This is the very plea that Jefferson Davis made when he kindled the flame of treason.

* * * * *

In the March, 1891, number of the Forum, Mr. W. M. Acworth discusses, under the title "Railways under Government Control," the working of the railway systems of the different nations. He holds that the management of railroads which are the property of the State is, as a rule, greatly inferior to the management of those roads which are the property of private trading corporations; he assigns to the railway experts of England and America the first places among the railway experts of the world, and appears to attribute all the good in the railroad management of these countries to the absence of State interference, and all the evil in the management of the railroads of other countries to the fact that such interference exists. He says of the railroads of England and the United States:

"In speed and accommodation, in the energy which pushes railways into remote districts, and in the skill which creates a traffic where no traffic existed before, they stand to-day in the front rank, as they have stood for the last half century. To say that they are very far from perfect is nothing; it is only to say that they are worked by human agency. Their worst enemies will scarcely deny that they are at least alive; so long as there is life there may be growth, and we may hope to see them outgrow the faults of their youth. The charge made against State railway systems is that they are incapable of vigorous life. The old adage which proclaimed that 'necessity is the mother of invention' has been re-stated of late years as the law of the survival of the fittest in the struggle for existence. If the doctrine is true, the State railway system, relieved from the necessity of struggle, must cease to be fit and will fail to survive."

While it is not intended to enter here into a defense of a State railway system, it may justly be questioned whether "the State railway system, relieved from the necessity of struggle, must cease to be fit and will fail to survive." The growth of the State system in Europe is in itself a sufficient refutation of Mr. Acworth's theory. The mail service has for several hundred years been a monopoly of the government; but, while it is far from being perfect, it remains to be demonstrated that private enterprise could give to the public a better service in the long run.

Mr. Acworth is an Englishman who in former years wrote many bitter things concerning the abuses which he then thought he saw in the management of the railroads of his native country, which, according to his own statement, are, besides those of the United States, the only roads in the world for whose regulation competition has been relied upon in the past. Mr. Acworth has become a convert to the laissez faire theory of dealing with railroads and now evinces an unusual, but perhaps pardonable, zeal in the defense of his new position. In the preface to his book, "The Railways of England," he says upon the subject:

"I have published before now not a few criticisms (which were meant to be scathing) on English railways anonymously. I find myself using, under my own name, the language of almost unvarying panegyric. This is partly to be explained by the plan of the book, which professes to set before the reader those points on each line which best merit description—its excellencies, therefore, rather than its defects. Much more, however, is it due to a change of opinion in the writer.... I have found in so many cases that a satisfactory reply existed to my former criticisms, that I have perhaps assumed that such an answer would be forthcoming in all; and if I have taken up too much the position of an apologist, where I should have been content to be merely an observer, let me plead as my excuse that I am only displaying the traditional zeal of the new-made convert."

Prof. Hadley, of whose work, "Railroad Transportation, its History and its Law," mention has been made above, contributed an article to the April, 1891, number of the Forum, under the title "Railway Passenger Rates." He endeavors to show that the high passenger rates of American railroads are due solely to superior service. He says:

"Continental Europe pays two-thirds as much as America or England and gets an inferior article. India pays still less and gets still less. The difference is seen both in quality and quantity of service. In India express trains rarely run at a greater speed than 25 miles an hour. In Germany and France their speed ranges from 25 to 35 miles an hour, and only in exceptional instances is more than 40 miles an hour. In the United States and in England the maximum speed rises as high as 50, or, in exceptional instances, 60 miles an hour. With regard to the comfort of the cars in different countries, there is more room for difference of opinion; but there can be no doubt that the average traveler in the United States, or even in the English third-class car, fares better than he would in the corresponding class on continental railroads, and infinitely better than the bulk of travelers in British India."

It may be admitted that upon the whole the speed of American and English railroads is greater than that of continental roads, yet the difference is much less than Mr. Hadley would make us believe. The fast trains of the Berlin and Hamburg Railroad, according to Roell's "Railroad Encyclopedia," make the distance of 179 miles in three hours and forty-four minutes. The average speed is therefore 48 miles an hour. There are but few lines in the United States whose regular express trains run at a greater speed. The express trains of the Berlin and Brunswick line make 45-1/2 miles an hour. Trains are run on the Vienna and Buda-Pesth Railway at the rate of 42 miles an hour and on the Paris and Calais Railway at a rate of over 40 miles an hour. Official reports give the average speed of express trains in Northern Germany as 32.2 miles per hour, which is considerably more than the average speed of our Western trains, upon which the rates charged are twice as high as those charged by German roads. The average speed of the express trains in England was 35.7 miles per hour in 1890, in the Netherlands 30.7 miles, in France 30 miles, in Denmark and Southern Germany 28.8 miles and in Austria 27.8 miles per hour. Accurate statistics showing the average speed in America are not in existence, but it may well be questioned whether the difference between the speed of American and European trains is sufficient to justify upon that score any essential difference in the rates. Mr. Hadley's statement that the average traveler in the United States, or even in the English third class, fares better than he would in the corresponding class on continental railroads, is far too sweeping to be true. It is certain that the Belgian, German, Austrian or French second-class coupes are much to be preferred to the smoking and emigrant cars which in America are made to take their places.

To prove that much more work is demanded of American railroads than of European railroads, Mr. Hadley presents the following table:

Annual Train Miles run Service per by Trains head of Countries. Population. annually. Population.

United States (1889) 61,000,000 724,000.000 12 Great Britain (1889) 38,000,000 303,000,000 8 Germany (1889) 48,000,000 181,000,000 3-3/4 France (1888) 38,000,000 145,000,000 3-3/4 Austria-Hungary (1887) 40,000,000 66,000,000 1-2/3 India (1889) 200,000,000 51,000,000 0-1/4

And he adds: "These figures are for passenger trains and freight trains together, as some countries do not give statistics of the two separately; but the general results would be nearly the same if passenger trains alone could be considered. The figures show that, for every man, woman and child, a train is run twelve miles annually in the United States, in Great Britain eight miles, in Germany or France a little less than four miles, in Austria not much more than a mile and a half, and in British India less than a quarter of a mile."

This statement, even if correct, is certainly misleading. No allowance is made for the greater distances and the greater average haul in America, and none for our bulky raw products, which require more car room than the manufactured goods predominating as freight in Europe.

If Mr. Hadley's statement of miles run by trains annually is used in connection with Mr. Poor's statement showing the length, for 1889, of the railroads of the countries given in the above table, it can be shown that the average number of trains run annually per mile is considerably less here than in Europe:

Length of Average Number Railroad Miles run of Trains in miles by Trains per mile per Countries. (1889). annually. annum.

