It will thus be seen that railroad rates ought to be lower, and even much lower, here than in Europe. If it is true that the average rate per ton per mile is lower in America than across the Atlantic, this is chiefly due to the fact that water transportation has forced down through (or long-haul) rates and has thus lowered the general average. This reduction was by no means made voluntarily by the railway companies, but was forced upon them. Where in the United States water does not exist, as in local traffic, rates are usually much higher than in Europe.

The reduction in freight rates was brought about by a number of inventions which greatly lowered the cost of both the construction and the operation of railways. Through the introduction of the steam shovel, of the wheel-scraper, of improved rock-drills, and of other labor-saving machines, as well as by a general improvement in the methods of grading, the cost of grading has been reduced from 25 to 50 per cent., and railroad bridges are now built at one-third of their former cost. Owing to Bessemer's great invention, steel rails can at the present time be bought for one-half of what iron rails cost ten or fifteen years ago, and about one-third of the cost twenty years ago. According to David A. Wells, the author of "Recent Economic Changes," the annual producing capacity of a Bessemer converter was increased fourfold between 1873 and 1886, and four men can now make a given product of steel in the same time and with less cost of material than it took ten men ten years ago to accomplish. A ton of steel can now be made with 5,000 pounds of coal, while it required twice that quantity in 1868. When it is considered that rails and tires made of steel last three times as long as those made of iron, permit greater speed, carry a much larger weight, and require less repairs, the importance to the railroad interests of the improvements made in the manufacture of steel can hardly be overestimated. Similar reductions have been made in the car and machine shops. An average train to-day probably costs no more than one-half as much as it did twenty years ago. Mr. Wells, in the work just mentioned, says:

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

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

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

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

It is, nevertheless, no easy matter always to determine what are reasonable rates. It is easier to tell what rates are unreasonable. Rates are unreasonable that bring an income in excess of sufficient to keep the road in proper condition, to pay operating expenses, including taxes and a fair rate of interest on the amount, not including donations, actually invested in the road. The patrons of a road should not be taxed to pay interest on their own donations, or on public donations, to the road, as the donations were made for the benefit of the public, and not for the benefit of private individuals. A rate which may appear reasonable to the carrier is apt to be regarded as too high by the shipper; and, again, one that seems reasonable to the shipper is denounced as too low by the railroad man. Each is tempted to consult only his own interests and to disregard the just claims of the other side. Thus, while the shipper will claim that his rates ought to be low enough to enable him to compete with other shippers more advantageously located than he is, the railroad manager will demand a rate which would enable him to declare high dividends on largely fictitious values. The owners of roads which were built merely for purposes of speculation or blackmailing insist on being permitted to charge exorbitant rates to bring up their earnings to the level of those roads for whose construction there was a legitimate demand.

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

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

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

These views cannot fail to commend themselves to any unprejudiced mind. It is a well-established fact that all officials will, if permitted, extend their jurisdiction, and judges are no exception to the rule. It was therefore but natural that the courts should attempt to solve the problem of railroad rates.

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

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

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

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

But even if the competency of the courts to properly determine such questions were admitted, there would still exist one serious objection to their jurisdiction. Courts necessarily move slowly, while all differences arising between the public and the railways, and especially those concerning rates of transportation, require prompt and decisive action. There are no fixed conditions in commerce. It is a kaleidoscope constantly presenting new phases. Competition at home and abroad, tariff duties, the condition of the crops and a thousand other influences affect it and may require a prompt readjustment of the tariff. So long as railroad companies are permitted to resort to injunctions and effect other delays rendered possible through the machinery of the courts, to prevent for years the enforcement of tariffs prescribed by administrative authorities, so long will the public be at their mercy. So long as they have nothing to lose and everything to gain by a judicial contest, it will be their policy to delay through the courts the enforcement of any tariff, whether prescribed by legislature or by an authorized commission, that falls below their standard. It is not to be understood that the acts of railroad commissioners should never be subject to a judicial view. If such boards clearly exceed their authority or are otherwise guilty of maladministration, if they violate constitutional rights, then railroad companies, if injured by their acts, should be permitted to seek redress in the courts; but they should not be permitted to nullify an official tariff by legal maneuvers. It is clearly not within the province of the courts to make rates or to lay down rules to be followed by those to whom the law has delegated the power to make them, nor should the courts aid the railroads in any attempt to nullify an official tariff that has been legally promulgated. A tariff prepared by sworn and disinterested officials is more likely to be just than one prepared by interested railroad men, and railroad companies should be compelled to adopt it and continue it in use until it is amended or revoked by legal authority.

