The Railroad Question Part 21

Wells, the author of "Recent Economic Changes," the annual producing capacity of a Bessemer converter was increased fourfold between 1873 and 1886, and four men can now make a given product of steel in the same time and with less cost of material than it took ten men ten years ago to accomplish. A ton of steel can now be made with 5,000 pounds of coal, while it required twice that quant.i.ty in 1868. When it is considered that rails and tires made of steel last three times as long as those made of iron, permit greater speed, carry a much larger weight, and require less repairs, the importance to the railroad interests of the improvements made in the manufacture of steel can hardly be overestimated. Similar reductions have been made in the car and machine shops. An average train to-day probably costs no more than one-half as much as it did twenty years ago. Mr. Wells, in the work just mentioned, says:

"In 1870-'71 one of the leading railroads of the Northwestern United States built 126 miles, which, with some tunneling, was bonded for about $40,000 per mile. The same road could now (1889) be constructed, with the payment of higher wages to laborers of all cla.s.ses, for about $20,000 per mile."

A great saving has also been made in the consumption of coal. Under favorable circ.u.mstances a loaded freight car can now be propelled a mile with one pound of coal. A similar economy of fuel has, through the improvement of their engines, been effected in ocean steamers. The invention of the compound engine has reduced the expense of running about one-half, while it has doubled the room left for the cargo. The statement has recently been made that a piece of coal half as large as a walnut, when burned in the compound engine of a modern steamboat, drives a ton of food and its proportion of the ship one mile on its way to a foreign port.

Furthermore, the invention of the air-brake has materially reduced the number of train men formerly necessary to safely manage a train, just as the introduction of steam-hoisting and other machines, both upon docks and vessels, has greatly decreased the number of men employed upon the mercantile marine.

There is certainly much similarity between the railroad and the steamboat as agencies of transportation. Whatever fuel and labor-saving causes operate on one must necessarily operate upon the other. When we, therefore, find that the ocean rates are only from one-third to one-fourth of what they were thirty years ago, we are justly surprised to see railroad rates maintained as high as they are. Operating expenses have been greatly reduced and pa.s.senger travel has largely increased during the past twenty years, but reductions corresponding in the pa.s.senger rates of the United States have not been made.

It is, nevertheless, no easy matter always to determine what are reasonable rates. It is easier to tell what rates are unreasonable.

Rates are unreasonable that bring an income in excess of sufficient to keep the road in proper condition, to pay operating expenses, including taxes and a fair rate of interest on the amount, not including donations, actually invested in the road. The patrons of a road should not be taxed to pay interest on their own donations, or on public donations, to the road, as the donations were made for the benefit of the public, and not for the benefit of private individuals. A rate which may appear reasonable to the carrier is apt to be regarded as too high by the shipper; and, again, one that seems reasonable to the shipper is denounced as too low by the railroad man. Each is tempted to consult only his own interests and to disregard the just claims of the other side. Thus, while the shipper will claim that his rates ought to be low enough to enable him to compete with other shippers more advantageously located than he is, the railroad manager will demand a rate which would enable him to declare high dividends on largely fict.i.tious values. The owners of roads which were built merely for purposes of speculation or blackmailing insist on being permitted to charge exorbitant rates to bring up their earnings to the level of those roads for whose construction there was a legitimate demand.

It is a settled principle of common law that all rates must be reasonable, but no uniform rule has as yet been adopted by which the question of reasonableness is to be determined. The doctrine laid down by Judge Brewer, that "where the rates prescribed will not pay some compensation to the owners, then it is the duty of the courts to interfere and protect the companies from such rates," and that "compensation implies three things: cost of service, interest on bonds, and then some dividends," is absurd. A question is never settled until it is settled right, and this rule is certainly open to very serious objections. A road may be bonded for several times its cost or its real value, it may be managed with such recklessness or extravagance that its operating expenses may be twice what they would be under a careful and economical management, yet under this rule the shipper must pay the premium which bond-watering and bad management command. The general enforcement of such a rule would place the public at the mercy of scheming railroad manipulators. No matter to what extent the business of a road may increase, a reduction of rates can always be prevented by the issue of new bonds and the doubling of the already lordly salaries of its managers. Again, under the operation of this rule a road which entirely suffices to do the business between two points may be paralleled by another and the public be compelled to pay excessive rates to maintain both. It might be said that the public cannot be forced to patronize any road, that if it would not withdraw its patronage from the old line, the new line would soon become bankrupt, and that in such an event its owners, and not the public, would be the sufferers. This argument may be met by the statement that, aside from the fact that concerted action among a large number of people can never be secured, few roads rely for their support solely upon local business, and that any loss which the older road sustains from encroachments by its rival upon its through traffic it is compelled to make up by raising its rates upon its local business. It is the almost inevitable consequence when one road is paralleled by another that the business which was previously done by one road will be nearly equally divided between the two, and under the rule laid down by Judge Brewer the public will be called upon to pay the operating expenses and the interest on the bonds of both, together with such dividends on the stock as the financiering ability of their managers may secure. The better judgment seems to be that to determine what are reasonable rates is not a question for judicial adjudication.

