The McGregor and Sioux City Railway Company also failing to comply with the terms of the grant, the lands were again resumed by the General Assembly on March 15th, 1876, and regranted to the McGregor and Missouri River Railroad Company upon the condition that it complete the road to the intersection of the Sioux City and St. Paul Railroad on or before the first day of December, 1877.

But the State found itself again disappointed, and two years later the General Assembly for the third and last time resumed its grant and then conferred it upon the Chicago, Milwaukee and St. Paul Railway Company upon the express conditions that it complete the road to Spencer on or before the first day of January, 1879, and to Sheldon within a year thereafter, and that the road should at all times be subject to State control. The road was completed to Sheldon without delay, and on the 30th of November, 1878, the Governor of the State certified to the Secretary of the Interior that the Chicago, Milwaukee and St. Paul Railway Company had completed its road from Algona to Sheldon in compliance with the conditions of the original grant and the laws of the State.

It thus took over twenty years to complete this road. Ten years after its construction had commenced it had only reached Calmar in Winneshiek County. In 1869 the road was completed to Clear Lake and in 1870 to Algona. This point remained its terminus until it passed into the hands of the Chicago, Milwaukee and St. Paul Railway Company.

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

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

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

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

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

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

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

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

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

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

The Granger laws have been and are still severely criticised by those opposed to the principle of State control and by the ignorant. It is nevertheless true that those laws were moderate, just and reasonably well adapted to remedy the evils of which the public complained. It has been the policy of most railroad men to attack them as crude, intensely radical and socialistic. The obloquy heaped upon them was the work of designing men who desired to continue their impositions upon the people. Mr. Charles Francis Adams, however, admits that the Granger method was probably as good a method as could have been devised of approaching men who had thoroughly got it into their heads that they, as common carriers, were in no way bound to afford equal facilities to all, and, indeed, that it was in the last degree absurd and unreasonable to expect them to do so.

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

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

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

Though the enactment of this law was a surprise to the people, they accepted it in good cheer, and determined to give it an honest trial. The law was extensive in its scope and stringent for that time, and, if strictly enforced in letter and in spirit, promised to be, and would have been, entirely sufficient for the thorough control of railroad corporations.

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

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

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

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

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

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

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

These papers, attempting to disguise the motives that prompted them to come to the defense of the Wall Street interest, affected the position of disinterested and impartial observers. They condemned the proposed measures as wild and socialistic, and they painted in dark colors the disasters to railroad property, the injustice to its owners, and misfortunes to the people of Iowa, that would follow their adoption. Especially did they bewail the losses that would fall upon the widows and orphans who had confidingly invested all of their hard earnings in this property.

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

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

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

So well did the bill which was finally adopted by the committee reflect the general sentiment of the members of the General Assembly that not a single vote was cast against it in either house upon its final passage. Since the adjustment of business under this law, there has been less friction between the people and the railroads than before for thirty years, and so satisfactory has it proved to all that no one, not even a railroad man, has to this day asked the legislature to repeal the law or any part of it. The act contains no new principle of railroad control. By far the greater part of its provisions were taken from the old law. Nearly every one of its features may be found either in the Interstate Commerce Act or upon the statute books of other States. It provides that charges must be reasonable and just, that no undue preference or advantage shall be given to any railroad patron, and that equal facilities for interchange of traffic shall be given to all roads; it prohibits pooling, a greater charge for a shorter than longer haul, the shorter or any portion of it being included in the longer, and discrimination against any shipping point. It requires that schedules of rates and fares shall be printed and kept for public inspection, and that no advance shall be made in rates or fares once established except after ten days' public notice; and it empowers the Board of Railroad Commissioners to make and revise schedules for railroads, the rates contained in such schedules to be received and held in all suits as prima facie reasonable maximum rates. The act further provides penalties and means of enforcement.

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

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

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

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

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

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

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

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

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

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

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

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

It was claimed by railroad men that the effect of Iowa legislation would be particularly disastrous to her local roads, which had no opportunity to make up on through business the losses incurred in the local traffic. The Burlington, Cedar Rapids and Northern was particularly cited as a line which would have to go into bankruptcy under the new law. Its earnings commenced to increase, however, immediately after the adoption of the commissioners' schedule, and at the end of the first year they were large enough to change this line from a Class "C" to a Class "B" road. They continued to increase, and in 1891 its gross earnings on substantially the same mileage were 36 per cent, and its net earnings 64 per cent. larger than they had been in 1888. The increase continued and enabled the company to make a dividend to its stockholders February 1, 1893, it being the first dividend ever made by the company. It is a good illustration of what the Iowa law has done for weak railroads. It has again changed class and is now a Class "A" road.

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

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

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

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

The State of Texas is not so productive in proportion, but is much greater in extent than Iowa, and upon the whole resembles it much in its prominent characteristics. Both are thrifty, progressive States, with no large commercial or manufacturing centers where their people can easily organize to protect their financial interests.

