Popular Science Monthly/Volume 34/February 1889/The Political Control of Railways: Is it Confiscation?
By APPLETON MORGAN.
IT may be doubted whether the non-enforcement of the Interstate Commerce law, however fortunate for the railway companies, is not an unmixed calamity for the country. For, if the shortest way to abolish a bad law is to vigorously enforce it, the danger is that the slumber of so un-American and unconstitutional a measure will lead, by mere lapse of time, to its becoming an apparent part of our governmental policy, and so, at the last, all the more awkward to be got rid of. Had the principle of the interstate commerce law been applied by Congress to any other industry or industries than that of transportation, it is exceedingly doubtful if the industries so paternally favored would have acquiesced as patiently and good-naturedly as have the railway companies. But there is no knowing how far the precedent may be pushed. So long as consumers outnumber producers and purchasers out-number sellers, if the temptation should ever arise for the consumers and purchasers to decree the price at which producers shall produce and sellers sell (that is to say, for the majority to confiscate the property of the minority), certainly the principle of the interstate commerce law could be cited in favor of such a confiscation. (The railway companies in at least one of our Western States have been enjoying this sort of confiscation, under what has been called "the Iowa idea," viz., that "railways can take care of themselves," in abject silence now for many years, thus affording another cumulative precedent for a possible majority programme.)
When Judge Nelson set aside the verdict of a jury, on the ground that it "took thirteen men to rob a corporation in that court," he was entertaining a sort of judicial cognizance of that disposition on the part of the average "jury of the vicinage" toward railway companies which, unchecked, would quite speedily make railway operating a very costly amusement for investors. But the utmost juries can do toward robbing or crippling railway corporations is a very small matter compared with this latest movement of political forces, to confiscate—under the pretext of caring for—the interests of the people, of which the laws we are about to glance at are the outcome. Every sovereign State in this Union has constituted a "Board of Railway Commissioners," which is, and must be, political in its character, and so shifting with the politics of the State and of its Executive; and to these boards is relegated the whole procedure of the railway companies. and upon them is made incumbent and peremptory the duty of "regulating" the affairs of the railways. What is, and what must be, the result? The average politician knows fully as little or as much about railway management as he does about photographing the moon or applying the solar spectrum; yet, once upon a board of railway commissioners, he is required to excogitate and frame rules for an industry which not only supplies the financial arteries of a continent, but holds the lives as well as the credits of its citizens dependent upon the click of a telegraph or the angle of a semaphore—an industry which adjusts at once the most volatile and the most ponderous forces of nature to every necessary or luxurious service of our people! And, since thirty-eight boards of these accomplished commissioners were not enough, the General Government has kindly added another—not to regulate or supervise these thirty-eight, but to act in independent chaos to their tergiversations, and to contribute to the general value of their independent conclusions, ordinances, rules, and codes. What must, or rather what must not, be the result, when the country asks, as it appears to be now asking, to be furnished with railway experts and traffic accountants at the polls?
When the socialist programme shall be carried out to its full, it is understood that there is to be no inequality between the capitalist and the tramp. This equality, however, need not wait the perfection of that programme. It can be achieved to-day by two extremely simple methods. Either the tramp can go to work, earn money, economize, and become a capitalist, or the capitalist can divide with the tramp. But while the capitalist, for his part, opposes no objection to the first plan, the latter appears to be the only one the tramp will listen to. Both seem to be at present in abeyance. But, as to those aggregations of operated capital we call railway companies, I am not so sure but that the entering wedge for the second plan has been inserted. Let us see.
The interstate commerce act, with its administrative commission, does its fine work by forbidding two things; namely, "pools" and "discriminations." The State acts, with their administrative boards, also deny these two, but add edicts as to almost everything else: charges for service, size and cost of equipments, ratio of salaries, etc., to be charged, made or paid by their pupils the railway companies. I shall attempt in this paper to show that all this tutelage can have but one logical and political outcome; and that outcome—confiscation! The terminal sounds harsh, extravagant, impossible! But let us lead up to it and see if it be either.
