Popular Science Monthly/Volume 23/July 1883/The Railroad Problem in the United States
By GEORGE ILES.
GEORGE STEPHENSON, in October, 1829, made his memorable journey in the Rocket over the Railhill trial course; the next year the Liverpool and Manchester Railway was opened, and soon every civilized nation adopted the new method of locomotion. In the United States a variety of circumstances have concurred to make the railways the most extensive, the most economical in working, and the most influential in the world. The immense area of the country, the small value of most of the land required for the roads, the easy grades marked out by the great water-courses of the continent, and the broad prairie-sweeps, conjoined with the ease and cheapness of obtaining charters, make American railroads but one third as costly in construction as those of Great Britain and the European Continent, and much less expensive in operation. On this side of the Atlantic railways are built with embankments, culverts, bridges, and tunnels, much less elaborate and substantial than those of England and France. The requirement here is not the best but usually the cheapest thing that will serve. This is one of the reasons among others why American freight charges are the lowest in the world. In 1881 the average cost of moving a ton of freight a mile was 1·66 cent in France, 1·5 cent in Belgium, and but 0·9 cent in the United States. The railways of the Union are now 114,000 miles in extent, and construction proceeds at the rate of thirty miles a day. The aggregate capital of the lines is 86,500,000,000, one eighth the valuation of all kinds of property in the country, according to the best estimates.
Less than fifty years ago, within the clear recollection of men now living who were then actively engaged in business, the great problem was, how soon the country could be provided with railroads. Far-sighted men of capital and public spirit saw something of what railroads were to be, and soon the iron way began to connect the great cities of the Atlantic together, and then these with the interior of the New England and Middle States, until at last the continent has been belted, and the distant mining-camps of the Rocky Mountains, and the broad stretches of the Californian and Texan plains, are directly connected with every city and town in the country. A single life covers the entire period which separates the time when stage-coaching and wagoning were the methods of transportation, from to-day, when railroads loom up in capital and centralized control as the most important element of American commerce.
The benefits derived from the railroads have been so great as to have virtually created the population and wealth of some of the wide Western States and Territories. Railroads have opened up homes for millions sent across the sea from overcrowded Europe, have cheapened food, clothing, and shelter, have practically broken down State and sectional lines, and by interfusion of capital and population have done more to weld the Union together than any other influence. The locomotive has proved a giant indeed, capable of bearing heavy burdens, and accomplishing splendid results; yet of late railroad corporations have shown a disposition to abuse their strength for public oppression, and the railroad problem is, how this tendency may be best overcome.
While on all hands the indebtedness of the community to railroad enterprise is gladly acknowledged, and while the average return on railroad investments throughout the country is but three per cent, and the charges generally are lower than elsewhere in the world, yet the complaints made against some of the leading lines are so serious as to have given rise to one of the angriest discussions of the time.
The chief complaints, of course, have been made against the lucrative roads, those which run through thickly-settled regions, like the New York Central; and against lines which, like the Central Pacific, are monopolies pure and simple. The complaints are of exorbitant charges, of discrimination in favor of individuals, firms, and localities; that the railroad companies lend themselves to the aggrandizement of monopolies such as the Standard Oil Company, and of minor subsidiary organizations, car, bridge, express, stock-yard, and elevating companies which absorb parasitically profits which should belong to the railway shareholders, and which, if rightfully appropriated, would tend to relieve the burdens borne by the general public. The complainants furthermore aver that the railroad companies make use of their influence, as employers of large bodies of voters, to corrupt Legislatures and courts that they may remain unpunished in committing acts of fraud and rapacity, and defeat attempts by the State to exert the control which the highest authorities declare to be within its rightful powers.