The people of Texas endured patiently the abuses so prevalent in railroad management until a few years since they enacted a railroad law similar to that of Iowa. The Wall Street managers of the Texas railroads are at the present time using all of their familiar methods to influence the people of that State to repeal their law. The following letter serves to show the spirit with which they are approached:

"23 BROAD STREET, NEW YORK, November 30, 1891.

James B. Simpson, Esq., Dallas, Tex.

"DEAR SIR: Yours of the 26th is received and contents carefully noted. Very likely you have valuable franchises, or what would be valuable in almost any other state than Texas; but while there are many places in Texas where we would like to build some railroads—mostly short ones—we cannot do anything so long as the disposition exists that now seems to in Texas; that is, to do all the harm they can do this kind of property, and I think my views are shared by all people who have money to invest. No one is disposed to create property which, after being created, is not to be controlled by its ownership. Of course, we all expect to be subject to the police regulations and to pay the taxes of any State even as other property, but whenever anything is done beyond that it checks this kind of improvement, and where it approaches so near confiscation as the sentiment of Texas tends it entirely prevents capital from being invested.

"I think there is no road in Texas that is to-day earning its operating and fixed charges. Every road, I think, has been or is in the hands of a receiver, excepting our great east and west line, which is supported by business going entirely through the State, which business could also be sent another way, and would be so sent, excepting that we believe the people of Texas will some time take a sober second thought and treat the railroads as they do other kinds of property. When that time comes I shall be ready to talk to you about your franchises, if it comes in my day, and I believe it will, as I think no other people are suffering from an unwise policy persistently pursued as are the people of your State.

"Yours truly, C. P. HUNTINGTON."

"Now, in the name of all the gods at once, Upon what meat doth this our Caesar feed, That he hath grown so great?"

It was but a few years ago when this Mr. Huntington was keeping a small retail store in the city of Sacramento, and he exhibited then no greater ability, except perhaps that he was a little more venturesome, than thousands of others engaged in the same occupation; subsequently he engaged, with several others, in the Central Pacific Railroad scheme, and received from the bounties of our generous Government as his share of the profits in that enterprise several million dollars, which sum has ever since been continually swelled by the exercise of a power scarcely inferior to the power of taxing the property of the Pacific Coast. He has been so successful for years in manipulating Congressmen and State legislatures and shaping the policies of States that he now considers it impertinent and short-sighted for a people to take steps to limit his levies upon them. It is to be hoped that the boycotting and intimidating methods resorted to will have no more effect upon the people of that State than they had on the people of Iowa.

Iowa is the queen among the States of the Union. No other State has so little waste land or is so productive. Her annual output of staple products amounts to hundreds of millions of dollars in value. Her people are intelligent, progressive and just. None are governed more by the precepts of the golden rule, or are more disposed to render unto Caesar the things that are Caesar's. She can well be proud of the progress she has made in State control of railroads. Let no backward step be taken.



CHAPTER XII.

THE INTERSTATE COMMERCE ACT.

The Constitution of the United States was adopted nearly fifty years before the locomotive made its appearance. Had the steam railroad been in existence in 1787 and been as important an agency of commerce as it is to-day, there is every reason to believe that the railroad question would have received the special attention of the framers of that instrument. It is a well-known fact that the "new and more perfect government" had its origin in the necessities of commerce, and while the future exigencies of trade were beyond the reach of the most speculative mind, the provisions of the Constitution relating to the subject of interstate commerce were made broad and far-reaching. Section 8 of Article I. of the Constitution provides that "the Congress shall have power ... to regulate commerce with foreign nations, and among the several States, and with the Indian tribes ... and to make all laws which shall be necessary and proper for carrying into execution the foregoing powers and all other powers vested by this Constitution in the Government of the United States, or in any department or officer thereof."

If any doubt ever existed as to the import of the phrase "to regulate commerce," it has been entirely removed by the decisions of the Supreme Court. In the Passenger cases, 7 Howard, 416, the court said:

"Commerce consists in selling the superfluity; in purchasing articles of necessity, as well productions as manufactures; in buying from one nation and selling to another, or in transporting the merchandise from the seller to the buyer to gain the freight."

And again, in the Philadelphia and Reading Railroad vs. Pennsylvania, the Supreme Court said:

"Beyond all question the transportation of freights or of the subjects of commerce for the purpose of exchange or sale is a constituent of commerce itself. This has never been doubted, and probably the transportation of articles of trade from one State to another was the prominent idea in the minds of the framers of the Constitution when to Congress was committed the power to regulate commerce among the several States.... It would be absurd to suppose that the transmission of the subjects of trade from the seller to the buyer, or from the place of production to market, was not contemplated, for without that there could be no consummated trade with foreign nations or among the States."

Chief Justice Marshall, in Gibbons vs. Ogden, 9 Wheaten, 196, construed the words "power to regulate" as follows:

"This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than are prescribed in the Constitution."