The Interstate Commerce Commission, in their fourth annual report, a.s.sert that "there can be no standard of expense which the courts can act upon and apply, but that the whole field is one of judgment in the exercise of a reasonable discretion by the managing powers, or by the public authorities in reviewing their action." Their views upon this subject are still more definitely stated in the following words contained in the same report:

"An attempt is made to give authority to the courts to interfere by the suggestion that property or charter contract rights, or both, are involved in the matter of fixing rates, and therefore that it is not possible the conclusions of administrative boards should be final. This is an endeavor, by the mere use of words, to confer jurisdiction upon the courts where the substance is altogether wanting. Property or contract rights are involved in these cases precisely as they are in numerous other cases of the exercise of power under the police authority of the State, either by the State itself or by its munic.i.p.alities."

These views cannot fail to commend themselves to any unprejudiced mind.

It is a well-established fact that all officials will, if permitted, extend their jurisdiction, and judges are no exception to the rule. It was therefore but natural that the courts should attempt to solve the problem of railroad rates.

The attempt so far has been fruitless, nor will it be otherwise as long as the courts persist in approaching with abstract legal maxims a question which, above all things, requires the light of experience and the exercise of sound discretion. The question of railroad rates will never be satisfactorily settled until it is definitely referred to expert administrative State and National boards empowered and prepared to meet the many contingencies that will always arise in the transportation business.

It is not difficult to account for the inability of the courts to properly adjudicate the question of reasonable rates. The legislature, or a board to which it has delegated its power, prescribes for a railroad company a cla.s.sification and tariff. The company claims that the rates so fixed are unreasonably low and applies to the courts for redress.

Now, if the rates were based upon the cost of service only, it might, perhaps, be possible for a court to determine whether the prescribed rates are adequate or not. But even in such a case the question would arise whether the capitalization and the operating expenses of the road are not excessive, and its determination would require expert knowledge and sound discretion rather than legal lore. However, since the cost of service is not the only, and with railroad men not even an essential, factor in rate-making, it is evident that the rates upon single commodities can not be reviewed upon their individual merits, but the tariff must, in the judicial determination of the question whether it is reasonable or not, be viewed as a whole. But as it is impossible to foretell what effect a readjusted tariff would have on the revenues of a road, even courts are forced to admit that an actual trial of the tariff is necessary to establish its merits or demerits.

If the complaining company were as anxious to give the new tariff a fair trial as it usually is to demonstrate to the satisfaction of the court that it is devoid of every principle of justice, such a test might be accepted by the public as a reliable basis of judicial procedure. But railroad managers are not only striving to perpetuate their own high rates, but to show to the public that freight tariffs not emanating from a railroad company's office are of necessity crude and unjust to the carrier. They know that if they should succeed in convincing the public that administrative boards are incapable of dealing with that question, they might for years to come be left in undisputed possession of the power to make their own rates. This is certainly for the railroad manager a prize worth contending for, and no sacrifice is too great for him to make when there is any hope of ultimate victory. Being absolutely uncontrolled in his action, he finds it an easy matter, by temporarily diverting business from his line, by the increase of operating expenses and by repressing growing industries, and in many other ways, to curtail the business of his road and diminish its revenues. He can court losses in a thousand different ways discernible neither to the courts nor the general public. In short, it is in the power of any railroad manager to manipulate such a trial in his own interest, and, if determined, to obtain a verdict against any tariff not of his own making. This policy was pursued by several Iowa roads subsequent to Judge Brewer's decision that the alleged unreasonableness of the Iowa commissioners' tariff must be established by an actual trial, and was persevered in until the suit was withdrawn.