The word "discrimination" means almost everything, and can hardly be limited to anything definitive. If I invite one of my friends to dinner, I discriminate in his favor against any friend whom I do not invite to dinner. If, in company with several millions of my fellow-citizens, I vote for President Harrison, and President Harrison invites a man who has voted for him to dinner, and does not invite me, he discriminates against me—me, from whom his charter as President has come equally as from my fellow-citizen who dines at the White House when I do not. But, conceding, in the case of a railway company, that discrimination, otherwise innocent, may work hardship—and also conceding the jurisdiction of the people over the railway company it has chartered, to prevent hardship to themselves—have this Interstate Commission and these boards legislated against the hardship? Have they not rather expended their legislation against the thing which may or may not be a hardship, according to circumstances, and in so doing increased the hardship, to their own damage and expense, rather than ameliorated it?
I. The Interstate Act.—This act directs itself to forbid (a) discriminations and (b) pools. Now, an edict against either of these might mean something—might even, if qualified, be productive of good. But an edict against both is really nothing—can not possibly amount to anything—except either an increased hardship to all parties concerned, or else the usual affirmative to which two negatives invariably amount. If railway companies, can neither discriminate nor come together for consultation and abolishment of discriminations, what is the result? Merely the result which would follow an attempt to abolish the mice in a pantry by first abolishing the cat which had been put into the pantry to abolish the mice.
The only possible pretext on which Congress, acting for the people, could abolish pools, was that a pool was a "corner" in transportation, by which two or more competing lines proposed to raise the carrying-tariff in their section of country. But, as a matter of fact, the pooling system was a contrivance to reduce jointly the carrying-tariff in territory where two or more lines served, and that pooling system practically and actually did reduce the tariffs to shippers. This I have demonstrated and proved by figures already in the pages of "The Popular Science Monthly." "The pool" proper had nothing to do with this reduction, except that it controlled the division of tariff receipts between the treasuries of the two or more pooling roads by a process of exact and expert differentiation in which a question of distance transported was only the very minor factor employed; such items as the cost of stopping, loading, or siding, or returning a freight-car empty to its owner, station expenses, repairs to track-way, rolling-stock, clerk-hire, improbability of finding load at small stations, fuel, grade, volume of traffic, cost of domestic goods at terminals as against direct importations from convenient ports of entry, rates of exchange, markets, first cost of plant, location and construction of track—and a few thousand other such items (an array which tends to make the practical railroad man's head swim by the very enumeration, but which are of no consequence whatever—are but the crackling of thorns under a pot—to the politician who represents his "district" in the Legislature or in the lobby), went into the consideration of the question of division of tariff receipts before the pool commissioner, (We may pause to ask, if reasonable rates were charged the public for transportation by a pooling road, what concern was it of the public's how the rates were divided when received? If I go into Delmonico's and pay a dollar for my luncheon, and on the way out stop at the cigar-stand and pay a quarter of a dollar for a cigar, what business is it of mine how the two cashiers I have paid equate the two payments—whether they turn them in as cash or merchandise, or itemized, or as items, or as receipts?) The public were not interested in the book-keeping methods of our railway companies. They were, however, very deeply interested in the cheapening of railway tariffs; and when, on the abolition of the pool, rate wars began again and tariffs advanced until—up to the first day of July the people had paid about $60,000,000 to the companies in excess of railway tariffs of the year before the interstate commerce law began to protect them against railway despotism—the people then began to look about for a possible cause. That cause was not far to seek. The railways, unable to meet and settle their differences in convention, where each should discuss its own problems and average them with the others, were forced to prepare each its own schedules independently. These separate schedule-tariffs were enforced and collected, and the Interstate Commerce Commission was able to say triumphantly, in its first annual report, that the act had operated directly to increase railroad earnings in eight months from the approval of the act.