It is a strange fact that during the first eighty years of the Government's existence Congress did not exert its power to regulate the conduct of common carriers engaged in interstate transportation. The first act regulating such carriers was passed in July, 1866. It authorized railroad companies chartered by the States to carry passengers, freights, etc., "on their way from any State to another State, and to receive compensation therefor, and to connect with roads of other States so as to form continuous lines for transportation of the same to the place of destination." The passage of this act, it should be remembered, was urged by the railroad companies themselves. Seven years later an act was passed providing that "no railway within the United States, whose road forms any part of a line or road over which cattle, sheep, swine or other animals shall be conveyed from one State to another, or the owners or masters of steam, sailing or other vessels carrying or transporting cattle, sheep or swine or other animals from one State to another, shall confine the same in cars, boats or vessels of any description for a longer period than twenty-eight consecutive hours, without unloading the same for water, rest and feeding, for a period of at least five consecutive hours, unless prevented from so unloading by storm or accidental causes."

Every violation of this act was made punishable by a penalty of from $100 to $500.

Though Congress had asserted the right to regulate commerce among the States, it had made previous to 1873 very limited use of that power. In the midst of the Granger movement the Senate of the United States passed on the 26th day of March, 1873, the following resolution:

"Resolved, That the Select Committee on Transportation Routes to the Seaboard be authorized to sit at such places as they may designate during the recess, and to investigate and report upon the subject of transportation between the interior and the seaboard; that they have power to employ a clerk and stenographer, and to send for persons and papers...."

The committee, under the chairmanship of Mr. Windom, discharged their duty with great fidelity, and submitted their report to the Senate during its next regular session. They declared that the defects and abuses of the then existing systems of transportation were insufficient facilities, unfair discrimination and extortionate charges. As the principal causes of such excessive rates they assigned stock watering, capitalization of surplus earnings, construction rings, general extravagance and corruption in railway management, and combinations and consolidations of railway companies. The committee were of the opinion that the promotion of competition would not permanently remedy the existing evils, and laid it down as a general rule that competition among railways ends in combination and in enhanced rates. As expedient and practical remedies for the existing evils they recommended the following measures:

1. Direct Congressional regulation of railway transportation, under the power to regulate commerce among the several States.

2. Indirect regulation and promotion of competition, through the agency of one or more lines of railway, to be owned and controlled by the Government.

3. The improvement of natural water-ways and the construction of artificial channels of water communication.

The report was accepted and considered, but there the matter rested, so far as the practical results were concerned.

In 1878 Mr. John H. Reagan, of Texas, introduced in the House of Representatives a bill for an act to regulate railroad companies engaged in interstate commerce. This may be said to have been the first real interstate commerce bill before Congress. It was a progressive, thorough and well-planned measure, but failed to receive the approval of Congress because a majority of its members considered it too radical a measure. The bill contained many of the provisions of the present Interstate Commerce Act, including the anti-pooling and the long and short haul clauses; but instead of creating a commission it lodged in the courts, both State and Federal, the power to enforce the law.

Other bills were introduced from year to year, but during a period of nine years none of them drew sufficient votes to make it a law. Congress may be said to have been divided into three camps upon the railroad question, viz.: those who favored the system of regulation proposed by Mr. Reagan, those who favored the commissioner system and those who were opposed to every mode of Federal regulation of interstate commerce. In the meantime, the inactivity of Congress caused considerable restlessness among the people, and the demand for action became louder every year. The issue entered into politics, and a number of Western Congressmen owed their failure to be re-elected to their indifference or enmity to Federal railroad legislation.

On March 21st, 1885, under authority of a resolution adopted by the Senate of the United States, the President of the Senate appointed a select committee to investigate and report upon the subject of the regulation of the transportation of freight and passengers between the several States by railroad and water routes. Senator Cullom, of Illinois, became its chairman. The committee examined a large number of witnesses, including railroad managers and shippers, addressed letters to the railroad commissioners of the several States, to boards of trade, chambers of commerce, State boards of agriculture, Patrons of Husbandry, Farmers' Alliances, etc., and made every effort to obtain the opinions of those who had given special attention to the transportation problem.

The report of the committee was submitted to the Senate on January 18, 1886. Concerning the abuses of railroad transportation it differed but little from that of the Windom committee. The report declared publicity to be the best remedy for unjust discrimination and recommended that the posting of rates and public notice of all changes in tariffs be required. It also recommended that a greater charge for a shorter than a longer haul be made presumptive evidence of an unjust discrimination, and that a national commission be established for the enforcement of any laws that might be passed for the regulation of interstate commerce. Upon the question of pooling the report stated:

"The committee does not deem it prudent to recommend the prohibition of pooling, which has been urged by many shippers, or the legalization of pooling compacts, as has been suggested by many railroad officials and by others who have studied the question.... The majority of the committee are not disposed to endanger the success of the methods of regulation proposed for the prevention of unjust discrimination by recommending the prohibition of pooling, but prefer to leave that subject for investigation by a commission when the effects of the legislation herein suggested shall have been developed and made apparent."

The report was accompanied by a bill representing "the substantially unanimous judgment of the committee as to the regulations which are believed to be expedient and necessary for the government and control of the carriers engaged in interstate traffic."

