The Railroad Question Part 18

The State of Iowa has not derived that benefit from the large land grants made to its railroads which her people had a right to expect. In spite of these grants roads were built only when there was reason to believe that they would be immediately profitable to their owners. The land grants enriched the promoters of these enterprises much more than they did the State in whose interest the grants were presumed to be made. As a rule they enabled scheming men to hold the selected territory until a railroad through it promised to be a safe and profitable investment, and to avoid the payment of taxes on their millions of acres of land, which in the meantime became very valuable. Other roads were built at an early day without Government aid. They were pushed forward by the current of immigration until the threatened compet.i.tion of roads favored by these grants checked their progress. The Chicago, Iowa and Nebraska road may be cited as a fair ill.u.s.tration. It was projected on the 26th of January, 1856, in the town of Clinton, to be built from Clinton to the Missouri River via Cedar Rapids. It was opened to De Witt in 1858 and completed to Cedar Rapids the following year. The road was 82-1/2 miles long and was built entirely with private means, receiving neither legislative aid nor local subsidy. It is more than probable that this road would at an early day have been completed to the Missouri River, had it not feared the rivalry of the subsidized Cedar Rapids and Missouri road.

The total number of acres of land granted by Congress to aid the construction of Iowa roads is 4,069,942. A fair idea of the value of these lands may be obtained from the fact that the Chicago, Rock Island and Pacific Railroad Company sold over half a million acres of its lands at an average of $8.68 per acre, and the Chicago Burlington and Quincy sold nearly 350,000 acres at an average of $12.17 per acre.

But land grants form only a small part of the public and private donations which have been made to Iowa roads. Including the railroad taxes voted by counties, townships and munic.i.p.alities, the grants of rights of way and depot sites and public and private gifts in money, these roads have received subsidies amounting to more than $50,000,000, or enough to build 40 per cent. of all the roads of the State. There is no doubt that the contributions of the public toward the construction of the railroads of Iowa is several times as large as the actual contributions of their stockholders for that purpose.

The people of Iowa were from the first very favorably disposed towards railroads. Every inducement was held out to railroad builders to come here and help to multiply the tracks for the iron horse. They came and brought with them many abuses which since the first introduction of railroads had gradually been developed in other States.

The contrast between the old and the new mode of transportation was so great, and the public appreciated so highly the superior conveniences afforded by the latter, that for years the abuses practiced by the early railroads were scarcely noticed, or, if they did attract the attention of the public, they appeared more like necessary features of the new system of transportation than like abuses. The evil gradually increased, but for years no attempt was made to check its growth. The railroad managers construed this failure of the people to interfere with, or even protest against, their unjust practices as a quasi-sanction of their course, and soon claimed to do by right what they had formerly done by sufferance. The evils increased until the patience of the people finally became exhausted.

While the State thus for years dealt very leniently with the railroad companies, the laws of Iowa had from the beginning of railroad building emphasized the principle of State control. This principle was a.s.serted in the very first railroad act ever pa.s.sed in the State. Section 14 of chapter I. of the acts of the extra session of the Fifth General a.s.sembly, regranting to the various railroad companies the lands granted to the State by Congress for railroad purposes, provides that "railroad companies accepting the provisions of this act shall at all times be subject to such rules and regulations as may from time to time be enacted and provided for by the General a.s.sembly of Iowa...." In 1866 an attempt was made in the General a.s.sembly to regulate rates, but the Attorney-General, to whom the question of const.i.tutionality was submitted, held in his opinion that it was not in the power of the legislature to prescribe rates for railroad companies. This opinion provoked much indignation among the people of the State, and led to the expression of a sound public opinion by legislative acts which could not be misunderstood.

When the Twelfth General a.s.sembly (in 1868) regranted to the Chicago, Rock Island and Pacific Railroad Company the lands originally granted to the Mississippi and Missouri Company, it only did so upon the condition that "said railroad company, accepting the provisions of this act, shall at all times be subject to such rules, regulations and rates of tariff for transportation of freight and pa.s.sengers as may from time to time be enacted and provided for by the General a.s.sembly of the State of Iowa...." The same restricting clause, known as the Doud Amendment, was added to all other land grant acts pa.s.sed by the Twelfth and subsequent General a.s.semblies, and the various companies willingly and gladly accepted it.