To take up these complaints somewhat in detail—and beginning with that of exorbitant charges—there was provision made in most of the early railroad charters—those of New York State, for instance—whereby the profits divisible annually were limited to ten per cent; but this provision, intended to secure shippers against unduly high rates, has been evaded by the process known as stock-watering. To illustrate: The contract for the consolidation of the lines forming the New York Central Railroad was made in 1853, and the ten amounts of capital then fused formed a total of $23,000,000, on which premiums were granted aggregating $8,900,000. In 1868 and 1869 the New York Central and Hudson River Railroad Companies were consolidated as a single company, which named its capital at nearly $15,000,000 more than the capitals of the two lines before union. Of course, more than ten per cent would have to be earned on the inflated figures before the State law would apply, and by that time doubtless a new company would appear to buy the road at a handsome advance on its nominal capital. The critics of stock-watering or of the capitalizing of surplus earnings say that it is in substance exacting money from the people, creating an indebtedness representing the same, and making this the basis for forever asking the public to pay interest upon their money so exacted. These critics would limit the profits of the lucrative roads, but, unjustly it would seem, would leave the struggling lines to their fate.
The railroad companies are told, "You may earn as little as you can, but, if by good fortune and good management you earn more than ten per cent, the State will seize the surplus." Practically, however, the law can not be enforced, as the common rights of sale and purchase can be exercised to evade it.
In response to the complaints against the New York roads, the Assembly in February, 1879, appointed a special committee, with Mr. A. B. Hepburn as chairman, to investigate alleged abuses, propose remedies, and report. The testimony before this committee fully established the truth of the alleged abuses in discrimination. Mr. Goodman, Assistant General Freight Agent of the New York Central Railroad Company, testified that special rates were given to all points almost invariably when asked. About ninety per cent of the business between New York and Syracuse was done at reductions from tariff terms, and about one half the business between New York and other points was done at special rates. Other witnesses proved that flour had been carried from Milwaukee to New York while the tariff rate was thirty-six cents, at the specially reduced price of twenty cents, the maintained rate at the time from Rochester being thirty cents. Rochester is 350 miles from New York, and Milwaukee 1,030 miles. So marked and inconsistent a difference did there exist between local and through freight charges, that Mr. W. W. Mack, of Rochester, could ship edge-tools to New York and thence to Cincinnati via Rochester, and save fourteen cents per hundred; to St. Louis by the same route, eighteen cents per hundred—in each case the goods being carried seven hundred miles more than a direct haul! Surely one would say that rates devised so loosely as to render Mr. Mack's plan worth adopting discredit the officials responsible for them. Among the remarkable cases of discrimination proved were the following: Babbitt & Co., soap-manufacturers in New York, ascertained that Crouse & Co., of Syracuse, had a special rate of eight cents per box over the New York Central road; Babbitt & Co. asked for a similar reduction, which was refused, the rate charged them being twelve cents to Syracuse, and this while their shipments over the New York Central and Hudson River Railroads aggregated 1,346 tons in the year preceding the session of the committee. In the winter of 1877 Jesse Hoyt & Co. and David Dows & Co., of New York, two large grain firms, controlled the market by having obtained freights from the West two and a half to five cents per hundred less than any of their competitors. Their facilities for freight exceeded their purchasing power, so they actually sublet their privileges to other houses in the trade.
Towering far above all the wrongs under the head of discriminations ever perpetrated by railroads must be placed those committed in favor of the Standard Oil Company. This monopoly, the strongest of the kind in the world, controls the production of petroleum in the United States, the second largest export of the country; its relations with the railroads are such that it obtains freighting at an immense reduction from the terms charged to other customers of the roads. In August, 1879, the Erie and New York Central roads charged the Standard Company about ten cents for hauling a barrel of three hundred and ninety pounds somewhat more than four hundred miles, empty cars having to be hauled back over the lines. Contrast this with the charge of forty-five cents for bringing a can of ten gallons of milk weighing ninety pounds but sixty miles! The proportions are as 1 to 130. From January to October, 1879, the total shipments from the oil-regions were 12,900,240 barrels. All shipments to the seaboard might have borne one dollar more per barrel than they did, yet all these millions of dollars were lost to the roads by a policy for which their officers are accountable. The Central Pacific Railroad Company is another against which discriminations of an unwarrantable character have been proved. While one shipper was charged 65 cents from Ogden to Toano, another shipper was charged $3.35 for the same service. Vegetables were carried for different firms at rates as various as 55 cents and $1.36. Through rates from New York to San Francisco were to some shippers one half those charged to others. The complainants take good ground when they declare that discriminations in favor of particular localities and firms create deficiencies which shippers generally are taxed to equalize; and, as mercantile competition becomes yearly more severe, the unjust discriminations of railroads unfairly discount the legitimate returns of business enterprise, and hasten the undesirable tendency so plainly observable on all sides, whereby the great houses are constantly absorbing the trade of the lesser ones, and the business of the country seems passing into fewer and fewer hands.