But even if the competency of the courts to properly determine such questions were admitted, there would still exist one serious objection to their jurisdiction. Courts necessarily move slowly, while all differences arising between the public and the railways, and especially those concerning rates of transportation, require prompt and decisive action. There are no fixed conditions in commerce. It is a kaleidoscope constantly presenting new phases. Compet.i.tion at home and abroad, tariff duties, the condition of the crops and a thousand other influences affect it and may require a prompt readjustment of the tariff. So long as railroad companies are permitted to resort to injunctions and effect other delays rendered possible through the machinery of the courts, to prevent for years the enforcement of tariffs prescribed by administrative authorities, so long will the public be at their mercy.

So long as they have nothing to lose and everything to gain by a judicial contest, it will be their policy to delay through the courts the enforcement of any tariff, whether prescribed by legislature or by an authorized commission, that falls below their standard. It is not to be understood that the acts of railroad commissioners should never be subject to a judicial view. If such boards clearly exceed their authority or are otherwise guilty of maladministration, if they violate const.i.tutional rights, then railroad companies, if injured by their acts, should be permitted to seek redress in the courts; but they should not be permitted to nullify an official tariff by legal maneuvers. It is clearly not within the province of the courts to make rates or to lay down rules to be followed by those to whom the law has delegated the power to make them, nor should the courts aid the railroads in any attempt to nullify an official tariff that has been legally promulgated.

A tariff prepared by sworn and disinterested officials is more likely to be just than one prepared by interested railroad men, and railroad companies should be compelled to adopt it and continue it in use until it is amended or revoked by legal authority.

Individual shippers are powerless as against strong corporations.

Railroads apply to the courts for what they are pleased to term redress, and in the meantime refuse with impunity to accept an official tariff; but the shipper has no protection: he must pay their rates or go out of business. What reason can be a.s.signed why the weaker should thus be discriminated against? A promulgation of a tariff prepared by a commission is equivalent to a declaration on the part of these officials that the rates or some of the rates charged by the railroads are unreasonably high. The railroad, in applying to the courts for protection, claims that the tariff prescribed by the commission is unreasonably low. Both tariffs are therefore impeached, one being that of an interested private company, the other that of a disinterested public board. It is evident that, even if the people should see fit to give the courts jurisdiction in such controversies, one of these tariffs must temporarily prevail pending the decision of the court, and sound public policy and justice to the patrons of the road certainly require that the official tariff be recognized by the courts and made to be respected by the railroad company until it is proved to be unreasonable and is set aside by lawful authority.

It is claimed by railroad men that they should be allowed to make their own tariffs because rate-making is so intricate a subject that none but railroad experts can do it justice. If this were so the courts would be even less competent to review a schedule of rates than a State or National commission would be to make one. Courts cannot be expected to have expert knowledge in all matters that are likely to be brought before them. They must rely upon the testimony of expert witnesses whenever technical questions are involved in the determination of cases.

