trains
would run into one centrally located depot; freight and
passengers be transferred without present cost, annoyance
and friction, and public convenience and comfort subserved,
and added to in manner and degree almost inconceivable.
"The great number of expensive attorneys now employed, with
all the attendant corruption with the fountains of justice,
could be dispensed with, and there would be no corporations
to take from the bench the best legal minds, by offering
three or four times the Federal salary....
"Every citizen riding would pay fare, adding immensely to
the revenues. Few have any conception of the proportion who
travel free, and half a century's experience renders it
doubtful if the evil--so much greater than ever was the
franking privilege--can be eliminated otherwise than by
national ownership. From the experience of the writer, as an
auditor of railway accounts, and as an executive officer
issuing passes, he is able to say that fully ten per cent.
travel free, the result being that the great mass of railway
users are yearly mulcted some thirty millions of dollars for
the benefit of the favored minority; hence it is evident
that if all were required to pay for railway services as
they are for mail services, the rates might be reduced ten
per cent, or more, and the corporate revenues be no less,
and the operating expenses no more. In no other
country--unless it be under the same system in Canada--are
nine-tenths of the people taxed to pay the traveling
expenses of the other tenth. By what right do the
corporations tax the public that members of Congress,
legislators, judges and other court officials and their
families may ride free? Why is it that when a legislature
is in session passes are as plentiful as leaves in the
forest in autumn?...
"The corporations have ineffectually wrestled with the
commission evil, and any number of agreements have been
entered into to do away with it; but it is so thoroughly
entrenched, and so many officials have an interest in its
perpetuation, that they are utterly powerless in the
presence of a system which imposes great and needless
burdens upon their patrons, but which will die the day the
Government takes possession of the railways, as then there
will be no corporations ready to pay for the diversion of
traffic.
"As a rule, American railways pay the highest salaries in
the world for those engaged in directing business
operations, but such salaries are not paid because
transcendent talents are necessary to conduct the ordinary
operations of railway administration, but for the purpose of
checkmating the chicanery of corporate competitors. In other
words, these exceptionally high salaries are paid for the
purpose, and because their recipients are believed to have
the ability to hold up their end in unscrupulous corporate
warfare where, as one railway president expressed it, 'the
greatest liar comes out ahead....'
"Government control will enable railway users to dispense
with the services of such high-priced umpires as Mr. Aldace
F. Walker, as well as of all the other officials of
sixty-eight traffic associations, fruitlessly laboring to
prevent each of five hundred corporations from getting the
start of its fellows, and trying to prevent each of the five
hundred from absorbing an undue share of the traffic. It
appears that each of these costly peace-making attachments
has an average of seven corporations to watch....
"With National ownership the expenditures involved in the
maintenance of traffic associations would be saved and
railway users relieved of a tax that, judging from the
reports of a limited number of corporations of their
contribution towards the support of such organizations, must
annually amount to between $4,000,000 and $5,000,000.
"Of the six hundred corporations operating railways,
probably five hundred maintain costly general offices,
where president, secretary and treasurer pass the time
surrounded by an expensive staff. The majority of such
offices are off the lines of the respective corporations, in
the larger cities, where high rents are paid and great
expenses entailed, that proper attention may be given to
bolstering or depressing the price of the corporation's
shares, as the management may be long or short of the
market. So far as the utility of the railways is concerned,
as instruments of anything but speculation such offices and
officers might as well be located in the moon, and their
cost saved to the public....
"Railways spend enormous sums in advertising, the most of
which National ownership would save, as it would be no more
necessary to advertise the advantages of any particular line
than it is to advertise the advantages of any given mail
route.... A still greater expense is involved in the
maintenance of freight and passenger offices off the
respective lines, for the purpose of securing a portion of
competitive traffic. In this way vast sums are expended in
the payment of rents and the salaries of hordes of agents,
solicitors, clerks, etc., etc....
"Under Government control discriminations against localities
would cease, whereas now localities are discriminated
against because managers are interested in real estate
elsewhere, or are interested in diverting traffic in certain
directions....
"Another, and an incalculable benefit, which would result
from National ownership, would be the relief of State and
National legislation from the pressure and corrupting
practices of railway corporations, which constitute one of
the greatest dangers to which republican institutions can be
subjected. This alone renders the nationalization of the
railways most desirable, and at the same time would have the
effect of emancipating a large part of the press from a
galling thraldom to the corporations....
"Estimated net annual saving to the public which would
result from Government control:
From consolidation of depots and staffs $20,000,000
From exclusive use of shortest routes 25,000,000
In attorneys' fees and legal expenses 12,000,000
From the abrogation of the pass evil 30,000,000
From the abrogation of the commission evil 20,000,000
By dispensing with high-priced managers
and staffs 4,000,000
By disbanding traffic associations 4,000,000
By dispensing with presidents, etc 25,000,000
By abolishing all but local offices,
solicitors, etc. 15,000,000
Of five-sevenths of the advertising account 5,000,000
-----------
Total savings by reason of better administration $160,000,000
"It would appear that, after yearly setting aside
$50,000,000 as a sinking fund, there are the best reasons
for believing that the cost of the railway service would be
some $310,000,000 less than under corporate management.
"That $6,000,000,000 is much more than it would cost to
duplicate existing railways will not be questioned by the
disinterested familiar with late reductions in the cost of
construction, and that such a valuation is excessive is
manifest from the fact that it is much more than the market
value of all the railway bonds and shares in existence."
The above quotations from Mr. Davis' article hardly do it justice, and
it should be read in full to appreciate its full force. Many of the
predictions and estimates are undoubtedly in the main correct, yet upon
the whole it must be admitted that it is a rather rosy and too hopeful
view to take of Government ownership of our railroads.
_4. State ownership with private management._
This is a compromise between a public and a private system of railway
ownership and management. It is claimed by the advocates of this system
that if the Government would acquire by purchase or through condemnation
proceedings all of the railroads of the country, pay for them by issuing
its bonds, and then lease the various lines to the highest responsible
bidders, prescribing a schedule and rules of management, most of the
benefits resulting from state ownership of railroads could be secured
while nearly all its disadvantages would be avoided. It is proposed to
purchase railroads at their actual value and to issue in payment bonds
bearing the same rate of interest as other Government securities. This
would deprive managers of every opportunity to manipulate the railroad
business for purposes of stock speculation. It would also reduce the
fixed charges of our railroads at least 50 per cent., the benefits of
which reduction the public would chiefly share. The acquisition of the
railroads by the Government would, moreover, afford the conservative
capitalist a safe and permanent investment, which, with the gradual
disappearance of our war debt, might become a national desideratum.
It is proposed by the advocates of this system that the Government fix
rates of transportation for a certain period, to be reviewed at the end
of that period upon an agreed basis. The operating companies would be
required to keep their roads in repair and give sufficient bonds for the
faithful performance of their contracts. If found guilty of persistent
violations of the terms of their leases or of such laws as Congress
might enact for their control, their bonds and leases might be declared
forfeited. A new Government department or bureau would have to be
established and charged with the duty of exercising the same control
over railroads which the Government now exercises over national banks,
and in addition to this complete publicity of the service would have to
be relied upon to prevent the introduction of abuses.
There are at least two valid objections that can be urged against the
adoption of such a system. Responsible companies could not be induced to
lease a line for a valid consideration unless their rates were
definitely fixed for a series of years. Such a course might, however,
in time result in great hardship to the commerce of the country, as the
great and unavoidable difference in the rates of the various railroad
lines of the country would give to the commercial interests of some
sections decided advantages over those of others. Besides this it would
be very difficult to compel the different companies to keep the lines
leased by them in repair. Controversies would constantly arise between
the officers charged with the supervision of the roads and the operating
companies, which could be ultimately determined only by the courts,
causing to the Government loss, or at least delay in the adjustments.
_5. National control._
Mr. A. B. Stickney, in his work, "The Railway Problem," holds that in
the interest of uniformity it is desirable to transfer the entire
control of railroads to the National Government. He assigns two reasons
for the proposed change; one being that Congress would consider the
subject of railroad control with more intelligence and greater
deliberation; the other, that "the problem of regulating railway tolls
and of managing railways is essentially and practically indivisible by
the State lines or otherwise," and that the authority of Congress to
deal with interstate traffic carries with it the right to regulate the
traffic which is now assumed to be controlled by the several States.
It must be admitted that it is a difficult matter to draw the line of
demarcation between National and State control, and that Congressional
regulation of railways would remedy many evils which now affect our
transportation system; yet there is reason to believe that the proposed
change would in the end be productive of more evil than good. It is an
essentially American maxim that the home government only should be
trusted with the administration of home affairs. The people of each
State know best their local needs, and it is safe to say that for a
generation or two no serious effort will be made to amend the Federal
Constitution in this respect or to secure from the courts an
interpretation of the interstate commerce clause greatly differing from
that which now obtains.
It is thus seen that nearly all the methods of railroad management which
we have discussed are, at the present time at least, more or less
impracticable on account of the radical changes which they would
necessitate. It is not likely that for many years to come the American
people could be induced to try any extensive experiments in state
ownership of railroads; nor is it any more likely that the present
generation will undertake the difficult task of separating the ownership
of railroads from their operation.
A nation is, like the individual, inclined to follow beaten tracks. It
finds it, as a rule, easier to improve these tracks than to abandon them
and mark out a new course. Any proposition made for the improvement of
our system of railroad transportation is in the same proportion likely
to receive the approval of the masses in which it makes use of existing
conditions. It will, therefore, be my aim, in making suggestions as to a
more efficient control of this modern highway, to retain whatever good
features the present system possesses, and to only propose such changes
as may seem essential to restore to the railroad the character of a
highway.
As has been indicated above, any system of railway regulation, to be
applicable to our circumstances, must recognize the dual sovereignty of
Nation and State. The great majority of our railroad corporations were
originally created by the State, and are only responsible to the State
as long as they do not engage in interstate commerce. Even foreign
corporations must submit to all police regulations of the State in which
they may do business, and as long as the American Constitution remains
intact the individual States will, and should, assert their right to
regulate local traffic and to exercise police supervision over all
railroads crossing their boundaries.
All power should be kept as closely to the people as is consistent with
efficiency in the public service. It may even be questioned whether
entire transfer to the Federal Government of the supervisory powers now
exercised by the States in railroad affairs would tend to correct
existing railroad evils more speedily or more effectually than they can
be corrected through the agency of local rule. The conditions, and
therefore the wants, of the different States differ so greatly that
general legislation must always fail when it attempts to regulate
matters of merely local concern.
The means employed by the State for the regulation of the roads under
its jurisdiction should be such as are least likely to lead to a
conflict with Federal authority, and experience has shown that the
authority of the General Government and that of an individual State over
a railroad company, which is incorporated under the laws of the latter,
but is engaged in interstate commerce, may be so harmonized as to avoid
conflicts between the two sovereignties without any great sacrifice of
power on the part of either. Judge Cooley said recently in reference to
regulation by National and State commissions:
"There is no good reason in the nature of things why the
conformity should not be complete and perfect. It is
remarkable that up to this time there has been so little--I
will not say of conflict, but even of diversity of action
between the National and State commissions. Indeed, I recall
no instance at this time when anything done by the one has
seemed to me to afford just ground for complaint by the
other. This may justly be attributed to the fact that there
has been no purpose on the part of either to do any act that
could afford ground for just complaint on the part of
managers of the business regulated and no desire to do
anything else than to apply rules of right and equality for
the protection of the general public. The aim of all
regulation ought to be justice, and when it is apparent that
this is the purpose of the several commissions, the railroad
managers of the country may more reasonably be expected to
coöperate with them much more generally than they do now. If
these managers were to come generally and heartily into more
full and complete recognition of the rules of right and
justice that the law undertakes to lay down for the
performance of their duties in their management of the great
interests they represent, there cannot be the least doubt
that the general result would be, not only that their
service to the public would be more useful than it is now,
but that the revenues derived from their business would be
materially increased through the cutting off of many of the
drains upon them, which now, while affecting injuriously the
returns they can make to their stockholders, at the same
time have the effect of prejudicing the mind of the general
public against railroad management to an extent quite beyond
what is generally understood by those who suffer from it.
The prejudice is inevitable, and not at all unreasonable
when it is seen, as it very often is, that these drains
result from an unjust discrimination against the public or
some portion thereof, that they are of a character that
ought to need no law and no criminal or other penalties to
put them under the ban of condemnation in every office of
railroad management.
"I take the liberty of adding one more thought: that the
more perfect is railroad legislation, the less we shall hear
of transportation by rail being made a Government function,
the General Government making purchase of all the roads and
entering upon a course which will lead we know not where or
into what disasters."
There has been during the past twenty years a tendency in a majority of
the States to place the local control of railroads in the hands of
executive boards, usually styled "railroad commissioners." Previous to
this period the various States relied solely upon legislation for the
regulation of the transportation business, but in time they became
convinced that such laws were inoperative for the want of an enforcing
power. It was found that the individual shipper was unable to cope with
a powerful company and usually would rather suffer wrong than to enter
into a contest which nearly always resulted in great pecuniary loss to
him. On the other hand, it was apparent that if the claim of the
individual were pressed by a railroad commission, even though such a
body had but limited powers, it would, under ordinary circumstances, be
honored, provided it was meritorious; and if the commission was
compelled to enforce a demand through the courts, it would have the
support of the State to poise the wealth and power of the corporation.
The term "railroad commissioner" in the United States is nearly as old
as the railroad itself; but the first officials bearing that title were
merely successors to the turnpike commissioners of yore; their duties
consisted chiefly in supervising, passing or reporting upon the
construction and condition of the highway.
The first railroad commission, in the present acceptation of the term,
was created in the State of Massachusetts, in 1869. The commission
consisted of three persons, whose principal duty was to "make an annual
report to the General Court, including such statements, facts and
explanations as will disclose the actual working of the system of
railroad transportation in its bearing upon the business and prosperity
of the commonwealth, and such suggestions as to its general railroad
policy, or any part thereof, or the condition, affairs or conduct of any
railroad corporation, as may seem to it appropriate." This board also
had the general supervision of all railroads and power to examine the
same. It was required to give notice in writing to any railroad
corporation which, in its judgment, was guilty of any violation of the
railroad laws of the State; and if such company continued the violation,
after such notice, it became the duty of the commission to present the
facts to the Attorney-General. It was further made the duty of the board
to examine, from time to time, the books and accounts of all railroads,
to see that they were kept in a uniform manner, and upon the system
prescribed by the board. It was also required to investigate the cause
of any accident on a railroad resulting in loss of life. These being the
principal duties of the board, its powers were very limited; but its
personnel supplied the power which the law had withheld. The success of
this commission exceeded even the expectations of the advocates of the
system, who, in view of the limited powers of the commission, had
anticipated but meager results.
To quiet the Granger movement the railroads favored and finally secured
the adoption of the commissioner system in the West, and South, in which
sections it attained its highest development. It was soon found that a
commission after the Massachusetts model, when composed of men less
competent or less disposed to do their duty, was liable to dwindle into
a statistical board or even become a pliant tool in the hands of the
railroads. Furthermore, the conditions in Massachusetts, where railroad
owners and railroad patrons lived side by side and were in many
instances even identical, differed materially from those found in the
West and South, where railroad patrons were made to pay excessive rates,
to produce liberal dividends on fictitious stocks for non-resident
stockholders. Here a conflict between the railroads and such commissions
as were determined to do their duty became often unavoidable. Railroad
companies were as a rule disposed to disregard the recommendation of a
commission to reduce exorbitant rates. This led in those States which
suffered most from unjust tariffs to a popular demand to endow the
commission with the power to fix _prima facie_ rates. While the number
of States which have taken this step is at present still limited, public
opinion in its favor is growing throughout the nation, and a general
adoption of this policy is probably only a question of time. There is
every reason for believing that a commission vested with the right to
fix local rates, to require full and complete reports from railroad
companies, and to make proper regulations for their control, aided by
penal legislation to compel compliance with their orders, will be a
sufficient aid to the State in exercising such control over the
companies operating lines within its borders as its dignity and the
welfare of its people demand.
Viewing the question from a national point of view, we find that, owing
to the great and constantly increasing importance of interstate traffic,
improved Federal agencies for railroad control are a pressing need.
While much has been accomplished by the Interstate Commerce Act, much
yet remains to be done. Violations of the act are still far too
frequent, and they have been encouraged by unfriendly decisions by some
of the inferior Federal courts.