As to the growth of subordinate railroad organizations, the quotations of the stock-exchanges and the testimony of those interested in investments not listed on the stock-exchanges prove the great lucrativeness of express, fast-freight line, palace-car, elevating, and stockyard companies. It is a question whether these businesses can be successfully carried on by railroad companies, but, if not, the corporations which give them birth should, if honestly managed, see to it that they retain such interest as to participate in the large profits earned. The chief danger attending these subsidiary organizations is, that the railroad officials who take stock in them are interested in granting them special privileges and good bargains. It is notorious that officers of unprofitable or bankrupt roads have grown rich by interests of the kind mentioned.
The political power which the railroads can exert has repeatedly attracted public attention. In New York State there are thirty thousand railway employés, and the number of people indirectly interested in the roads, and influenced by them, is perhaps equally large. At the capital this voting element has opposed railway legislation, and triumphantly. Parallel cases have occurred in other States, notably in California and Illinois. As an example of what a railroad can do in the way of controlling political action, let this quotation be given from Jay Gould's testimony before the State Committee appointed in 1873 to investigate the management of the Erie Railway: "I do not know how much I paid toward helping friendly men. We had four States to look after, and we had to suit our politics to circumstances. In a Democratic district I was a Democrat, in a Republican district I was a Republican, and in doubtful districts I was doubtful; but in every district, and at all times, I have always been an Erie man." Other testimony proved that millions of dollars had been expended from the treasury of the Erie road in nominating, electing, and corrupting Senators and members of Assembly. A new danger certainly threatens public liberties in the light of these and many kindred revelations, a danger which, perhaps, only counter-organization by the people can successfully face. It was a notable day in American history when the attorney of the Pennsylvania Railroad threatened the Supreme Court of the State with the displeasure of his clients if a verdict unfavorable to them were granted. When President Vanderbilt, of the New York Central, was told about the State Commissioners who were to supervise railroad affairs, he said that either the railroads would have to own the commissioners or the commissioners the railroads. His later utterances with respect to public criticism are tolerably familiar, and need not be here repeated.
The complaints against railroad management, as far as they appear to be just, show that the railroad problem may be divided into two parts: First, how shareholders in railroads can meet the difficulties of joint-stock ownership, and control their property, so that it can be made by all legitimate methods as profitable as possible. This means the election of directors not as now, as a whole board by a single majority vote, but by a plan of minority representation, which will give a voice in the directorate to every interest entitled to it. It means including in the business such branches of traffic as are now delegated to subsidiary companies, where this can be done advantageously; and the employing of officers of such high character and ability that they shall be disposed to co-operate with one another to avoid illegitimate and ruinous competition—officers able to establish tariffs based on sound and consistent principles, and tariffs with which no subordinate officer shall have power to tamper.
The second part of the railroad problem is how the general public, while desirous of paying just remuneration to the roads, may protect themselves against extortion and unjust and arbitrary discriminations. This part of the subject raises the question of the constitutionality and feasibility of State control, and brings up for discussion the various influences which are spontaneously exerted within the railroad business itself for its fair and equitable management. In the brief sketch here presented of the chief complaints made against the railroads, it has been evident that some of the most serious of these complaints arise from the inherent difficulties of joint-stock ownership. A board of directors, provided with many proxies, can do pretty much as they please, and the history of American roads shows that at times they please to enrich themselves at the expense of those whom they represent.