The identical sources of information from which courts draw are accessible, or may be made accessible, to a commission, which has the additional advantage that its members may be selected with special reference to their fitness for the duties which they will be called upon to perform and are expected to devote their whole time to the settlement of questions arising in the transportation business. Such a commission can practically be made a court with jurisdiction over all matters connected with railroad business. The railroad manager, no doubt, is thoroughly familiar with the wants and desires of his company; but it may fairly be presumed that he is less familiar with the needs of the public than a railroad commission whose members are in constant communication with the people, patiently listen to the complaints of shippers, court and receive suggestions as to needed changes in cla.s.sification and rates, and study the relative advantages of the different sections and different interests of the State or the country as regards transportation. A railroad freight agent, on the contrary, is disposed to think that shippers ought to be satisfied with any rate lower than those charged fifty years ago for carting or other crude methods of transportation. He regards their views and suggestions as chimerical and not worthy of any notice, and does not even hesitate to inform them that rate-making is a branch of the railroad business wholly beyond their comprehension, and ought not to be meddled with or even inquired into by the public. The general freight agent is the employe of a company which rates his usefulness solely by his ability to constantly increase its revenues, and he invariably proceeds upon the theory that the best tariff is that which comes nearest imposing upon each commodity offered for carriage the maximum transportation tax that it will bear. A man who entertains such opinions cannot be supposed to be able to do justice to the shipper, and should not be permitted to act as arbitrator in rate controversies between the public and the company whose employe and advocate he is. Nor have we any reason to hope for a change in the present tariff policy of railroads. History has sufficiently demonstrated the fact that reforms must come from without. As long as human nature remains as it is, railroad officials will, if permitted, arrange tariffs in the interest of the men who give them employment, for if they did otherwise their services would soon be dispensed with. A freight tariff should be in the nature of a contract between the carrier and the shipper, and the a.s.sent of both parties ought to be essential to its validity. But as it is impracticable for all the parties interested to meet for the purpose of effecting an agreement, the power to make rates has in several States wisely been conferred upon railroad commissioners, and there is a strong tendency in others to adopt the same policy. Such boards have every opportunity to obtain any information needed for the efficient and faithful discharge of their duties. They can hear the representatives of the railroads as well as those of the shippers, investigate carefully disputed points, summon experts and witnesses, and obtain official information relating to cla.s.sifications and rates from every State in the Union, and, if necessary, from every quarter of the civilized world. The a.s.sertion may safely be made that, with experience, a commission acquires more expert knowledge relating to the business of rate-making than a railroad manager. If there is any mystery connected with the business of rate-making which has so far been in the sole possession of railroad men, it is to their interest to initiate the commissioners into their profound secrets. It will be their privilege to enlighten the commissioners as to the actual cost of their respective lines, the cost of every branch of the railway service, and as to a thousand other matters which the public has both a desire and a right to know. If, after a schedule of rates has been prepared, and before it is promulgated, railroad men can suggest any improvement in it, they should have the privilege to do so; or if, after giving it a fair trial, they should be prepared to show that any rate is unreasonably low and injurious to them, their complaint should be carefully investigated, and, if found well grounded, the wrong should at once be righted.

But the same privileges should be extended to shippers. Their rights and their welfare should be guarded as sacredly as those of the railroad companies. They should have the same opportunity to examine a proposed schedule before its promulgation and protest against any feature of it which they may regard prejudicial to their interests, and their statements should receive the same consideration as is accorded to those of representatives of the railroad companies. So, likewise, when shippers prove to the satisfaction of the commission that a rate has outlived its reasonableness, their complaints should at once be investigated, and if their cause is found to be a just one, the tariff should be so amended as to give them relief.

The labors of a board of railroad commissioners are onerous, and their responsibility is great. No uniform rule can be laid down for their guidance in the fixing of rates, yet there are a few fundamental principles which should always be adhered to. The cost of service should invariably be an important factor of a rate. Railroads should not be compelled to carry any commodity for less than the actual cost of moving it, nor should rates be fixed greatly in excess of such cost of service. The carload should be the unit of wholesale shipments. Since it costs the railroad company as much to move ten carloads of freight which belong to one shipper as it costs to move ten carloads belonging to ten shippers, no advantage beyond the general carload rate should be given to the large shipper. The difference in the rates between shipments in less than carload lots ought to be determined solely by the difference in the cost of carriage and handling. Where shipments are made in carload lots, the loading and unloading is usually done by the shipper and consignee, cars are loaded to their full capacity, and no loading or unloading of shipments at intermediate points is necessary. It is therefore but just that the consignor and consignee should have the benefit of the reduced cost of such shipments. Raw materials, and especially coal and lumber and kindred articles, the transportation of which requires neither an expensive rolling stock nor warehouse accommodations nor speedy movement, and in which the risk of loss or damage is insignificant, should be carried at the lowest rate possible.

Such a policy will tend to foster other interests, which will develop business for the road and will build up remote sections of the country, and will often enable railroads to carry large quant.i.ties of these commodities at times when they would otherwise be nearly idle. There should be a uniform cla.s.sification throughout the country, based upon considerations of justice and equity instead of railroad tradition. Such articles should be cla.s.sed together as resemble each other as concerns bulk, weight and risk, or what is virtually the same, cost of carrying and handling. It may be safely a.s.sumed that a rate which has been made and used by railroad companies is remunerative. If it is claimed by railroad men that it is not, the burden of proof should rest upon them.