Why should it not have so operated? It could not have operated otherwise. That a carrier's rates should be "reasonable" had and has been common law for four hundred years, and by repronouncing it the interstate commerce law added nothing to its force. But to be "reasonable" a carrier's rate must not be unfair to either party. If it is unfair to the carrier—if it demands that he perform services for less by way of remuneration than it costs him to do the work—then the rate is certainly not "reasonable." And so it comes about that, by declaring in one paragraph that rates should be "reasonable" and in another that there should be no "pool," the act did not prevent but rather conserved unreasonableness; for—since a "pool" was not a "corner," but an attempt, by co-operation and convention of railway companies, to make rates "reasonable"—a law which does not give the railways a schedule itself, and forbids them to come together to make one, simply means that each company shall make its rates without consulting anybody but themselves: must work in the dark, independent of any considerations except its own local, presumptive, or past experiences, frictions, and financial difficulties. Railways must not only make bricks without straw, but make them at their peril; for if, upon being made, these rates prove to be discriminate—that is not absolutely perfect and uniform between individuals—then the Interstate Commerce Commission (and nobody knows when it may wake up and commence operations) can send the officers to jail and hold the road in breach of law. Clearly the only safe alternative for the road is either to wind up business at once, or do business at a loss and pass a dividend to get even, thereby placing its securities at the mercy of the wrecker and the stock-jobber!
It follows from the above that the interstate commerce law operates, if operated at all, to create rather than to abolish "discrimination." But let us be a little more explicit. If all the people in the United States were shippers over one railway, a law that no one person shall be given a better or worse rate than another might possibly prevent injustice (though, unless it also provided that the volume of business or the length of the haul be taken into account, it may well enough be questioned whether it would or not). Even the non-railway intellect must absorb such self-evident propositions as that it costs as much to load, unload, or stop a car that has run two miles as one that has run two hundred; that if the car must be returned without a load, it has not earned as much as if it had found a load back; that a long haul, with but one loading and one unloading, one stoppage, and a return cargo for the car, ought reasonably to be done for less than a short haul involving quite as much handling without a return load, and that a railroad company ought in all fairness to be allowed to give the shipper the benefit of the decreased expense to the company. But the interstate commerce law peremptorily tells the railroad company that it must not give this benefit to the shipper, under the pains and penalties of fine and imprisonment, in its pleasure, for contempt of court. But let us admit, for argument's sake, that a law providing that no shipper shall be charged more per pound than any other would prevent discrimination if all the shippers of freight in the United States shipped over a single road. Clearly, if they shipped, as these shippers do, not over one, but over some five hundred different roads, such, a law would not prevent discrimination, but actually compel it. Let us say that a shipper in New York desires to send goods all-rail to Chicago, and that he has a choice of three all-rail routes (as a matter of fact he has a choice of thirteen, but we will use the lesser number). One of these all-rail routes runs by a right of way laid out some forty years ago, under the then existing systems of engineering, climbs heavy grades, crosses the Alleghany Mountains twice, and makes the trip about one thousand miles. A second, laid out some twenty years later, has better grades, but crosses the mountains only once. A third runs by almost a series of bee-lines, has a grade nowhere exceeding one per cent, and was constructed and capitalized at less than a fourth part of the accumulated capital and indebtedness of the other two. Now, left to themselves, can these three railways, with different amounts of fixed charges, interest, dividends, and operating expenses to pay annually, carry for the same tariffs at the same rates to the same points, and all pay expenses? Ought they, in justice to the investors, whose money built them (and who are portions of the people quite as much as are the shippers over the line or the members of State Legislatures), to make the same rates for equivalent services? From the standpoint of the gentleman who believes that railways should meet their fixed charges, and all other expenses—should pay their bills, that is to say, like ordinary mortals!