The abuses of which the people of Iowa complained were far from being confined to their State. They were practiced throughout the Northwest, and the demand for reform was as loud in Minnesota, Wisconsin and Illinois as it was in Iowa. In 1871 laws were pa.s.sed in Illinois and Minnesota fixing maximum charges for the transportation of freight and pa.s.sengers and prohibiting discriminations. The railroads claimed that a State did not have the right to prescribe rates and refused to be bound by these laws. Instead of modifying their policy, they became daily more arrogant. Discriminations which had before been practiced under the veil of secrecy, or which had been defended by railroad managers as exceptions to the general rule made necessary by a peculiar combination of circ.u.mstances wholly beyond their control, were now openly and defiantly practiced by several of the larger roads. The Chicago, Milwaukee and St. Paul Railroad Company, in its effort to annihilate a rival, went so far as to openly announce to the public its intention to entirely disregard distance as a factor in rate-making. It gradually became the general rule to wage war against rivals at compet.i.tive points and to "recoup" by charging excessive rates at non-compet.i.tive points. Every encouragement was thus given by the railroads to the Granger movement, which spread in less than two years over the whole Northwest.

In the fall of 1873 Iowa elected a Granger legislature, like Minnesota, Wisconsin and Illinois. The wildest predictions were made by railroad men as to the extremes to which the Granger legislature would go, but it confined itself to enacting a law establishing an official cla.s.sification and fixing maximum rates for all railroad companies. The law was approved March 23, 1874, and went into effect on the 4th of July following. This law in no case compelled companies to carry freight at a lower rate than they had voluntarily carried it in the past. Many of the rates in force at the time of the pa.s.sage of the act were considerably lower than the corresponding maximum rates fixed by the legislature. The average rates fixed by the law were higher than the rates at which the railroads had previously carried a large portion of corresponding freight. The revenues of the road were not even curtailed by this law; on the contrary, by equalizing rates, _i. e._, by leveling up the rates given to favored places and favored individuals and leveling down the exorbitant rates exacted from the public at non-compet.i.tive points, the railroad companies were enabled to effect an increase in their total revenue.

The Granger law remained in force until 1878. Its const.i.tutionality was tested by the railroad companies in the Supreme Court of the United States, but this high tribunal held that rate-making was a legislative and not a judicial function, that it was within the province of the State legislature to prescribe rates for the transportation of pa.s.sengers and freight wholly within the State, and that for protection against abuses by legislatures the people must resort to the polls, and not to the courts.

The Granger laws have been and are still severely criticised by those opposed to the principle of State control and by the ignorant. It is nevertheless true that those laws were moderate, just and reasonably well adapted to remedy the evils of which the public complained. It has been the policy of most railroad men to attack them as crude, intensely radical and socialistic. The obloquy heaped upon them was the work of designing men who desired to continue their impositions upon the people.

Mr. Charles Francis Adams, however, admits that the Granger method was probably as good a method as could have been devised of approaching men who had thoroughly got it into their heads that they, as common carriers, were in no way bound to afford equal facilities to all, and, indeed, that it was in the last degree absurd and unreasonable to expect them to do so.

The Iowa law was imperfect in detail, and yet its enactment proved one of the greatest legislative achievements in the history of the State. It demonstrated to the people their ability to correct by earnestness and perseverance the most far-reaching public abuses and led to an emphatic judicial declaration of the common-law principle that railroads are highways and as such are subject to any legislative control which may be deemed necessary for the public welfare.