It must be admitted that nearly all the evils connected with interstate
transportation could soon be remedied were it not for the difficulties
which the Interstate Commerce Commission encounters in the enforcement
of the law. On the one hand it is not possible with the machinery at
present provided to detect and prove a considerable part of the
violations of which railroad managers are daily guilty; and on the other
hand, if these violations are brought to light, there would not,
according to the testimony of a prominent railroad man, be courts enough
in the country to try the violators. Besides this, such is the
artfulness of railroad managers that in a majority of cases it would be
impossible to reach the guilty party, and subordinates would have to
answer for the transgressions of their superiors.
To provide adequate machinery for the supervision of the transportation
business, a national bureau of commerce and transportation should be
established. As its chief a director-general of railroads should be
appointed by the President, on the recommendation of the Secretary of
the Interior, by and with the advice and consent of the Senate. This
officer should hold his office for a term of at least six years, unless
sooner removed by the President, upon reasons to be communicated by him
to the Senate. He should not be interested either directly or indirectly
in railroad securities. The Interstate Commerce Commission should be
continued as an advisory board. It should upon the whole retain its
present functions and should be consulted by the director-general in all
matters requiring expert investigation. A number of divisions or
sub-bureaus should be established, and each should be entrusted, under
the supervision of the director-general, with such duties as may be
deemed necessary to secure the greatest efficiency.
There should be a division charged with the duty of carefully examining
and compiling the detailed reports which the various companies should by
law be required to make to the bureau. An inspection service should also
be established, similar to that now maintained by the Treasury and
Post-office Departments. Its officers should be empowered to enter all
railroad offices and examine the companies' books, board trains and
employ other legal means to detect violations of the railroad law and
report them to the chief of the bureau.
Railroad companies might be permitted to make interstate rates, but all
schedules should be submitted to the bureau for approval or revision.
Legal provision should be made against every sort of speculation in
railroad stocks on the part of railroad officers, who should, in
addition, be prohibited from sharing in the profits of favorite rates,
as at present. All executive officers and directors of railroad
companies should, like officers of national banks, be required to
qualify by taking an oath of office, and should be held to strict
accountability for their official acts. Officers of railroad companies
should not be allowed to receive and use proxies at stockholders'
meetings.
The director-general should have the power, when he has proof that a
railroad manager is persistently violating the law, to remove him and to
appoint a receiver to take charge of the road until its owners can make
provision and furnish sufficient guarantee for a more responsible
management. Such a procedure would not be without analogy in the sphere
of Federal authority. The Comptroller of the Currency is authorized by
law to remove the derelict officials of a national bank and place its
business in charge of a receiver. The beneficial effect of this
provision is evinced in the extreme rareness of such a step. When
railroad managers are held responsible for their own official acts, as
well as for those of their subordinates, and when all railroad
transgressions are visited upon their source in such a manner as to be
remembered by the stings of disgrace and of a blighted career,
unfaithful railroad managers will be extremely rare.
The plan here outlined is of course capable of being greatly improved.
Experience only is a reliable guide as to the merits of the various
details of such a system of control. What is needed above all things is
a beginning, the establishment of the principle of complete control of
railroad transportation by the State and the Nation. When this step is
once taken, the friends of railroad reform may safely trust to time for
the solution of the subordinate questions of this important problem.
By thorough State and Federal supervision of the railroad business many
of the present abuses can be prevented. But the temptations of railroad
managers to violate the law will continue to exist as long as the
speculative element is permitted to remain in railroad securities. To
remove the fountain-head of the evil eventually, the way should
gradually be paved for a change in railroad organization and ownership
which would also greatly increase the responsibility and efficiency of
railroad management. In the beginning of the railroad era, nearly all,
and not unfrequently all the capital needed for the construction of a
new line was supposed to be furnished by the company's stockholders. But
as it often happened that the cost of construction considerably exceeded
the original estimate, the State authorized railroad companies to
mortgage their property for the purpose of raising the money necessary
to complete the road. In time this provision of the law was taken
advantage of by speculative stockholders to such an extent that roads
were often bonded for the full amount necessary to construct them, and
even for more, while the stock was issued simply as a bonus to the
promoters and the bondholders of the road. But as the bonds and shares
scarcely ever remain in the same hands, such a condition was eventually
brought about that roads were controlled by those who had little or
nothing invested in the enterprise, and their real owners were deprived
of all influence in their management, retaining only the right to
foreclose their mortgages when things came to the worst. It is evident
that men who have only a speculative interest in property cannot have
the same concern for its permanent value and prosperity as those who
hold it as a permanent investment. Many of the railroad abuses of the
past had their origin in the law permitting the bonding of railroad
property. Were it desirable to make a property for the sole use and
convenience of speculators and gamblers, a better scheme could hardly be
devised than the present system of our railroad organizations. Were
railroad companies organized like national banks, were each shareholder
required to pay the full amount of the face value of his shares, and
were mortgaging railroad property entirely prohibited, it is not likely
that the proportion of bankrupted railroads would be any larger than
that of bankrupted banks. Few, if any, railroads would be built for
purely speculative or blackmailing purposes.
Capital is naturally conservative, and speculation is only invited where
the chances of gain are greatly out of proportion to the capital
invested. Were the principle of ownership which applies to national
banks and other well regulated corporations also applied to the
railroads, and were bonds entirely abolished, only such persons would
by the shareholders be placed in charge of their property as could give
to them the best assurance of honest and conservative management. Such a
change would greatly increase public confidence in, and the value of,
railroad securities, and would eventually place them above bank stock as
desirable investments. With the great fluctuations which under present
circumstances obtain in railroad stocks, these securities are regarded
as unsafe and unsatisfactory investments by conservative people. During
a period of less than twelve months in 1891 and 1892 the stock of the
Atchison, Topeka and Santa Fe fluctuated from 28-1/2 to 43-1/2, or 53
per cent.; that of the Chesapeake and Ohio from 15-1/4 to 25-7/8, or 70
per cent.; of the Chicago and Northwestern from 101 to 118, or 17 per
cent.; of the Chicago, Saint Paul, Minneapolis and Omaha from 20-1/2 to
38-1/2, or 88 per cent.; of the Chicago, Milwaukee and St. Paul from
48-3/4 to 78-1/2, or 61 per cent.; of the Iowa Central from 6-1/2 to 13,
or 100 per cent.
If we look over the stock quotations of the past ten or twelve years we
find still greater fluctuations. The following table, taken from the
_United States Investor_, shows the range of prices of a few of the
principal stocks during this period:
Name. Lowest. Highest.
Central Pacific 26-1/2 (1888) 102-7/8 (1881)
Chesapeake and Ohio 1 (1888) 33-7/8 (1881)
Erie 9-1/4 (1885) 52-7/8 (1881)
Illinois Central 79-1/4 (1879) 150-1/2 (1882)
Lake Erie and Western 1-3/8 (1885) 65-3/4 (1881)
Michigan Central 46-1/2 (1885) 130-1/8 (1880)
New Jersey Central 31 (1885) 131 (1889)
New York Central 81-3/4 (1885) 155-3/8 (1880)
Northern Pacific 14 (1884) 54-3/8 (1882)
Rock Island 63-3/8 (1891) 204 (1880)
C., M. & St. P. 34-3/8 (1879) 129-1/4 (1881)
Texas and Pacific 5-1/2 (1884) 73-5/8 (1881)
Wabash 2 (1885) 60 (1881)
Atchison and Topeka 23-3/4 (1890) 152-1/2 (1880)
Chicago, Burlington and
Quincy 75-7/8 (1891) 182-1/2 (1881)
N. Y. & N. E. 9 (1884) 86 (1881)
Wisconsin Central 2 (1880) 39 (1881)
Union Pacific 28 (1884) 131 (1881)
And such fluctuations have always been rather the rule than the
exception. It is a gross outrage upon the investing public to let this
state of affairs continue. It should be corrected without delay.
How many high officials in charge of railroad property will under these
circumstances resist the temptation to speculate in the stock of their
companies, and, so long as it is permitted, how many will resist the
temptation to adopt such policies in the government of their roads as
will cause such fluctuations? It is a common report that it is not an
unfrequent occurrence for Senators and members of Congress to receive
information from railway officials that enables them to raise their
campaign funds by speculation in Wall Street.
Mr. Henry C. Adams, statistician of the Interstate Commerce Commission,
says in his third annual report:
"It certainly appears ... that the motive for ownership in
railroad stock is quite different from the ordinary motives
which lead men to invest in corporate enterprises, thus
presenting an additional proof that railways are a business
not subject to ordinary business rules."
There is no safer business in the world than railroad transportation;
there is none that has less elements of uncertainty; none whose returns
in the aggregate are less varying. Every other business in the country,
whether prospering or struggling, pays tribute to it. It rests on a cash
basis, and suffers probably less from hard times than any business of
its magnitude. Both the merchant and the manufacturer run large risks in
doing business largely on a credit basis. The farmer sows in the spring,
harvests in the fall, and often cannot realize on his products until
winter; but the railroad company always receives its pay as soon as its
work is done, and not unfrequently even before it is done. Statistics
show that railroad revenues are, in the aggregate, remarkably uniform,
and there is no reason why railroad securities should be less stable
than bank or insurance stocks. Mr. Jeans says:
"It is observable, in respect to the net profits from
railway working, that they have not fluctuated from year to
year in the same way as nearly all other profits have
done.... It comes, then, to this, that, next after land and
house property, the railway interest is the largest and most
important in the country. But it is superior to both of
these rival interests in its profit-earning capabilities,
yielding, as it does, more than 4 per cent. on the capital
expended, against a possible average of 2-1/2 to 3 per cent.
in respect to the others."
There may be some arguments in favor of bonding railroads, but this
practice is, upon the whole, productive of infinitely more evil than
good. The State should, therefore, compel railroad companies to
liquidate all of their bonded indebtedness without unnecessary delay. In
the proportion in which this is accomplished railroad shares will gain
in stability and value.
Railroad men complain that the small savings of the poor invested in
railroad securities do not yield adequate returns and are often lost in
consequence of the foreclosing of the roads in which these investments
have been made. Others complain that railroads are bankrupted in the
interest of designing bondholders. Still others charge that rich and
powerful roads contrive to obtain a controlling interest in the
depreciated stock of weaker roads and then manage these roads in their
own interest and greatly to the detriment of other stockholders. All
these evils would disappear if the law required the identity of actual
and virtual ownership. "Freezing-out" processes could no longer be
resorted to by expert directors to obtain without compensation the
property of their less sophisticated fellow stockholders. One railroad
could no longer obtain control of another by acquiring an insignificant
part of the sum total of its securities. There would be no longer any
clashing between the interests of bondholders and stockholders, and
railroads would no longer be managed in the interest of a small minority
of their owners.
In addition to the cancellation of all railroad mortgages the State
should require that all railroad stocks should, in the future, be paid
in full. Furthermore, roads should be built only from the proceeds of
the capital stock, and the expense of repairs should be defrayed from
the revenues of the road. Dividends should only be paid from surplus
earnings and should in no case exceed a fair rate of interest on the
actual present value of the road. The statistician to the Interstate
Commerce Commission suggests the creation of a special commission
charged with the duty of converting the actual capitalization of
railroad lines into a just value of their property. To do justice to
both the railroads and their patrons in the fixing of rates, it is
important that the just value of railroad property be ascertained, but
the work could probably be done with less friction by a coöperation of
National and State commissions. A number of reforms are needed within
the province of railroad management. Passenger rates are, as a rule, too
high, and out of all proportion to freight rates. Many passenger
tariffs still recognize the old stage-coach principle of fixing the fare
in an exact proportion to the distance traveled. Thus a passenger who
takes the train for a five-mile trip pays only fifteen cents for his own
transportation and that of one hundred pounds of baggage, while the
passenger who buys a ticket for a journey of one hundred miles pays, on
most American lines, exactly twenty times the amount paid by the
five-mile passenger. Here the principle of collecting terminal charges
is entirely ignored. Sufficient inducements are not held out to the
passenger to prolong his journey, and as a consequence of this
short-sighted policy of the railroad companies the average distance
traveled in the United States by each passenger, instead of having
gradually increased, has gradually decreased of late years until it is
now only 24.18 miles. The average freight haul in the United States is
120 miles, or about five times as long as the average journey per
passenger. How can such a difference be accounted for except by the
dissimilarity in the principles which govern the computation of
passenger and freight charges? The same rule should be adopted in fixing
passenger rates that is recognized by railroad men in fixing freight
rates: the rate per mile should decrease with the increase of the number
of miles traveled.
The principle of arranging passenger tariffs on a sliding scale has
found recognition in Europe. In Denmark first-class passenger fare is
3.13 cents for each of the first 47 miles, 2.67 cents for each of the
next 47 miles, and only 2.22 cents for every additional mile. The
practical application of this principle is, in fact, only limited by the
extent of the kingdom. In nearly all European countries a uniform
reduction, ranging from 20 to 30 per cent., is made from regular rates
for return trip tickets, and coupon tickets are issued to tourists
almost everywhere at largely reduced rates.
Hungary recently adopted a new method of making passenger and freight
tariffs for its state lines. This is now generally called the zone
system. There are two classes of tickets sold, one for short trips on
suburban or branch lines, the other for longer journeys on the main
lines. The distances that can be traveled on short or suburban lines are
divided into two zones of stations, and those on main lines into
fourteen zones. The division of the kingdom into zones is made with
Buda-Pesth as the center. A ticket purchased for a particular zone
carries the passenger to the end of that zone or any nearer station.
The following table will show the extent of each zone and the fares
paid:
--------------+---------------+--------------------+--------------------
| | LOCAL TRAINS. | FAST TRAINS.
ZONE | DISTANCE |------+------+------+------+------+------
| |First |Second|Third |First |Second|Third
| |Class.|Class.|Class.|Class.|Class.|Class.
--------------+---------------+------+------+------+------+------+------
Short Lines.| | Fl. | Fl. | Fl. | Fl. | Fl. | Fl.
|First Station. | 0.30 | 0.15 | .10 | - | - | -
|Second Station.| .40 | .22 | .15 | - | - | -
Main Lines. | | | | | | |
1 | 1-25 km. | .50 | .40 | .25 | 0.60 | 0.50 | 0.30
2 | 26-40 " | 1.00 | .80 | .50 | 1.20 | 1.00 | .60
3 | 41-55 " | 1.50 | 1.20 | .75 | 1.80 | 1.50 | .90
4 | 56-70 " | 2.00 | 1.60 | 1.00 | 2.40 | 2.00 | 1.20
5 | 71-85 " | 2.50 | 2.00 | 1.25 | 3.00 | 2.50 | 1.50
6 | 86-100 " | 3.00 | 2.40 | 1.50 | 3.60 | 3.00 | 1.80
7 | 101-115 " | 3.50 | 2.80 | 1.75 | 4.20 | 3.50 | 2.10
8 | 116-130 " | 4.00 | 3.20 | 2.00 | 4.80 | 4.00 | 2.40
9 | 131-145 " | 4.50 | 3.60 | 2.25 | 5.40 | 4.50 | 2.70
10 | 146-160 " | 5.00 | 4.00 | 2.50 | 6.00 | 5.00 | 3.00
11 | 161-175 " | 5.50 | 4.40 | 2.75 | 6.60 | 5.50 | 3.30
12 | 176-200 " | 6.00 | 4.80 | 3.00 | 7.20 | 6.00 | 3.60
13 | 201-225 " | 7.00 | 5.30 | 3.50 | 8.40 | 6.50 | 4.20
14 | 225 km. | | | | | |
| and over | 8.00 | 5.80 | 4.00 | 9.60 | 7.00 | 4.80
(The florin is a little more than one-third of a dollar.)
A ride from a city to the first suburban station costs from 3 to 10
cents, according to class of car, and to the second station 5 to 13.6
cents. On through trains a person may travel 15 miles at a cost of from
8-1/2 to 20 cents, according to kind of train and class of car, a
hundred miles for from 85 cents to $2.00; 140 miles for from $1.15 to
$2.80 and any distance above 140 miles for from $1.35 to $3.25. A person
may thus travel from Buda-Pesth to Predeal, a distance of 472 miles,
with a third-class ticket for zone 14, purchased at a cost of $1.35, or
28-100 of a cent per mile.