A rate may also be considered remunerative to a road if other lines similarly situated have voluntarily adopted it. A schedule finally must be considered reasonable if it enables the company for which it is prescribed to earn under efficient and economical management sufficient to maintain its road in proper condition and a fair rate of interest upon a fair valuation of its road. Property is never worth more than what it can be duplicated for, and railroad property is no exception to the rule. If there has been a depreciation in the property of a company, it should not demand dividends upon values which no longer exist. Nor can the same returns be conceded to railroad property as to private capital. Its investment is permanent and well secured, if it is honestly and intelligently made; and its dividends are net returns after the payment of all expenses, including taxes, cost of management and maintenance. The three per cent. bonds of the United States Government find a ready sale at prices above par. Were there less speculation and more honesty and stability in railroad management, railroad securities yielding a revenue of from 2-1/2 to 4 per cent. on the actual investment would be eagerly sought after by conservative capitalists.

Rate-making requires honesty of purpose, intelligence and discretion, qualities as likely to be found among the servants of the people as among those of corporations. A commission may err, but its errors are not likely to prove as detrimental to the railroad companies as the extortionate and discriminating rates imposed by railroad managers have proved to the interests of the public. Railroad managers acknowledge no obligation except that of earning dividends for their companies, while the members of a railroad commission, on the contrary, are responsible for their acts to the people, with us the source of all government and all power. To question the justice and sincerity of the people, or to deny the efficacy of such a control, is to deny the wisdom of popular government.

Railroads might be permitted to reduce their rates below the official tariff, but they should be required to give at least thirty days' notice of such a change, to enable shippers to prepare for it. The companies should not be permitted, however, to raise rates again without obtaining the commissioners' consent and giving at least two months' notice of the proposed advance. Sudden fluctuations in rates are a fruitful source of disaster in those branches of business in which the cost of transportation forms an important factor in the price of commodities, and are as unjust and unwarrantable as would be fluctuations in import duties. As long as they are tolerated there can be no reliable basis for business calculations or contracts. There is little doubt that, were such regulations enforced, railroad wars, so demoralizing to the business of the country, would soon belong to the things of the past, and a far-reaching a.s.surance of future welfare would be given to the commercial, manufacturing and all other legitimate interests of the country. It should always be kept in view by the rate-making power that the railroad company, like the gas company, the water company and the street car company, is acting in the capacity of a public agent, and the rate of compensation should be fixed by public authority.

CHAPTER XIV.

REMEDIES.

The railroad in America is still in its infancy, both as regards extent of mileage and methods of operation. In 1860 the United States had in round numbers 30,000 miles of road; in 1870 this number had increased to 53,000; in 1880 to 93,000, and in 1890 to 167,000. It will thus be seen that the average increase during each of those three decades was nearly 80 per cent. Should this rate of increase continue during the next three decades there would be in the present territory of the United States a little over three hundred thousand miles in 1900, 550,000 miles in 1910 and close to one million miles in 1920, or about one mile of road for every three miles of territory. It is not likely that the rate of increase of the past will continue in the future; but even if this should be reduced from 80 to 40 per cent. it would be less than fifty-five years when the railroad mileage of the United States would reach the million point.

Even this might seem an extravagant estimate, but it must be remembered that there are already a number of States in the Union with a railroad mileage closely approaching this proportion. The District of Columbia has one mile of road for every 3.39 square miles of territory, New Jersey for every 3.79, Ma.s.sachusetts for every 3.96, and Connecticut for every 4.96 square miles. Ohio, Pennsylvania, Rhode Island and Illinois follow with one mile of railroad for every 5.14, 5.20, 5.57 and 5.59 square miles of territory, respectively, and Indiana, New York, Delaware and Iowa are not far behind them.

It should also be borne in mind that many of the through lines have double, some triple, and some even quadruple tracks, which, if taken into the account, would increase the mileage much more; and still railroad construction in most of these States is far from being at a standstill. The United States will eventually be able to sustain a closer net of railways than any country in Europe, and we may rest a.s.sured that the time will come when the fertile prairie States of the Northwest will have a mile of railroad for every square mile of territory.

In view of the future magnitude of the transportation interest the importance of placing its control and management early upon sound principles should not be under-estimated. Abuses crept into railroad management in the past, not because the men who controlled it were necessarily worse than men engaged in other pursuits, but because the States failed to provide adequate legislation for the control of this new social and commercial force, and the license enjoyed by railroad men gradually turned into serious evils what seemed at first only harmless practices. It cannot be denied, however, that the absence of restraint in time attracted to the business unscrupulous men whose sharp practices frequently forced their colleagues of better conscience to do what their sense of honor and justice condemned. These evils and abuses have increased with the growth of the railroad system, and nothing short of the sovereign power can now correct them. It is inc.u.mbent upon the state not only to correct the evils of the past, but to base legislative control of railroads upon principles so wise and so broad as to endure for ages, permitting the unlimited growth of the system and at the same time insuring commercial liberty and prosperity to the generations to come.