—from this standpoint, I say, it would seem as if a difference in rates to Chicago, over these three all-rail lines, was inevitable. And so it was, up to the invention of the pooling system: each road made its own tariff-schedules independently, and naturally the tariff of each was different from that of the others. But, without supposing that they were committing a crime, and as yet unconvinced of sin, these three railways, let us say, came together, and determined to make a single rate to Chicago for all business received by each of the three lines; these receipts to be pooled and divided something upon the basis outlined above. Even had they proceeded upon a basis of the single actual receipts to each for solicited business, there could be no difference to the public either way; but they chose to consider the most complicated problem of a single tariff divided upon the items of expenditure, outlay, and cost described above. What resulted? Simply that there was (as the interstate commerce law says there shall be) no discrimination. But when the interstate commerce law, while keeping the word of promise to the ear by saying there should be no discrimination, broke it to the hope by saying there should be no pool, what resulted? Why, in the case of these three roads, a discrimination in favor of one third against two thirds! For, when each of these three roads makes its own tariff, of course, the road having the smallest fixed charges to pay makes the lowest rates. The dwellers along that line have the advantage of these low rates to which, of the other two railways, only one can approximate; while the third line must either go to the other extreme, or defraud the holders of its securities. Not to dilate unnecessarily upon the situation, the reader can see at once that prohibiting a long and short haul discrimination upon any one railway really increases discrimination to the whole people; and that, on the whole, the pooling system was the fairest system for the whole people, as well as for the railways, that could have been devised, for both shipper and investor: for the shipper, since it gave him all the benefits of cheap freights; and for the investor in railways, because it secured to the railway built under heavy capitalization, and laboring beneath huge operating expenses (but serving a territory as entitled as any other, per se, to transportation facilities), a fair return upon the wealth that had been lavished to build it.
The theory of the interstate commerce law was borrowed from Europe—from England and Germany; and, although there may be those who admit that whatever is good enough for England or Germany is good enough for the United States, it ought not to be forgotten that neither of these eminent nations possess railroad systems at all analogous to our own, or in the operation of which anything like the same problems or conditions arise. The existence of two, let alone five or six, parallel lines is not only unknown, but impossible, in either of those countries; and yet the promoters of the interstate commerce act in Congress, and apologists for it ever since, pointed and still point with pride to the fact that the provisions of the act can not be onerous, because their operation has been tested, without annihilating the railway interest, in England and in Germany! As a matter of fact, there are several hundred other practical discrepancies between American and foreign railways; but it would swell this paper unduly to discuss them here, and the above-mentioned alone is enough to dispense with the plea that the interstate commerce act is a good one for this people because its tenor has worked well across the ocean. I might add, however, that, despotic as is the German Government—the government of blood and iron—over all private enterprise, at any rate it has never yet discriminated against the enterprise of its own subjects in favor of the schemes of national rivals. Doubtless it is unfair to charge to the framers of the interstate commerce act a desire to benefit Canadian railroads (notably the Canadian Pacific Railroad) at the expense of our own railways. That such has been the paramount unpatriotic effect of that act is merely a proof that its framers overlooked the consequences of their hastily advised and badly considered procedure; were betrayed into regarding the popular hostility to railways from a political rather than from a patriotic standpoint, and so into the folly of precipitating a hard and fast rule upon an industry as delicate in its adjustments as it is massive in its ramifications; an industry of whose operations no single act or necessity of our sixty millions of people is independent; a rule so hard and so fast that were it attempted to be enforced (as a possible anarchist or socialist administration might see fit to enforce it) it would plunge the entire commerce and credit of this continent into chaos in twenty-four hours! To express the consequences, were it once literally carried into effect, the performances of the typical bull in a china-shop would be a notoriously inadequate figure (removal of a cataract from a human eye with a butcher's cleaver, or oiling the works of a Jurgensen watch by boiling it in axle-grease, might possibly better express the summary viciousness of the process).