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

It is claimed by railroad men that they should be allowed to make their own tariffs because rate-making is so intricate a subject that none but railroad experts can do it justice. If this were so the courts would be even less competent to review a schedule of rates than a State or National commission would be to make one. Courts cannot be expected to have expert knowledge in all matters that are likely to be brought before them. They must rely upon the testimony of expert witnesses whenever technical questions are involved in the determination of cases. The identical sources of information from which courts draw are accessible, or may be made accessible, to a commission, which has the additional advantage that its members may be selected with special reference to their fitness for the duties which they will be called upon to perform and are expected to devote their whole time to the settlement of questions arising in the transportation business. Such a commission can practically be made a court with jurisdiction over all matters connected with railroad business. The railroad manager, no doubt, is thoroughly familiar with the wants and desires of his company; but it may fairly be presumed that he is less familiar with the needs of the public than a railroad commission whose members are in constant communication with the people, patiently listen to the complaints of shippers, court and receive suggestions as to needed changes in classification and rates, and study the relative advantages of the different sections and different interests of the State or the country as regards transportation. A railroad freight agent, on the contrary, is disposed to think that shippers ought to be satisfied with any rate lower than those charged fifty years ago for carting or other crude methods of transportation. He regards their views and suggestions as chimerical and not worthy of any notice, and does not even hesitate to inform them that rate-making is a branch of the railroad business wholly beyond their comprehension, and ought not to be meddled with or even inquired into by the public. The general freight agent is the employe of a company which rates his usefulness solely by his ability to constantly increase its revenues, and he invariably proceeds upon the theory that the best tariff is that which comes nearest imposing upon each commodity offered for carriage the maximum transportation tax that it will bear. A man who entertains such opinions cannot be supposed to be able to do justice to the shipper, and should not be permitted to act as arbitrator in rate controversies between the public and the company whose employe and advocate he is. Nor have we any reason to hope for a change in the present tariff policy of railroads. History has sufficiently demonstrated the fact that reforms must come from without. As long as human nature remains as it is, railroad officials will, if permitted, arrange tariffs in the interest of the men who give them employment, for if they did otherwise their services would soon be dispensed with. A freight tariff should be in the nature of a contract between the carrier and the shipper, and the assent of both parties ought to be essential to its validity. But as it is impracticable for all the parties interested to meet for the purpose of effecting an agreement, the power to make rates has in several States wisely been conferred upon railroad commissioners, and there is a strong tendency in others to adopt the same policy. Such boards have every opportunity to obtain any information needed for the efficient and faithful discharge of their duties. They can hear the representatives of the railroads as well as those of the shippers, investigate carefully disputed points, summon experts and witnesses, and obtain official information relating to classifications and rates from every State in the Union, and, if necessary, from every quarter of the civilized world. The assertion may safely be made that, with experience, a commission acquires more expert knowledge relating to the business of rate-making than a railroad manager. If there is any mystery connected with the business of rate-making which has so far been in the sole possession of railroad men, it is to their interest to initiate the commissioners into their profound secrets. It will be their privilege to enlighten the commissioners as to the actual cost of their respective lines, the cost of every branch of the railway service, and as to a thousand other matters which the public has both a desire and a right to know. If, after a schedule of rates has been prepared, and before it is promulgated, railroad men can suggest any improvement in it, they should have the privilege to do so; or if, after giving it a fair trial, they should be prepared to show that any rate is unreasonably low and injurious to them, their complaint should be carefully investigated, and, if found well grounded, the wrong should at once be righted.