United States 161,396 724,000,000 4,485 Great Britain 19,930 303,000,000 15,203 Germany 25,360 181,000,000 7,137 France 21,910 145,000,000 6,618 Austria-Hungary 15,990 66,000,000 4,127

It is seen that while the average number of trains run per mile per annum is only 4,485 in the United States, it is 6,618 in France, 7,137 in Germany, and 15,203 in Great Britain. In Austria-Hungary it is somewhat less than here. It is not claimed that this is in every respect a fair argument; but it is at least as fair as Mr. Hadley's. As has been stated before, the average earnings per train mile are larger in the United States than in most nations, and, excepting Sweden, railway capital has the highest gross earnings of any nation in the world; and when Mr. Hadley bases his argument in favor of higher rates for American railroads than for those of Europe upon the claim that the latter secure larger train loads, he simply reasons from false premises.

Mr. Hadley then continues:

"But why cannot our railroad men, with our present train service, secure larger loads by making lower rates, and give us cheap service as well as plenty of it? Why cannot we secure two good things instead of one? For two reasons: First, because it is not certain that low rates will be followed by greatly increased travel; second, because such increased travel would not be so economical to handle in America as it is in Europe. It is wrong to assume that, because reductions of charges in Europe have increased travel enormously, they would have a proportionate effect in America and a corresponding advantage in American railroad economy. It is a somewhat significant fact that second-class trains at reduced rates have been extremely successful in Europe and not at all so in America. Other things being equal, the American public would be glad to have its travel at lower fares; but it cares more for comfort and speed, and for being able to travel at its own times, than for a slight difference in charge. The assumption so frequently made, that a reduction in fares would cause an enormous increase in travel in this country, is for the most part a pure assumption, not borne out by the facts."

The great increase in business which has everywhere followed reductions in postage rates, telegraph rates and street-car fares, as well as railroad rates, sufficiently refutes the assertion that it is not certain that low rates would be followed by greatly increased travel. If the second class has not been as successful here as in Europe this is solely due to the fact that the American railroad companies have systematically discouraged second-class travel by forcing passengers into filthy and over-crowded cars. The statement that increased travel would not be so economical to handle in America as in Europe scarcely needs a reply. If, as Prof. Hadley says, the American public demand more frequent trains than the people of Europe, and if these frequent trains are not at present profitable to our railroad companies, it would seem to be plainly to their interest to hold out every inducement to the public to increase travel and thus fill their trains.

Mr. Hadley does not aid his argument when, referring to the Hungarian zone system, he says: "The importance of the zone system in Austria and in Hungary lies in the fact that its adoption was accompanied by a great reduction in rates. The unit rate for slow, third-class trains, which had previously been nearly a cent and a half a mile, was reduced to less than one cent.... The use of railroads under the new system, though vastly greater than it was before, is vastly less than that of a well-managed American road at American rates." Mr. Hadley inadvertently presents here one of the very best reasons why our passenger rates should be reduced.

The fact is, railroad men are opposed, and always have been opposed, to reduction of rates, and to all progressive movements that require increased expenditures or threaten to temporarily reduce their revenues. When the introduction of the zone system was first advocated in Hungary it was opposed by just such men and just such arguments.

No one can contradict the following facts, viz.: That the average cost of European roads is much greater than that of American roads; that the number of railroad employes per mile is much greater there than here; that much larger sums are expended for repairing and improving the roads, and that therefore the lives of passengers are much safer in Europe than in America; and that the average speed and corresponding accommodations of European trains, and especially those of England, Germany, France and Austria-Hungary, compare quite favorably with the average speed and corresponding accommodations of our roads. It is, under these circumstances, absurd to claim that the higher prices charged by American roads are due to the greater cost of service.

Mr. Hadley's labors as a railroad author have, it seems, greatly increased his corporation bias. In an address which he delivered before the American Bankers' Association at New Orleans in November, 1891, upon the subject of "Recent Railroad Legislation and its Effects upon the Finances of the Country," he made a number of assertions which ill comport with the fairness of a public statistician or the wisdom of a Yale professor. After a few introductory remarks, Prof. Hadley made the following statement:

"Every one knows that railroad property has fallen in value since the passage of the Interstate Commerce Act four years and a half ago; few have made any accurate estimate of the amount of that fall. Let us take the stock of the leading railroad systems centering in Chicago as a type. Here we find an aggregate shrinkage of over $60,000,000, or more than one-quarter of the par value of the stocks.

Par Value. Price. Shrinkage. Apr. 4, Nov. 4, 1887. 1891. C., M. & St. P. $30,904,261 93 75 $5,560,000 " " Preferred 21,555,900 122 119 647,000 C. & N. W. 31,365,900 121 116 1,568,000 " " Preferred 22,325,454 148 139 2,009,000 C., R. I. & P. 41,960,000 126 82 18,462,000 C., B. & Q. 77,540,500 140 98 32,567,000 —————- ————— Total. $225,651,000 $60,815,000"

The table shows that fifty-one million of these sixty million dollars are the shrinkage of the Chicago, Rock Island and Pacific and the Chicago, Burlington and Quincy stocks. It is surprising that Prof. Hadley should be ignorant of the real causes of this depreciation, which are known to nearly every Granger in the West. In 1887 the Chicago, Rock Island and Pacific Railroad Company owned 1,121 miles of road, only 172 of which were outside of the States of Illinois and Iowa. In 1891 the same company owned 2,725 miles of road, with 1,776 miles outside of Illinois and Iowa and scattered through Missouri, Kansas, Nebraska, Colorado, Indian Territory and Oklahoma. In Kansas alone the Rock Island system grew from two miles in 1887 to 1,059 miles in 1891. In other words, to a little over a thousand miles of good road the company's managers added nearly 2,000 miles of poor road and a proportionate amount of new stock, and the depreciation in the company's stock which followed was no greater than one should have expected under such circumstances. The managers of the Rock Island and the promoters of these new lines found the transactions to their advantage, while the original stockholders of the company had to bear the imposition, as hundreds of thousands of railroad stockholders had done before them. But neither the law of Congress nor that of any State was to blame for this depreciation of the Rock Island stock.

Since 1891, railroad stocks have advanced on an average at least twenty per cent., and during the last sixty days have declined about twenty-five per cent., although there has been no essential change in interstate or State legislation. It is certainly as fair to call the advance the ultimate result of restrictive railroad legislation as to attribute to that legislation the shrinkage above referred to. Extensive speculations similar to those just mentioned were, during the same period, indulged in by the managers of the C., B. & Q. Railroad Company and its protege, the C., B. & N., who, in addition to this, greatly injured their road in 1888 by the unjust provocation of the engineers' strike. So destructive were this strike and its consequences to the company's business that it is difficult to account for the motives of those who provoked and stubbornly prolonged it except upon the theory that it played an important role in their stock manipulations.

But the recent legislation of a considerable number of States has, in Prof. Hadley's opinion, been still more detrimental to railroad interests than that of Congress. He says;

"In the second place, the legislatures of several States, stimulated by the example of Congress, hastened to pass in imitation, of the Interstate Commerce Act, laws which, in many instances, went far beyond their model in point of stringency. Examples are furnished by the statutes of Iowa, Maryland, Minnesota and South Carolina in 1887-88; of Florida in 1888-89, and of no less than thirteen States in 1889-90, viz.: Georgia, Iowa, Kentucky, Massachusetts, Mississippi, New Hampshire, New Jersey, North Dakota, Ohio, Rhode Island, South Dakota, Virginia, Wyoming; as well as by the recently adopted Constitution of Kentucky. The legislation of 1890-91 shows a slight reaction against the movement of the three years previous.