The shareholders in a large company are often a shifting, chaotic, and helpless body, fortunate, indeed, when the directorate are sufficiently honest and interested to administer affairs as they should. It seems strange, too, that the management of railroads should so widely permit an evil which causes so much just censure, namely, the cutting of rates, by a staff of agents scattered throughout the whole country. When control by the owners of railroad property remains as imperfect as it is in important particulars, it certainly seems an idle task to attempt the State control of the largest and most complicated business in existence.
The discussion of the railroad problem has given the public some insight into the difficulties which beset this business. There are now in the United States some twelve hundred railroad companies, more or less actively competing with one another. Between two great cities like New York and Chicago, and between a great center of distribution like St. Louis and the Atlantic seaboard, there are many competing routes, and the contest for business among these routes is very keen, and at times so violent as to set all considerations of profit at defiance. The routes connecting the great West with the Atlantic ports vary in directness, in gradients, and in the thickness of the population in the districts through which they run; it follows that their-inequality of desirableness as freight lines must be balanced by differences in rates. To establish and maintain these differences in rates, it has been the practice for the roads to enter into agreements with one another, and, in making these agreements on fair and satisfactory terms, and in enforcing the agreements when made, have been encountered the most perplexing tasks of railway management. In arguing for a basis of rates, two widely different stand-points are occupied by the trunk-lines running eastward from Chicago. The great interests centering in New York declare that the cost of service should be the prevailing consideration in proportioning rates among competing lines.
It is adduced that the easy gradients of the New York Central and the immense traffic which belongs to the cities and towns through which it runs enable it to be operated at less cost per ton per mile than any other road in the country: the geographical and census arguments should, therefore, be permitted to give New York a preference over competing cities in the framing of joint tariffs. Philadelphia and Baltimore take different ground: they point out that they are respectively one hundred and thirty-two and one hundred and fifty-two miles nearer Chicago than is New York via the New York Central, and therefore they desire freight rates to be fixed on the basis of mileage. Contests, which have consumed many millions of dollars, leave the question open as to which of these two principles shall govern the charges of the trunk-lines on through business. Another reason for the difficulty attending the making and keeping of agreements between railroads is the fact that the temptation to bad faith is extreme. If one road can defraud another of some freight by an illegitimate reduction of rate, the cash so earned is almost wholly profit, for the fixed expenses of the road are scarcely affected whether that freight be carried by it or not. The bad faith of a single road can lead to the breach of an agreement entered into by several great roads; and often it is the weak or bankrupt line whose dishonorable dealing leads to a war of rates being declared which may cost a million dollars before it ends. And a curious point comes up just here: so dear to the heart of the average shipper are these wars of rates, that clear-headed men who know his inner springs aver that the shipper does not desire permanent peace among the railroads, and does not wish to see them earn their incomes with the steady regularity enjoyed by the investor, say, in Government bonds. Peace to the shipper would be as distasteful as the absence of fluctuations to the speculator in stocks or grain, for railroad men and those who find fault with them seem to be made of the same clay.
Railroads have enemies within as well as without. Intense competition has given birth to a class of soliciting freight agents, to whom reference has already been made; these men are empowered to grant reduced rates at discretion; their bargains are binding on all the lines forming the routes for which they solicit business, and their acts are in their nature so difficult of detection, and so inimical to the integrity of agreements, that a sound business policy would dictate that their powers should only be wielded by officers of the roads sufficiently high in position and character to guarantee good faith in carrying out the joint contracts made by the presidents of the lines.
It is a strange fact in railroad history that the contracts between roads for the maintenance of rates have never, up to the present time, invoked legal sanction and enforcement; they have been made and broken purely at will. Good authorities, among whom may be named the Railroad Commissioners of Massachusetts, state that the existing laws of the country afford all the provisions needed for the purpose; while, again, the chief railroad expert in the country, Mr. Fink, holds that special legislation is necessary. So important does Mr. Fink hold this matter to be, that he states that when the necessary enactments have been passed, and when railroad managers have the good sense to co-operate and avail themselves of legal authority, he will regard the railroad problem solved as far as solution is possible.