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

The labors of a board of railroad commissioners are onerous, and their responsibility is great. No uniform rule can be laid down for their guidance in the fixing of rates, yet there are a few fundamental principles which should always be adhered to. The cost of service should invariably be an important factor of a rate. Railroads should not be compelled to carry any commodity for less than the actual cost of moving it, nor should rates be fixed greatly in excess of such cost of service. The carload should be the unit of wholesale shipments. Since it costs the railroad company as much to move ten carloads of freight which belong to one shipper as it costs to move ten carloads belonging to ten shippers, no advantage beyond the general carload rate should be given to the large shipper. The difference in the rates between shipments in less than carload lots ought to be determined solely by the difference in the cost of carriage and handling. Where shipments are made in carload lots, the loading and unloading is usually done by the shipper and consignee, cars are loaded to their full capacity, and no loading or unloading of shipments at intermediate points is necessary. It is therefore but just that the consignor and consignee should have the benefit of the reduced cost of such shipments. Raw materials, and especially coal and lumber and kindred articles, the transportation of which requires neither an expensive rolling stock nor warehouse accommodations nor speedy movement, and in which the risk of loss or damage is insignificant, should be carried at the lowest rate possible. Such a policy will tend to foster other interests, which will develop business for the road and will build up remote sections of the country, and will often enable railroads to carry large quantities of these commodities at times when they would otherwise be nearly idle. There should be a uniform classification throughout the country, based upon considerations of justice and equity instead of railroad tradition. Such articles should be classed together as resemble each other as concerns bulk, weight and risk, or what is virtually the same, cost of carrying and handling. It may be safely assumed that a rate which has been made and used by railroad companies is remunerative. If it is claimed by railroad men that it is not, the burden of proof should rest upon them. A rate may also be considered remunerative to a road if other lines similarly situated have voluntarily adopted it. A schedule finally must be considered reasonable if it enables the company for which it is prescribed to earn under efficient and economical management sufficient to maintain its road in proper condition and a fair rate of interest upon a fair valuation of its road. Property is never worth more than what it can be duplicated for, and railroad property is no exception to the rule. If there has been a depreciation in the property of a company, it should not demand dividends upon values which no longer exist. Nor can the same returns be conceded to railroad property as to private capital. Its investment is permanent and well secured, if it is honestly and intelligently made; and its dividends are net returns after the payment of all expenses, including taxes, cost of management and maintenance. The three per cent. bonds of the United States Government find a ready sale at prices above par. Were there less speculation and more honesty and stability in railroad management, railroad securities yielding a revenue of from 2-1/2 to 4 per cent. on the actual investment would be eagerly sought after by conservative capitalists.

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

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



CHAPTER XIV.

REMEDIES.

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

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

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

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

As it is always easier to tear down than to build up, so it is likewise easier to point out evils than it is to provide proper remedies for their cure. Almost any one can criticise existing conditions, but it requires wise and constructive statesmanship to propose practical measures which will bring about desired improvement. The apparent magnitude of the work of correcting the evils and abuses connected with the transportation business, many of which have been in vogue for more than a generation, has discouraged many from seriously undertaking it. And yet we shall find the problem by no means a difficult one, if we properly analyze it and go to the root of the evil. Prof. Bryce, in his work "The American Commonwealth," refers to the fact that the people of this country have been equal to the task of solving the gravest problems which have been presented to them, and we need have no doubt of their ability to solve the railroad problem. Railroad regulation does not require the adoption of any new principle of law. If the common law is rightly applied and provision is made for its strict and systematic enforcement, it will meet every condition that is likely to arise in the transportation business. It should always be remembered that the railroad is an improved highway, and the principal reason for which it is built is to accommodate the people and promote their welfare, and not to serve the selfish ends of a few individuals, and that private companies were permitted to build and operate it only because the State believed that the public interests could best be served in this way.

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

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

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

The Government might as well lease the post-office, waterways and the collection of import duties to the highest bidder and permit the lessees to reimburse themselves by the collection of such tolls as they might see fit, without any governmental restraint whatever, their franchises enabling the operating companies to tax each individual, each locality and each letter, parcel or article as they saw fit. How long would the people of this country endure such a condition of things? The collection of taxes has been farmed out, but not by any civilized nation in modern times. History shows that this system of taxation has always been productive of the gravest abuses, and prejudicial to the public welfare. As has already been shown, the railroad is an improved highway, and the railroad company in operating it is doing a public business and not a private business, and therefore it should be governed by rules applicable to public business, and not such as are applicable to private business. It is admitted by all that for the services which it performs the operating company should receive a reasonable compensation; but to say what a reasonable compensation is, how it shall be collected, and to prescribe rules regulating the business of the public carrier, is solely the right and the duty of the State. The people have never permitted the rate of any other public charge to be fixed by the beneficiary. Why, then, should privileges be conceded to one beneficiary which are denied to all others?