"In two respects the State legislatures went quite beyond the scope of the Interstate Commerce Act. They tried to prescribe safety appliances to the operating department, and rates to the traffic department. Of the first of these groups little need be said, except that as a rule they have failed to accomplish any great progress toward the result in view, and have in some instances actually hindered such progress. The attempt at prescribing rates was more serious. It involved a return to the methods of the Granger legislation, fifteen years earlier, which had operated so disastrously upon the railroads and the public alike. The system of commissioners with powers to make schedules which should be at least prima facie evidence of reasonable rates had, during the intervening period, never been wholly abandoned; but the powers thus conferred had been sparingly exercised. It was either left unused, as was generally the case in the North from 1877 to 1887, or the schedule rates were put so high as not to interfere with good railroad economy, of which examples are seen in Georgia and other parts of the South. But from the year 1887 onward there was a pressure upon the Commissioners to make schedules, and to make them low; and lest these boards should not be able to reflect the popular feeling directly enough, they were, in some instances, no longer to be appointed by the Governor, but elected by popular vote. The law which was most severely applied and attracted most public attention was that of Iowa.... The agitation against the railroads has many points in common with the land agitation in Ireland. Absentee ownership is at the bottom of the trouble in either case. Property is owned in one place and used in another, and the users, not satisfied with the conditions of use, insist on taking the business direction into their own hands. They claim the right to fix rates in Iowa for the same general reasons by which they claim the right to fix rents in Ireland."

It must be presumed that Mr. Hadley is ignorant of the fact that under the Iowa Commissioners' tariff the gross earnings of the Iowa railroads increased $7,000,000, or more than 17 per cent., in about three years, and their net revenue increased in proportion. Never have the railroads or the people of Iowa enjoyed a healthier prosperity than they do at present. It is true that the State of Iowa denies to the railroad companies the right to charge what they please; but this claim does not prevent them from doing justice to the absentee owner of railroad property. That absentee owners of property are disposed to take undue advantage of those who use it is illustrated in the very case which Mr. Hadley cites. So flagrant was the injustice done by the English landlord to the Irish tenant that the English Parliament was constrained to interfere and correct it.

Mr. Hadley says further:

"It is seen in Iowa to-day, where, as a result of radical legislation with regard to rates, railroad construction has almost entirely ceased, the average for the years 1888-90 being less than fifty miles."

Now Professor Hadley hails from the State of Connecticut, where railroads are permitted to make their own tariffs and where legislators are supposed not to be hostile to them. According to Poor's Manual, that State had 1,004.02 miles of railroad in 1888, and just 2.52 miles more in 1891, while Iowa had 8,364 miles in 1888, 8,436 in 1891, and 8,505 miles on January 1, 1893. Will Mr. Hadley please explain why railroad construction has ceased in Connecticut? Iowa has one mile of railroad for every 227 inhabitants, and Connecticut has one for every 741 inhabitants, although the per capita valuation is $473 in the latter, and only $273 in the former State. Nor have other Eastern States done much better than Connecticut. During the three years 1888-1891 there were built 74 miles of railroad in New Hampshire, 50 in Vermont, 23 in Massachusetts and 9 in Rhode Island. Iowa has an area of 56,000 square miles and a population of 1,911,896, an assessed valuation of $520,000,000; New England has an area of 66,400 square miles, a population of 4,700,745, and an assessed valuation of $3,500,000,000. 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 assertions, 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 circumstances as they arise calling for legislative intervention in the public interest; and that no serious invasion of constitutional 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 passion 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 passenger rates of Europe with those of the United States, he gives the regular first-class schedule rates for the United Kingdom, France and Germany and the average earnings per passenger 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 passengers are carried in the third class 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-class passengers carried as low as half a cent a mile."

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

"Principal 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 Association. 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 passed 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 passage 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 pass—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 competition. 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 passage 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 entitled, 'An act to promote railway bankruptcies and consolidations by driving weak roads out of competitive 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 illustrates, 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 competitive 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 title "Unregulated Competition 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, "Competition is the life of trade," and arrives at the conclusion that the phrase is fatherless and insignificant. He says:

"'Competition is the life of trade;' 'Competition 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 masses 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 competitive strife," and then he asks:

"Has not the time come for a reversal of the legislative attitude? Would it not be well for Congress, State legislatures and the judiciary to cease their futile attempts to maintain unqualified freedom of competition, and substitute 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 institutions 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 competition. "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 competition." 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 Association, are necessary for the purpose of restraining competition among them. He holds that such competition 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 Association 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 class of pleaders.

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

It is evident that some progress is being made upon this question, as Mr. Walker admits that "the fortunes which have been made are seen to have been the result of dealings in stocks and in titles, the consequences of which, if involving wrong, are rightly charged against the lax legislation which has made such operations possible." "Every person seeking for the services of a common carrier is entitled to know that he is charged no more than his neighbor who obtains the same service under the same conditions." "The theory that any unjust discrimination or unjust preference or advantage in respect to individuals, communities or descriptions of traffic must be suppressed by the State, has become firmly lodged in legislation." This improvement in the sentiment of railroad men is gratifying.

This gentleman, as has already been stated, was for several years a member of the Interstate Commerce Commission, a board created by Congress for the special purpose of enforcing the law which he so unreservedly condemns. No doubt Mr. Walker performed the duties of his office as he understood them; but if he held then the views which he holds now, his work must have been a hindrance rather than a help to the commission.

Among financial journals, so many of which are devoted to the support of vicious and demoralizing methods, and are ever ready to defend whatever is bad in corporation management, it is refreshing to find occasionally one that exposes abuses and favors the earning of legitimate dividends, and it is a pleasure to quote the following from the June number, 1892, of the Banker's Magazine:

"There are two widely differing theories concerning the management of railroads in this country; one theory is that profits should be acquired from fluctuations in the stock, and the other is that the profits should be acquired in the old-fashioned way, by performing a useful service and receiving a reward therefor, to be divided among the stockholders in the way of a dividend. These two theories are so different in their practical operation that they give rise to the most diverse consequences. Of course, many railroads are not dividend-earning, and with these the profits to the managers and those who are allied with them must come from stock fluctuations and from whatever sucking arrangements can be devised whereby their vitality or sustenance can be acquired by the favored few who are in control. Unfortunately, there are many railroads in this condition, the history of which is too well known to require description. Once in control, the way is easy to retain it and to make money by a thousand devices which ingenious and unscrupulous managers are constantly planning and putting into operation.