Our railroad men with much complacency point to the fact that these
rates do not cover the forwarding of passengers' baggage and that this
service must be paid for separately. These charges, however, are very
moderate, being on 120 pounds of baggage 8-1/3 cents a distance of 34
miles or less, about 17 cents for a distance of more than 34 and less
than 62 miles, and about 34 cents for any distance over 62 miles. The
additional charge for carrying 120 pounds of baggage from Buda-Pesth to
Predeal is therefore about one-fourteenth of one cent per mile. It must
be admitted that this system of charging separately for passenger and
baggage is eminently just, for there is no good reason why the passenger
without baggage should be taxed to pay for the carriage of that of his
fellow-traveler.
The zone tariff was introduced on the state railways of Hungary by M.
Barosz, the Hungarian Minister of Commerce, on the 1st of August, 1889.
The adoption of the new tariff was ridiculed and condemned as visionary
by road experts, who even went so far as to prove to the satisfaction of
practical railroad men that the innovation was destined to be a failure.
For a month or two it almost seemed as if their prediction might be
fulfilled, the number of passengers carried remaining behind the number
carried during the corresponding period of previous years. But soon the
reaction set in. The month of November, 1889, already witnessed an
increase in the number of passengers as well as in receipts over the
same month of the year previous. The result of the first year's trial
demonstrated the wisdom of the "innovation." The number of passengers
carried, which had been only 5,186,227 in 1888-89, rose to 13,060,751 in
1889-90, and the total receipts for passengers and baggage rose from
9,138,715 florins to 11,186,321 florins, a gain of 2,047,606 florins, or
22 per cent., during the first year. There is a continued increase both
in the number of passengers and in receipts, and the success of the
system must be pronounced phenomenal. The railroad experts of Europe,
who had predicted the signal failure of the zone system, now that the
unexpected has happened, are trying to discover the particular favorable
conditions which made the success of the system possible in Hungary. It
will probably be a decade, or even two, before the railroad experts of
both hemispheres will be entirely reconciled to this new application of
the old principle that a reduction in the price of a commodity increases
the demand for it.
It is strange, indeed, that intelligent men should be so slow in
recognizing an economic principle for which both history and daily
experience furnish an unlimited number of illustrations. The post-office
receipts everywhere have increased with a reduction in postage. The
Government telegraph in England did not become self-supporting until
Parliament made a sweeping reduction in its rates. The revenue from the
Brooklyn bridge never paid a fair interest on the capital expended in
its construction until its tolls were cut down. Were it necessary,
hundreds of other examples could be added to these.
Hungary has also applied the zone system to its freight traffic. Three
zones are fixed for the carrying of goods, viz.: Zone I, for distances
less than 200 kilometers (124 miles); Zone II, for distances over 200
and less than 400 kilometers, and Zone III, for distances over 400
kilometers. A uniform tariff is established for each zone, which is
one-third less than the average freight rates for equal distances
formerly in force. American railroads should profit by the wisdom and
experience of the Hungarian Government, and adopt at an early day such
features of its system as upon our soil and under our institutions may
be made practicable. The Hungarian system, with some modifications, is
now being tried by Austria and a few of the German states, and is
increasing railroad revenues wherever adopted.
There is a growing demand for lower fares. This demand increases in the
same proportion in which the desire and the necessity for travel
increase. European states have not been slow to meet it. Reductions are
made everywhere, and chiefly favor the lower classes. Thus, when France,
within the last year, changed her passenger tariff, she reduced
first-class fare 9 per cent., second-class fare 18 per cent., and
third-class 27 per cent.
The European passenger reports show the numbers of first and
second-class passengers are continually falling off, while those of the
third-class passengers are fast increasing. In England and Wales the
number of first-class passengers fell between 1875 and 1889 from
37,000,000 to 24,000,000 while the number of third-class passengers
increased during that same period from 350,000,000 to 601,000,000, and
this increase still continues. In the United Kingdom the number of
third-class passengers for 1891 was over 750,000,000. Furthermore,
passenger revenue comes chiefly from the third class. In the United
Kingdom the receipts from first-class passengers were in 1889
£3,188,000; from second-class passengers, £2,705,000; and from
third-class passengers, £19,785,000. It is thus seen that receipts from
third-class passengers are nearly 3-1/2 times as large as those from the
first and second-class passengers combined. A similar proportion is
found in nearly every country on the continent. European roads
discovered some years ago that first and second-class passengers were
carried at a loss, and all the passenger earnings were derived from
third-class passengers. The profits from this source show a considerable
increase every year.
The average fare per mile is 2.15 cents in the United States, and only
1.17 cents in Germany, 1.67 cents in Austria, 1.18 cents in Belgium,
1.29 cents in Denmark, 1.45 cents in France, 1.64 cents in Italy, and
1.45 cents in Russia. It is often claimed by railroad men that we travel
more luxuriously than the people of any other country in the world, but
it should not be forgotten that traveling in the United States is also
more expensive than anywhere else. It is contended that class
distinctions are odious in America, and that second and third-class cars
would not be patronized. The same argument might be applied to theaters,
hotels, clothiers, grocers, etc. It is difficult to see why distinction
here should be less odious than on the railroad train. The truth is,
Americans are just like other people and will avail themselves of
accommodations in keeping with their means if they have the opportunity.
Many passengers who will not travel in an uncouth smoking-car would, if
clean second-class cars were provided, gladly dispense with the luxury
of an upholstered seat if by doing so they could save from $5 to $10 a
day.
A common laborer in this country earns from a dollar to a dollar and a
half a day, and in the performance of his labor as a rule suffers
greater inconvenience than does the traveler who travels the country in
a second-class car. Is it under these circumstances at all likely that
the American would hesitate to travel for a day in a plain but clean
car, if by doing so he could save a week's earnings? We may even go
further and say that it is a very reasonable assumption that the man who
earns his bread by the sweat of his brow would choose the cheaper car if
the difference in one day's fare were equal to one day's wages. It is a
common saying in Europe that the first-class passengers consist of lords
and fools, and few of the hundreds of thousands of American tourists
traveling abroad give the natives occasion to class them with either.
The first-class car has almost fallen into disuse in Europe, and even
the patronage of the second-class is less than ten per cent, of that of
the third.
Reduced rates for return tickets should be provided under rules and
regulations of commissioners.
The Massachusetts legislature recently passed a law requiring the
railways of that State to sell interchangeable thousand-mile tickets for
$20. The State commission is given power to except any company from its
requirements if the public welfare or the financial condition require or
demand it. This is a step in the right direction and should be followed
by other States. Michigan also requires certain roads to carry
first-class passengers at two cents per mile.
Railroad companies should be compelled to discard the pass as a
courtesy as well as a consideration. The giving of passes under the
guise of mileage books, or tickets for pretended or unnecessary
services, is very pernicious and should be prohibited. Such a reform
would soon enable them to offer low fares to all. An employe may be
furnished free transportation while actually engaged in the business of
his company, and it should be made the duty of the State and National
commissions to make proper regulations governing such free
transportation of employes. Half-fare tickets for adults should also be
abolished. The pauper ticket is given to the minister of the gospel to
secure for the railroads the influence of the pulpit, though offered
under the pretense of charity or support of the church. The State should
not permit the railroad companies to practice this or any other kind of
charity at the expense of the general public. The railroad is a highway,
and the company operating it is entitled to rates sufficient to pay
operating expenses and a fair interest on the value of the property. It
can therefore easily be seen that the so-called gifts show no liberality
on the part of the railroad company, but are made at the expense of
other people. Donations made by railroad companies should be made from
the pockets of their stockholders and not from the pockets of their
patrons.
All perquisites of railroad officers should be abolished. When a railway
official has become so pompous and consequential that he requires a
special car, it is about time to look about for his successor. If we are
to have a special-car aristocracy in this country let it be supported at
the expense of some other interest.
Another railroad reform is needed on this side of the Atlantic. While
the great majority of railroad officials are courteous and considerate,
and perform their duties in the most agreeable and acceptable manner,
there are a few who do not properly appreciate the relation which they
sustain to the patrons of their companies. They are inclined to forget
that they are quasi-public servants, and that the public has a right to
demand courteous treatment at their hands. All railroad employes should
realize that their first duty is to administer to the welfare and the
convenience of the public, and each one should have the full protection
of the law in his efforts to do so. The American public objects much
less to an inferior car than to rude treatment by the companies' agents.
Railroad superintendents may justly be blamed for the incivilities of
their subordinates. It is their duty to know the character of those whom
they employ, and not to retain in their employ those who are derelict in
their duty to the public. Nothing offends the feelings of a true
American more than the display of a bureaucratic spirit on the part of
public servants. Nothing more commends a line of railroad to the public
than uniform painstaking kindness and courteous treatment on the part of
its employes. It is made the duty of railroad employes of France "to so
treat the public as if they were eager to oblige it," and the very first
paragraph of the official instructions to the railroad employes of
Germany enjoins them "to assume a modest and polite demeanor in their
intercourse with the public." In this connection it might be stated that
the second paragraph of those instructions positively forbids the
acceptance of any gratuity by a railroad employe. If our American
sleeping and dining-car companies would give their employes adequate
compensation and then adopt and enforce the German rule concerning
"tipping," their service would gain popularity and their employes
self-respect.
Entrance into the railway service should be by agreement for a definite
time, and dismissals and resignations should be governed by rules agreed
upon by boards of commissioners and the companies.
The use of the corporation has done so much to secure for capital so
large a share of the profits of industrial enterprises, and large
salaries also for the officers who manage them, that laborers have been
led to organize themselves into associations for like purposes, and
ambitious men have not been slow in availing themselves of the
advantages afforded them in this new field.
It is right and proper for laborers to organize such associations when
they can do so under wise and economical management, for the purpose of
securing greater intelligence, better education, higher culture, higher
wages, a shorter work-day, and a general ameliorating of their
condition, all of which will tend to make them more efficient workmen
and also better enable them to resist the aggression of centralized
wealth; for, in the absence of organization, the single-handed employe
of the great modern employer is comparatively helpless. But if these
organizations are allowed to be controlled by ignorant, unreasonable or
designing men, who will, at trifling provocations, resort to violent and
unlawful measures, they are sure to prove harmful, and a great
detriment, instead of a help, to their members, and the sooner they are
abandoned the better for all.
Great conflicts are sure to arise between organized capital and
organized labor, and they must be settled in a reasonable way, or
anarchy will prevail. They cannot be left for headstrong or
inconsiderate men representing either side to determine, but the line
must be drawn by the public authorities.
Each year affords accumulated evidence of the necessity of extending
legal restrictions over the management of the railway business, and the
law, as laid down by Judge Ricks to the Ann Arbor strikers last March,
in the United States Circuit Court, at Toledo, is undoubtedly correct
and will meet with general approval from the public.
He says:
"You are engaged in a service of a public character, and the
public are interested not only in the way in which you
perform your duties while you continue in that service, but
are quite as much interested in the time and circumstances
under which you quit that employment. You cannot always
choose your own time and place for terminating these
relations. If you are permitted to do so you might quit your
work at a time and place and under circumstances which would
involve irreparable damage to your employers and jeopardize
the lives of the traveling public."
Mr. Powderly, in commenting upon the above decision, does not complain
of it, but says:
"The decision shows, as I have said before, that the
principle of Government ownership of the railroads is being
recognized by the courts. While the decision is apparently
against the men, it emphasizes our position that the
Government has the right to supervise the railroads. Now it
is a poor rule that won't work both ways.
"The Interstate Commerce Law was passed for the purpose of
controlling the railroads, but up to date no railroad has
paid any attention to the law. Anarchy of the worst kind has
prevailed. By that I mean a total disregard of the law, and
that is what the corporations charge against the anarchists.
The courts hold themselves in readiness to obey the will of
the corporations when a charge is made against the workmen,
but no effort is made to carry out the mandates of the law
when the provokers of strikes, the corporations, violate the
law."
There is but little doubt, if the judges of the Federal courts would
show the same zeal in holding railroad managers amenable to the law as
Judge Ricks has displayed in this case with the employes, they would
secure increased confidence from the people in the tribunals over which
they preside.
All fair-minded persons will agree that labor as well as capital must be
subjected to proper restraints, and that the public will demand nothing
unreasonable from either.
Accidents are too frequent upon American railroads. The reports of the
Interstate Commerce Commission give the following as the numbers killed
and injured during the years named:
---------+---------------+---------------+---------------+---------------
| 1888 | 1889 | 1890 | 1891
|Killed. Injured|Killed. Injured|Killed. Injured|Killed. Injured
---------+-------+-------+-------+-------+-------+-------+-------+-------
Employees| 2,070 | 20,148| 1,972 | 20,028| 2,451 | 22,396| 2,660 | 26,140
Passeng's| 315 | 2,138| 310 | 2,146| 286 | 2,425| 293 | 2,972
Others | 2,897 | 3,602| 3,541 | 4,135| 3,598 | 4,206| .... | ....
---------+-------+-------+-------+-------+-------+-------+-------+-------
Total | 5,282 | 25,888| 5,823 | 26,309| 6,335 | 29,027| .... | ....
---------+---------------+-------+-------+-------+-------+-------+-------
For the year ending June 30, 1890, the total number of employes was
749,801. There was, therefore, one death for every 306 men employed and
one injury for every 33 men employed. For the previous year one was
killed for every 357 men employed, and one was injured for every 35 men
employed. While trainmen represent but 20 per cent, of the total number
of employes, the casualties among them represent 58 per cent. of the
total number of casualties.
For the year 1888, one passenger was killed in every 1,523,133
passengers carried, and one injured in every 220,024 carried.
The corresponding rate in England for the year 1888 is one passenger
killed for every 6,942,336 carried, and one injured for every 527,577
carried.
Railroads doing a large business should be compelled to adopt the most
improved appliances for avoidance of accidents.
The occupation of trainmen is especially hazardous, and too long
continued service should not be required, but proper intervals of rest
should be allowed. It is to the want of this, undoubtedly, that a great
many of the serious accidents are owing.
No more Sunday trains should be run than are absolutely necessary.
Provision should be made by law to enable trainmen to procure insurance
at the lowest rate possible, for indemnity against loss of health, life
or limb.
It was only a few days before the great disaster occurred on the Hudson
River Railroad at Hastings, over a year ago, that an announcement had
been made to the public of the extreme prosperity of the road during the
year. The great slaughter that occurred there is another illustration of
the disregard of public duty, and another instance of the sacrifice of
life and limbs of passengers and employes by a railway corporation in
order to secure large dividends on watered stock. It is not only gross,
but criminal neglect for a company with such an immense income not to
provide greater safety appliances, and the coroner's jury in this case
was too modest when it decided that the management of the road was
morally responsible for the disaster.
Parliament has compelled the British railways to adopt, in the interest
of the public safety, the block system and continuous brake, and great
lines like the New York Central and Hudson River companies should be
compelled to adopt such improvements.
The traveling public has another grievous cause for complaint. There are
but few companies that make any efforts to have their trains connect
with those of rival roads. On the contrary, a good deal of scheming is
often done by railroad companies to so arrange their time-tables with
reference to those of their rivals as to inconvenience passengers as
much as possible by delays at competing points. To remedy this evil the
State should require that every time-table should have the approval of
proper authorities, and no change should be permitted without their
approval.
Railroad companies are chartered for the purpose of promoting the public
welfare, and every violation of their charter should be punished.
It should be the main object of railroad legislation to compel companies
to fulfill their public obligations without depriving them of their
efficiency. Above all things these companies should be stripped of the
power to use their great wealth for the purposes of corruption or the
attainment of political influence. Our railroads to-day probably
represent no less than one-fourth of the personal property of the
country, and this vast wealth is controlled by a comparatively small
number of men, many of whom have in the course of time become so
arrogant and despotic that they have little regard for popular rights or
the expressed will of a free people.
It is reported that when, a few years ago, a representative of the press
directed Mr. Vanderbilt's attention to the fact that the public
disapproved of his railroad policy, the latter gave vent to his contempt
for public opinion by the no less profane than laconic reply: "The
public be damned." Ex-Railroad Commissioner Coffin called on one of the
Goulds to urge the adoption of the automatic car-coupler and other
safety appliances for the roads controlled by them. He was very curtly
told that not a cent would be expended by the Gould roads for such a
purpose until the West had repealed its obnoxious railroad laws. The
Gould dynasty thus intends to accomplish the repeal of these laws by
coercion. Railroad magnates and their lieutenants often show still
greater arrogance in dealing directly with their employes.