The bill was before Congress for more than a year, receiving several important amendments before its final passage in both houses. It was approved by the President on the 4th day of February, 1887, and took effect sixty days after its passage, except as to the provisions relating to the appointment and organization of an Interstate Commerce Commission, which took effect at once.

The act contains twenty-four sections, but is by no means cumbersome. It is, in many respects, the most important piece of legislation that has been had in Congress for the past twenty years. It applies to common carriers engaged in the transportation of passengers or property wholly by railroad, or partly by railroad and partly by water, when both are used, under a common control, management or arrangement, for a continuous carriage or shipment from one State or Territory of the United States, or the District of Columbia, to any other State or Territory in the United States or the District of Columbia, or from any place in the United States to an adjacent foreign country, or from any place in the United States through a foreign country to any other place in the United States. It prohibits unjust and unreasonable charges, special rates, rebates, drawbacks, undue or unreasonable preferences, advantages, prejudices and disadvantages, as well as all discriminations between connecting lines. It makes unlawful a less charge for a longer than for a shorter haul over the same line, in the same direction, the shorter being included within the longer distance, except when specially authorized by the Interstate Commerce Commission. It prohibits pools, requires schedules of freight rates and passenger fares to be kept in all depots and stations, permits no advance in the rates, fares and charges once established, except after ten days' public notice, and makes it unlawful for common carriers to charge either more or less than schedule rates.

It also requires them to file copies of all schedules, traffic contracts and joint schedules with the Interstate Commerce Commission, as well as to make them public when directed by the commission, and prohibits combinations to prevent the carriage of freight from being continuous from the place of shipment to the place of destination. It makes common carriers liable for all damages to persons injured by violations of the act, and specially provides that any court before which such a damage suit may be pending may compel any director, officer, receiver, trustee or agent of the defendant company to appear and testify in the case, and that the claim that any such testimony or evidence may tend to criminate the person giving such evidence shall not excuse such witness from testifying, but that such evidence or testimony shall not be used against such person on the trial of any criminal proceeding. It likewise subjects such officers and employes of a railroad company as may be guilty of aiding or abetting in violations of the act to fines not exceeding $5,000 for each offense.

These provisions are covered by the first ten sections of the act. Section 11 establishes the Interstate Commerce Commission, to be composed of five commissioners appointed by the President by and with the advice and consent of the Senate. It provides that the commissioners first appointed shall continue in office for the term of two, three, four, five and six years, respectively, from the first of January, 1887, the term of each to be designated by the President, and that their successors shall be appointed for terms of six years, except that any person chosen to fill a vacancy shall be appointed only for the unexpired term of the commissioner whom he shall succeed. No more than three commissioners may be appointed from the same political party, and the President has the power to remove any commissioner for inefficiency, neglect of duty or malfeasance in office. Authority is given to the commission to inquire into the management of the business of all common carriers subject to the provisions of the act and to require the attendance of witnesses and to invoke the aid of any court of the United States for that purpose.

Section 13 authorizes any person, firm, corporation or association, any mercantile, agricultural or manufacturing society, any body politic or municipal organization to file complaints against any common carrier subject to the provisions of the act, with the commission, whose duty it is made to forward a statement of the charges to such common carrier and call upon him to satisfy the complaint or answer the same in writing, and to investigate the matters complained of, if the complaint is not satisfied. The commission is also charged with the duty of making such investigations at the request of State or territorial railroad commissions and may even institute them at its own motion. Section 14 requires the commission to make a report in writing of any investigation it may make and to enter it of record and furnish copies of it to the complainant and the common carrier complained of. Section 15 makes it the commissioners' duty, when it is found that any law cognizable by it has been violated by a common carrier, to serve notice on such carrier to desist from such violation and to make reparation for an injury found to have been done. If any lawful order or requirement of the commission is disobeyed by a common carrier, it becomes their duty and is lawful for any company or person interested in such order to apply by petition to the Circuit Court of the United States sitting in equity in the judicial district in which the common carrier complained of has its principal office, and the court has power to hear and determine the matter speedily and without the formal pleadings and proceedings applicable to ordinary suits, and to restrain the common carrier from continuing such violation or disobedience. It is further provided by this section that on such hearings the report of the commission shall be accepted as prima facie evidence.

Section 17 regulates the proceedings of the commission. A majority constitute a quorum for the transaction of business. The commission may from time to time make or amend rules for the regulation of proceedings before it. Any party may appear before it and be heard in person or by attorney, and every vote or official act of the commission must be entered of record and its proceedings made public upon the request of either party interested.

Section 19 provides that the principal office of the commission shall be in Washington, but that for the convenience of the public it may hold special sessions in any part of the United States.

Section 20 authorizes the commission to require annual reports from all common carriers subject to the provisions of the act, to fix the time and prescribe the manner in which such reports shall be made, and to require from such carriers specific answers to all questions upon which the commission may need information.

Section 21 excepts from the operation of the act the carriage of property for the United States, State or municipal governments, or for charitable purposes, or for fairs and expositions; also the issuance of mileage, excursion and commutation tickets, the giving of reduced rates to ministers of religion, the free carriage by a railroad company of its own officers and employes, and the exchanging of passes or tickets among the principal officers of railroad companies.