"The consequences of the other theory are as different, both to the corporate property and to the public, as can be imagined. When a railroad is properly managed and earning dividends, a policy of development is adopted, having for its end the natural expansion of the property in harmony with the growth of the country, the needs of business and the desires of the people. The fruits of such a policy may not be apparent at once, but they inevitably come, and, when they are reaped, are enjoyed and appreciated by all. Only by such a policy can our roads ever become great, commanding the confidence of the people, and fulfilling their highest uses; in short, only by such a policy can a railroad be brought to a high degree of perfection.

"The difference is clearly seen by contrasting a road of this character with one that is run by the Wall Street method for stock-jobbing purposes. By this method dividends are not regarded as of so much consequence to investors as an instrument or argument for affecting the value of the stock. In other words, if a dividend is earned and paid at all, it is chiefly as an instrument or agency for stock-jobbing purposes, and not because the road is managed primarily for this purpose. Furthermore, dividends, too often, are disregarded altogether, as well as any policy of permanent improvement or of general development. The cardinal idea always is, how can the road be maintained and manipulated so as to cause the largest variations in the stock and the most money for the managers?

"Too many managers, as is well known, have made great sums for themselves and built additions long in advance of their means, and have seriously crippled their corporations by so doing. But they have made fortunes for themselves. What the great majority of mankind consider is the immediate present, and not the future.

"It is undoubtedly a hard thing for those who are conducting their corporations in an honest and able manner, for the benefit of their owners, to keep still while their enemies are pounding them and glorifying those who are managing their corporations for personal and corrupt ends; but all cheap and false practices must finally lead to disaster. We hear a great deal of this kind of thing nowadays. One of the evil effects of speculation and newspaper reading is, that people have got in the way of not thinking much for themselves; of regarding as truth whatever is printed, and of not opening their eyes wide enough to discover the shallowness of the reasonings and falsehoods that are put forth at the behests of speculators, or of those who are managing corporations for speculative purposes. The American people have had an amazing experience in losses from following advice thus plentifully and freely given; nevertheless, there seem to be persons left who are willing to listen and fall into the old ways and be trapped, as so many others have been in the past. There is a considerable class, having means and nothing to do, who perhaps might just as well lose their money in poker, railroad or grain speculation as in any other way, for this furnishes about the only source of amusement to them; but, after all, there is no reason why railroads should be managed so exclusively for the amusement of this class. The time is coming, and probably is not far off, when they will get enough of it; and railroad investors will conclude that dividends for themselves are better than profits for speculators; and when they do, all stock-jobbing managers will be consigned to the limbo which is their proper destination."

This magazine is edited by Mr. Albert S. Bolles, author of several excellent financial works. We are much indebted to him for the sound banking system which we now have, and which has contributed so largely to the unexampled prosperity which this country has enjoyed for the last thirty years.

Our national banking system illustrates well how service able the corporation may be to a people when its use is restricted by wholesome laws to the performance of its proper functions.

The old United States Bank was organized for practically the same purposes as our present national banks, but for lack of proper restrictions its use was soon perverted to ignoble purposes. The bank managers showed so much partiality in the distribution of their favors and accommodations, and meddled in politics to such an extent, that the people became disgusted with it, and a renewal of its charter was refused.

Mr. Clay clearly saw how dangerous a great money power might become to our country, and, in opposing the extension of the bank's charter, said:

"The power to charter companies is one of the most exalted attributes of sovereignty. In the exercise of this gigantic power we have seen an East India Company created, which is in itself a sovereignty, which has subverted empires and set up new dynasties, and has not only made war, but war against its legitimate sovereign! Under the influence of this power we have seen rise a South Sea Company, and a Mississippi Company, that distracted and convulsed all Europe, and menaced a total overthrow of all credit and confidence, and universal bankruptcy."

Can we afford to ignore the lessons of history?

Mr. Henry Clews makes some spicy and pertinent observations on railroad men's methods in an article which recently appeared in the Railway Age. Mr. Clews seems to have but little confidence in the average railroad director. He advises stockholders to exercise constant vigilance and defensive conservatism, "lest they become the instruments by which unscrupulous and crafty directors work out schemes that are in reality nothing but frauds or robbery." And then he adds:

"In estimating corporate acts we must never forget that, while the best of men will bear watching as to their individual dealings with others, they need to be doubly watched when they sit around a corporation board and vote as to transactions in respect of which none of them can be called to personal account. Temptations attack with enormous force when the gains are prospectively great and the risk of penalty inappreciable or non-existent."

Mr. Clews also tells us how roads are wrecked by their boards of directors. "In one case," he says, "the stock of a leading railway, which in 1880 sold at 174, in 1884 sold at 22-1/2, and in 1885 at 22. This vast shrinkage of value was not owing to panic or to stringency of money, nor did it arise from a diminution of traffic on the original line; but it was because consolidation had been pushed to an extreme by the directors of the corporation, so much so that the entire system yielded no dividends; a fleet and useful animal had been loaded down with dead wood and rubbish till he could scarcely crawl; barren acres had been added to an originally fruitful farm until the whole estate could hardly pay taxes; a mass of rotten apples had been thrown into the measure with sound fruit, and buyers refused the whole as a mere heap of corruption. And it was generally believed that the men who perpetrated this mischief under the names of 'construction,' 'requisite consolidation,' 'absorption of necessary branches,' etc., had made a great deal of money by it and had not made it honestly. But it was all done pursuant to legal forms and by boards of directors, so that the defrauded stockholders were without remedy."

Mr. Clews then gives us a more detailed account of the way in which branch roads are built and absorbed, viz.:

"Given a useful, well constructed, dividend-paying road, a body of people with some capital and political influence, aided by some of the directors of this prosperous line; construct a branch road to some outside point; the more important such point the better, but that is of small consequence. The road gets itself built; it is bonded for more than it cost, and it cost twice as much as it ought, since the constructors were all together in the ring and have favored each other. Then the capital stock is fixed at so much, and this is mostly distributed among the constructors. The road then, swelled to a fictitious price of three or four to one, and not worth anything to start with, is ripe for absorption and consolidation. Its directors and those of the main line meet, confer and vote the measure through. They all profit by it, more or less, but their profits are enormously in excess of the trifling losses due to the shrinkage of values of the shares of the main line. A director of the main line may perhaps lose $20,000 on a thousand shares, but what is this when compared to a gain of hundreds of thousands in his holdings of the branch road, whose liabilities are assumed by his victimized corporation? And such a director would not be equal to the demands of his covetousness if he had not sold thousands of shares short, in anticipation of the fall which the transactions of himself and his associates were inevitably bound to produce."