It may be difficult for railroad managers of the present school to adapt
themselves to new conditions; it may be impossible for them to
understand how any other practices than those which have long been
established can succeed; yet in spite of them both the law and public
sentiment have already undergone great changes, and still greater
changes will follow. It may take years to accomplish this work; to bring
about any great reform requires time and a deter, mined purpose on the
part of its advocates. Yet I believe the era is not far off when
railroads will be limited to their legitimate sphere as common carriers,
when they will treat all persons and all places as impartially as does
the Government in the mail service, when their chief factor in
rate-making will be the cost of service, when they will respect the
rights of the public and those of their stockholders, insuring perfect
service to the former and fair profits upon the actual value of the
lines operated to the latter.
The fact should, finally, not be overlooked that it is in the power of
the General Government to prevent many railroad abuses, and especially
excessive freight charges, by the improvement of our rivers and harbors.
That our water-courses act as levelers of interstate rates is apparent
from the fact that railroad rates invariably rise with the freezing of
the water-ways and fall with the opening of river and lake navigation.
By connecting, wherever feasible, our large Western rivers with the
great lakes, the Government could greatly extend the reign of
competition in transportation, and thereby keep freight rates within
reasonable bounds. Lake transportation even now plays an important role.
In 1892 it was not less than 20,000,000,000 ton miles during the season
of eight months' duration, and it is almost equal to one-fourth of the
total ton mileage of all the railroads in the country for the entire
year. The average rate of lake transportation has been reduced to 1.3
mills per ton per mile, which is only about one-seventh of the average
railroad freight rate in the United States.
Where the masses hold the sovereign power, there, if anywhere, the
welfare of the people should be the supreme law. Violent political
commotions never disturb the government whose policy is to secure the
greatest good to the greatest number. Thorold Rogers justly remarks that
the strength of communism lies in the misconduct of administrations, the
sustentation of odious and unjust privileges and the support of what are
called vested interests. Lord Coleridge, in a remarkable article
published not long ago, recommended a revision of the laws relating to
property and contract, in order to facilitate the inevitable transition
from feudalism to democracy, and laid down the rule that the laws of
property should be made for the benefit of all, and not for the benefit
of a class.
During the middle ages, and even up to the beginning of the present
century, nearly all the laws on the statute books looked towards the
protection of the rights of the feudal lord. Provision was made for the
expeditious collection of his dues and a severe punishment of his
delinquent debtor. The peasant was forced to labor fifteen hours per day
and three hundred and sixty-five days in the year to pay the baron's
rentals and sustain life. The law permitted him to be flogged for
failing to courtesy the feudal lord, and to be executed for injury to
the lord's person, while to kill a peasant was no worse a misdemeanor
than to kill his lordship's favorite dog or falcon. In short, all laws
were made to protect and perpetuate the wealth and power of the few by
impoverishing, humbling and enslaving the masses.
The age of feudalism has given way to an age of democratic liberty, but
there is many a feudal feature left in our statutes and many a feudal
doctrine is enunciated by our judges and learned expounders of modern
jurisprudence. In his decision in the Iowa tariff case Judge Brewer
said:
"I read also in the first section of the Bill of Rights of
this State [Iowa] that 'all men are by nature free and equal
and have certain inalienable rights, among which are those
of enjoying and defending life and liberty, acquiring,
possessing and protecting property and pursuing and
obtaining safety and happiness,' and I know that while that
remains as the supreme law of the State, no legislature can,
directly or indirectly, lay its withering or destroying hand
on a single dollar invested in the legitimate business of
transportation."
Had Judge Brewer taken the pains to read on, he would have found in
section 2 of the Bill of Rights the following:
"All political power is inherent in the people; government
is instituted for the protection, security and benefit of
the people."
It is strange that the learned Judge failed to see the difference
between "men," the creatures of God, "by nature free and equal," and
"possessing certain inalienable rights," and corporations, the creatures
of man, having no rights except those which the State sees fit to give
them. Had the learned Judge perused the whole of the document to which
he refers, he would have found in article VIII, section 12, the
following provision:
"The General Assembly shall have power to amend or repeal
all laws for the organization or creation of corporations,
or granting of special or exclusive privileges or
immunities, by a vote of two-thirds of each branch of the
General Assembly."
It should thus have been plain to the learned Judge that in Iowa
corporations have not human or inalienable rights, and government was
not instituted for their special protection, but for the protection,
security and benefit of her people. Nor should it be otherwise.
The corporation for pecuniary gain has neither body nor soul. Its
corporeal existence is mythical and ethereal. It suffers neither from
cold nor from hunger, has neither fear of future punishment nor hope of
future reward. It takes no interest in schools or in churches. It knows
neither charity nor love, neither pity nor sympathy, neither justice nor
patriotism. It is deaf and blind to human woe and human happiness. Its
only aim is pecuniary gain, to which it subordinates all else.
Should the State sacrifice the welfare of all her people rather than lay
its "withering or destroying" hand on a single dollar of corporate
wealth? Are there no human rights, for the protection of which
government was established, more sacred than the rights of a wealthy
corporation's dollar? Have the people made the judiciary a coördinate
branch of the Government in order that it may protect the vested or
rather usurped rights of corporations against legislative attempts to
curtail them? If the courts so interpret the power which has been
delegated to them, they will awake one day to the painful reality that
popular convictions of right are more potent than judicial decrees.
It is the duty of the State not so much to defend the so-called vested
rights of corporations as to make such just and beneficial laws as will
temper inequality, mitigate poverty, protect the weak against the
strong, preserve life and health, and, in short, promote the welfare and
the happiness of the masses. Constitutions have been made to accomplish
these ends, to protect the lives, the liberty and the conscience of
human beings, while laws have been sufficient to protect the dollars of
corporations. It is a short-sighted policy on the part of the latter to
take unfair advantage of their wealth and influence, for "As ye sow, so
shall ye reap," is the inexorable law of Providence. There is no dynasty
so mighty, no class so privileged, no interest so influential or wealthy
as to obtain immunity from its operation.
APPENDIX.
TABLE No. 1.
COMPILED FROM THE SIXTH ANNUAL REPORT OF THE INTERSTATE COMMERCE
COMMISSION.
Mileage in the United States June 30, 1891 168,402.74
Number of men employed 784,285
Number of employes per 100 miles 486
Number of locomotives per 100 miles 19
Number of passenger cars per 100 miles 17
Number of cars per 100 miles 721
Capital $9,829,475,015
Capital per mile 60,942
Gross earnings 1,096,761,395
Gross earnings per mile 6,801
Operating expenses 731,887,893
Operating expenses per mile 4,538
Net income from operation 364,873,502
Net income per mile 2,263
Of gross income 67.17 per cent. was earned on freight.
Of gross income 25.64 per cent. was earned on passengers.
Received for carrying mails $ 24,870,015
Received rentals from express companies 21,594,349
Received from investments 133,911,126
No. of passengers carried 531,183,988
No. of tons freight carried 675,608,323
Average journey per passenger 24.18 miles
Average haul per ton of freight 120 miles
Average number passengers per train 42
Average number tons freight per train 181.67
Average revenue per passenger per mile 2.142 cents
Average revenue per ton per mile of freight .895 cents
Average revenue per train mile, passenger $1.06
Average revenue per train mile, freight 1.64
TABLE No. 2.
STATISTICS OF THE RAILWAYS OF THE UNITED KINGDOM FOR THE YEAR ENDING
DEC. 31, 1891.
From the English Reform Almanac for 1893 and from the Report of
Commissioners R. Giffen and Courtenay Boyle to the Board of Trade.
Mileage 20,191 miles
Double, triple or quadruple 10,853 miles
Capital per mile £45,536
Gross income per mile 3,873
Net income per mile 1,818
Income from passenger traffic 35,130,916
Income from goods traffic 43,230,717
Income from miscellaneous 3,498,974
------------
Income, total £81,860,607
Operating expenses, 55 per cent £45,144,778
Rates and taxes 2,246,430
Government duty 321,260
Paid for persons injured 165,219
Paid for damage and loss of goods 257,804
Number of first-class passengers 30,423,776
Number of second-class passengers 63,378,397
Number of third-class passengers 751,661,495
Number of third-class passengers over 88 per cent. of all.
Number of employes 346,426
Number of employes per 100 miles 1,750
Number of locomotives per 100 miles 80
Number of passenger cars per 100 miles 249
Number of freight and other cars 2,595
Revenue per train mile 58.37d
Expense per train mile 30.54d
Per cent. of earnings on capital 4.21
TABLE No. 3.
SHOWING SALARIES AND WAGES PAID TO OFFICIALS AND EMPLOYES OF STATE
RAILWAYS IN EUROPE.
Compiled from Röll's Encyclopädie des Eisenbahnwesens.
=======================================================================
POSITION. | AUSTRIA. | HUNGARY. | PRUSSIA. | BELGIUM.
-----------------+-------------+-------------+-------------+-----------
| Fl., equal | Fl., equal | Mark, equal | Fr., equal
| to about | to about | to about | to about
|33-1/3 cents.|33-1/3 cents.| 24 cents. | 20 cents.
| | | |
President | 7,000 | --- |10,500 | 9,000
Directors and | | | |
Superintendents | 4,000-5,500 | 4,000-4,800 | 4,200-6,000 | 7,000-8,000
Chief Engineer | 1,600-2,000 | 1,900-2,500 | 3,600-4,800 | 2,700-5,500
Clerks | 500-1,200 | 640-1,000 | 1,000-2,700 | 900-3,100
Station Agents in| | | |
Cities, Division| | | |
Superintendents | 2,200-2,600 | 2,600-3,400 | --- | ---
Station Agents | | | |
in Towns | 500-850 | 520-880 | 1,500-3,200 | 1,600-4,000
Locomotive | | | |
Engineers | 500-850 | 520-780 | 1,200-2,000 | ---
Firemen | 300-350 | 380-480 | 1,000-1,500 | ---
Conductors | 450-550 | 520-850 | 1,100-1,500 | 2,000-2,400
Brakemen | 300-350 | 380-480 | 800-1,200 | 1,200-2,000
Section Men | 288-336 | 270-370 | 700-900 | ---
------------------------------------------------------------------------
TABLE No. 4.
Compiled from Röll's Encyclopädie des Eisenbahnwesens.
_FREIGHT TARIFFS._--BELGIUM.
All freight is divided into three general classes:
1. _Express Freight_, which is delivered by special messengers. Parcels
weighing 5 kg. (11 lbs.) and less, if prepaid, are carried for .80 fr.
(16c.) for all distances. Parcels not prepaid and such as weigh from 6
to 10 kg. pay .90 fr. for a distance of from 1 to 25 km.; 1 fr. for 26
to 75 km.; 1.10 fr. for greater distances.
2. _Fast Freight_, which may be made use of for consignments weighing up
to 200 kg. (440 lbs.) Parcels weighing up to 5 kg. pay .50 fr. for all
distances. Parcels not prepaid and such as weigh from 5 to 10 kg. pay
.50 fr. for from 1 to 25 km.;.60 fr. for distances ranging from 26 to 75
km., and .70 fr. over 75 km.
3. _Common Freight_, which is again sub-divided into four classes: In
Class I 400 kg., in Classes II and III 5,000 kg., and in Class IV 10,000
kg. is recognized as the minimum weight.
* * * * *
TARIFF FOR THE FOUR DIFFERENT CLASSES OF COMMON FREIGHT.
_Terminal Charges--Franc 1.00._
I Class--For 1,000 kg. (2,250 lbs.)
From 1 to 5 km Fr. 1.00
From 6 to 75 km, per km .10
From 76 to 150 km .08 (per km. above 75)
From 151 to 200 km .06 (per km. above 150)
Above 300 km .06 (per km. above 200)
II Class--For 1,000 kg.
From 1 to 5 km. Fr. 0.40
From 6 to 75 km., per km. .08
From 76 to 125 km. .04 (per km. above 75)
Above 125 km. .02 (per km. above 125)
III Class--For 1,000 kg.
From 1 to 5 km. Fr. 0.30
From 6 to 75 km., per km. .06
From 76 to 100 km. .03
From 101 to 125 km. .02
Above 125 km. .01
IV Class--For 1,000 kg.
From 1 to 24 km., per km. Fr. 0.06
From 25 to 75 km., per km. .04
From 76 to 100 km. .02
From 101 to 350 km. .01
Above 350 km. .02
For distances from 1 to 24 km. the terminal charges are only
.5 fr. for Class IV.
TABLE No. 5.
GERMANY.
The tariff recognizes the following distinctions:
1. Fast parcel freight.
2. Fast carload freight.
3. Parcel freight.
4. General carload Class A1, for shipments of at least
5,000 kg.
5. General carload Class B, for shipments of at least
10,000 kg.
6. Special tariffs.
_Distance charges per ton per kilometer: (Pfennig, 1/4 c.)_
1. For parcel 11.0 pfennige
2. For carload Class A1 6.7 "
3. For carload Class B 6.0 "
4. For Special Tariff A2 5.0 "
5. For Special Tariff I 4.5 "
6. For Special Tariff II 3.5 "
7. For Special Tariff III:
For distances up to 100 km 2.6 "
For distances above 100 km 2.2 "
8. For fast parcel freight 22.0 "
9. For fast carload freight, twice the rate of Classes
A1 and B.
_Terminal Changes._
1. For parcels and carload Class A1:
Up to 10 km 10 pfennige
From 11 to 20 km 11 "
From 21 to 30 km 12 "
From 31 to 40 km 13 "
From 41 to 50 km 14 "
From 51 to 60 km 15 "
From 61 to 70 km 16 "
From 71 to 80 km 17 "
From 81 to 90 km 18 "
From 91 to 100 km 19 "
Above 100 km 20 "
2. For carload Class B:
Up to 10 km 8 pfennige
From 11 to 20 km 9 "
From 21 to 30 km 10 "
From 31 to 40 km 11 "
Above 40 km 12 "
3. For Special Tariffs A2, I, II and III:
Up to 10 km 8 pfennige
From 11 to 100 km 9 "
Above 100 km 12 "
_Charges for Live Stock._
(a) Horses. Terminal charge per head, 1 m. (24c.)
Distance charge per kl. for one head 0.30 mark
Charge per kl. for 2 head .40 "
Charge for each additional head .10 "
(b) Cattle.
Terminal charge, per head 0.60 mark
Distance charge per kl., for one head .10 "
Distance charge for each additional head .03 "
(c) Sheep, Hogs, Calves, etc.:
Terminal charge, per head 0.20 mark
Distance charge, per kl., for each of the
first 10 heads .02 "
Distance charge, per kl., for each
additional head .01 "
If shipped in carloads the charges for live stock are .03 m.
per square meter per kilometer.
TABLE No. 6.
FRANCE.
The French railroads divide all freight into six different classes. The
following is the tariff adopted by a majority of the principal roads:
_Common Freight._
==================================================
| Centimes per Ton--Kilometer.
--------------------+----+----+----+----+----+----
Classes | 1 | 2 | 3 | 4 | 5 | 6
--------------------+----+----+----+----+----+----
Up to 25 km | 16 | 14 | 12 | 10 | 8 | 8
From 26 to 100 km | 16 | 14 | 12 | 10 | 8 | 4
From 101 to 150 km | 15 | 13 | 11 | 9 | 8 | 3.5
From 151 to 200 km | 15 | 13 | 11 | 9 | 7 | 3.5
From 201 to 300 km | 15 | 13 | 11 | 9 | 4 | 3.5
From 301 to 500 km | 14 | 12 | 10 | 8 | 4 | 3
From 501 to 600 km | 13 | 11 | 9 | 7 | 4 | 3
From 601 to 700 km | 12 | 10 | 8 | 6 | 4 | 2.5
From 701 to 800 km | 11 | 9 | 7 | 5 | 4 | 2.5
From 801 to 900 km | 10 | 8 | 6 | 4 | 4 | 2.5
From 901 to 1000 km | 9 | 7 | 5 | 4 | 4 | 2
Above 1,000 km | 8 | 6 | 5 | 4 | 4 | 2
--------------------------------------------------
The rates for fast parcel freight are, on all roads, for less
than 40 kg., per ton, km.:
Up to 200 km 35 centimes
From 201 to 300 km 32 "
From 301 to 400 km 31 "
From 401 to 800 km 30 "
From 801 to 1,000 km 28 "
Above 1,000 km 25 "
For more than 40 kg.:
Up to 100 km 32 centimes
From 101 to 300 km 30 "
From 301 to 500 km 28 "
From 501 to 600 km 26 "
From 601 to 700 km 24 "
From 701 to 800 km 22 "
From 801 to 900 km 20 "
From 901 to 1,000 km 18 "
Above 1,000 km 16 "
Express parcels weighing up to 3 kg. (6-3/5 lbs.), pay 1 fr. for
all distances, and parcels weighing from 3 to 5 kg. pay
fr. 1.20. Delivery to the house, 25 centimes (5c.)
additional.