So much for the Federal railway statute. As to the railway statistics of the several States, they have been comparatively innocuous—not so much from desuetude as from the general incapacity of their administrators. On the whole, their operation has been more largely comedy than tragedy—as where the Board of Railway Commissioners of one State have enacted that upper berths in railway-sleepers shall not be made up before the lower ones; that of another have found that if a rail way-bridge had fallen before a train reached it, instead of after the train had passed upon it, it would have been safer for the train; or that if a bridge had been known to be unsafe, a train would not have been run upon it at all. But that even State railway laws may be dangerous, I may note two very recent examples. The Board of Railway Commissioners of Mississippi have recently been given increased powers; have now authority to specify the description and size of station-houses which railway companies must build, and the point and location at which they must stand; to require the building of union passenger depots where two or more railroads connect, and to allot expenses of the same between the two or more companies compelled to pay for erecting them. This, in all conscience, seems to be going far enough. But the Iowa Board of Railroad Commissioners went still further, and not only regulated the question of accommodations, but actually furnished the railway companies with a schedule of the prices at which they must do the business which the people bring to them: that is to say—for the terms are convertible—the prices which the people shall be allowed to pay the railways! It is precisely as if the Legislature of New York should provide upon what quality of paper, with what size of type, or color of ink "The Popular Science Monthly" should be printed and furnished to its readers, the Legislature meanwhile not assuming any of the expenses or responsibilities of the publication, paying any losses, troubling itself about any of the risks incident thereto, or even inquiring into the facts of its circulation, cost of manufacture, or pay-roll: for that the Mississippi board even made the slightest effort to inquire—or heard any testimony as to—the volume of business, fixed charges, earnings or operating expenses of the companies to whom it dictated disbursements, there never was the slightest idea or claim anywhere. Indeed, it was the very gist of the ruling in some of those wonderful "Granger" cases (so called), that any such items as the above were "too remote"; the railway company must do business under schedules furnished by the shippers in Legislature assembled. Would a single powerless individual on this continent submit to such legislation as that?
It is rather remarkable that, though the Interstate Commerce Commission has existed almost two years at Washington, the only decisions at all affecting the general railway situation should come from Federal judges holding remote circuits, and that both of these should contravene and ignore an extraordinary tribunal created by Congress to specially oversee railways, sitting at the capital itself. The first of these declared that a railroad company might remain upon the earth, even though it was compelled to charge more for a short than for a long haul; while the other enjoins the Iowa Board of Railway Commissioners from dictating the tariffs at which certain trunk lines shall do business within the borders of that State. Of this latter decision let us hope that it will do something to relieve the delicate adjustments of our railway systems from the lash of ward politics and unenlightened demagogy.
Of all the popular fallacies ever discussed, it seems to me that the one which invokes popular prejudice against railway companies has the least actual basis of merit to stand upon. As a positive fact, the railway is not only chartered by the people, but can only be operated for the people's convenience. In "The Popular Science Monthly" for May, 1888, I had occasion to allude to a certain voluminous denunciation of incorporated industries as rehabilitating the effete institution of feudalism, which appeared to be principally based upon the supposition that feudalism and despotism were convertible terms. As a matter of fact, feudalism was not by any manner of means a despotism per se, even though obtaining at a date when all government was more or less despotic (and generally more than less). Neither did a feudal system ever decree the prices at which its vassals should yield their labor. Supposing a railway company to have been in operation in the days of feudal systems, can any one imagine a law compelling it to make charges irrespective of the services it rendered? And yet, in a late session of the House of Representatives at Washington, a bill was, I am informed, introduced to forbid a railway company from carrying oil in tanks at lesser rates than it charged for carrying oil in barrels! (It is immaterial that oil in tanks can be carried with very little handling, and at an expense of labor and material very little over that required to run empty cars, while to transport it in barrels requires much handling, care, and