Mr. Clews concludes his article with the following passage:

"The profits realized on the speculative constructions are enormous and have constituted the chief source of the phenomenal fortunes piled up by our railroad millionaires within the last twenty years. It is no exaggeration to characterize these transactions as direct frauds upon the public. They may not be such in a sense recognized by the law, for legislation has strangely neglected to provide against their perpetration; but morally they are nothing less, for they are essentially deceptive and unjust, and involve an oppressive taxation of the public at large for the benefit of a few individuals who have given no equivalent for what they get. The result of this system is that, on the average, the railroads of the country are capitalized at probably fully 50 per cent. in excess of their actual cost. The managers of the roads claim the right to earn dividends upon this fictitious capital, and it is their constant effort to accomplish that object. So far as they succeed they exercise an utterly unjust taxation upon the public by exacting a compensation in excess of a fair return upon the capital actually invested. This unjust exaction amounts to a direct charge and burden on the trade of the country which limits the ability of the American producer and merchant to compete with those of foreign nations and checks the development of our vast natural resources. In a country of 'magnificent distances' like ours the cost of transportation is one of the foremost factors affecting the capacity for progress; and the artificial enhancement of freight and passenger rates due to this false capitalization has been a far more serious bar to our material development than public opinion has yet realized. The hundreds of millions of wealth so suddenly accumulated by our railroad monarchs is the measure of this iniquitous taxation, this perverted distribution of wealth. This creation of a powerful aristocracy of wealth, which originated in a diseased system of finance, must ultimately become a source of very serious social and political disorder. The descendants of the mushroom millionaires of the present generation will consolidate into a broad and almost omnipotent money power, whose sympathies and influence will conflict with our political institutions at every point of contact. They will exercise a vast control over the larger organizations and movements of capital; monopolies will seek protection under their wing, and by the ascendancy which wealth always confers they will steadily broaden their grasp upon the legislation, the banking and commerce of the nation."

These are strong words, but they come from a man whose thirty years' experience in Wall Street enables him to speak intelligently upon this subject and who certainly cannot be accused of being prejudiced against railroad men or corporate investments. In a recent number of his Weekly Financial Review Mr. Clews said of the railroad stock market:

"Judgment passes for little in estimating the future of many securities, for the market is almost wholly under the control of comparatively few persons, whose operations must inevitably influence the value of thousands of millions of stocks and bonds. Never in the history of Wall Street was the value of such an enormous aggregation of securities so absolutely under the control of so small a circle as at this time. Such a state of affairs cannot be considered satisfactory; hence not only is speculation likely to be unhealthily stimulated, but the future of these combinations gives birth to a variety of uncertainties which, while they may elevate prices, will certainly not add to their stability."

If the silly claim of railroad men, that Western people do not invest in railroad securities on account of their unprofitableness, needed any answer, the above words would furnish it.

The May, 1893, number of the North American Review contains an article entitled "A Railway Party in Politics," by Mr. H. P. Robinson, editor of the Railway Age. Mr. Robinson belongs to that class of reformers who can see but one side of a question, and only a short-sighted view of that. He is as zealous as a new convert, and is expert, in the ward politician's way, in defense of the worst abuses practiced by railway men. He says:

"That the right to 'regulate' the railways, which is vested in the State, has now been carried in the West to a point not only beyond the bounds of justice, but beyond its constitutional limits, and that it would soon be impossible for any railway company in the West to keep out of bankruptcy unless some vigorous and concerted action were taken to arouse public opinion, and to compel a modification of the present policy.

"It is easy to see how much strength such a party, if formed, would possess. According to the reports of the Interstate Commerce Commission there were in the immediate employ of the railways of the United States a year and a half ago 749,301 men, all or nearly all voters, which number has now, it may be assumed, been increased to about 800,000. There are, in addition, about one million and a quarter shareholders in the railway properties of the country; and in other trades and industries immediately dependent upon the railways for their support there are estimated to be engaged, as principals or employes, over one million voters more. These three classes united would give at once a massed voting strength of some three millions of voters. There are also, in the smaller towns especially, and at points where railway shops are located, all over the country, a number of persons, small tradesmen, boarding-house keepers, etc., who are dependent for their livelihood on the patronage of railway employes, and whose vote could unquestionably be cast in harmony with any concerted employes' movement. Moreover, unlike most new parties, this party would be at no loss for the sinews of war or for the means of organization. The men whom it would include form even now almost a disciplined army. With them co-operation is already a habit. While the financial backing and the commercial and physical strength of which the party would find itself possessed from its birth would be practically unlimited....

"For the present it seems to them better to believe that the people—those people who are not railway men—are acting now only in ignorance, and that as soon as they see the truth they will, by their own instinctive sense of justice, re-mould their opinions and their policy without political coercion.

"At the same time there has already come into existence in some of the Western States a movement which has its significance and its practical influence. This is what is called the Railway Employes' Club movement. It started in Minnesota, at a small meeting of railway employes held in Minneapolis in 1888. From that meeting the movement grew, and made a certain feeble effort, not entirely unsuccessful, to influence the State election in the fall of that year. By the State election of 1890 the movement had grown and was better organized, and the Employes' Club did exercise considerable influence in the election of certain of the State officers and certain members of the State legislature in that year.

"From Minnesota the movement spread to Iowa, and there is no contradiction of the fact that the railway employes' vote was one of the strongest forces in the State election of the fall of 1891. It also overflowed into Kansas, Nebraska, Missouri and Texas. Had the election of last November been normal it is probable that the effect of the Railway Employes' Club vote would have been as visible in two or three of those States then as it had been in Iowa in the preceding year. But in the deluge which occurred all trace of the smaller streams and currents was obliterated. Had the members of the clubs not taken the precaution to do considerable work in the local nominating conventions of both parties they would be compelled to confess that their campaign of 1892 was a failure....

"So far the clubs have admitted and will admit of no negotiations with the State committees of other parties. They hold their own meetings and decide for themselves that such and such a candidate is inimical to their interests as railway employes, and such and such a man is their friend. Then they go to the polls and vote—voting in the main their normal party ticket, scratching only a man here and a man there, their attention being chiefly centered upon members of the boards of railroad commissioners and of the State legislatures.

"In Minnesota in 1890 their weight was thrown chiefly in favor of Republicans. In Iowa in 1891 it was given to Democrats. In all States the men whom they oppose are those who have made themselves conspicuous as 'Granger' and anti-railway politicians. The keynote of the movement and the one plank in the platform of the clubs is that the extreme anti-railroad legislation of late years has reduced the earnings of the companies to a point at which they are unable any longer to keep full forces on their payrolls or to pay such wages as they should, and that by this legislation the railway employes are necessarily the immediate sufferers....

"A railway party is therefore already in existence.... And moreover, though accidentally only, it is working forcibly in behalf of railway interests as a whole....

"Meanwhile Mr. A. F. Walker, the chairman of the Joint Committee of the Trunk Line and Central Traffic Associations, prophesies that if things go on as they are going now, before long 'the managers of the railways will be chiefly receivers.' In the year 1891 receivers were appointed for twenty-six companies in the United States, representing $84,479,000 of capital, and twenty-one companies, with 3,223 miles of road, with a capitalization of $186,000,000, were sold under foreclosure.