The sections not noticed are of minor importance, relating to annual reports, salaries, appropriations of funds, etc.

The act was amended on March 2, 1889, but the amendments made did not materially affect its principal provisions.

When the law was passed its friends well realized that its success would greatly depend on the character of the commissioners whom it was incumbent upon the President to appoint. It was feared that if the railroad influence should control these appointments, the power to suspend the long and short haul clause would be the chief and perhaps the only power exercised by the commission. There was great danger that the office of Interstate Commerce Commissioner might become a sinecure for servile railroad lawyers, as similar State officers had been before, and that a public trust might be turned into an additional corporation agency for evil. The selection of the commissioners, and especially that of Judge T. M. Cooley, of Michigan, was greatly to the credit of President Cleveland. A man of unquestionable integrity, an eminent jurist and close student of railroad affairs, Judge Cooley was particularly well qualified for the office of chairman of the Interstate Commerce Commission, which he occupied for nearly five years with signal fitness, and from which he only retired to the sincere regret of the American people. Under Judge Cooley's leadership the commission has been more than a purely executive board. It was under the Constitution not in the power of Congress to clothe the Interstate Commerce Commission with full judicial authority without giving its members, like other Federal judges, tenure for life, instead of a term of years. The inherent force of the commission's decisions in its interpretation of the law made them in many cases virtually the equivalent of judicial rulings.

A few of the most important decisions of the commission may be mentioned here. Construing the long and short haul clause, they held that, in case of complaint for violating this section of the act, "the burden of proof is on the carrier to justify any departure from the general rule described by the statute, by showing that the circumstances and conditions are substantially dissimilar." They also decided that "when a greater charge in the aggregate is made for the transportation of passengers or the like kind of property for a shorter than a longer distance over the same line in the same direction, the shorter being included in the longer distance, it is not sufficient justification therefor that the traffic which is subjected to such greater charge is way or local traffic and that which is given the more favorable rates is not; and that it is not "sufficient justification for such greater charge that the short-haul traffic is more expensive to the carrier, unless when the circumstances are such as to make it exceptionally excessive, or the long-haul traffic exceptionally inexpensive, the difference being extraordinary and susceptible of definite proof; nor that the lesser charge on the longer haul has for its motive the encouragement of manufactures or some other branch of industry, nor that it is designed to build up business or trade centers."

Upon the question of publicity of the railroad business the commission held that, as the books of the defendant carriers, as to rates charged, facilities furnished and general movements of freight, are in the nature of semi-public records, the officers and agents of defendant carriers ought to give promptly to a complainant any statement of facts called for, if such statement may probably have importance on the hearing.

Judge Brewer's opinion as to what constitutes a reasonable rate was evidently not shared by Judge Cooley and his colleagues, for in the case of the New Orleans Cotton Exchange vs. the Cincinnati, New Orleans and Pacific Railway Company the commission decided that the fact that a road earns but little more than operating expenses cannot be made to justify grossly excessive rates, and that "wherever there are more roads than the business at fair rates will remunerate, they must rely upon future earnings for the return of investments and profits." In another case the commission hold that "in fixing reasonable rates the requirements of operating expenses, bonded debt, fixed charges and dividend on capital stock from the total traffic are all to be considered, but the claim that any particular rate is to be measured by these as a fixed standard, below which the rate may not lawfully be reduced, is one rightly subject to some qualifications, one of which is that the obligations must be actual and in good faith."

The rules governing the proper construction of classification sheets which the commission has laid down are founded upon common sense and justice. They say:

"A classification sheet is put before the public for general information; it is supposed to be expressed in plain terms so that the ordinary business man can understand it and, in connection with the rate sheets, determine for himself what he can be lawfully charged for transportation. The persons who prepare the classification have no more authority to construe it than anybody else, and they must leave it to speak for itself."

In defining what is legitimate traffic the commission made the following decision:

"The transportation of traffic under circumstances and conditions that force a low rate for its carriage or an abandonment of the business, but which affords some revenue above the cost of its movement, and works no material injustice to other patrons of a carrier, is to be deemed legitimate competition. When, however, its carriage is at a loss and imposes a burden on like traffic at other points and on other traffic, it is to be deemed destructive and illegitimate competition."

It has been shown in a former chapter that the weaker oil refiners have been discriminated against by the railroads, which permitted the Standard Oil Company to use their own tank cars in the shipment of oil and charge its competitors excessive rates for like shipments in barrels. Complaint being made of this discrimination, the commission held that it is properly the business of a carrier by railroad to supply rolling stock for the freight he offers or proposes to carry, and that "if the diversities and peculiarities of traffic are such that this is not always practical, and the consignor is allowed to supply it for himself, the carrier must not allow its own deficiencies in this particular to be made the means of putting at unreasonable disadvantage those who may use in the same traffic all the facilities which it supplies."

