ply makes the other route a present of the through traffic. What, for instance, would be the effect of a national short-haul law on the movement of wheat from Chicago to the seaboard? At present, it is a traffic which the railroads can afford to make special efforts to secure, and they bring the rates down nearly to the level of operating expenses. If they reduced local rates to this basis, they would have nothing left to pay fixed charges. The only way by which they could comply with the law would be by raising through rates. This would simply have the effect of sending the wheat to Europe via Montreal instead of via American ports. The Grand Trunk Railroad, which would be outside of our control, would have the chance to make low through rates, and get the heavy through traffic. The English stockholders of the Grand Trunk would be the persons most benefited by such a law.
It is only a few years since the Prussian Government got into trouble in exactly this way. It was thought by the authorities that the low through rates favored the foreigners at the expense of the Germans; and an attempt was made to carry out the short-haul principle rigidly. The result simply was that the foreigners sent their goods by other routes which Bismarck was unable to control, and that the Prussian railroads lost a part of their traffic, which, low as were the rates charged upon it, was yet a matter of importance to their business prosperity.
Similar instances could be cited from almost any other country. Whenever we find a competitor which our law can not reach be it water-route, foreign railroad, or domestic railroad which violates the law in an underhand fashion the short-haul principle simply cripples the roads which obey it, without producing any corresponding good effect.
Experience has shown pretty clearly that local discrimination can be avoided only by bringing competition under control. The States where legal regulation of this matter has been most successful have been those like Georgia and Iowa, where the pooling system has been strongest and most stable, or those like Massachusetts, where competition has become, in local business, largely a thing of the past. Everywhere, in America and in Europe, periods of active competition have been periods of active discrimination. To check the second you must control the first. And the only practicable way of doing this, short of actual consolidation, is by a system of pooling. The mere agreement to maintain rates is not enough,; it is too easily violated by secret rebates. An agreement to divide the traffic or the earnings, as long as it holds at all, is much harder to violate secretly. This is what constitutes a "pool."
We are thus reduced to the simple alternative, pooling or discrimination. Each effort to prohibit both at the same time only makes the necessity more clear. The governments of Continental Europe have ceased to struggle against it. Rightly judging that discrimination is