"It is doubtful whether the result which Mr. Walker foretells would be regarded as a calamity by the 'uninformed public opinion of the West.' That Minnesota railroad commissioner was quite sure of the public applause before he made his classic declaration that he proposed to 'shake the railroads over hell' before he had done with them, and the Governor of Iowa, who announced that he did not care if 'every d—d railroad in the State went into bankruptcy' before the expiration of his term of office, knew that the sentiment would have the sympathies of his constituents. This attitude of the Western mind is, of course, largely explained by the fact that the people of the West do not as a rule own railway securities. In two States (the only two in the West in which, so far as I am aware, the figures have been compiled) out of 27,645 stockholders in the lines within the State borders only 359 are residents of the States. If the other 27,286 were also residents of these States (that is to say, if 27,286 of the present residents were also stockholders in the railways), it is probable that the ferocity of the public opinion in these States against railways would be materially modified."

It is evident that Mr. Robinson has not been as successful in organizing small tradesmen, boarding-house keepers, employes and shareholders into a new party as he contemplated, notwithstanding "it was at no loss for the sinews of war."

He attempts to show that this movement originated with the employes, but it is too well known that the employes who organized the movement were under pay of the railroad companies and received their instructions from the railroad managers. The statement which Mr. Robinson attributes to the Governor of Iowa undoubtedly originated in the mind of one who is laboring to modify the ferocity of "the uninformed public opinion of the West." No Governor of Iowa ever made any such statement, nor ever entertained any such sentiment. It is a sheer fabrication.

There are a number of standard text-books of law which are indispensable to the student of railroad questions desiring to go back to first principles. Only a few of them can be mentioned here.

I. F. Redfield, in his "Law of Railways," says concerning the necessity for railroad supervision:

"Railways being a species of highway, and in practice monopolizing the entire traffic, both of travel and transportation, in the country, it is just and necessary and indispensable to the public security that a strict legislative control over the subject should be constantly exercised."

Regarding the original character of the railway as a common highway, Redfield says:

"The Railways Clauses Consolidation Act provides, in detail, for the use of railways by all persons who may choose to put carriages thereon, upon the payment of the tolls demandable, subject to the provisions of the statute and the regulations of the company. The view originally taken of railways in England evidently was to treat them as a common highway, open to all who might choose to put carriages thereon. But in practice it is found necessary for the safety of the traffic that it should be exclusively under the control of the company, and hence no use is, in fact, made of the railway by others."

As to the questionable financial expedients so frequently resorted to in building American railways, this author says:

"This is not the place, nor are we disposed, to read a homily upon the wisdom of legislative grants, or the moralities of moneyed speculations in stocks on the exchange or elsewhere. But it would seem that legislation upon this subject should be conducted with sufficient deliberation and firmness so as not to invest such incorporations with such unlimited powers as to operate as a net to catch the unwary, or as a gulf in which to bury out of sight the most disastrous results to private fortunes, which has justly rendered American investments, taken as a whole, a reproach wherever the name has traveled."

The opinion is expressed in this work that under certain circumstances railroad securities should be aided by State credit, and is supported by the following argument:

"Here we have no national funded stock in convenient sums for small investment, and which, being sure, is really a great blessing to the mass of those who wish to invest moderate sums as a protection against age or calamity. In those countries where such opportunities exist, it removes all temptation to invest small sums in these enterprises, which, however necessary for the public, such small owners can but poorly afford to aid in carrying forward, and which consequently should in justice either be guaranteed or owned by the State, or at all events aided by State credit, when they become indispensable for the public convenience."

Upon the subject of eminent domain Redfield says:

"That railways are but improved highways, and are of such public use as to justify the exercise of the right of eminent domain, by the sovereign, in their construction, is now almost universally conceded."

Kent says in his "Commentaries on American Law":

"The right of eminent domain, or inherent sovereign power, gives to the legislature the control of private property for public uses, and for public uses only.... So, lands adjoining New York canals were made liable to be assumed for the public use, so far as was necessary for the great object of the canals.... In these and other instances which might be enumerated, the interest of the public is deemed paramount to that of any private individual; and yet, even here, the constitutions of the United States and of most of the States of the Union have imposed a great and valuable check upon the exercise of legislative power, by declaring that private property should not be taken for public use without just compensation.... It undoubtedly must rest, as a general rule, in the wisdom of the legislature to determine when public uses require the assumption of private property; but if they should take it for a purpose not of a public nature, as if the legislature should take the property of A and give it to B, or if they should vacate a grant of property, or of a franchise, under the pretext of some public use or service, such cases would be gross abuses of their discretion, and fraudulent attacks on private right, and the law would clearly be unconstitutional and void."

Concerning the construction of corporate powers Kent lays down the following rule:

"The modern doctrine is to consider corporations as having such powers as are specifically granted by the act of incorporation, or as are necessary for the purpose of carrying into effect the powers expressly granted, and as having no other. The Supreme Court of the United States declared this obvious doctrine, and it has been repeated in the decisions of the State courts. No rule of law comes with a more reasonable application, considering how lavishly charter privileges have been granted. As corporations are the mere creatures of law, established for special purposes, and derive all their powers from the acts creating them, it is perfectly just and proper that they should be obliged strictly to show their authority for the business they assume, and be confined in their operations to the mode and manner and subject matter prescribed."

As to the duties of common carriers he says:

"As they hold themselves to the world as common carriers for a reasonable compensation, they assume to do and are bound to do what is required of them in the course of their employment, if they have the requisite convenience to carry and are offered a reasonable and customary price; and if they refuse without just ground, they are liable to an action."

Judge Cooley, in his very able work, "Constitutional Limitations," refers to the so-called vested rights of corporations and the abuse growing out of them as follows:

"It is under the protection of the decision in the Dartmouth College case that the most enormous and threatening powers in our country have been created, some of the great and wealthy corporations actually having greater influence in the country at large, and upon the legislation of the country, than the States to which they owe their corporate existence. Every privilege granted or right conferred—no matter by what means or on what pretense—being made inviolable by the Constitution, the Government is frequently found stripped of its authority in very important particulars, by unwise, careless or corrupt legislation; and a clause of the Federal Constitution whose purpose was to preclude the repudiation of debts and just contracts protects and perpetuates the evil."

The late President Garfield, in one of his legislative speeches, called attention to the fact that Chief Justice Marshall pronounced the decision in the Dartmouth College case ten years before the steam railway was born, and then said:

"I have ventured to criticise the judicial application of the Dartmouth College case, and I venture the further opinion that some features of that decision, as applied to the railway and similar corporations, must give way under the new elements which time has added to the problem."

Charles Fisk Beach, Jr., in his recent work entitled "Commentaries on the Law of Private Corporations," well defines what constitutes dedication to a public use. He says:

"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. When private property is affected with a public interest it ceases to be juris privati only. This was said by Lord Chief Justice Hale more than three hundred years ago in his treatise De Portibus Maris, and has been accepted without objection as an essential element in the law of property ever since."

Treating of the fiduciary position of directors and officers of corporations, the same author says:

"The directors, officers and agents of a corporation are held to the general rule of law resting 'upon our great moral obligation to refrain from placing ourselves in relations which ordinarily excite a conflict between self-interest and integrity.' The directors and officers are the agents of the company, and while acting in that capacity for it cannot deal with themselves to the detriment of the corporation. All contracts of that character are voidable at the option of the corporation."