As it is always easier to tear down than to build up, so it is likewise easier to point out evils than it is to provide proper remedies for their cure. Almost any one can criticise existing conditions, but it requires wise and constructive statesmanship to propose practical measures which will bring about desired improvement. The apparent magnitude of the work of correcting the evils and abuses connected with the transportation business, many of which have been in vogue for more than a generation, has discouraged many from seriously undertaking it.

And yet we shall find the problem by no means a difficult one, if we properly a.n.a.lyze it and go to the root of the evil. Prof. Bryce, in his work "The American Commonwealth," refers to the fact that the people of this country have been equal to the task of solving the gravest problems which have been presented to them, and we need have no doubt of their ability to solve the railroad problem. Railroad regulation does not require the adoption of any new principle of law. If the common law is rightly applied and provision is made for its strict and systematic enforcement, it will meet every condition that is likely to arise in the transportation business. It should always be remembered that the railroad is an improved highway, and the princ.i.p.al reason for which it is built is to accommodate the people and promote their welfare, and not to serve the selfish ends of a few individuals, and that private companies were permitted to build and operate it only because the State believed that the public interests could best be served in this way.

It is one of the duties of the State to facilitate transportation by establishing highways. These highways may be built by the State directly or through munic.i.p.alities or even private corporations. Thus, under authority derived from the State, cities lay out, construct and maintain streets within their limits. But these streets become public and are always subject to State control. The same rule applies to turnpikes and ferries. Although the State transfers to an individual or a company its right to maintain a ferry or to build and maintain a turnpike, and to compensate itself for its outlay by the collection of tolls, the ferry and turnpike nevertheless remain highways, subject to the control of the State.

The railroad partakes of two natures, that of a highway and that of a common carrier. Railroad companies therefore enjoy the privileges and a.s.sume the duties of both. The State justly exercises in behalf of such companies the right of eminent domain, _i. e._, the right of the sovereign to apply private property to public use; but it cannot rightfully appropriate private property for private use, even if legal compensation were to be made for it. It is only upon the theory that railroads are highways, constructed for the public good and subject to public control, that the State has authorized railroad companies to take private property for their own use by paying for it a reasonable compensation. A railroad may even take possession of and intersect a public road for the purpose of carrying on its functions. But while the sovereign may exercise the right of eminent domain, it cannot delegate it to any individual or number of individuals, except to its agents, performing its functions and being bound to comply with any rule which may be prescribed for the public good. Under the common law the individual is ent.i.tled to as full use of the railroad as he is of the common highway. If he is not allowed to put on his own vehicle, this restriction is simply due to the fact that the people believe that the business can be done most safely, most economically and most efficiently by one company or a limited number of companies operating the road for a reasonable compensation. Nor does this restriction differ materially from that which the law has placed upon the use of the common road. Without legislative sanction no one has a right to put upon it a team of elephants or a locomotive and train of cars, or other strange motors, and thereby obstruct the public travel. These restrictions might be removed by the legislative power, and there is also no doubt that under the common law the State has the right to permit the independent use of the railroad track by any person having motive power and cars adapted to it. The persons and freight transported on the railroad are taxed to maintain it, while in the case of the common road this tax is placed upon the people and the adjoining property. How to collect the tax necessary to sustain the road is simply a question of public policy, and it cannot be collected in any case except with the expressed permission of the State. If a company is permitted by the State to operate a railroad it should only be permitted to collect such tolls as are just and reasonable, and what is just and reasonable should be determined by the sovereign State, and not by the operating company. The railroads of the United States collect from our people in round numbers a transportation tax of eleven hundred million dollars annually. This tax is equal to a levy of $17 per head, or $85 per family; it is about as large as all our other taxes combined. In the State of Iowa it amounts to about $22 per head, or $110 per family, and is two and one-half times as large as all the State, county, school and munic.i.p.al taxes collected within her borders.