In March, 1882, a commission at Washington, appointed to consider the railway question, brought together Mr. Fink and General Reagan, of Texas, the member of Congress who proposed a bill for the direct regulation of the railroads by the Federal Government. General Reagan's bill is chiefly aimed at what he and many others conceive to be a grave injustice, namely, the discrimination which makes through freight pay a much less rate than local freight, and which grants one shipper more favorable terms than another for the same service. The bill would make the rate per mile uniform over all roads, and would make through rates the sum of the local rates charged over the component parts of a line. The testimony of Mr. Fink before the commission, and particularly in reply to General Reagan, is one of the most instructive pieces of railway literature so far given to the public. Mr. Fink deemed the railroad problem too difficult to be handled by a directly appointed commission: all that he could recommend was a commission to investigate complaints. He pointed out the great services railroads had done the country, and declared the evils attending the management of the business to be largely unavoidable amid affairs so vast and involved. As an example of the benefits railroads had conferred upon the public, he stated that in the fall of 1880 the rate from Chicago to the East was but six tenths of one cent per ton per mile, or equal to carrying seventeen barrels of flour one mile for one cent! The intense competition between roads has been one of the main causes of the remarkable economy of their management, and their eagerness to adopt every improvement as soon as produced, chief among which improvements must rank the steel rail. Quoting from Mr. Edward Atkinson, Mr. Fink said that an artisan in the Eastern States pays the transportation from Chicago on a year's food by a single day's labor, and so great have been the reductions during recent years, in railway charges, that, had the rates of 1873 been maintained until 1879, the roads would have had in the interval $922,000,000 more revenue than they actually collected. In 1880 more than three times as much freight was carried by the roads as in 1868, and at sixty per cent less rate; and, although shippers may grudge certain companies the appreciation of their property which has taken place—an advance in value decidedly less than that which has overtaken real-estate holdings generally—no agitation has yet been promoted to pay dividends or make up deficiencies on unprofitable lines, although such lines have been indirectly great sources of prosperity to their districts and the country at large. Mr. Fink recognizes the injustice of charging different prices to different firms for the same service, but has no faith in any attempted legal preventives of the practice. Rebates may be granted a year or two after a transaction, or may take the form of gifts, or in other ways detection may be evaded. His explanation of the disparity so often complained of, between local and through rates, is very interesting. A line is built chiefly to accommodate and develop the region through which it passes; that region, without it, might remain backwoods or unbroken prairie; and, therefore, as the services of the road are of most value to its own district, that district should in justice principally contribute to its support. Now, when a road has a fair local business at regular tariff rates, and can add to its business without proportionate increase of expense by taking through freight originating in a city like Chicago, where many competing roads center, then it is allowable to grant marked reductions in terms to attract a share of through business. It is plainly unfair, under the circumstances, to take the stand of certain complainants and ask that local rates be based upon through rates. Mr. Stanford, President of the Central Pacific Railroad, explains some of the discriminations of his line on the same principle. A car-load is taken from New York to San Francisco for $300, but if dropped at Elcho, 619 miles east of San Francisco, the charge is $800, the sum of the through rate from New York to San Francisco, plus the charge from San Francisco to Elcho. Mr. Stanford points out that his road has to meet severe water competition at San Francisco, and that therefore the local rates charged towns created by the line can have no relation to competitive terms, and must wholly rest on considerations of the revenue to be earned on the capital employed, after the expenses of management are paid. Facts worthy of being weighed in this connection are that cars carrying local freights are, on an average, not more than a quarter filled, and that they are subject to long delays at way-stations, causes justifying low rates on full cars in active motion on long, unbroken journeys.
Another form of allowable discrimination Mr. Fink holds to arise where a new industry awaits development, and offers all it can afford to pay—a rate somewhat under the tariff. He gives as an example a case where staves from a Western point were to be sent to England, to compete there with staves from Norway: he holds it to have been good railway policy to create freight by carrying it at a reduced figure, if it gave promise of increased business in the future, with a prospect of building up a new industry for the country.