Live Stock, per piece, per km.:
Horses and cattle 16 centimes
Calves and hogs 6 "
Sheep, etc. 3 "
TABLE No. 7.
ITALY.--_Freight Tariff._
========================================================================
| GENERAL CLASSES.
RATES. |------+------+-----+------+-------+------+-----+------
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8
-----------------+------+------+------+------+------+------+-----+------
For the ton--km |0.1632|0.1428|0.1224|0.1020|0.0816|0.0714|0.612|0.0510
Terminal charges,| | | | | | | |
per ton. |2.04 |2.04 |2.04 |2.04 |2.04 |1.224 |1.224|1.224
------------------------------------------------------------------------
The rate on merchandise sent as fast freight is .452 lire (9c.) per ton
kilometer.
_Live Stock--(5 Classes.)_
=======================================================================
| | Cattle, | | | Cattle,
FIRST-CLASS. |Horses. |Swine and| SECOND-CLASS. |Horses. |Swine and
| | Sheep. | | | Sheep.
----------------+--------+---------+----------------+--------+---------
1 head, per km | 0.1530 | 0.136 |1 head, per km | 0.1530 | 0.1326
2 heads, per km | .0918 | .0765 |2 heads, per km | .0816 | .0714
3 heads, per km | .0816 | .0714 |3 heads, per km | .0663 | .0612
4 heads, per km | .0765 | .0663 |4 heads, per km | .0612 | .0561
5 heads, per km | .0714 | .0612 |5 heads, per km | .0561 | .0510
6 heads or more,| | |6 heads or more,|
per km | .0663 | .0561 | per km | .0510 | .0459
| | |III Class | | .02244
| | |IV Class | | .01224
| | |V Class | | .00612
------------------------------------------------------------------------
TABLE No. 8.
_Austrian Tariff (in kreutzers).--July 1, 1891._
=============================================================================
| | Parcel | | Special |
| Fast Freight. | Rate. | Carload Rate.| Tariff Rate. |
|--------+-------+----+----+----+----+----+----+----+----|
| | | | | | | | | | |Excep-
|Ordinary|Reduced| | | | | | | | |tional
| Rate | Rate | I | II | A | B | C | 1 | 2 | 3 |Rate
-------------+--------+-------+----+----+----+----+----+----+----+----+------
1 to 50 km | 1.20 |0.60 |0.60|0.50|0.34|0.24|0.18|0.26|0.18|0.15|0.12
50 to 150 km | 1.16 | .58 | .58| .46| .29| .22| .15| .23| .15| .13| .10
150 to 300 km| 1.12 | .56 | .56| .42| .25| .18| .12| .19| .12| .10| .09
For every | | | | | | | | | | |
addit'n'l km| 1.00 | .50 | .50| .30| .20| .12| .10| .15| .10| .08| .08
| | | | | | | | | | |
| _Terminal Charges._
1 to 30 km | 6.0 |3.0 |3.0 |3.0 |3.0 |2.0 |2.0 |2.0 |2.0 |2.0 |2.0
31 to 80 km | 6 |3 |3 |3 |3 |3 |3 |3 |3 |3 |2
Above 80 km | 8 |4 |4 |4 |4 |4 |4 |4 |4 |4 |2
-------------+--------+-------+----+----+----+----+----+----+----+----+------
_Horses_ and _mules_ are placed in Class II, with a minimum weight of
1,400 kg. for one head and 700 kg. for every additional head.
_Cattle_ are placed in Class II, and are billed at actual weight.
_Potatoes_, hay, straw, wood, coal and coke enjoy the "exceptional rate"
when shipped in carload lots.
TABLE No. 9.
_Hungarian Tariff (in kreutzers).--January 1, 1891._
=============================================================
| | Parcel | |
| Fast Freight. | Rate. | |
|--------+-------+----+----| |
| | | | | |
|Ordinary|Reduced| I | II | |
| Rate | Rate | | |"Sperrgüter."|
-------------------+--------+-------+----+----+-------------+
From 1 to 200 km. | 1.3 | 0.6 |0.72|0.52| 0.9 |
| | | | | |
From 201 to 400 km.| 1. | .5 | .52| .42| .8 |
| | | | | |
Above 400 km. | 1. | .5 | .52| .42| .8 |
|
| _Terminal Charges for 100 kg._
| .10 | .10 | .10| .10| .10 |
-------------------+--------+-------+----+----+-------------+
===============================================================
| | Special |Exceptional
| Carload Rate. | Tariff. | Tariff.
|----+----+------+----+----+----|-----+-----
| | | | | | | |
| A | B | C | I | II | III| I | II
| | |Lumber| | | | |
-------------------+----+----+------+----+----+----+-----+-----
From 1 to 200 km. |0.32|0.21| 0.16 |0.27|0.16|0.13|0.13 |0.11
| | | | | | | |
From 201 to 400 km.| .24| .17| .13 | .15| .13| .10| .10 | .09
| | | | | | | |
Above 400 km. | .16| .10| .09 | .10| .09| .07| .07 | .06
| .06| .06| .04 | .05| .04| .03| .03 | .03
-------------------+----+----+------+----+----+----+-----+------
Exceptional Tariff I comprises coal, wood, potatoes, stone, hay and
straw.
Exceptional Tariff II comprises manure, earth and Hungarian ores.
TABLE No. 10.
STATE OF IOWA.
SCHEDULE
OF
REASONABLE MAXIMUM RATES OF CHARGES
IN EFFECT MARCH 1, 1893,
FOR THE TRANSPORTATION OF
_Freight and Cars on each of the Railroads in the State of Iowa, together
with a Classification of Freights, prepared by the Railroad
Commissioners, in accordance with the Laws
of the State of Iowa._
* * * * *
Superseding all former schedules on the said railroads, including all
bridges and ferries used or operated in connection with any railroad;
and, also, all the roads in use by any corporation, receiver, trustee or
other person operating a railroad, whether owned or operated under
contract, agreement, lease or otherwise, or which may hereafter be
purchased, leased, acquired or operated within the State of Iowa.
The classification of freights applies to all the lines, regardless of
class. The schedule of maximum rates applies to all Class "A" roads. The
rates on Class "B" roads will be FIFTEEN per cent. higher, and
the rates on Class "C" roads THIRTY per cent. higher than the
rates named for Class "A" roads. The respective roads have been
classified by the Executive Council of the State as follows, which
classification is adopted by the Railroad Commissioners, and made part
of this schedule:
CLASSIFICATION OF ROADS.
CLASS "A."
Where gross annual earnings, per mile, shall be $4,000 or
more.--Burlington, Cedar Rapids and Northern Railway; Chicago and
Northwestern Railway; Chicago, Burlington and Quincy Railroad; Chicago,
Milwaukee and St. Paul Railway; Chicago, Rock Island and Pacific
Railway; Chicago and Great Western Railway (operating the Chicago, St.
Paul and Kansas City Railway); Dubuque and Sioux City Railroad; Chicago,
St. Paul, Minneapolis and Omaha Railway; Sioux City and Northern
Railway; Chicago, Santa Fe and California Railway; Sioux City and
Pacific Railroad; Toledo, Peoria and Western Railway; Union Pacific
Railway.
CLASS "B."
Where gross earnings are $3,000 or over and less than $4,000 per
mile.--Iowa Central Railway; Kansas City, St. Joseph and Council Bluffs
Railroad; Omaha and St. Louis Railway.
CLASS "C."
Where annual earnings are less than $3,000 per mile.--Chicago,
Burlington and Kansas City Railway; Chicago, Ft. Madison and Des Moines
Railway; Chicago, Iowa and Dakota Railway; Crooked Creek Railroad and
Coal Company; Des Moines and Kansas City Railway; Des Moines, Northern
and Western Railway; Humeston and Shenandoah Railroad; Iowa Northern
Railway; Mason City and Fort Dodge Railroad; Minneapolis and St. Louis
Railway; St. Louis, Keokuk and Northwestern Railroad; Tabor and Northern
Railway; Wabash Railroad; Winona and Southwestern Railway; Keokuk and
Western Railway.
Burlington and Western; Burlington and Northwestern; Ames and College;
Albia and Centerville.
======================================================================
| MERCHANDISE IN CENTS | SPECIAL CARLOAD CLASSES IN
| PER 100 LBS. | CENTS PER 100 LBS.
Miles|----------------------------------------------------------------
| First|Second|Third |Fourth|Fifth |Class|Class|Class|Class|Class
|Class.|Class.|Class.|Class.|Class.| A. | B. | C. | D. | E.
-----+------+------+------+------+------+-----+-----+-----+-----+-----
5 | 14 | 11.9 | 9.34| 7 | 4.9 | 5 | 4.9 | 4.2 | 3.5 | 2.8
10 | 14.8 | 12.58| 10.1 | 7.4 | 5.18| 5.3 | 5.18| 4.44| 3.7 | 2.96
15 | 15.6 | 13.26| 10.4 | 7.8 | 5.46| 5.6 | 5.46| 4.68| 3.9 | 3.12
20 | 16.4 | 13.94| 10.94| 8.2 | 5.74| 5.8 | 5.74| 4.92| 4.1 | 3.25
25 | 17 | 14.45| 11.34| 8.5 | 5.95| 6 | 5.95| 5.1 | 4.25| 3.4
| | | | | | | | | |
30 | 17.6 | 14.96| 11.73| 8.8 | 6.16| 6.2 | 6.16| 5.28| 4.4 | 3.52
35 | 18.2 | 15.47| 12.1 | 9.1 | 6.37| 6.4 | 6.37| 5.46| 4.55| 3.64
40 | 18.8 | 15.98| 12.5 | 9.4 | 6.58| 6.6 | 6.58| 5.64| 4.7 | 3.76
45 | 19.4 | 16.49| 13 | 9.7 | 6.79| 6.8 | 6.79| 5.82| 4.85| 3.88
50 | 20 | 17 | 13.34| 10 | 7 | 7.05| 7 | 6 | 5 | 4
| | | | | | | | | |
55 | 20.4 | 17.34| 13.6 | 10.2 | 7.14| 7.2 | 7.14| 6.12| 5.1 | 4.08
60 | 20.8 | 17.68| 13.87| 10.4 | 7.28| 7.4 | 7.28| 6.24| 5.2 | 4.16
65 | 21.2 | 18.02| 14.14| 10.6 | 7.42| 7.6 | 7.42| 6.36| 5.3 | 4.25
70 | 21.6 | 18.36| 14.4 | 10.8 | 7.56| 7.8 | 7.56| 6.48| 5.4 | 4.32
75 | 22 | 18.7 | 14.67| 11 | 7.7 | 8 | 7.7 | 6.6 | 5.5 | 4.4
| | | | | | | | | |
80 | 22.4 | 19.04| 14.94| 11.2 | 7.84| 8.2 | 7.84| 6.72| 5.6 | 4.48
85 | 22.8 | 19.38| 15.2 | 11.4 | 7.98| 8.4 | 7.98| 6.84| 5.7 | 4.56
90 | 23.2 | 19.72| 15.47| 11.6 | 8.12| 8.6 | 8.12| 6.96| 5.8 | 4.64
95 | 23.6 | 20.06| 15.73| 11.8 | 8.26| 8.8 | 8.26| 7.08| 5.9 | 4.72
100 | 24 | 20.4 | 16 | 12 | 8.4 | 9 | 8.4 | 7.2 | 6 | 4.8
| | | | | | | | | |
105 | 24.8 | 20.89| 16.35| 12.33| 8.69| 9.35| 8.63| 7.4 | 6.17| 4.96
110 | 25.6 | 21.38| 16.7 | 12.66| 8.98| 9.7 | 8.86| 7.6 | 6.34| 5.12
115 | 26.4 | 21.87| 17.05| 12.99| 9.27|10.05| 9.09| 7.8 | 6.51| 5.28
120 | 27.2 | 22.36| 17.4 | 13.32| 9.56|10.4 | 9.32| 8 | 6.68| 5.44
125 | 28 | 22.85| 17.75| 13.65| 9.85|10.75| 9.55| 8.2 | 6.85| 5.6
| | | | | | | | | |
130 | 28.8 | 23.34| 18.1 | 13.98| 10.14|11.1 | 9.78| 8.4 | 7.02| 5.76
135 | 29.6 | 23.83| 18.45| 14.31| 10.43|11.45|10.01| 8.6 | 7.19| 5.92
140 | 30.4 | 24.32| 18.8 | 14.64| 10.72|11.8 |10.24| 8.8 | 7.36| 6.08
145 | 31.2 | 24.81| 19.15| 14.97| 11.01|12.15|10.47| 9 | 7.53| 6.24
150 | 32 | 25.3 | 19.5 | 15.3 | 11.3 |12.5 |10.7 | 9.2 | 7.7 | 6.4
| | | | | | | | | |
155 |32.8 |25.79 | 19.85| 15.63| 11.59|12.84|10.93| 9.39| 7.87| 6.56
160 |33.6 |26.28 | 20.2 | 15.96| 11.88|13.18|11.16| 9.58| 8.04| 6.72
165 |34.4 |26.77 | 20.55| 16.29| 12.17|13.52|11.39| 9.77| 8.21| 6.88
170 |35.2 |27.26 | 20.9 | 16.62| 12.46|13.86|11.62| 9.96| 8.38| 7.04
175 |36 |27.75 | 21.25| 16.95| 12.75|14.2 |11.85|10.15| 8.55| 7.2
| | | | | | | | | |
180 |36.8 |28.24 | 21.6 | 17.28| 13.04|14.54|12.08|10.34| 8.72| 7.36
185 |37.6 |28.73 | 21.95| 17.61| 13.33|14.88|12.31|10.53| 8.89| 7.52
190 |38.4 |29.22 | 22.3 | 17.94| 13.62|15.22|12.45|10.72| 9.06| 7.68
195 |39.2 |29.71 | 22.65| 18.27| 13.91|15.56|12.77|10.91| 9.23| 7.84
200 |40 |30.2 | 23 | 18.6 | 14.2 |15.9 |13 |11.1 | 9.39| 8
| | | | | | | | | |
210 |41.6 |31.18 | 23.7 | 19.24| 14.78|16.56|13.45|11.49| 9.71| 8.3
220 |43.2 |32.16 | 24.4 | 19.88| 15.36|17.22|13.9 |11.88|10.03| 8.6
230 |44.8 |33.14 | 25.1 | 20.52| 15.94|17.88|14.35|12.27|10.35| 8.9
240 |46.4 |34.12 | 25.8 | 21.6 | 16.52|18.54|14.8 |12.66|10.67| 9.2
250 |48 |35.1 | 26.5 | 21.8 | 17.1 |19.2 |15.25|13.05|10.99| 9.5
260 | 49.6 | 36.08| 27.2 | 22.44| 17.68|19.86|15.7 |13.44|11.31| 9.8
270 | 51.2 | 37.06| 27.9 | 23.08| 18.26|20.52|16.15|13.83|11.63|10..