When we consider how thoroughly other public charges are hedged about, by careful restrictions and limitations, and with what caution the amount to be collected is fixed after thorough public discussion, by agents of the people selected by them to serve only for short periods, and that those who collect and disburse the funds are under oath and bonds for a faithful performance of their duty, is it not preposterous to permit agents appointed by a few interested persons, and often serving for a long term of years, without any responsibility to the public, to fix the rate of this tax, and to collect and disburse the immense sums levied for the support of these highways without any supervision or restraint?

The Government might as well lease the post-office, waterways and the collection of import duties to the highest bidder and permit the lessees to reimburse themselves by the collection of such tolls as they might see fit, without any governmental restraint whatever, their franchises enabling the operating companies to tax each individual, each locality and each letter, parcel or article as they saw fit. How long would the people of this country endure such a condition of things? The collection of taxes has been farmed out, but not by any civilized nation in modern times. History shows that this system of taxation has always been productive of the gravest abuses, and prejudicial to the public welfare.

As has already been shown, the railroad is an improved highway, and the railroad company in operating it is doing a public business and not a private business, and therefore it should be governed by rules applicable to public business, and not such as are applicable to private business. It is admitted by all that for the services which it performs the operating company should receive a reasonable compensation; but to say what a reasonable compensation is, how it shall be collected, and to prescribe rules regulating the business of the public carrier, is solely the right and the duty of the State. The people have never permitted the rate of any other public charge to be fixed by the beneficiary. Why, then, should privileges be conceded to one beneficiary which are denied to all others?

The a.s.sertion is often made by railroad managers that railroad transportation is a private business as much as any other branch of commerce. It is not likely that these same managers would wish to have their argument carried to its logical conclusion, for, should the courts at any time take their view, they would be under the necessity of declaring null and void all their charters, which were granted to them upon the a.s.sumption that the railroad was a highway operated under the authority and control of the State by private companies for the public good. If, on the other hand, railroad managers are, for their own protection, forced to recognize the public character of railroads, they can no longer question the right of the State to so control their business as the public good may demand. And this shows the absurdity of the claim often made by railroad managers, that, as long as the rates charged by them are reasonable, the State has no right to interfere with their business, or, in other words, that they may discriminate between individuals and localities, and that they may legally practice a thousand other abuses as long as individual shippers find it beyond their power to prove that they have been charged exorbitant rates.

Charles Fisk Beach, Jr., in his "Commentaries on the Law of Private Corporations," lays it down as a general principle of law that "whenever any person pursues a public calling and sustains such relations to the public that the people must of necessity deal with him, and are under a moral duress to submit to his terms if he is unrestrained by law, then, in order to prevent extortion and an abuse of his position, the price he may charge for his services may be regulated by law." And applying this principle to common carriers, and especially railroads, this author says:

"The sovereign has always a.s.sumed peculiar control over common carriers as conducting a business in which the public has an interest, and in the case of railway carriers an additional basis of governmental control is grounded in the extraordinary franchise of eminent domain conferred upon these companies. For corporations engaged in carrying goods for hire as common carriers have no right to discriminate in freight rates in favor of one shipper, even when necessary to secure his custom, if the discriminating rate will tend to create a monopoly by excluding from their proper markets the products of the compet.i.tors of the favored shipper."

If railroads had no obligations or advantages beyond those of other common carriers, such as stage lines and steamship companies, their discriminations might be less objectionable, but, as keepers of the toll-gates of the public highways, they are no more at liberty to regulate their own business regardless of the public welfare than were their predecessors, the toll-collectors stationed along the public turnpikes and ca.n.a.ls. As such public tax-collectors they are bound to give equal treatment to all persons and places.

Although the business of constructing and keeping in repair the turnpike roads was, as a rule, left to private persons, and the promoters of such enterprises were permitted to reimburse themselves for their outlay by the collection of tolls, their schedules of tolls were prescribed by the State and their business was placed under the supervision of public officers, whose duty it was to see that neither extortion nor discrimination was practiced in the collection of these tolls, and that the private management of a public business did not become the source of abuse. The State thus insisted upon exercising a restraining influence over the business of turnpike companies because it realized the danger of entrusting the management of a semi-public business to companies organized solely for private gain, with officers responsible only to their stockholders, who, under ordinary circ.u.mstances, could be relied upon to measure the usefulness of an employe by his ability to contribute to the increase of the annual dividends. It will scarcely be claimed, even by railroad men, that since the days of turnpikes and stage-coaches corporations have become more unselfish and their officers less servile. The temptations have increased, while human frailty remains the same.