And further he says:

"A director whose personal interests are adverse to those of the corporation has no right to act as a director. As soon as he finds he has personal interests which are in conflict with those of the company he ought to resign."

T. Carl Spelling, in his treatise on "The Law of Private Corporations," says of pooling arrangements:

"Courts long ago exercised jurisdiction to regulate rates of quasi public corporations, and on the same principle will refuse to enforce pooling contracts between railroad and gas companies. Such contracts are void as against public policy.... There is substantial harmony between the English and American definitions of monopoly, the two countries agreeing that contracts entered into by and between two or more corporations, the necessary result of whose performance will crush and destroy competition, are illegal."

Upon the subject of eminent domain Mr. Spelling remarks:

"That the legislature may thus select any agency it sees fit for the exercise of eminent domain, and also that it may determine what purposes shall be deemed public, are propositions too deeply rooted in the jurisprudence of this country to admit now of doubt or discussion. Making an application of this doctrine to railway operations, conceding it to be settled that these facilities for travel and commerce are a public necessity, if the legislature, reflecting the public sentiment, decide that the general benefit is better promoted by their construction through individuals or corporations than by the State itself, it would clearly be pressing a constitutional maxim to an absurd extreme if it were to be held that the public necessity should be only provided for in the way which is least consistent with the public interest.... The power of eminent domain being an inherent element of sovereignty, it cannot be divested out of the State or abridged by contract or treaty so as to bind future legislatures. Nor can the right be divested by private contract."

Concerning State control of corporations the same author says:

"The subordination of all private interests to the purposes of government, subject only to the condition that the object to be accomplished shall be one in which the public has an interest, is no longer an open question. In its general bearing this principle is too well settled and uniformly recognized—underlying the adjudications by courts of all cases involving constitutional provisions—to require more than a mere statement."

And again he says:

"Nor is it longer necessary to seek a justification of the common practice of regulating the rates of charges and general management of railroads on the ground that they have received valuable franchises of a public nature and had important powers of sovereign character conferred upon them. That may be an important political consideration, and as such may strengthen the argument in favor of the right; but the right itself rests upon firmer ground, and upon other considerations than that of pecuniary consideration derived from the State. The State may regulate their business, not because they are corporations, nor yet because they are corporations of a particular kind, but because they, like the individuals of which they are composed, are subject to the laws which say that when one devotes his property to a use in which the public has an interest, he in effect grants to the public an interest in that use, and must submit to be controlled by the public for the common good to the extent of the interest he has thus created."



CHAPTER XI.

RAILROADS AND RAILROAD LEGISLATION IN IOWA.

The first survey for a railroad in the State of Iowa was made in the fall of 1852. The proposed road had its initial point at Davenport and followed a westerly course. It was practically an extension of the Chicago and Rock Island Railroad, which was then being built between Chicago and the Mississippi River. On the 22d day of December, 1852, the Mississippi and Missouri Railroad Company was formed, its object being to build, maintain and operate a railroad from Davenport to Council Bluffs. The articles of association were acknowledged before John F. Dillon, notary public, and filed for record in the office of the Recorder of Scott County, on the 26th of January, 1853, and in the office of the Secretary of State on the first day of February following. In 1853 the Mississippi and Missouri Railroad Company entered into an agreement with the Railroad Bridge Company of Illinois for the construction and maintenance of a bridge over the Mississippi at Rock Island. The work was commenced in the fall of that year, and the bridge was completed on April 21, 1856, it being then the only bridge spanning the Mississippi River. The first division of the Mississippi and Missouri Railroad, extending from Davenport to Iowa City, was completed on the first of January, 1856, and was formally opened two days later. A branch line to Muscatine was completed shortly thereafter. On the first day of July the State of Iowa had in all sixty-seven miles of railroad, bonded at $14,925 a mile, which at that time probably represented the total cost of construction. The earnings of these sixty-seven miles of road during the six months following July 1, 1856, amounted to $184,193, or $2,749 per mile, which was equal to an annual income of about $5,500 per mile.

On the 15th of May, 1856, Congress granted to the State of Iowa certain lands for the purpose of "aiding in the construction of railroads from Burlington, on the Mississippi River, to a point on the Missouri River near the mouth of the Platte River; from the city of Davenport, Iowa, by way of Iowa City and Fort Des Moines, to Council Bluffs; from Lyons City northwesterly to a point of intersection with the main line of the Iowa Central Air Line Railroad near Maquoketa, thence on said line running as near as practical to the forty-second parallel across the State; and from the city of Dubuque to the Missouri River near Sioux City." The grant comprised the alternate sections designated by odd numbers and lying within six miles from each of the proposed roads. Provision was also made for indemnity for all lands covered by the grant which were already sold or otherwise disposed of.

The wisdom of the land-grant policy has been questioned. When these grants were made it was believed by many that railroads would not and could not be built in the West without such aid. While others did not share this opinion, they at least supposed that land grants would greatly stimulate railroad enterprise and lead to the early construction of the lines thus favored.

The land grant of the Mississippi and Missouri Railroad was a mere donation for that part of the line which was already completed at the time the grant was made; and the extension of this line, as well as the construction of the other lines to which the grant applied, was not made as fast as had been anticipated. The price of all Government lands lying outside of the land-grant belts was $1.25 per acre. To reimburse the public treasury for the loss resulting from these grants, the price of lands situated within the land-grant belts was advanced to $2.50 per acre, practically compelling the purchasers of the even-numbered sections of land, instead of the Government, to make the donation to the railroads, it being supposed that the benefits resulting to those regions from the immediate construction of railroads would correspondingly enhance the value of the alternate sections of land reserved by the Government. Designing men soon saw the advantages which the situation offered. They combined with their friends to organize companies for the construction of the land-grant roads, built a small portion of the proposed line, to hold the grant, and then awaited further developments, or rather the settlement of the country beyond. There are those who believe that the doubling of the price of Government land within the belt of the proposed land-grant roads greatly retarded immigration and with it the construction of roads. They hold that, had no grant whatever been made to any railroad company and had equal competition in railroad construction been permitted, the Iowa through lines, instead of following, would have led, the tide of immigration.