280 | 52.8 | 38.4 | 28.6 | 23.72| 18.84|21.18|16.6 |14.22|11.95|10.4
290 | 54.4 | 39.02| 29.3 | 24.36| 19.42|21.84|17.05|14.61|12.27|10.7
300 | 56 | 40 | 30 | 25 | 20 |22.5 |17.5 |15 |12.5 |11
| | | | | | | | | |
310 | 56.5 | 40.5 | 30.5 | 25.5 | 20.5 |23 |18 |15.5 |13 |11.5
320 | 57 | 41 | 31 | 26 | 21 |23.5 |18.5 |16 |13.5 |12
330 | 57.5 | 41.5 | 31.5 | 26.5 | 21.5 |24 |19 |16.5 |14 |12.5
340 | 58 | 42 | 32 | 27 | 22 |24.5 |19.5 |17 |14.5 |13
350 | 58.5 | 42.5 | 32.5 | 27.5 | 22.5 |25 |20 |17.5 |15 |13.5
| | | | | | | | | |
360 | 59 | 43 | 33 | 28 | 23 |25.5 |20.5 |18 |15.5 |14
370 | 59.5 | 43.5 | 33.5 | 28.5 | 23.5 |26 |21 |18.5 |16 |14.5
380 | 60 | 44 | 34 | 29 | 24 |26.5 |21.5 |19 |16.5 |15
390 | 60.5 | 44.5 | 34.5 | 29.5 | 24.5 |27 |22 |19.5 |17 |15.5
400 | 61 | 45 | 35 | 30 | 25 |27.5 |22.5 |20 |17.5 |16
| | | | | | | | | |
410 | 61.5 | 45.5 | 35.5 | 30.5 | 25.5 |28 |23 |20.5 |18 |16.5
420 | 62 | 46 | 36 | 31 | 26 |28.5 |23.5 |21 |18.5 |17
430 | 62.5 | 46.5 | 36.5 | 31.5 | 26.5 |29 |24 |21.5 |19 |17.5
440 | 63 | 47 | 37 | 32 | 27 |29.5 |24.5 |22 |19.5 |18
450 | 63.5 | 47.5 | 37.5 | 32.5 | 27.5 |30 |25 |22.5 |20 |18.5
| | | | | | | | | |
460 | 64 | 48 | 38 | 33 | 28 |30.5 |25.5 |23 |20.5 |19
470 | 64.5 | 48.5 | 38.5 | 33.5 | 28.5 |31 |26 |23.5 |21 |19.5
480 | 65 | 49 | 39 | 34 | 29 |31.5 |26.5 |24 |21.5 |20
490 | 65.5 | 49.5 | 39.5 | 34.5 | 29.5 |32 |27 |24.5 |22 |20.5
500 | 66 | 50 | 40 | 35 | 30 |32.5 |27.5 |25 |22.5 |21
----------------------------------------------------------------------
NOTE.--When rates are not shown in this table for the exact
distance, the rates given for the next greater distance will prevail.
When these rates and the classification conflict, these rates will
govern.
A = Wheat, flour, millet, flaxseed.
B = Corn, oats, barley, other grain and mill stuffs.
C = Hard and soft lumber, lath, shingles, sash, doors and blinds.
D = Salt, lime, cement, plaster, stucco.
E = Horses and mules in carloads--minimum weight 20,000 lbs.,
31-foot cars, inside measurement.
F = Fat cattle in carloads--minimum weight 19,000 lbs.,
31-foot cars, inside measurement
G = Hogs (single deck) in carloads--minimum weight 15,000 lbs.,
31-foot cars, inside measurement.
H = Sheep (single deck) in carloads--minimum weight 15,000 lbs.,
31-foot cars, inside measurement.
I = Hard coal.
J = Soft coal, lump and nut.
K = Soft coal, pea and slack.
=======================================================================
| CARLOAD CLASSES IN | LIVE STOCK IN CENTS |COAL IN CENTS PER
| CENTS PER 100 LBS. | PER 100 LBS. |TON OF 2,000 LBS.
-----+-----------------------+-----------------------+-----------------
Miles| A | B | C | D | E | F | G | H | I | J | K
-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+------+----
5 | 4.5 | 3.75| 3.5 | 3.25| 5.37| 5.13| 5.67| 8.4 | .60| .30 | .25
10 | 4.7 | 3.92| 3.66| 3.39| 5.75| 5.53| 6 | 8.8 | .64| .34 | .28
15 | 4.9 | 4.09| 3.82| 3.53| 6.12| 5.92| 6.33| 9.2 | .68| .38 | .31
20 | 5.1 | 4.26| 3.98| 3.67| 6.5 | 6.32| 6.67| 9.6 | .72| .42 | .34
25 | 5.3 | 4.43| 4.14| 3.81| 6.87| 6.71| 7 |10 | .76| .46 | .37
| | | | | | | | | | |
30 | 5.5 | 4.6 | 4.3 | 3.95| 7.25| 7.11| 7.33|10.4 | .80| .50 | .40
35 | 5.7 | 4.77| 4.45| 4.09| 7.62| 7.5 | 7.67|10.8 | .84| .54 | .43
40 | 5.9 | 4.93| 4.6 | 4.23| 8 | 7.89| 8 |11.2 | .88| .58 | .46
45 | 6.1 | 5.09| 4.75| 4.37| 8.37| 8.29| 8.33|11.6 | .92| .62 | .49
50 | 6.3 | 5.25| 4.9 | 4.51| 8.75| 8.68| 8.67|12 | .96| .66 | .52
| | | | | | | | | | |
55 | 6.5 | 5.4 | 5.04| 4.65| 9.12| 8.95| 9 |12.4 | 1.00| .70 | .55
60 | 6.7 | 5.55| 5.18| 4.79| 9.5 | 9.21| 9.33|12.8 | 1.04| .74 | .58
65 | 6.9 | 5.7 | 5.32| 4.93| 9.87| 9.47| 9.67|13.2 | 1.08| .78 | .60
70 | 7.1 | 5.85| 5.46| 5.07|10.25| 9.74|10 |13.6 | 1.12| .82 | .62
75 | 7.3 | 6 | 5.6 | 5.2 |10.62|10 |10.16|14 | 1.16| .85 | .64
| | | | | | | | | | |
80 | 7.5 | 6.15| 5.74| 5.33|11 |10.26|10.32|14.4 | 1.20| .88 | .66
85 | 7.7 | 6.3 | 5.88| 5.46|11.37|10.53|10.48|14.8 | 1.24| .91 | .68
90 | 7.9 | 6.45| 6.02| 5.59|11.75|10.79|10.64|15.2 | 1.28| .94 | .70
95 | 8 | 6.6 | 6.16| 5.72|12.12|11.05|10.8 |15.6 | 1.32| .97 | .72
100 | 8.1 | 6.75| 6.3 | 5.85|12.5 |11.32|10.96|16 | 1.36| 1.00 | .74
| | | | | | | | | | |
105 | 8.24| 6.87| 6.41| 5.95|12.75|11.53|11.12|16.3 | 1.40| 1.015| .755
110 | 8.38| 6.99| 6.52| 6.05|13 |11.74|11.28|16.6 | 1.44| 1.03 | .77
115 | 8.52| 7.11| 6.63| 6.15|13.25|11.95|11.44|16.9 | 1.48| 1.045| .785
120 | 8.66| 7.23| 6.74| 6.25|13.5 |12.16|11.6 |17.2 | 1.52| 1.06 | .80
125 | 8.8 | 7.35| 6.85| 6.35|13.75|12.37|11.8 |17.5 | 1.55| 1.075| .815
| | | | | | | | | | |
130 | 8.94| 7.46| 6.96| 6.45|14 |12.58|12 |17.8 | 1.58| 1.09 | .83
135 | 9.08| 7.57| 7.07| 6.55|14.25|12.79|12.2 |18.1 | 1.61| 1.105| .845
140 | 9.22| 7.69| 7.18| 6.65|14.5 |13 |12.4 |18.4 | 1.64| 1.12 | .86
145 | 9.36| 7.79| 7.29| 6.75|14.75|13.21|12.6 |18.7 | 1.67| 1.135| .875
150 | 9.5 | 7.9 | 7.4 | 6.85|15 |13.42|12.8 |19 | 1.70| 1.15 | .89
| | | | | | | | | | |
155 | 9.63| 8.01| 7.5 | 6.95|15.25|13.63|13 |19.3 | 1.73| 1.165| .905
160 | 9.79| 8.12| 7.6 | 7.05|15.5 |13.84|13.2 |19.6 | 1.76| 1.18 | .92
165 | 9.89| 8.23| 7.7 | 7.15|15.75|14.05|13.4 |19.9 | 1.79| 1.195| .935
170 |10.02| 8.34| 7.8 | 7.25|16 |14.26|13.6 |20.2 | 1.82| 1.21 | .95
175 |10.15| 8.45| 7.9 | 7.35|16.25|14.47|13.8 |20.5 | 1.85| 1.225| .965
180 |10.28| 8.56| 8 | 7.44|16.5 |14.68|14 |20.8 | 1.88| 1.24 | .98
185 |10.41| 8.67| 8.1 | 7.53|16.75|14.89|14.2 |21.1 | 1.91| 1.255| .995
190 |10.54| 8.78| 8.2 | 7.62|17 |15.11|14.4 |21.4 | 1.94| 1.27 | 1.01
195 |10.67| 8.89| 8.3 | 7.71|17.25|15.32|14.6 |21.7 | 1.97| 1.285| 1.025
200 |10.8 | 9 | 8.4 | 7.8 |17.5 |15.53|14.8 |22 | 2.00| 1.30 | 1.04
| | | | | | | | | | |
210 |11.07| 9.23| 8.61| 8 |17.87|16 |15.22|22.3 | 2.04| 1.32 | 1.06
220 |11.34| 9.46| 8.82| 8.2 |18.25|16.47|15.64|22.7 | 2.08| 1.34 | 1.08
230 |11.61| 9.69| 9.03| 8.4 |18.62|16.95|16.06|23.1 | 2.12| 1.36 | 1.10
240 |11.88| 9.92| 9.24| 8.6 |19 |17.42|16.48|23.5 | 2.16| 1.38 | 1.12
250 |12.15|10.15| 9.45| 8.8 |19.37|17.89|16.9 |23.9 | 2.20| 1.40 | 1.14
| | | | | | | | | | |
260 |12.42|10.37| 9.66| 8.99|19.75|18.37|17.32|24.3 | 2.24| 1.42 | 1.16
270 |12.69|10.59| 9.87| 9.18|20.12|18.84|17.74|24.7 | 2.28| 1.44 | 1.18
280 |12.96|10.81|10.08| 9.37|20.5 |19.32|18.16|25.1 | 2.32| 1.46 | 1.20
290 |13.26|11.03|10.29| 9.56|20.87|19.79|18.58|25.5 | 2.36| 1.48 | 1.22
300 |13.53|11.25|10.5 | 9.75|21.25|20.26|19 |25.9 | 2.40| 1.50 | 1.24
| | | | | | | | | | |
310 |13.8 |11.48|10.71| 9.95|21.6 |20.53|19.13|26.7 | 2.44| 1.52 | 1.25
320 |14.07|11.71|10.92|10.15|21.95|20.79|19.25|27.1 | 2.48| 1.54 | 1.26
330 |14.34|11.94|11.13|10.35|23.3 |21.05|19.37|27.5 | 2.52| 1.56 | 1.27
340 |14.61|12.17|11.34|10.55|22.65|21.32|19.5 |27.9 | 2.56| 1.58 | 1.28
350 |14.88|12.4 |11.55|10.75|23 |21.58|19.62|28.3 | 2.60| 1.60 | 1.29
| | | | | | | | | | |
360 |15.15|12.62|11.76|10.94|23.35|21.84|19.75|28.7 | 2.64| 1.62 | 1.30
370 |15.42|12.84|11.97|11.13|23.7 |22.11|19.87|29.1 | 2.68| 1.64 | 1.31
380 |15.68|13.06|12.18|11.32|24.05|22.37|20 |29.5 | 2.72| 1.66 | 1.32
390 |15.94|13.28|12.39|11.51|24.4 |22.63|20.5 |29.9 | 2.76| 1.68 | 1.33
400 |16.2 |13.5 |12.6 |11.7 |24.75|22.89|21 |30.3 | 2.80| 1.70 | 1.34
| | | | | | | | | | |
410 |16.47|13.72|12.81|11.89|25.1 |23.15|21.12|30.7 | ....| .... | ....
420 |16.73|13.94|13.02|12.08|25.45|23.41|21.25|31.1 | 2.88| 1.74 | 1.36
430 |17 |14.16|13.23|12.22|25.80|23.67|21.37|31.5 | ....| .... | ....
440 |17.27|14.38|13.44|12.46|26.15|23.93|21.5 |31.9 | 2.96| 1.78 | 1.38
450 |17.54|14.60|13.65|12.65|26.5 |24.19|21.62|32.3 | ....| .... | ....
| | | | | | | | | | |
460 |17.80|14.82|13.86|12.84|26.85|24.45|21.75|32.7 | 3.04| 1.82 | 1.40
470 |18.06|15.04|14.07|13.03|27.2 |24.71|21.87|33.1 | ....| .... | ....
480 |18.33|15.26|14.28|13.22|27.55|24.97|22 |33.5 | 3.12| 1.86 | 1.42
490 |18.60|15.48|14.49|13.41|27.9 |25.23|22.12|33.9 | ....| .... | ....
500 |18.87|15.70|14.70|13.60|28.15|25.49|22.25|34.3 | 3.20| 1.90 | 1.44
-------------------------------------------------------------------------
* Stock cattle or feeders and calves take 75 per cent. of fat cattle
rate; 31-foot car (internal measurement) is adopted as the standard for
minimum weight, as per heading in table; 28-foot cars, 90 per cent. of
above; 33-foot 6-inch cars, 108 per cent. of above; other lengths of
cars to take same proportion as above.
INDEX.