Defeated in the courts, the railroad managers now endeavored to make odious the new law which deprived them of the power to manipulate railroad interests to their personal advantage. By complying with only part of its letter and none of its spirit, they contrived to create hardships for certain interests and localities. Instead of charging in all cases reasonable rates, as the spirit of the law demanded, they would frequently charge the maximum rates permitted under the law, and when they by this practice succeeded in damaging certain interests, they would point to the Granger law as the source of all existing railroad evils. So, likewise, when they were asked by their patrons to reduce a high rate, they would plead the legislative schedule in excuse of their failure to comply with the request. When the legislature of 1878 convened, the railroad managers appeared before it and pleaded submissively for a repeal of the Granger law and the establishment of a commissioner system. They claimed that they were ready and willing to submit to all reasonable regulation, but that a maximum tariff law was prejudicial both to the best interests of the roads and those of the public. They further a.s.serted that the people had grown tired of this manner of regulating railroad charges and earnestly desired a change of policy; that the interference of the State with the railroad business had injuriously affected certain industrial interests and had greatly r.e.t.a.r.ded railroad construction by driving capital and promoters of railroad enterprises from the State. These statements would indeed have argued strongly in favor of a repeal of the law if they had been based on facts. There had been, however, no expression of public dissatisfaction during the campaign preceding the session of the General a.s.sembly. There were doubtless individuals and even communities to whom the law had been made so odious that they felt they had but little to lose by a change, but the ma.s.ses of the people believed that the law was based upon just principles and desired its perfection rather than its repeal. As to the claim that railroad construction had been checked by hostile legislation, statistics prove that during the five years following the great panic of 1873 Iowa fared no worse in this respect than her sister States east, west or south.

The arguments produced by the railroad managers no doubt influenced some members of the General a.s.sembly; by far the greater number of them, however, realised that the failure of the law to bring the expected relief was not due so much to its own imperfections as to the absence of a power to enforce it. The writer, with others, was convinced that a strong and conscientious commission would be a much more potent agency to secure reasonable rates for the shipper than a maximum tariff law without proper provisions for its efficient enforcement; they, in short, preferred a commission without a tariff law to a tariff law without a commission. The question became the subject of many animated debates in both houses of the General a.s.sembly, but the commissioner system at last prevailed. The act establishing a Board of Railroad Commissioners, and defining their duties, was approved on the 23rd of March, 1878, and went into force a few days later. The act empowered the commission to exercise a general supervision over all railroads operated in the State, to inquire into any neglect or violation of the laws of the State by any railroad corporation or its officers or employes, to examine the books and doc.u.ments of any corporation, to investigate complaints of shippers that unreasonable charges had been made by railroad companies, and to modify any charge which they might deem unreasonable. It was also made the commissioners' duty to make an annual report to the Governor disclosing the working of the railroad system in the State, the officers of each company being required to make annual returns to the board for this purpose.

Though the enactment of this law was a surprise to the people, they accepted it in good cheer, and determined to give it an honest trial.

The law was extensive in its scope and stringent for that time, and, if strictly enforced in letter and in spirit, promised to be, and would have been, entirely sufficient for the thorough control of railroad corporations.

Nevertheless, in the course of time it became apparent that either the law had not lodged sufficient authority in the commission or the commission did not make use of the authority which the law had given them. In spite of the commission, the railroad companies maintained pools and charged extortionate and discriminating rates, in direct violation of the law. It is true the commissioners righted many a wrong.

In investigating the complaints of shippers against railroad companies they often rendered valuable services to those who had neither the means nor the inclination to prosecute their rights in the courts of law; but as they held that they could only pa.s.s upon individual charges, and did not have the power to revise the companies' tariffs, the companies were virtually in a position to become guilty of more extortions in one day than the commission could investigate in a year. Moreover, the railroad company might be ordered by the commission to return an overcharge to a certain shipper, but this did not prevent it from continuing the excessive charge. If the overcharged shipper again wanted relief it was his privilege to again apply to the commission, and to continue this tedious process until either his or the commissioners' patience became exhausted. The people soon found that the new system of control was almost as inadequate as that which it had displaced. Some attributed the weakness of the commission to its personnel, others to the law. There is no doubt that the commission might have accomplished more than it did.