A most important ruling of the commission is that relating to the pass abuse. Complaint was made that the Boston and Maine Railroad Company issued in the States of Maine, New Hampshire, Vermont and Massachusetts free passes to certain classes of persons, among them "gentlemen long eminent in the public service, higher officials of the States, prominent officials of the United States, members of the legislative railroad committees of the above named States, and persons whose good will was claimed to be important to the defendant." The commission decided that such a discrimination is unwarranted, that a carrier is bound to charge equally to all persons, regardless of their relative individual standing in the community, and that the words "under substantially similar circumstances and conditions" relate to the nature and character of the service rendered by the carrier, and not to the official, social or business position of the passenger.

It is a notorious fact that the practice of issuing free passes to public officials and other influential persons has been more or less indulged in by nearly every railroad in the country up to the present time. It is to be hoped that this ruling of the commission will be enforced in such a manner as to put an end to this intolerable abuse.

The Interstate Commerce Commission has been equally efficient in its administrative capacity. From the very first it called attention to the great advantage of having one classification of freight throughout the country, and it has since labored diligently to unify the various classifications in use. As the commission in this undertaking is only armed with the armor of moral suasion, it is a difficult task; but there is little doubt that the accomplishment of this great reform is only a question of a few years. Iniquities in classifications and rates are constantly pointed out by the commission and corrected by the companies. Moreover, the annual reports of the commission, not to mention its very excellent statistical data, diffuse much useful information and dispel many delusions. Thus the fourth annual report of the commission says:

"A stranger to the law might infer, from some public addresses and pamphlets which have assumed to discuss this subject, that the railroad companies were prohibited from carrying the necessities of life over long distances at very low rates, unless their rates on other subjects of transportation for shorter distances were made to correspond. Indeed, instances have been pointed out in which it was said that certain articles of commerce could not now be transported for long distances, because, by reason of this provision, they would not bear the charges that must under compulsion of law be imposed upon them. Among such instances has been mentioned the granite industry of New England, as to which it has been said that valuable manufactories have ceased to be profitable because it has now become impossible for the proprietors to obtain from the railroad companies the nominal rates for the transportation of their products which they formerly enjoyed, since it is now, by the long and short haul clause, made criminal for the companies to give such rates.

"A complaint of this nature is not to be met by argument, because it is baseless in point of fact. The instance mentioned may safely be assumed to be chosen rather from regard to the need of an attack upon the law than from any belief in the justice of its application. The prohibition of the fourth section, so far as concerns this article of commerce, or any other that can be named, will have no application whatever until it is made to appear that elsewhere upon the lines of the road conveying it there is property of the same kind, for transportation by the same carriers in the same direction, upon which the carriers are disposed to making greater charges in the aggregate for the shorter hauls.

"The wheat of the extreme West, it is also said, can no longer have the nominal rates which were formerly made for transportation to the seaboard, but this assertion is also without point or applicability, unless it is shown that the carriers are not only disposed to give such rates, but propose to make up for the consequent losses to themselves by the imposition of greater charges in the aggregate for the carriage of the like grain when offered for carriage by growers in the States nearer the seaboard. Nominal rates impartially made as between shippers of like articles in the same direction and under like circumstances and conditions are as admissible now as they ever were."

The same report contains a rather pointed reply to Judge Brewer's ruling in the Iowa rate cases, viz., that, "where the rates prescribed will not pay some compensation to the owners, then it is the duty of the courts to interfere and protect the companies from such rates," and that compensation implies three things: "Payment of cost of service, interest on bonds and then some dividends." The commission reviews this stupid rule as follows:

"The effort has sometimes been made to indicate a rule which must constitute the minimum of reduction in all cases, and it has been said that rates must not be made so low that the carriers would be left unable to pay interest on their obligations and something by way of dividend to stockholders, after maintaining the road in proper condition and paying all running expenses. This comes nearer to a suggestion of a rule of law for these cases than any other that has come to the knowledge of the commission. But it is so far from being a rule of law, that it is not even a rule of policy, or a practical rule to which any name can be given, and to which the carriers themselves or the public authorities can conform their action. In the first place, when we take into consideration the question of the condition of roads and of equipment, the proper improvements to be made, the new conveniences and appliances to be considered and made use of, if deemed desirable, and the innumerable questions that are involved in the matter of running expenses, it is very obvious that there can be no standard of expenses which the court can act upon and apply, but that the whole field is one of judgment in the exercise of a reasonable discretion by the managing powers or by the public authorities in reviewing their action. It is to be borne in mind that there are many roads in the country that never have been and in all probability never will be able to pay their obligations and to pay dividends, even the slightest, to their stockholders.... If the rule suggested is a correct one, and must be adhered to by the public authorities, then it is entirely impossible that those who operate these roads can prescribe excessive charges, since it is impossible to fix any rates that would bring their revenues up to the point of enabling them to pay any dividends.... But the rule suggested would also be one under which those roads would be entitled to charge the most which, instead of being built with the money of the stockholders themselves, had been constructed with money borrowed; the larger the debt the higher being the rates that would be legal. If a road were out of debt so that it had no bonds to provide for, it must content itself with such rates as would pay some dividend to its stockholders. If the road were in debt, though it perhaps served the same communities, it might be entitled to charge rates 50, or possibly 100 per cent higher.... But over and beyond all this the attempt to apply the rule suggested would be absolutely futile for the reason that the rates prescribed for one road would necessarily affect all others that either directly or indirectly came in competition with it."