watchfulness. Nothing in the way of detail, it appears, is material when politicians assume to legislate concerning railway companies.) Indeed, our railway companies might well clamor for and welcome a return to feudal systems, if they consulted their own convenience—to say nothing of their fixed charges! Nor would a return be such a bad thing for the anarchist or the socialist from his own standpoint. For, under feudalism, the subject was not touched by the crown-taxes—the taxes for revenue, for war-making, for internal protection. The fathers of our common law, in tracing the origin of property to "title by occupancy" to the garden of Eden (which Adam, at least until different arrangements were made, owned because he occupied it)—to the times when King Ahab, despot as he was, dared not help himself to Naboth's vineyard until, by ruse or device, he had divested Naboth's title—never denied the general proprietary title to the earth's surface which Mr. Henry George has selected as the proper one. They simply set it aside as inconvenient. But, whatever elemental title human beings may have to the use of the earth's surface as human beings, the railway company holds its title to its right of way by both alienation and use. It has purchased, but can only enjoy, so long as it serves the public. It is a public trust for a public convenience only. From the moment it ceases to serve the public and the public convenience, its franchises, its titles, its real estates lapse; and every court in Christendom has so decreed and maintained. If Mr. George's system of common proprietorship in real property were law to-day, he could not divest a railway company so long as it performed its functions. And yet it is over this industry, chartered only for the public facility—and simply because under and by reason of the immense convenience of that facility it requires enormous capitalizations and creates immense debts—that the politician squats, and the anarchist howls, and the communist grinds his teeth.
Altogether, the railroad company seems to be in the position of Mr. Dow's Calvinist:
"You can and you can't,
Twoscore of boards, framed by consent of local politicians, shout: "You railways must operate your trains. You must incur such bills as we Railway and Interstate Commissioners impose upon you, and do just as we say in everything; but you can not collect for your services the wherewithal to pay bills, except at such figures as we see fit to permit you to make. We know nothing about railroading. We are only Republicans, or Democrats, or Prohibitionists, or Women's-Righters. But do as we say; and if, in the doing of it, you kill anybody, or maim anybody, or if we hear of any defaults in payment of fixed charges, look not to us for loving-kindness!" This was Portia's idea of mercy to poor Shylock. And let us admit, for argument's sake (or concede it as certain, for that matter), that the railway company is a Shylock, compelled by law to exact the last penny to which it is entitled. "Cut out your pound of flesh," says Portia; "the court awards it and the law doth give it. But if, in the cutting, you take more or less, by the estimation of a single hair, than just one pound, then your goods are confiscate and your life itself is forfeit to the state"—and in so saying, the divine Portia (who had already admitted that the Jew asked nothing but justice, and was entitled to judgment at every point in his favor) was a by no means unfair prototype of the modern American Legislature, which first charters railway companies to exercise certain and stated functions, and then exercises them itself, leaving to the unhappy railway companies nothing but the responsibility and the punishment for its own blunders. Under the circumstances, is it to be wondered at that, very recently, a certain worm did, in some sort, turn?—that a certain railway company in the distant West, on being commanded by the Iowa Board of Railway Commissioners to turn in to them a statement of the value of its plant, replied that its plant was worth considerably less than before the commissioners began to make rules and regulations; that it would continue to depreciate as long as the commissioners kept on making them; that any estimate as to the aforesaid value would be mere guess-work; and that the only certainty possible in the matter was that enough rules and regulations from the honorable commissioners would ultimately deprive railway plants in their jurisdiction of any value whatever!
There are a few things left which a railway company may do. It may, by a late decision of the Interstate Commission, issue as many "passes" as it pleases, provided they are not used, But no railway company is to be allowed to escape an interstate character from any such pretext as that it operates entirely within a single State—the commission affirmatively holding that if any parcel, the ultimate destination of which is outside of the State in which it is shipped, is carried by a local road, that local road at once, and by the act of carrying that parcel, becomes an interstate railway, This is Lord Coke's celebrated maxim, that it is the part of a good judge to enlarge his jurisdiction—with a vengeance!