It was hoped by some that as the commission gained in experience it would gain in influence, and that railroad evils would gradually diminish. But they were disappointed in their expectations. Every year seemed to add to the grievances of the public. Success greatly emboldened the railway companies. Discriminations seemed to increase in number and gravity. At many points in the western part of the State freight rates to Chicago were from 50 to 75 per cent. higher than from points in Kansas and Nebraska. A car of wheat hauled only across the State paid twice as much freight as another hauled twice the distance from its point of origin to Chicago. Minnesota flour was hauled a distance of 300 miles for a less rate than Iowa flour was carried 100 miles. Certain merchants received from the railroad companies a discount of 50 per cent. on all their freights and were thus enabled to undersell all their compet.i.tors. The rate on coal in carload lots from Cleveland, Lucas County, to Glenwood was $1.80 per ton, and from the same point to Council Bluffs only $1.25, although the latter was about thirty miles longer haul. Innumerable cases of this kind could be cited. There was not a town or interest in the State that did not feel the influence of these unjust practices. Many of the rates complained against, it is true, were beyond the direct control of the State commission, but there was an impression among well-informed shippers that if the commission had the power to fix local rates and exercised it judiciously, the railroad companies would soon find it to their interest to be as reasonable in making through rates for Iowans as they expected the commission, to be in prescribing local tariffs.

The demand of the people for more equitable rates and a more thorough control of the railroad business increased from year to year. Repeated attempts were made in the General a.s.sembly to secure the pa.s.sage of an act looking to that end, but, owing to shrewd manipulations on the part of the railroad lobby, every attempt was defeated. There always was, of course, a large number of members who represented districts not well supplied with railroad facilities. These, as a rule, honestly opposed restrictive legislation, believing that such legislation would check building, and that, on the other hand, compet.i.tion could be relied upon to correct abuses. Of those members who had less positive convictions many were retained as railroad attorneys and were thus made serviceable to the companies. Other members with political ambition were nattered or intimidated into subjection, and bribes in disguise, such as pa.s.ses and special rates, were not unfrequently resorted to to strengthen the railroad following in both houses of the General a.s.sembly.

Railroad corruption did not pause here. It is a notorious fact that large sums of money were paid to venal papers of both parties in consideration of an agreement on their part to defend transportation abuses and exert their influence against progressive railroad legislation. The vilest means were often resorted to by these sheets to obtain their end. Public men who had the courage to avow their opposition to existing railroad abuses or to favor a more perfect system of State control of railways were misrepresented, ridiculed, traduced and denounced as demagogues and socialists by hypocritical editors, who prost.i.tuted their political influence as long as they enjoyed railroad stipends, and who at intervals became converts to the cause of the people for the purpose of extorting from the railroad companies a new and increased subsidy. But truth can not long be suppressed. The ma.s.ses of the people may be imposed upon for a time, but even the shrewdest rogue will eventually be compelled to surrender. In time even rather unsophisticated voters learned to place a true estimate upon the motives of the editors, whose policy, as one of them expressed it in the author's presence, was "controlled by the counting-room."

Railroad politicians gradually lost their influence, and the symptoms of public discontent greatly increased. In the political campaign of 1887 State control of railroads became one of the main issues. Both of the great political parties in their platforms had declared themselves very emphatically in favor of such legislation as would bring railroad corporations under complete State control, and with very few exceptions the various legislative districts had nominated only such men as candidates for legislative offices as were known to be in thorough accord with the ma.s.ses of the people upon the railroad question.

The election resulted in an even more complete defeat of the railroad forces than had been generally antic.i.p.ated. Yet no hasty step was taken when the General a.s.sembly convened. A large number of bills contemplating railroad reforms in various ways were introduced, but the material presented was carefully sifted by the railroad committees and a committee bill was framed which incorporated the best features of them all. The committees listened patiently for weeks to the arguments of the representatives of both the railroads and the shippers.

Never before had so formidable a railroad lobby a.s.sembled at the State Capitol. The danger signal had been raised, and not only were the great political manipulators of the State called into requisition, but experts from adjoining States joined them in besieging the legislature. The dogs of war were let loose from all quarters. A legion of hirelings were zealous to show their servility and loyalty to their lords. The daily and weekly papers of the State in the service of railroad companies teemed with arguments from the pens of railroad attorneys, and their columns were profusely supplemented with editorials copied from prominent corporation papers like the New York _Tribune_, New York _Times_, New York _World_, Albany _Evening Argus_, Boston _Advertiser_, and others from various parts of the country.