The Anti-Monopoly League of New York, an association formed to expose railroad abuses, and to endeavor to have them corrected by political agitation and legislative enactment, has widely circulated as the policy of the Erie and New York Central Railroads a statement signed by their presidents, wherein they declare it their principle to charge all an article will bear, and at the same time stimulate its production (they probably meant, not interfere with its production). On the Central Pacific Railroad the value of a shipment of ore or merchandise affects the cost of its carriage, and at first view the fact certainly has an arbitrary look. The explanation of the somewhat carelessly stated principle is this: Ores of various values are offered to the Central Pacific road, let us say; the least valuable can-not afford to pay tariff rates, although it can pay the cost of transportation and a small percentage of return to the capital of the line. The manager decides that a little profit is better than none, and accepts the ore of small value at a reduced rate. The same principle of classification makes, dry-goods pay a higher rate than coals, just as letters cost more for postage than books and parcels; its adoption develops the utmost quantity of railroad business, cheapening the average charge, and adjusting the burden of expense to the various capabilities of the different elements of traffic. Railroad managers, on the same general principle, find it pays to develop suburban passenger and excursion business on terms much below the charges for single tickets.
Against the proposal of General Reagan and others to make a uniform rate for every mile of railroad in the country, it is very properly urged that tariffs must vary from many considerations: the indirectness of one road competing with a shorter one obliging it to charge a lower rate per mile, or do no business; the determination of freight in a single direction, as of lumber from the Wisconsin forests, which requires the hauling of empty cars northwestward; the comparatively small business of some lines such as those common in the West, which serve as mere gatherers-up for the trunk-lines and feeders of them; the cost of fuel, three times as much in some parts of the country as in others, and, at the cheapest, a main element of railroad expense; difficulties of grade, which may make a single mile more costly in maintenance and operation than ten miles of level track; contingencies of climate, which in northern latitudes may wholly suspend traffic at times or make train service in an extraordinary degree both expensive and hazardous; the enormous cost of bridges and tunnels, and the terminal facilities of great cities—all fairly weigh as causes for varying assessments of tariff. Surely such considerations as these must set aside any attempt at the solution of railroad difficulties by the arbitrary rule of a uniform rate—uniform only in name, for genuine uniformity of charge can only be worked out by a broad view of the whole business of railroading in its full extent and detail, a view which it would be folly to expect a State Assembly or a State Board to take.
The trunk-lines connecting the West with the Atlantic have a Joint Executive Commission at New York, for the establishment and maintenance of rates. Though suffering from the merely voluntary nature of its constitution, and without the power of legally enforcing its agreements, the commission gets along pretty well, mainly through the esteem in which are held the character and ability of its chief commissioner, Mr. Fink. He gives a clear explanation of how co-operation, federation, or what is commonly called "pooling," may solve the problem of fixing rates and making railroads keep to them. Pooling may be explained, to readers unfamiliar with the term, as the gathering into a common fund of all the receipts of a group of railroads (or other corporations), for division according to a prearranged scale of apportionment. Mr. Fink points out that in peace or war the proportions of freight carried by the different through lines remain substantially invariable. He dwells on the powerful motives acting within the railroad business itself to prevent exorbitant charges. Traffic would not grow unless fairly treated, and the efforts of railroad managers have plainly been to reduce rates whenever possible to do so. The pool of which Mr. Fink is chief commissioner has gradually reduced its charges until they have fallen below those of the Erie Canal. The Southwestern pool has constantly reduced its tariff, seeing in that policy the best means for increasing its business and the net profits of its roads. Water competition has a far-reaching effect in railroad tariff, as an illustration will show: A reduction in rates between Chicago and New York, to meet lake and canal tariffs, creates reductions at Louisville, Nashville, and Savannah, for these cities have also their competing routes to New York. All rail routes from Chicago to so interior a point as Atlanta must conform to the total rate made up of the charges from Chicago to New York, from New York to Savannah by sea, and from Savannah to Atlanta by rail. Mr. Fink shows that competition within the pool is powerful to prevent excessive charges—thus the roads running from Indianapolis eastward must meet Chicago competition, otherwise shippers would send their freights to Chicago to go East, and the Indianapolis roads would remain idle. The bitterest complaint against railroads, that of discriminations in favor of individuals and special firms, finds its removal in the pool-system, for, with a fixed percentage of the total earnings of a federation of roads, what temptation can remain to make one particular road do more business than that agreed upon as its share? To the objection that pooling would abolish the incentive to excellence in each road, Mr. Fink answers that the system provides for a periodical reapportionment of percentages of earnings among the lines, and that at such times the public preferences for prompt and well-managed lines would tell, to the punishment of dilatory and badly conducted roads. One of the unavoidable difficulties of pooling must ever be the decision as to the percentage allowable to a new line. Only costly trials of strength seem to be able to bring about such decision.