Of course, if we consult the railroad managers as to the best policy to be adopted for the future control of railroad companies, we shall be informed that we have already gone too far in railroad legislation, that nearly all the present evils of transportation of which the public and the railroad companies complain may be traced to legislative restrictions, and especially to certain features of the Interstate Commerce Act. They reluctantly admit that this act has been instrumental for good inasmuch as it has corrected some of the abuses that formerly existed, but they insist that several of its provisions are too radical and do infinitely more harm than good, both to the railroad companies and the people; that these obnoxious provisions ought to be repealed, and that under such restrictions as would still remain railroad companies ought to be permitted to manage their own business. If we inquire what modification of the Interstate Commerce Act the railroads desire, we find that if the act were amended in conformity with their wishes there would be little of it left that is of value. But the features which are specially obnoxious to them are the long and short haul and the anti-pooling clauses. They even go so far as to demand that the Government should not only permit pooling, but should use its strong arm to enforce all pooling contracts which railroad companies might see fit to enter into. This means, in other words, that the Government should enforce an agreement to restrict compet.i.tion, which is made in direct violation of the common law, and aid the companies in maintaining such rates as they see fit to establish. If the railroad manager is cross-examined and forced to confess the truth, he will have to admit that what he really desires is freedom from all restraint, or, if public opinion will not tolerate this, then only law enough in letter to satisfy a public clamor and permit him to violate its spirit, and to then trust to him and the future to bring it into disrepute and cause its repeal.

Some shrewd managers have recently expressed a willingness to submit their pooling arrangements to a public commission for approval, before they should go into effect. This is objectionable on the ground that they would then, more even than before, endeavor to control the making of the commission. It is far safer to absolutely prohibit pooling and all devices used as a subst.i.tute for it. No necessity for pooling exists, and no good reason can be given why it should be permitted unless complete government control is established.

State control of railroad transportation is as essential to the welfare of the companies as it is to that of the public. The history of the past twenty years has shown that railroad companies are utterly unable to regulate their relations with each other. They either cannot arrive at an understanding, and then the stronger companies resort to hostilities to bring the weaker ones to their terms; or, when an agreement has been reached among them, they find themselves unable to enforce it. Anarchy then reigns supreme, until finally a truce is patched up, to be again followed by evasions, defiance and "war." The nature of the railroad business is in fact such that, in the absence of strict State control, it is impossible for a conscientious manager to retain the business to which his road is naturally ent.i.tled, and do full justice to both the patrons and the stockholders of his road. Efforts have been made again and again by railroad companies to regulate their affairs and adjust their difficulties by resorting to pools, agreements, a.s.sociations and combinations, formed with all the ingenuity of which men are capable, and supported by penalties and fines; but the unscrupulous railroad manager has always found a way to violate or subvert the agreement.

There is a disposition among railroad companies to arrogate all the powers of sovereignty. They want to make their own laws, impose fines and declare war, and often go even so far as to openly defy the power of the State that has given them their existence.

When railroad managers are shorn of the power to practice abuses, they are at the same time deprived of the many advantages they now have to speculate in railroad securities and enrich themselves at the expense of the public and of other railroad stockholders. The great fortunes of this country have been ama.s.sed within a few years, and chiefly from manipulations of railroad property. If the people permit these practices to go on without restraint but a few years more, the property of the nation will be largely under the control of a few bold adventurers. The great fortunes of Europe which it has required centuries to acc.u.mulate are already outstripped by the "self-made" millionaires of this country.

However persistently railroad managers may a.s.sure the people that abuses in the transportation business have been reduced to a minimum and that more stringent legislation will be an evil, it is a fact that many of the graver railroad abuses are still practiced and that much more reformation is needed in railroad management, or in railroad supervision, or in both, to make the railroad what it was designed to be, a highway operated for the public and open to all upon equal and equitable terms.

The virtual ruler of the United States is public opinion. It is the power that controls the legislative as well as the executive and judicial departments of the Government. Enactments of legislatures and of Congress and decisions of the courts, even of the Supreme Court of the United States, not in harmony with an intelligent and determined public opinion, cannot endure, and executives not in accord with the ma.s.ses of the people cannot long retain public confidence or official authority.