Abbett, Gov., 113
Absentee ownership, 287
Abuses, 101
cardinal, 134
for protection against, must resort to polls and not to courts, 332
increased, 129
of railroads, 124
origin of, 434
still practiced, 400
Accidents, 450
Acworth, Mr. W. M., 276
Adams, C. F., Jr., heresy, 260
difficulty not in legislation, 258
favors pooling, 260
on character of railroad men, 257
on Iowa law, 332
H. C., motive for ownership, 436
Africa, 61
roads constructed, 22
Agriculture among Babylonians and Assyrians, 19
Albany _Evening Argus_, 340
Albia, 324
Algiers, 62
Algona, 328
American colonies, 100
experience, 303
investments a reproach, 313
Americans would avail themselves of low rates, 445
American Transfer Company, 119
Amsterdam, 97
owes to canal, 32
Ann Arbor Strikers, 449
Area of land grants, 329
Argentine Republic, 68
Arrogance, 453
Asia, 59
early nations of, 18
Athens connected with Piræns, protected road, 24
Atkinson, Edward, 248
fallacious argument of, 249
relies upon a figurehead commission, 249
Atlantic nurseryman, 148
Attorney-General held that legislature had not the power to prescribe
rates, 330
Attorney, slow to accept fee, 402
Augustus instituted postal service, 27
Australia, 64
Austria, 54
Average fares per mile, 444
B. & M. Co., 324
Baker, C. W., 262
Balkan Peninsula, 59
physical features, important factor, 24
Ballou, H. S., 139
Baltimore and Ohio, watered stock, 172
_Bankers' Magazine_, 301
Banks and insurance, not private, 403
Barosz, M., 441
B., C. R. & N. Railroad Co., increased prosperity of, 344
Beach, C. F., Jr., 395
law of private corporations, 316
Bering Strait, 89
Belgium, 56, 409
cost of right of way, 370
Bessemer's invention, 374
Blackstone, T. B., 413
Blatchford, Justice, 213, 290
Blinkensop, 48
Board of Railroad Commissioners, 428
Bolles, A. S., 303
Bonded debt of M. & M. R. R., 322
Bonham, John M., 268
Boone, 327
Boston _Advertiser_, 340
Bradley, Justice, 213
Braithwaite, 49
Branch roads, 306
Brazil, 69
Brewer, Justice, 214, 215, 455
doctrine, 376
opinion of reasonable rates, 360
reply to ruling of, 364
Bridge across the Mississippi, 319
British railways, cost of right of way, 370
Brown, Justice, 214
Bryce, Prof., 391
on decadence of bar, 222
on lobby, 222
Budd vs. N. Y., 213, 290, 295
Buddha, commended roads to care of pious, 18
Burmah, 61
Burstall, 49
California railways, 122
Calmar, 328
Camden and Amboy charter, 113
Camden and Amboy Railroad Company, 102
Canada, 73
canals, 43
Canadian Pacific, 74
Canal, Erie, 40
from Bitter Lake to Red Sea, 23
Nicaragua, 44, 174
Canals, Canadian, 43
in Great Britain, 33
Italian, 34
private companies, 42
Spanish, 34
Candidates, railroad, 226
servile to railroads, 206
Cape Colony, 63
Capitalization of railroads, 86
Capital of Standard Oil Company, 121
Carey, H. C., 110
Carload lots, 386
rates, 140
Carthage, harbor, fleets, roads, 24
Carthaginians, 91
commerce of, constructed roads, 22
Cars refused, 120
Cassat, Mr., testimony of, 121
C., B. & Q. R. R. strike, 285
Cedar Rapids and Missouri River R. R. Co., 324
Central America, 70
Central Pacific, 175
scheme, 347
Ceylon, 61
Charlemagne repaired and built roads, 28
Chicago and Milwaukee system, cost of, 235
and Omaha pool, 194
convention, 224
Iowa and Nebraska Railroad, 328
third-rate lawyer, 222
Chile, 68
Chinese built roads before the Christian era, 21
Classification, 363
rule, 361
unjust features, 151
Clay, Mr., 303
Clews, Henry, 304
pictures evils, 404
"Twenty-eight Years in Wall Street," 185
Clear Lake, 328
Clerk of U. S. Court, 217
Cleveland, President, 359
Clinton, 328
Club address of C. F. Adams, Jr., 257
C., M. & St. P. R. R. Co. vs. Minn., 213
Coal and kindred articles, 386
Coffin, Mr. L. S., 452
Colbert, idea of postal service, 30
Coleridge, Lord, 454
Combinations, 189
regulate, 299
Commission evil, 420
Commission received, 119
Commissioner system, 246
Commission, Interstate, reviews Judge Brewer's rule, 365
Commissions acquire expert knowledge, 384
Commission's decisions, 359
acts subject to judicial review, 381
become a pliant tool, 429
character of, 359
Commission system adopted in Iowa, 335
Committee bill passed, 354
Commodities, character of, 373
Common law, sufficient in theory but fails in practice, 268
Competition, 190, 196
a great educator, 260
and enhanced rates, 352
in United States depended upon, 129
the death of trade, 298
vicious, 300
Communism, strength of, 454
Conduit company, 117
Confiscation of railroads, 293
Conflicts between labor and capital, 448
Congress, appropriations for improving rivers, 44
in three camps, 352
responds to demand of Pacific road, 183
to cease futile attempts 299
Congressmen imposed upon, 17
Connecticut railroad construction, 288
Conscientious managers cannot retain business, 399
Consolidation of C., R. I. & P. R. R. Co., 323
tendency to, 262
Conspiracies should not be legalized, 260
Conspiracy, 296
Constitutions made for, 457
Contests, expense of in Great Britain, 371
Contributions to Pacific roads, 180
Control, suggestions for, 425
Cooley, Judge, 315, 359
in reference to State and National Commissions, 426
Corporations, danger from, 223
willing to pay for questionable services, 222
Corrupt practice act in Mass., 223
Cost of American roads, 187
of building roads at present, 186
of existing railway system, 422
of operating M. & M. R. R., 322
of railroads, 172, 370, 417
Council Bluffs, 324
line completed to, 323
Courteous employes, 447
Courts ordered restoration of Erie securities, 170
should not aid, 381
C., R. I. & P. Railroad, 284
Crosby, J. O., story of tramp, 178
Crusaders, 92
Cuba, 70
Cullom committee report, 131
Senator, 353
Customs laws, 15
Dabney, W. D., drift toward railroad centralization, 261
favors pooling, 261
favors State control, 261
Darius I., work on canal, 23
Dartmouth College case, 315
decision, 259
Davis, C. Wood, 413
on cost of roads, 187
Dows, David, & Co., 138
Davis, Jefferson, plea, 276
Delegates to conventions, 224
Demand in other States for reform, 331
Denmark, 35, 58
first-class passenger rates, 439
Depew, Mr., 138
Depew says all railroad men are politicians, 366
Devices, various, 296
Differentials, 296
Discriminations, 118, 137, 143, 156, 147, 160
damaging, 248
in classifications, 148
in Iowa, 337
practiced openly, 331
Dillon, Judge, 411
Sidney, 273
on cost of Pacific roads, 185
Directors and officials of corporations, 316
character of, 406
with personal interests 317
Director-General, 431
should have power to remove managers, 432
Distance disregarded, 331
Dividends, 164, 187
by fluctuations, 302
Standard Oil Company, 121
Donations, 329
for benefit of public, 376
made by railroad companies, 446
to Pacific roads, 176
to railroads, 125
Donation to road completed, 320
Doud amendment, 331
Dual government, 401
Dual sovereignty must be recognized, 425
Dubuque & S. C. Co., 324
Dutch East India Company, 97
Duties of common carriers, 315
Duty of state, 456
Earnings diverted, 403
of first Iowa railroad, 320
gross, larger in United States, 281
of C., B. & Q., 175
of Iowa roads increased, 264
of Massachusetts railroads, 175
of Lake Shore, 175
Earnings of Liverpool and Manchester, 50
of Terre Haute, 175
of railroads, 86
per employe, 372
per train mile in the United States and United Kingdom, 270
per train mile larger in United States, 281
East India Company, 99, 303
Economy of fuel, 375
Editors, 221, 231
controlled by counting-room, 339
Egyptians, commerce of, constructed roads, 22
Electoral Commission, 215
Eminent domain, 314
Spelling on, 317
Employes fare better under Government management, 412
in Iowa, compensation, 344
in Iowa, number, 344
number of, in various countries, 371
number of, per mile of road, 269
number of, as related to gross earnings, 269
organized for political work, 277
quasi-public officers, 447
should have passes, 209
England, 99
roads maintained by statute and parish labor, 32
English landlords, 287
Entrance into railway service regulated, 448
Ericsson, 449
Erie Canal, 40
Railroad, 170
European and American investments compared, 371
European history began in Greece, 24
Evans, Oliver, 47
Executive charged with construction and maintenance of roads and
canals, 22
Executives influenced, 225
Experiments with wooden rail, 46
Extortion, effects of, 111
Farmers' Alliance, 300
Farmers' pool, 300
Federal agencies, need of improved, 430
Federal courts, influence of, 212
Ferocity of public opinion in the West, 312
Feudal features, 455
Field, Justice, 214, 269
Fink, Albert, 200
First rail tracks, 46
First railroad survey in Iowa, 319
Fort Dodge, 325
Fortunes, great, 400
made, 301
France, 54
duty of employes, 447
first system of roads, first artificial waterways, 30
large number of canals, 30
rates on freight and passengers, 293
Frederick the Great built turnpikes and canals, 31
Frederick William IV., 53
Free competition, 407
Freight agents, 383
Freight carried by railroads in the United States, 292
Friction under Iowa law, 341
Galena and Chicago Union, 164
Gallatin advocated roads and canals, 38
Garfield, President, 224
on Dartmouth College case, 316
Garrett, J. W., 83
Germany, first mail service, 31
first railroad, 53
German instructions to employes, 447
Georgia prescribed rates, 289
Glenwood, 337
Gibbon, 92
Gibbon concerning postal service, 27
Goodman, Mr., testimony of, 138
Gospel of wealth, 404
Göta canal, 35
Gould's bulldozing, 452
Gould, Jay, 212, 224, 269
on cost of Pacific roads, 184
Governor called extra session of General Assembly, 321
importuned, 228
of Iowa, 311
influenced, 227
Government ownership drawbacks, 412
Granger cases, 212
Granger, Judge, 229
Granger law did not retard construction, 335
of Iowa, 332
Granger laws, moderate, 322
repealed, 246
Granger movement, 84
a necessary one, 258
spread, 332
Granger system in Wisconsin, 245
Grant and Conkling, 224
Grant, Judge, 411
Great Britain, canals, 33
crossed by Roman roads, 27
recent origin of public roads and postal service, 32
Great Northern Railroad Co., 185
Grecian civilization passed to Romans and then to other nations, 24
Greek geographers, praise of highways of Hindostan, 19
Gresham, Judge, 212
Grinnell, Hon. J. B., 411
Gross and net earnings in Iowa, 344
earnings, increase in Iowa, 287, 293
earnings of Iowa roads, 265
Hadley, Prof. A. T., 245
on passenger rates, 278
on State legislation, 286
Hadley's address before Bankers' Association, 284
ignorance, 287
mistake, 290
Hadrian improved postal service, 27
Hagar, Mr., 109
Hackworth, 49
Hale, Lord Chief Justice, 316
Harrison, President, 214
on watered stocks, 174
on Nicaragua Canal, 44
Hanseatic League, 94
object, extent, power, 95
Haul, length of, compared, 372
Hayes-Tilden contest, 215
Hayti, 71
Hepburn committee, 137, 146
Hindoo culture and broad statesmanship, 18
Hoe printing-press, 231
Holland, 98
largest canal of, 31
Hoyt, J., & Co., 138
Hudson, J. F., 250, 266, 407
Hudson River Railroad accident, 451
Co., 167
stock watering, 167
Humboldt said of roads of Incas, 36
Hungary, 54
Hungarian zone system, 282, 440
Huntington, C. P., 347
letter of, 346
Illinois canals, 42
Granger laws, 331
Importance of transportation facilities, 17
Improved appliances should be used, 450
Income of railroads, 128
per capita, 292
Increase of traffic under zone system, 442
India supplied Nineveh and Babylon, Greece and Rome, 18
Individual entitled to full use, 392
Inflation, 163
Influences at work to create public sentiment, 294
Iniquitous taxation, 307
Injunction asked for, 323
Inspection service should be established, 432
Insurance provided for, 451
Interchangeable 1,000-mile tickets, 445
Interstate Commerce Act, 85, 319
amended, 358
approved, 354
Interstate Commerce Commission, sixth annual report, 160
Interstate Commerce law attacked, 162
Intimidation of railroad employes, 226
Inventors, 126
Investments, none pay so well, 248
Iowa attorney, 210
Bill of Rights, 445
Central Air Line, 324
City, road built to, 319
Commissioners enjoined, 343
Commissioners' valuable service, 336
Falls & S. C. Co., 325
General Assembly passed maximum tariff act, 264
General Assembly passed act authorizing commissioners to make _prima
facie_ rates, 264
law, features of, 341
misunderstanding of, 342
vindicated, 266
legislation, 319
politics, 311
prosperity accelerated, 345
railroad construction, 288
the queen, 348
Irish tenants, 287
Iron strap rail, 46
Itaki Atabeck, road seen to this day, 19
Italy, 57
canals, 34
Jackson, President, 367
Japan, 60
Java, 61
Jeans, Mr. J. S., 269
on railroad revenues, 437
on state railroad, 410
Jefferson's inquiries, 37
Judges, servile, 162
use passes, 208
Jurists, eminent, 234
Kansas Midland, 187
Kent, 314
Kirkman, M. M., 239
Labor organizations, 448
Labor-saving causes, 375
Lake transportation, 453
Land grant policy, wisdom of, 320
to Dubuque & S. C. R. R., 325
Land grants to Iowa railroads, 320
value of, 325
Languedoc Canal, 30
Lawyer and farmer, 209
Lawyers, briefless, 219
political, 223
third-rate, 222
Legislation, 299
of California, 123
Legislative campaign of 1887, 339
reform needed, 405
reports, 110
Lincoln, President, 216
story of the Irishman, and the pig, 271
Lines projected, 288
Lobbies frowned out of legislative halls, 402
Lobby, 219
formidable, 339
Locomotive, early inventors, 47
reward for, 49
Long and short haul clause, 297
of Iowa law, 341
Louis XIV., 98
Louis XI. transferred postal service to state, 30
Lowest rates in Europe, 409
Mails carried free in France, 373
Managers arrogant, 331
concede necessity of regulation, 369
have lost influence, 230
make law odious, 333
naturally despotical, 151
of great parties, 144
M. & M. R. R. Co., 319
Marshall, Chief Justice, 350
Marshalltown, 324
Massachusetts Commission, 428
Mathews, Judge Stanley, 269
Maximilian established postal route, 31
Maximum charges, 331
McDill, Hon. J. W., as a lobbyist, 238
McGregor grant resumed, 326, 327
McGregor Western R. R. Co., 325
Means employed to control legislation, 218
Mesopotamia, inhabitants perfect cart, 19
Methods for control, 402
impracticable, 425
Mexico, 72
Mileage of the future, 389
to area, 112,389
to population, 292
Minneapolis and Chicago conventions, 224
Minnesota case, 295
Granger laws, 331
politics, 311
Missouri Pacific, 187
Mitchell, Alexander, 232
Modern doctrine, Kent's rule, 314
Monopoly, 317
in transportation, 90
Morgan, Appleton, 250
Mortgaging prohibited, 434
Munn vs. Illinois, 213, 290
Muscatine, branch line to, 319
Mushroom millionaires, 307
National banking system, 303
National bureau should be established, 431
National control, 424
Nation inclined to follow beaten tracks, 425
Nations should profit by experience, 367
Napoleon Company, 108
Navigation act, 98
Nebraska maximum tariff, 346
Net earnings increased in Iowa, 265
in 1890 and 1891, 187
Netherlands, canals, 31
Net profit of passenger traffic in United Kingdom, 270
Nevada, 324
New England railroad construction, 288
New Orleans Cotton Exchange case, 360
Newton, 47
New York canals, 41
New York Central, gross earnings, 167
stock watering, 165
New York delegation, 224
Nicaragua, 70
Canal, 44, 174
Nile, canals, roads, people, 23
Notice given when rates are changed, 388
Number of employes per mile, 372
of hours' work of employes, 372
Office of railroad public, 368
Officers of railroads should not be allowed to use proxies, 432
should take oath, 432
Officials not likely to resist temptation, 436
Ohio canals, 42
Oliver Cromwell, 98
Operating expenses reduced, 375
Pacific railroad, 81
diplomacy, 180
prejudice, 45
Pacific roads before boards of equalization, 186
comparative cost, 186
cost to duplicate, 185
easy grade, 185
indebtedness to Government, 184
Papin, constructed steamboat, 47
Parliament compelled British railways, 451
Party organs, 221
Pass abuse, ruling of commission, 362
Pass, purposes for which given, 209
should be discarded, 446
Passenger rate-making principle wrong, 439
Passenger rates not reduced, 375
Passenger rates too high, 438
Passengers carried by railroads in the United States, 292
Passengers, English third-class, 270
killed and injured, 450
third-class, 269
Passes, 207, 208
plentiful, 420
to delegates, 226
Pauper tickets for the clergy should be abolished, 446
Pausanias shown well-kept road, 19
Pedigree of a proverb, 298
Peik vs. Chicago, 213
Pennsylvania canals, 41
Pennsylvania Central R. R. Co., 171
People prone to believe, 245
People's parties called into existence, 404
People will not tolerate, 397
Perquisites abolished, 446
Persian Empire, magnitude, 20
Peru, 67
roads, 35
Phoenicians, 90
built great roads,
traders of antiquity, 20
first great maritime nation, 19
Pipe line, 116, 119
Plan capable of being improved, 433
Policy of delay, 381
Political campaigns in Iowa, 339
Politicians as railroad employes, 229
Pooling, 261, 398
committee does not recommend prohibition, 354
contracts void, 317
grave effects of, 268
means of swelling railroad earnings, 267
should be prohibited, 203
Pools, 85, 194, 195, 251, 297
defended by Mr. Hadley, 247
defended by Mr. Morgan, 250
maintained in Iowa, 336
suppress competition, 198
Poor's, H., opinion, 187
estimate of cost, 86, 173, 247
Poor's estimate of watered stock, 186
Porter, Horace, _North American Review_ article, 290
Porter, John, 104
Portugal, 58
Portuguese, 96
Postal communication, royal road from Susa to Sardes, 21
Postal service not carried on by state, 30
Potential value of interstate law, 367
Powderly, T. V., 449
Prediction of Mr. Walker, 299
Predictions of railroad men, 332
Press abuse, 221
Press, efforts of railroads to control, 271
servile to railroads, 228
_Prima facie_ rates, 341
Prize worth contending for, 380
Procopius, statement of, concerning Via Appia, 27
Problem would be solved if abuses, 297
Providence, 136
Psammitichus cuts canal, 33
Ptolemaic kings built canals, 24
Public at mercy of managers, 381
not unreasonable, 450
Public opinion dormant, 400
efforts to influence, 273
rules, 400
Publicity advantageous, 402
Purchasers of land made the donation, 321
Question not settled until settled right, 377
