The Railroad Question Part 15

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 a.s.sertions, 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 circ.u.mstances as they arise calling for legislative intervention in the public interest; and that no serious invasion of const.i.tutional 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 pa.s.sion 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 pa.s.senger rates of Europe with those of the United States, he gives the regular first-cla.s.s schedule rates for the United Kingdom, France and Germany and the average earnings per pa.s.senger 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 pa.s.sengers are carried in the third cla.s.s 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-cla.s.s pa.s.sengers carried as low as half a cent a mile."

Now the question arises whether American railway companies carry pa.s.sengers at such rates with or without loss to themselves. If they are carried at a loss, an injustice is done to the regular pa.s.sengers, 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 spa.r.s.e; 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 pa.s.sengers. 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 pa.s.sengers 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 pa.s.senger 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. Roll's Encyclopedia of Railroads for 1892 shows that in France the average rate for all traffic for the year 1888 was for pa.s.sengers 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 pa.s.senger 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:

"Princ.i.p.al 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 a.s.sociation. 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 pa.s.sed 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 pa.s.sage 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 pa.s.s--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 compet.i.tion.

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 pa.s.sage 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 ent.i.tled, 'An act to promote railway bankruptcies and consolidations by driving weak roads out of compet.i.tive 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 ill.u.s.trates, 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 compet.i.tive 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 t.i.tle "Unregulated Compet.i.tion 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, "Compet.i.tion is the life of trade," and arrives at the conclusion that the phrase is fatherless and insignificant. He says:

"'Compet.i.tion is the life of trade;' 'Compet.i.tion 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 ma.s.ses 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 compet.i.tive strife," and then he asks:

"Has not the time come for a reversal of the legislative att.i.tude? Would it not be well for Congress, State legislatures and the judiciary to cease their futile attempts to maintain unqualified freedom of compet.i.tion, and subst.i.tute 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 inst.i.tutions 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 compet.i.tion. "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 compet.i.tion." 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 a.s.sociation, are necessary for the purpose of restraining compet.i.tion among them. He holds that such compet.i.tion 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 a.s.sociation 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 cla.s.s of pleaders.

Suppose we apply the same rule to other cla.s.ses. 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 a.s.sociation? They never find terms sufficiently expressive with which to condemn the Farmers' Alliance and other kindred a.s.sociations, which are organized solely for the purpose of lawfully correcting existing abuses and of forming a wholesome public sentiment.