It has been seen that in 1856 the Mississippi and Missouri Railroad was completed as far as Iowa City. On the second day of June of that year its Board of Directors asked the Governor of the State to convene the General Assembly in extra session, to consider the disposition which should be made of the recent Congressional grant. This urgency might lead one to suppose that the company was anxious to extend its line at the earliest opportunity. The General Assembly was convened, and the land given to the State by Congress for the purpose of aiding in the construction of a railroad from Davenport to Council Bluffs was given to the Mississippi and Missouri Railroad Company. The act was approved by the Governor on July 14, 1856, and three days later the company "assented to and accepted the grant." It then executed mortgage after mortgage, and built a branch line through quite a populous territory, from Muscatine to Washington, but the main line made very slow progress. In 1865 the bonded debt of the company amounted to $6,851,754, although the line was completed only to Kellogg, in Jasper County, about forty miles east of Des Moines. In spite of the fact that the cost of operating the road had from the beginning varied but little from 60 per cent. of its gross receipts, its president, in a circular letter to the stock-and bondholders, dated October 20th, 1865, made the statement that the company was "driven to the necessity of selling the road or reorganizing." In 1866 suit was brought in the Circuit Court of the United States for the District of Iowa for the foreclosure of the company's mortgages, and a decree of foreclosure was entered on the 11th day of May of that year. The property was sold on the 9th day of July following at Davenport, and was purchased by the Chicago, Rock Island and Pacific Railroad Company, which was incorporated in this State a few weeks previous to the sale, for the purpose of acquiring the railroads built by the Mississippi and Missouri Railroad Company with all its appurtenant property, "and all the rights, privileges and franchises granted by the act of Congress of May 15th, 1856, to the State of Iowa, and by the State of Iowa granted to the said Mississippi and Missouri Railroad Company, and when so acquired to maintain and operate the said railroad." It is a significant fact that all the corporators of the new company, except one, were directors of the bankrupt company. On the 20th of August, 1866, the Chicago, Rock Island and Pacific Company of the State of Iowa consolidated with the Chicago, Rock Island and Pacific Railroad Company of Illinois, and conveyed all its property, powers and franchises to the consolidated company. The validity of the consolidation was questioned by a large number of stock-and bondholders, and the courts were appealed to to issue injunctions restraining the consolidated company from extending its line or expending any money obtained through the sale of its securities. In this predicament the company turned to the Iowa legislature for protection. Anxious to secure the early completion of the road, the Twelfth General Assembly, by an act approved February 11th, 1868, recognized the consolidated company, and resumed and granted to it "all right or interest" which the State had in the lands previously granted to the Mississippi and Missouri Railroad Company. The act expressly provided, however, that the Chicago, Rock Island and Pacific Railway Company should "at all times be subject to such rules, regulations and rates of tariff for transportation of freight and passengers as may from time to time be enacted and provided for by the General Assembly of the State of Iowa," and that if the company should neglect to comply with any of the requirements of the act, it should forfeit to the State all its franchises and corporate rights acquired by or under the laws of the State, and all lands granted to aid in the construction of its road. The line was completed to Council Bluffs in June, 1869.

The lands in aid of the construction of a railroad running across the State, as nearly as practicable along the forty-second parallel, were granted by the General Assembly to the Iowa Central Air Line on the 14th of July, 1856, but as this company failed to fulfill the conditions of its grant, it was, on the 17th of March, 1860, transferred to the Cedar Rapids and Missouri River Railroad Company. This company completed the road to Marshalltown in 1862, to Nevada in 1864, to Boone in 1865, and to Council Bluffs in the fall of 1867.

The Burlington and Missouri River road reached the Missouri River but a few months later. Ten years after this company had received its grant, its line had only been completed as far as Albia, in Monroe County. In 1867 the road was built little more than half across the State. But it managed not to be far behind its two rivals on the north in reaching the Missouri River.

At first sight it might seem as if these companies had all at once become awake to their obligations. When it is remembered, however, that in 1869 the junction of the Union Pacific and Central Pacific railroads was effected, and thus a continuous line across the continent formed, the conclusion lies near that the haste with which the three Iowa land-grant roads were completed was simply the result of a strife for the large amount of through business which the completion of the Pacific route promised to bring to them.

No such inducement existed for the Dubuque and Sioux City Company, and twelve years after receiving its grant it had not yet built half of its line. In his message to the Twelfth General Assembly, delivered January 14, 1868, Governor Stone said: "Under the provisions of the act adopted by the General Assembly, at its extra session (in July, 1856), this (the Dubuque and Sioux City) company became the beneficiary of the grant designed to secure the construction of a railroad leading from Dubuque to Sioux City, and this valuable donation was accepted from the State, with all the terms and conditions imposed. A large portion of this grant has already been absorbed by the company, in various ways, by pretended sales and incumbrances. This road has been constructed to Iowa Falls, a distance of 143 miles from Dubuque, but I am unable to discover any reliable evidence of earnest intention on the part of this company to construct the line to its terminal point on the Missouri River."

The Governor further recommended that the General Assembly pass an act resuming the control over these lands. At about the same time an agreement was effected between the Iowa Falls and Sioux City Railroad Company (which was organized in the fall of 1867) and the Dubuque and Sioux City Railroad Company, by which the latter transferred to the former its land grant for the unfinished portion of the Dubuque and Sioux City road. This agreement was confirmed by the General Assembly, through an act approved April 7, 1868. The road was completed to Fort Dodge in August, 1869, and to Sioux City a year or two later. The entire line was then leased to the Illinois Central.

The land grant to this line of road embraced over 1,000,000 acres of the finest lands of the State. We can appreciate the magnitude of this donation when we consider that, had these lands been sold at only $8 per acre, the proceeds would have paid the whole expense of building and equipping the road from Dubuque to Sioux City. The lands granted to the C., R. I. & P. R. R. were sold at an average price of over $8 per acre, and those of the B. & M. at over $12 per acre.

Among the other important land grants is that made to the McGregor Western Railroad Company. This company was the successor of the McGregor, St. Peters and Missouri River Railroad Company, which was organized in 1857 for the purpose of constructing a railroad from McGregor to the Missouri River. The construction of the road was commenced in 1857 at McGregor. Large local subscriptions were taken along the proposed line, the writer being one of the subscribers. Work was continued the next year until much of the heavy grading had been done, when the road was allowed to go through the process of foreclosure, like many other roads built in the West at that time. The old stock was completely wiped out, and new owners came into possession of the property, reorganizing under the name of the McGregor Western Railway Company. Nearly all the early investments of Iowa people were thus confiscated by the same class of men who now cry out loudly against confiscatory measures. By an act of Congress approved May 12, 1864, the State of Iowa was granted, for the use and benefit of the McGregor Western Railroad Company, every alternate section of land designated by odd numbers for ten sections in width on each side of the proposed road. The act contained the condition that in the event of the failure of said McGregor Western Railroad Company to build twenty miles of said road during each and every year from the date of its acceptance of the grant the State might resume the grant and so dispose of it as to secure the completion of the road in question. The McGregor Western Railroad Company failing to comply with the conditions of the grant, the General Assembly on the 27th day of February, 1868, resumed the lands and on the 31st day of March of the same year regranted them to the McGregor and Sioux City Railway Company. The act specially provided that the company accepting the grant "shall at all times be subject to such rules, regulations and rates of tariff for the transportation of freight and passengers as may from time to time be enacted and provided for by the General Assembly of the State of Iowa, and further subject to the conditions, limitations, restrictions and provisions contained in this act and in the acts of Congress granting said lands to the State of Iowa." It also contained the condition that at least twenty miles of road should be built by the company every year and that the whole road should be completed to the intersection of the then proposed railway from Sioux City to the Minnesota State line by the first day of December, 1875.