It is no exaggeration to say that the annual reports of the commission stand unexcelled as dauntless, clear, concise and instructive public documents. It may also be asserted that whatever success has so far attended the Interstate Commerce Law, that success is in a great measure due to the tact, courage and ability of the men who, in the past, have been the guiding spirits of the commission.

Efforts will be made by railroad managers in the future, as they have been made in the past, to weaken the commission by securing the appointment of men servile to the railroad interest as members of that body.

Mr. Depew says that "all railroad men are politicians, and active ones." This is true as to manipulating managers and will continue to be so just as long as we allow such extraordinary powers to be exercised by them. The saloon men are politicians, and active ones. There is not a city or town in this broad land that is not in danger of falling under their sway unless their offensive efforts are resisted. The old United States Bank managers were politicians, and active ones. They perverted the trust reposed in their hands to such an extent that the indignation of the people was aroused, and under the lead of a stern old patriot the bank was swept out of existence. Shall we restrain corporation management within proper limits and make corporations serve the public welfare, or shall we let the abuses go on until the people, under the lead of another Jackson, demand emphatically the application of some remedy, for better or for worse? Perhaps Government ownership, perhaps something else. Nations, like individuals, should profit by the experience of the past.

The Interstate Commerce Commission, in their sixth annual report, say, concerning the Interstate Commerce Law:

"It was scarcely possible that it should be so complete and comprehensive at the outset as to require no alteration or amendment. Those who are familiar with the practices which obtained prior to the passage of this law, and contrast them with the methods and conditions now existing, will accord to the present statute great influence in the direction of necessary reforms and a high degree of usefulness in promoting the public interest.

"Whoever will candidly examine the reports of the commission from year to year, and thus become acquainted with the work which has been done and is now going on, will have no doubt of the potential value of this enactment in correcting public sentiment, restraining public injustice and enforcing the principle of reasonable charges and equal treatment. Imperfections and weaknesses which could not be anticipated at the time of its passage have since been disclosed by the effort to give it effective administration. The test of experience, so far from condemning the policy of public regulation, has established, its importance and intensified its necessity. The very respects in which the existing law has failed to meet public expectation point out the advantages and demonstrate the utility of Government supervision....

"Of this much we are convinced: The public demand for Government regulation and the necessity for legal protection against the encroachments of railroad corporations have not been diminished by the experience of the last six years. The act to regulate commerce was not framed to meet a temporary emergency, nor in obedience to a transient and spasmodic sentiment. The people will not tolerate a return to the injustice and wrong-doing which inevitably occurs when no correction is undertaken and no regulation attempted. The evils of unrestricted management will not be permanently endured, and legal remedies will continue to be sought until they are amply provided. The present statute, however crude and inadequate in many respects, was the constitutional exercise of most important powers and the legislative expression of a great and wholesome principle. Its fundamental and pervading purpose is to secure equality of treatment. It assumes that the railroads are engaged in a public service, and requires that service to be impartially performed. It asserts the right of every citizen to use the agencies which the carrier provides on equal terms with all his fellows, and finds an invasion of that right in every unauthorized exemption from charges commonly imposed.

"The railroad is justly regarded as a public facility which every person may enjoy at pleasure, a common right to which all are admitted and from which none are excluded. The essence of this right is equality, and its enjoyment can be complete only when it is secured on like conditions by all who desire its benefits. The railroad exists by virtue of authority proceeding from the State, and thus differs in its essential nature from every form of private enterprise. The carrier is invested with extraordinary powers, which are delegated by the sovereign, and thereby performs a governmental function. The favoritism, partiality and exactions which the law was designed to prevent resulted, in large measure, from a general misapprehension of the nature of transportation and its vital relation to commercial and industrial progress. So far from being a private possession, it differs from every species of property, and is in no sense a commodity. Its office is peculiar, for it is essentially public. The railroad, therefore, can rightfully do nothing which the State itself might not do if it performed this public service through its own agents instead of delegating it to corporations which it has created. The large shipper is entitled to no advantage over his smaller rival in respect of rates or accommodations, for the compensation exacted in every case should be measured by the same standard. To allow any exceptions to this fundamental rule is to subvert the principle upon which free institutions depend and substitute arbitrary caprice for equality of right.

"The spirit of the law is opposed to usages so long continued and so familiar that their unjust and demoralizing character has not been clearly perceived, but it is a long step towards such regulation of the agencies of transportation as will make them equally available to all without discrimination between individuals or communities. It can hardly be the fault of those who are charged with its administration if the beneficial aims of this statute have not been fully attained and compliance with its provisions not completely secured. A better understanding of its purpose and an educated public sentiment, aided by the needful amendments which experience suggests, will fully vindicate the policy of Congress in undertaking to bring the great transportation interests of the country into general harmony with its requirements.