Railroad attorneys, 214
Railroad-building after 1873, 246
Railroad business not private, 403
safe, 436
changes in Iowa, 393
company public agent, 388
competition, 190, 338
consolidation, 82
construction, 287
diplomate, 228
first line, 77
first steam engine, 47
improved highway, 339
like common road, 391
literature, 231
magazine literature, 273
managers do not do things by halves, 223
managers' opportunities to speculate, 399
men always oppose reductions of rates, 283
officials, 257
papers, 340
precursor of, 46
president's letters, 229
Railroads, abandoned, 79
bonded for more than cost, 175
capitalization of, 86
but few that do not pay, 52
cost to build, 186
earnings of, 86
in Asia, 59
in Austria, 54
in Belgium, 56
in Denmark, 58
in France, 54
in Germany, 53
in Granger States did not comply with law, 246
in Hungary, 54
in Italy, 57
in politics, 205
in Portugal, 58
in Russia, 58
in Switzerland, 56
in Spain, 57
in the Balkan Peninsula, 59
in the Scandinavian Peninsula, 58
in the United States, 76
in Turkey, 60
land grants to, 80
partake of two natures, 392
propitiate judiciary, 211
public tax collectors, 396
rebelled against Iowa law, 344
Railroad stations, number of, 190
Railroad tax, amount of, 393
Railway acts, first in England, 127
_Railway Age_, 288
Railway benefits, 231
employes in politics, 308
first act, 49
organs, 229
Pan-American, 88
Railways, highways, 13
weakened their arguments, 237
Railway system, growth of, 87
length of in the world, 87
Rate-making a legislative and not a judicial function, 332
Rate-making difficult, 244
not a judicial question, 378
Rate of 1870, 248, 249
per ton per mile on Camden and Amboy Railroad, 109
question, 370
Rates, fixing of by commission demanded, 430
fundamental principles in making, 385
in France, 293
lower will prevail, 256
lower, reason for, 374
might be reduced, 417
on Milwaukee road, 233
reduced by zone tariff in Austria-Hungary, 283
should be lower here than in Europe, 373
should be referred to National and State boards, 379
under Granger laws, 246
under Wisconsin Granger laws, 236
what are reasonable, 376
Reagan, John H., bill of, 352
Reform demanded, 295
Reasonable rates, 376, 387
fixing of, 361
Rebates Standard Oil Company, 115
Redfield, J. F., 312
Reduced rates on Government business in France, 293
increased business, 282
Refineries closed, 116
Reforms needed, 438
Remedies, 389
proposed by committee, 352
Remedy proposed by Mr. Hudson of doubtful efficiency, 268
Reorganization of the M. &. M. R. R., 322
Report of Cullom committee, 353
Reports of Interstate Commission, 366
Revenues increased by Granger law, 246, 332
uniform, 437
Revolution and anarchy, 299
Rhenish League, 94
Ricks, Judge, 449
Ridgeway, Jacob, 106
Right of control rests upon firmer ground, 318
Right of way, cost of, 370
River and harbor improvements, 453
Rivers, improvement of, 44
Robber knights, 93, 149
Robbers and feudal knights, depredations being tax, 29
Rob Roy, 258
policy, 102
Robinson, H. P., railway in politics, 308
Rocket, the, 49
Rogers, Thorold, 454
Roman Empire, after downfall roads destroyed, 28
Roman postal service, 27
Romans learned art of paving roads from Carthaginians, 24
Rome, 91
connecting link between antiquity and mediævalism, 24
extent, population, roads, etc., 25
Roads built from proceeds of stocks and bonds, 373
Roads built only when immediately profitable, 328
early, 37
pioneers of enlightenment and political eminence, 17
subject to legislative control, 327
utility of good, recognized in colonial times, 36
Russia, 58
roads, 35
Rutter, J. H., agent of New York Central, 116
Salaries, American railways pay the highest, 420
Saloon men politicians, 366
San Domingo, 71
San Salvador, 70
Sanspareil, the, 49
Savings under Government management, 422
Scandinavian Peninsula, 58
Scandinavian roads and canals, 35
Schedule rates made by Iowa Commission, 342
Schedules should be submitted to bureau, 432
Scriptures, roads of the, 22
Second-class passenger rates,
why not successful, 282
Secrecy a source of evils, 402
Select committee, 353
Select Committee on Transportation, 351
Senate committee, 172
Senators and Congressmen raise campaign funds, 436
Servility of Interstate Commerce Commission, 203
Sesostris cut canal, 23
Shippers given favors, 219, 221
powerless, 382
Sioux City, 325
Smyth Judge, 229
South America, 66
Southern Pacific Railroad Company, 122
Southern pool, 200
Southern Railway and Steamship Association, 194
South Sea Company, 303
Spain, 57
canals, 34
Spain and Gaul, roads of, 27
Special arrangements, 295
Special-car aristocracy, 445
Special contracts, 137
rate agreement, 141
rates, 120, 138
Speed of railroads, 279
Spelling, T. Carl, 317
Speculative element should be removed, 433
Speculators and gamblers, 434
Spirit of Interstate Law, 369
Standard Oil monopoly, 114
discrimination, 160, 362
State control encourages building, 130
in Iowa asserted early, 330
Spelling on, 318
State, duty of, 391
management, advantages of, 410
ownership and regulation, 409
with private management, 422
railway system, 277
States to cease futile attempts, 299
Steam engine, first account, 47
Stephenson, 48
Stevens, Mr., 107
Stewart, A. T., & Co., 138
Stickney, A. B., criticises President Mitchell's letter, 23
his criticism of Iowa rates, 343
his error, 256
favors entire control by Nation, 255
on interstate law, 255
on national control, 424
Stock a bonus, 434
Stock and bond inflation, 163
Stockholders, 131
dissatisfied, 112
interested in publicity, 403
Stock market controlled by few, 308
Stocks, fluctuations of, 435
should be paid in full, 438
shrinkage of value, 284
Stockton, R. F., 103
Stock watered 50 per cent., 307
Stock-watering, 164, 165
in America, 270
English, 371
Stock wiped out, 326
Stone, Governor, 324
Subordinates have to suffer for superiors, 203
Subsidies, 329
to press, 271
Sunday trains restricted, 451
Superintendents responsible for uncivil subordinates, 447
Supreme Court, 215, 289
Switzerland, 56
Taney, Justice, 216
Tariff, a tax, 135
prepared by sworn officials, 381
Tariffs impeachable, 382
official, should stand until proved unreasonable, 382
Texas legislation, 346
Text books, 312
Thiers, M., 51
Third-class passengers in Europe, 443
_Times_, New York, 340
Tipping, 447
Traffic associations, 149, 300
Trainmen should be allowed rest, 451
Train mile earnings, 269
Trains, number of, per mile, per annum, 281
should connect, 451
Transportation not a commodity, 368
Trevithick, Richard, 48
_Tribune_, Chicago, 244
New York, 340
Turkey, 60
Turnpike, first American, 37
Turnpikes in Great Britain, 32
Turnpike tolls, 396
Twelfth General Assembly, 323, 330
Umpires, high-priced, 420
Unanimous vote on Iowa law, 341
Union Pacific, 175
United States Bank, 303, 366
Unscrupulous men attracted, 390
Value of land grants, 329
Vanderbilt, 82, 452
Vedas, testimony of, 18
Venetian council, 253
Venezuela, 66
Venice, 93
Via Appia and other roads, 26
Violations of law encouraged by courts, 430
Wabash Railroad, 212
Walker, A. F., 294, 295, 311
Wall Street, defense of, 340
managers, 346
method, 302
War, 399
War rule, 331
Washington among the first to advocate internal improvements, 39
Water courses as levelers, 453
Watering stock, Mr. Jeans on, 270
methods of, 174
Water transportation, 145
Watered stocks, 172
Hadley on, 247
Watt and Stephenson's inventions, 126
Watt, James, 47
Weak roads helped, 344
Western candidates, 224
Water classification, 343
West Indies, 71
Western politician outwitted, 225
pool, failure of, 200
Traffic Association, 299
Union Telegraph Company, 127
White House, the, 215
Whitney, Asa, 81
Whitney's cotton gin, 231
Why Western people do not invest in railroad stocks, 308
Wells, David A., 374
Windom committee, 351
Wisconsin Granger laws, 331
Witnesses recusant, 134
Wrecking roads, 305
Wrought-iron rails patented, 47
_World_, New York, 340
Zone tariff, 409
ridiculed, 441
A Standard Book on an Important Subject.
THE
RAILROAD QUESTION.
A HISTORICAL AND PRACTICAL TREATISE
ON
RAILROADS, AND REMEDIES FOR THEIR ABUSES.
BY
=_William Larrabee_=,
Late Governor of Iowa.
12mo, cloth extra, gilt top (488 pages), $1.50.
I.--History of Transportation. II.--The History of Railroads.
III.--History of Railroads in the United States. IV.--Monopoly in
Transportation. V.--Railroad Abuses. VI.--Stock and Bond Inflation.
VII.--Combinations. VIII.--Railroads in Politics. IX., X.--Railroad
Literature. XI.--Railroads and Railroad Legislation in Iowa. XII.--The
Inter-State Commerce Act. XIII.--The Rate Question. XIV.--Remedies.
Appendix:--Tables and Statistics. There is also a bibliography on the
subject of Railroads, embracing ninety-eight titles, and a carefully
prepared alphabetical index.
Opinions of the Press.
"No work has ever before told so completely and clearly what the public
want to know, and ought to know, about the secret management and true
legal status of railroads. What journalists and magazine writers have
studiously left unsaid, whether from lack of knowledge or from motives
of 'revenue only,' Governor Larrabee has said, and said it
well."--_Western Rural._
"This book is evidently the result of long study and experience and much
thinking. While it is radical in its treatment of the question, no side
of it has been overlooked. It deserves careful reading by every person
who is interested in this great question. No subject is more worthy the
profound study of the statesman, the man of affairs, the scholar and the
citizen. Surely all who are trying to understand the good and evil of
railroads can turn to the pages of this book with the certain
expectation of learning much both in the way of fact and
suggestion."--_Bankers' Magazine._
"Perhaps the most interesting chapters are the two in which the author
reviews and criticises former publications on railway questions, and the
one in which he reviews the various remedies which have been from time
to time advanced for railway abuses. The book is concisely and clearly
written."--_Engineering News._
"Ex.-Gov. Larrabee of Iowa has written a highly meaty book on the
railroad question. It is a topic he is well qualified to handle, viewing
that he was no small part of the movement in former days to repress
railroad abuses in the West, and particularly in his own
State."--_Chicago Tribune._
"A careful study of an important question, fortified by facts and
figures which are both interesting and valuable."--_New York Recorder._
Hon. Thomas M. Cooley says: "I have read the book with interest,
especially that part which discusses State ownership and management. I
have not before seen the side you advocate so clearly and so ably
presented."
"The book is the most valuable work yet issued on its subject."--_Des
Moines News._
"Mr. Larrabee is eminently fitted for the task to which he has set
himself. He is not a mere theorizer. He brings to the discussion the
ripe knowledge that comes from long experience in dealing with the
railroad question, not only as a State Senator and Governor, but also
'as a shipper and as a railroad promoter, owner and stockholder,' and
likewise as 'a director, president and manager of a railroad company.'
In his treatment of the railroad problem, moreover, Mr. Larrabee
displays a breadth of view and an earnestness of purpose that must
command respect even where they fail to carry conviction."--_Public
Opinion._
"It is devoid of the animus which usually enters into the works of the
reformers, but on the contrary is written in admirable style, enhanced
by happy anecdotes, and altogether is a much more readable book than one
is accustomed to find upon so practical a question."--_Kansas City
Journal._
"It justifies a claim to a place among the standard books upon the
railroad problem. It is particularly in those portions of the work which
deal with the relations of the Government to the railroads and the
solution of the difficulties that have arisen between the railways and
the people that the experience of the author both in guiding and
executing the railway legislation of Iowa comes into prominent
play."--_Omaha Bee._
"We commend the book to the careful reading of the railroad
stockholder."--_Railroad Record and Investor's Guide._
"A thoughtful volume, showing careful research and
reflection."--_Chicago Inter-Ocean._
"A most interesting, valuable and timely book. Every student of the
subject will need to read it, and the popular vein of narrative makes it
very interesting and instructive to the general reader."--_New England
Home._
"This work will present Governor Larrabee in a new and novel light
before the public. Heretofore he has been known as the successful man of
affairs and business; as the earnest and zealous legislator; as the
persistent and vigorous executive; and now he comes as the laborious
student upon a great economic and practical question who has aptly and
clearly put his views into a book."--_Dubuque Herald._
"A thorough treatise by an able mind. The authorities quoted are the
best in print."--_Coming Nation._
"By far the best work on the popular side of the railroad
question."--_Gen. M. M. Trumbull in the Open Court._
"Gov. Larrabee's book will rank among the greatest productions of the
day on that question."--_Cedar Rapids Gazette._
"The book is the result of extraordinary observation, great reading and
careful study. * * * This element of completeness, of massing so much
information between the covers of a book of ordinary size, makes it
invaluable for reference. Of all the many books called out by the
agitation of the railroad question, this one will be oftenest referred
to, not so much for its opinions as for its stores of facts."--
_Davenport Democrat._
"Governor Larrabee has always been a careful and conscientious student
of the railroad question, and in exposing the abuses to which the
railroad system has committed itself he renders a service from which the
public may derive great benefit."--_Good Roads._
"The high character and well known reputation of the author will create
a demand for this book, aside from the fact that it contains a vast
amount of information as well as sound reasoning on the railroad
question."--_American Journal of Politics._
"The author's attitude, while firm, is by no means a sinister or
fantastic one. He writes obviously from honest conviction, and he writes
with skill and force."--_Philadelphia Press._
"A temperate and instructive contribution to railroad
literature."--_Chicago Times._
"A mine of facts gathered by a man who has made a specialty of his
subject and who is evidently in earnest in his desire to lessen the
burdens of the American people."--_San Francisco Chronicle._
"In point of authenticity the book is absolutely to be relied
upon."--_St. Louis Post-Dispatch._
"Governor Larrabee came to Iowa before any railroad had reached the
Mississippi. Engaging in manufacturing, the inconveniences which he
suffered from want of transportation facilities instilled liberal
opinions concerning railroads. He made private donations to new roads
and he advocated public aid to them. As a legislator he introduced a
bill authorizing a 5 per cent. tax in aid of railroad construction. He
believed that the common law and competition could be relied upon to
correct abuses and to solve the rate problem. It has not been until
since these efforts were made that he has become convinced, as he says
in his preface, that 'where combination is possible competition is
impossible.' The object of this work is explained to be to set forth the
objections which lie against the management of railroads as private
property. They are used by their managers for speculative purposes. They
cannot perform their proper functions so long as they are used only for
the interests of their stockholders. In order to serve their real
purpose, 'they must become in fact what they are in theory, highways to
be controlled by the Government as thoroughly and effectively as the
common road, the turnpike and the ferry, the post-office and the
custom-house.'"--_Council Bluffs Nonpareil._
="THE RAILROAD QUESTION"=
may be ordered through any bookseller,
or will be sent by mail to any address,
on receipt of price, by the publishers.
The Schulte Publishing Company,
334 DEARBORN STREET,
CHICAGO.
+-----------------------------------------------+
| Transcriber's Note: |
| |
| Inconsistent hyphenation and spelling in the |
| original document have been preserved. |
| |
| Roman numeral page numbers in the Appendix |
| have been changed to Arabic numerals. |
| |
| Typographical errors corrected in the text: |
| |
| Page 13 Ackworth changed to Acworth |
| Page 25 Jerusalen changed to Jerusalem |
| Page 26 Brundusium changed to Brundisium |
| Page 27 af changed to of |
| Page 27 if changed to of |
| Page 29 Strasburg changed to Strasbourg |
| Page 37 Pittsburg changed to Pittsburgh |
| Page 45 subsides changed to subsidies |
| Page 65 Williamston changed to Williamstown |
| Page 70 Cabello changed to Caballo |
| Page 107 resolulution changed to resolution |
| Page 215 prejudiee changed to prejudice |
| Page 232 aquainted changed to acquainted |
| Page 236 omiting changed to omitting |
| Page 252 Bastile changed to Bastille |
| Page 266 possiple changed to possible |
| Page 342 Is changed to It |
| Page 346 their changed to there |
| Page 350 cammerce changed to commerce |
| Page 361 upan changed to upon |
| Page 368 iujustice changed to injustice |
| Page 373 Eurpean changed to European |
| Page 407 despatcher changed to dispatcher |
| Page 408 despatcher changed to dispatcher |
| Page 417 Sante changed to Santa |
| Page 422 aquire changed to acquire |
| Page 478 reasonaable changed to reasonable |
| Page 482 addres changed to address |
| Page 485 Potuguese changed to Portuguese |
+-----------------------------------------------+
End of Project Gutenberg's The Railroad Question, by William Larrabee
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