The prices of various important commodities in the different markets of the Union limit the freights chargeable upon them. Thus, if Liverpool salt is to compete with the American article, its carriage inland must be very cheap; and wider considerations of the same kind have to be borne in mind by those intrusted with the power of making tariffs over the great lines. American grain competes with Russian in the great market of Liverpool, and a question of the tenth of one cent per ton per mile may in the long stretches of American rail-carriage decide for or against the sale of the Iowa or Minnesota farmer's produce. The tea and silk trade of China with Great Britain can choose between two great routes, the direct water-route, or the journey in part made up of the American transcontinental railroads.
A closing argument on behalf of pools remains to be stated. They make each great road the guardian of its district, which would not be the case were there to be a consolidated monopoly instead of a pool. As matters now stand, the Pennsylvania and the Baltimore and Ohio roads prevent a concentration of business on the New York Central, the line on which, as far as simple and direct economy is concerned, the harvests of the West can be cheapest carried to the seaboard. Pools, too, by preventing wars, will tend to make railroading less uncertain and more profitable than it has been, and will thus lead to new lines being constantly built.
The detailed criticism of General Reagan's proposed enactments presents fatal objections, and furnishes a new theme for that school of thinkers who hold that the sphere of legislation does not include the control of any business whatever, which may be safely left to meet its difficulties spontaneously. General Reagan's uniform mileage rate would give the shortest route connecting New York and Chicago the lowest rate; hence that route would command all the business until it could accept no more, when the next shortest would come in for the surplus, and so on, leaving nothing for indirect routes whatever. Besides, in railroad practice after the Chicago rate eastward has been fixed, the St. Louis business comes in, and the competition of the roads directly connecting St. Louis and the Atlantic ports must be met by the routes less directly connecting the termini via Chicago. As a matter of fact, the shortest or economically best line fixes the rate, and other lines must base their charges thereupon.
Should there be formed in America a general pool to establish tariffs as the Railway Clearing-House does in England, or the Railway Unions do in Germany, it would probably enter into relations with the Federal Government for the sanction and enforcement of its contracts.
The strong pleas made by the railroad interest do not silence the voice of murmuring. Every great railroad serves without competition important breadths of country, and proofs abound that the interest of a road may not always be a consenting parallel with the interests of its patrons. Charges much higher than justice would fix are exacted from customers, who must submit, and who are not sufficiently injured to be driven from their field. There is something ominous, too, in the way in which coarse and unscrupulous men are getting more and more control of the railroad system of the country. People are asking, "What is to prevent the great railroad presidents from exercising their power arbitrarily, and compassing the ruin of individuals, firms, and localities?" Some of the eminent statesmen and politicians of the republic are of firm belief that the railroads are getting too much power, and that the abuses complained of here and there now are only examples of what may be expected very generally as the years of the near future elapse. The lurid light of "Standard" oil shows how a railroad oligarchy might repeat abuses of its power in the dishonest control of great staples which, like petroleum, form the bases of national wealth. A rise or fall of five cents a bushel in the freight from Chicago to the seaboard affects the value of every farm in the West, and it is easy to see how speculative interests can unwarrantably depress prices, for a time so as to enrich the few manipulators of the market.