These papers, attempting to disguise the motives that prompted them to come to the defense of the Wall Street interest, affected the position of disinterested and impartial observers. They condemned the proposed measures as wild and socialistic, and they painted in dark colors the disasters to railroad property, the injustice to its owners, and misfortunes to the people of Iowa, that would follow their adoption.

Especially did they bewail the losses that would fall upon the widows and orphans who had confidingly invested all of their hard earnings in this property.

They never uttered a word of condemnation, but entirely ignored or defended the abuses by which the stockholders were robbed at one end of the line and the patrons were imposed on at the other.

Many of these papers were notified that their statements were altogether erroneous, but they would not admit a line to their columns in relation to the matter that indicated any other disposition than complete subserviency to the interests of Wall Street.

There were, however, an unusual number of strong men in this General a.s.sembly, and this extraordinary display of railroad forces only tended to impress more strongly upon them the necessity of curbing the railroad power, and their best energies were concentrated upon the subject, with a firm determination to deal with it in a manner dictated by reason and experience.

So well did the bill which was finally adopted by the committee reflect the general sentiment of the members of the General a.s.sembly that not a single vote was cast against it in either house upon its final pa.s.sage.

Since the adjustment of business under this law, there has been less friction between the people and the railroads than before for thirty years, and so satisfactory has it proved to all that no one, not even a railroad man, has to this day asked the legislature to repeal the law or any part of it. The act contains no new principle of railroad control.

By far the greater part of its provisions were taken from the old law.

Nearly every one of its features may be found either in the Interstate Commerce Act or upon the statute books of other States. It provides that charges must be reasonable and just, that no undue preference or advantage shall be given to any railroad patron, and that equal facilities for interchange of traffic shall be given to all roads; it prohibits pooling, a greater charge for a shorter than longer haul, the shorter or any portion of it being included in the longer, and discrimination against any shipping point. It requires that schedules of rates and fares shall be printed and kept for public inspection, and that no advance shall be made in rates or fares once established except after ten days' public notice; and it empowers the Board of Railroad Commissioners to make and revise schedules for railroads, the rates contained in such schedules to be received and held in all suits as _prima facie_ reasonable maximum rates. The act further provides penalties and means of enforcement.

It must not be supposed that by the pa.s.sage of this act the legislature disclaimed the right to fix absolute rates; it simply chose this expedient because in the present tentative stage of rate regulation it seemed most efficient.

There has been much misunderstanding concerning the Iowa law. Many suppose that the Iowa commissioners have power to make confiscatory rates for the railroads, while in fact they can only name maximum rates which shall be deemed and taken in all courts of the State as _prima facie_ evidence that they are reasonable and just maximum rates until the railroads show that they are not. They are at liberty to go into court any day and show this, if they are able. They are, however, careful not to undertake it, for no one knows better than they do that the rates fixed by the commissioners are liberal for the railroads.

There are nine States, besides Iowa, in which the power to fix rates has been conferred upon railroad commissioners. This feature of the law was therefore far from being a novel one, yet no provision of the act was, previous to its pa.s.sage, so furiously opposed, or subsequent to it so stubbornly resisted as this. Railroad managers realized that a surrender of the right to make their own rates was virtually a surrender of the power to practice abuses.

Soon after the pa.s.sage of the law the commissioners commenced the work of preparing schedules of the rates for the roads. They endeavored to do justice to both the railroad companies and their patrons by affording a fair compensation to the former and at the same time giving relief to the depressed interests represented by the latter. Their rates were not as low as the special rates that had at various times been granted to favorite shippers, but were a fair average of the various rates in vogue at the time. While the schedule was under consideration, the railroad managers were given frequent hearings, in which they endeavored to impress their views upon the commissioners and to obtain many important concessions, which they urged as essential to the welfare of the railroad interests. Their views guided the commission to such an extent that it was generally supposed that the schedule as finally adopted would be accepted by the railroad companies without protest.

The schedule of the Iowa commission has been sharply criticised by Mr.