"It affords us gratification to add that many railroad managers of the highest standing now concede the necessity for Government regulation, and avow themselves in favor of such further enactments as will make that regulation effective."



CHAPTER XIII.

THE RATE QUESTION.

Railroad managers frequently make the assertion that the average freight rates charged in the United States are lower than those usually charged in European countries and that this fact is in itself sufficient proof that they are too low. A comparison of the transportation problem of Europe with our own will show this argument to be fallacious.

While from $25,000 to $30,000 a mile is a very liberal estimate of the average cost of American roads, the average cost of European railroads, owing to their expensive rights of way, substantial road-beds and heavy grades, is probably not less than $75,000 per mile. British railway companies have laid out for the purchase of land, for right of way and depot accommodations an amount about equal to the entire average cost of American roads for the same number of miles.

For instance, the Southeastern Company paid $20,000; the Manchester and Leeds Company, $30,750, and the London, Birmingham and Great Western, $31,500 per mile. The first Eastern Counties line paid even $60,000 per mile for land through an agricultural district. As nearly as can be ascertained, the average cost of the right of way of railroads was over $20,000 for the United Kingdom. In Belgium the average cost of the right of way was $11,000. It was lower, however, in the other countries of the European continent.

The topography of the country through which the English railways are built is such as necessitated enormous expenses for heavy embankments, cuttings, viaducts, tunnels and bridges, and in some cases increased the cost of the roads to fabulous sums. The Lancashire and Yorkshire Railway actually cost $260,000 per mile for the whole of its 403 miles. European roads have been built in a much more permanent manner and have terminal facilities whose cost is far beyond any sum paid for such purposes in this country. In Great Britain, moreover, the expenses of contests and of procuring charters have been very great and have probably averaged $3,000 per mile.

English railway men charge Americans with having indulged in stock-watering to a greater extent than any other people in the world. This is probably true, yet the English have not been dull students of this art, and they are far from free of having indulged in this luxury. Much of their railroad stock was issued in a wasteful manner and represents no actual investment, and it is safe to say that from 30 to 40 per cent. of their present railroad capitalization is water.

If upon the above basis both European and American railroads are to yield an interest of 4-1/2 per cent. on the actual investment, the former will have to earn at least $2,250 per mile more than the latter, and this difference equals about 50 per cent. of the average operating expenses of American roads per mile. Labor is cheaper across the Atlantic, but this difference is more than equalized by the employment of a much larger number of men per mile, as the following table will show:

Countries. No. of men employed Average wages Wages paid per mile. per annum. per mile.

United Kingdom 18 $335 $6,000 Belgium 22 210 4,620 Russia 15 240 3,600 Germany 14 250 3,500 France 14 220 3,080 United States 5 555 2,625

The London and Northwestern Railway is 1,793 miles long and has over 55,000 employes, or over 30 per mile. The Lancashire and Yorkshire Company employs over 42 per mile.

The train men of Europe work less hours and earn less per capita for their employers than do the train men of this country. The average annual gross earnings per employe on sixteen of the leading lines of Great Britain, as shown by Mr. Jeans, appear to be $975 against $1,600 on fifteen leading lines of the United States, while the average net earnings per employe are $465 on the British lines against $720 on the American lines; making a difference in favor of this country of 70 per cent. in gross earnings and 53 per cent. in net earnings. If American labor is more expensive, it is also more efficient than labor is elsewhere.

It must also be considered that the average haul in Europe is much less than the average haul in the United States. It has always been maintained by the railroad companies, and very justly, too, that the terminal charges are as important a factor of freight rates as is the cost of carriage. The terminal charges are the same for a twenty-five-mile haul as for a thousand-mile haul; they form a comparatively large part of the total charges for the former and a very small part of the total charges for the latter. It is therefore manifestly unjust to compare the rates per ton per mile of Europe with those of the United States without making due allowance for the difference in the length of their average hauls. All other things being equal, a fair comparison between the freight rates of different countries should be based upon hauls of equal length.

There is another consideration which should not be lost sight of. The commodities in the United States which contribute principally to the long haul are raw products. The universally low rates of these commodities greatly lower the general average. In Europe, on the other hand, manufactured goods predominate as long-haul freight, and based upon increased risk and increased cost of carriage, considerably swell the general average of freight charges. The railroads of the United States also do more business per train mile than those of any other country excepting perhaps Austria, Russia and India. This should certainly enable them to do business for less than it is done by transatlantic lines.

In addition to all this, a number of European countries, particularly France, require their railroads to perform large services, such as the carrying of the mails and the transportation of the officers and employes of the Government, gratuitously, and to carry soldiers at reduced rates.

Another factor in the equation should be considered. European roads are built, equipped and all permanent improvements wholly made at the expense of the stock- and bondholders, while in this country they are partially constructed at the expense of the patrons of the road. In the former case the capitalization of the road represents what has been paid by the stock- and bondholders, and in the latter, not only what they have paid, but large contributions paid from the income of the road and from public and private donations.