There is throughout the Union great capacity on the part of the people to organize for political ends, and, when the agitation against the railroads took place in the West a few years ago, the rapid spread of the Granger movement showed the power the public are ready to exert whenever they feel that they suffer grievances capable of remedy, and this dormant force in the last resort will rise to resist any tyranny which railway kings may be foolish enough to exercise. Among the most prominent public men who are of opinion that it is now time that the Federal arm were invoked to repress railroad aggression and who advance the cause of anti-monopoly, may be named Senators David Davis and William Windom, Judge Jeremiah S. Black, and Governor Gray, of Indiana. Judge Black holds the paradoxical opinion that railroads are held by their owners simply as trusts, and that therefore their tariffs should be public, reasonable, and just. Hon. J. M. Mason, of West Virginia, holds that railroads are common carriers who levy tolls and exercise eminent domain, and as such they are subject to government control for the enforcement of reasonable rates. Chief-Justice Waite has decided that a State has the right to regulate any business such as grain-elevating, dedicated to a public use, and this decision is held to apply a fortiori to railroads. All authorities agree that each State can, if it chooses, supervise the railroads within its borders in the public interest, and the allowability of Federal control is deduced from that paragraph in the Constitution which says that Congress has power to regulate commerce between the States. Against all this the railroads urge that the essence of property is in control, and that if the Government wishes to manage the lines it should buy them. It is contended that no Government officials can fitly prescribe rules for the regulation of a business so complicated as railroading, and that complaints so far from being abated would increase were the blight of political patronage to fall upon the transportation lines of the country. The party who urge the necessity of Government control of railroads among their arguments give prominence to the fact that an area of public lands, nine times that of Ohio, has been given to railroads to aid in their construction. In reply, the corporations say that these lands formed part of the business consideration on which they began work; and, furthermore, the value of these lands for the most part has been created solely by the existence of railroad facilities.
The debate for and against leaving the railroad problem to solve itself has not shown that the people who wish to invoke control by the Federal Government have numbers or influence or very sound arguments on their side. To throw the management of between six and seven thousand millions of capital into the hands of political partisans, who only represent the people in an indirect way through cumbrous elective machinery, is a proposal which few seriously consider; but, if the Federal Government can not honestly and safely be called upon to control railroads, the establishment of railroad commissions may render important services to the public. Twenty-six of the States have such commissions, intended to supervise and regulate railroads in the public interest, but the variety in the laws creating them, the limits of State jurisdiction in the presence of so many interstate roads, and their general lack of authority, render their efforts but feeble. These commissions depend for success on the degree of good sense which is employed in forming them, in the personal character and ability of their boards, and in the commissioners remaining long enough in office to be able to gain and use experience in their duties. Of the commissions so far established in the Union, that of Massachusetts takes the lead; its guiding principle is not that of force, so popular in Western railroad legislation, but that of publicity, trusting to the influence of an enlightened public opinion. The Massachusetts Commission has authority to obtain and publish in full detail the annual statements of the railroads of the Commonwealth. Their capitals, earnings, expenses, and profits, are all clearly tabulated, as the book-keeping of all the companies is on a uniform and simple plan. The tariffs of the roads are accessible to the commission, which is a bureau where complaints of unjust discrimination can be lodged for inquiry and for correction, as far as its powers admit. These powers the commission believes might be advantageously extended, for the abstract rights of the public without legal remedies are very apt to be disregarded. The authority of the board, however, extends to enforcing for public safety the proper strength, breadth, and height of bridges and tunnels, and such guarding of crossings and employment of mechanical appliances as experience suggests for adoption. All serious and fatal accidents are investigated, and the "Annual Report" of the board is a document which might serve as a model of a business-like State paper.
A system of State commissioners patterned after the Massachusetts board, with a national center of reference, is as much in the way of legislation and public supervision as the leading railroad minds of the country deem advisable at present. The chiefs of the greatest commercial interest of America are quite prepared to accept legislation; all that they ask is that it be intelligent.
The public must not, however, expect too much from enactment, for, with business morality as it is, why should ideal justice prevail in railroad transactions more than in any other? The fact which on the broad stage of railroading is odious discrimination, less recognizably pervades the smaller circles of trade where employés permit personal interest or personal friendship to jolt the sacred scales. The view that railroading is a special and public service, in a sense which entitles the people to control it, is not a view which the facts of American politics favor as yielding any practical suggestion.