Stickney in his "Railway Problem." He finds in it inconsistencies and confusion, due, as he charges, to faulty mathematics. But it is claimed by the commission, and Mr. Stickney should know, that whenever mathematics were ignored in the construction of the schedule it was done at the earnest and persistent solicitation of the railroad managers, who, it seems, were more interested in maintaining their interstate rates than in the consistency of the Iowa schedule.

The rates were published, as required by law, and June 28, 1888, was fixed as the day on which they were to take effect. A few days previous to this date the companies asked that the taking effect of the new tariff be postponed a week. When this request was granted by the chairman of the commission, the railroad managers took advantage of the courtesy by enjoining the commissioners in the Federal court from enforcing it.

Several months later the commissioners modified their schedule by the adoption of the Western Cla.s.sification. Again the railroad managers asked the court for an injunction, but this time met with a refusal.

After many suits for penalties had been inst.i.tuted against them, and many more threatened, they adopted the new schedule, but endeavored to inaugurate a policy of retaliation by reducing their train service and discharging a large number of employes, and in many ingenious ways continued their seditious course with a determination characteristic of a band of insurrectionists. But the impetus which railroad traffic received under the operation of the commissioners' schedule was such that they soon found it necessary to restore to the service its former efficiency.

The Railroad Commissioners' report shows that while the number of employes was 24,642, and their yearly compensation was $14,212,500 in 1889, in 1892 there were 30,492 employes, and their yearly compensation $18,070,915.

The increase in both the gross and net earnings of Iowa lines has been remarkable, as shown in the following table gathered from the commissioners' reports:

Gross Earnings, Net Earnings, Year. Total. Total. Per Mile.

1888-89 $37,369,276 $11,861,310 $1,421 1889-90 41,318,133 12,798,430 1,522 1890-91 43,102,399 14,463,106 1,720 1891-92 44,540,000 14,945,000 1,777

It was claimed by railroad men that the effect of Iowa legislation would be particularly disastrous to her local roads, which had no opportunity to make up on through business the losses incurred in the local traffic.

The Burlington, Cedar Rapids and Northern was particularly cited as a line which would have to go into bankruptcy under the new law. Its earnings commenced to increase, however, immediately after the adoption of the commissioners' schedule, and at the end of the first year they were large enough to change this line from a Cla.s.s "C" to a Cla.s.s "B"

road. They continued to increase, and in 1891 its gross earnings on substantially the same mileage were 36 per cent, and its net earnings 64 per cent. larger than they had been in 1888. The increase continued and enabled the company to make a dividend to its stockholders February 1, 1893, it being the first dividend ever made by the company. It is a good ill.u.s.tration of what the Iowa law has done for weak railroads. It has again changed cla.s.s and is now a Cla.s.s "A" road.

It is seen that the fears, or rather the pretended fears of the railroad managers, that the legislature of Iowa would bankrupt her railroads, were entirely groundless. As a result of the law railroads have been able to increase their gross earnings as well as their profits. They have been enabled to give employment to a larger number of men, and there has been no occasion for them to carry out the dishonest threat to decrease the wages of their employes. Had it not been for their increased earnings in Iowa, the losses recently sustained in other States by several of the through lines would have made it impossible for them to declare the dividends which they did.

Under her beneficial railroad policy Iowa has prospered wonderfully, and her railroads have been more prosperous than when they were allowed to have their own way. The commissioners' tariff has made jobbing and manufacturing profitable where it was unprofitable before. It has added to our industries and our commerce, and has made new business for the people as well as the railroads. It has contributed to the increase in the value of our farms and factories and their products, and the time will come when wise railroad managers, like the majority of former slaveholders of the South, would not resurrect the past if they could.

In fact, honorable managers now acknowledge that they would not if they could.

The railroad companies are at present making a systematic effort to weaken the Iowa commission, but if they should succeed in doing so, the people, under our system of electing the commissioners, can readily correct the evil.

Other States have much experience similar to that of Iowa. Nebraska has just adopted a maximum tariff law for the control of her roads. It will, of course, be resisted by the railroad managers of that State.