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

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

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

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

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

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

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

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

When railroad managers are shorn of the power to practice abuses, they are at the same time deprived of the many advantages they now have to speculate in railroad securities and enrich themselves at the expense of the public and of other railroad stockholders. The great fortunes of this country have been amassed within a few years, and chiefly from manipulations of railroad property. If the people permit these practices to go on without restraint but a few years more, the property of the nation will be largely under the control of a few bold adventurers. The great fortunes of Europe which it has required centuries to accumulate are already outstripped by the "self-made" millionaires of this country. However persistently railroad managers may assure the people that abuses in the transportation business have been reduced to a minimum and that more stringent legislation will be an evil, it is a fact that many of the graver railroad abuses are still practiced and that much more reformation is needed in railroad management, or in railroad supervision, or in both, to make the railroad what it was designed to be, a highway operated for the public and open to all upon equal and equitable terms.

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

Under these circumstances no reform movement has any prospect of success unless it is supported by public opinion. It should therefore be the principal endeavor of all advocates of railroad reform to create public opinion in favor of the measures proposed by them. With an intelligent public on the alert, the Government may be relied upon to pursue a healthy and progressive railroad policy. Unfortunately, there are times when public opinion upon great questions is dormant, while pecuniary interests, like the force of gravity, never suspend their action. To arouse the masses at such times, we must rely largely upon an honest, independent and courageous press, not influenced by gift or patronage.

Many plans have been proposed for a better control of railroads. Some of these are merely theoretical; others have been tried in part, and a few have been tried in their entirety, but under circumstances radically different from those surrounding us. A system which may be well adapted to a monarchy with a centralization of governmental powers would probably prove a failure here, when brought in contact with the principles of dual sovereignty and local rule. Unless a revolution should change our system of government, a dual system of railroad control will always be necessary in the United States; for it is not at all likely that the individual States will ever voluntarily give up their right to regulate commerce carried on within their respective borders. On the other hand, the common welfare requires that the commerce which is carried on between the States should not be hampered by local interference, but should be regulated only by Congress. Our experience as a nation has shown that such a quality of sovereignty is not inconsistent with strength or efficiency, nor need it be productive of rivalry or friction. The fact that a certain mode of railroad management has been successful elsewhere is not sufficient proof that it would be successful here, nor is the fact that it has not been successful elsewhere sufficient proof that it would not be successful here. The more the conditions which exist here resemble those under which it was tested, the greater is the probability that it can be adapted to our circumstances. Independent thought and action is an essential element of progress, yet it is the part of wisdom to profit by the speculation and experience of others.

The following are the principal methods that have been tried or proposed for the control and management of railroads:

1. Publicity of the railroad business.

It is held by some that the secrecy with which railroad business is at present transacted is the source of all evils. It is contended that if railroads were required to report to the public every item of income and expenditure, discrimination and extortion, as well as bribery and corrupt subsidizing, would soon cease. If the companies were compelled to render an account of all receipts, special rates and drawbacks could not safely be granted by railroad managers, or, if granted, would soon lose their charm for recipients, for it would be but a short time until others would demand and even exact the same privileges. An attorney would, as a member of the legislature, be slow to accept a retaining fee if the amount of such fee were made known to his constituents. Publishers would hesitate to apply for railroad subsidies if the companies were compelled to render periodically an itemized account of such expenditures, and railroad companies would, under similar circumstances, hesitate to pay subsidies, for the subsidized journal would soon be without patrons. If the items annually expended upon railroad lobbies were reported, these lobbies would soon be frowned, or even hissed, out of legislative halls. There can be no doubt that full and complete publicity in railroad business would correct a large number of existing abuses, and it should therefore be insisted upon as one of the first and essential features of railroad reform. It is questionable, however, whether railroad managers are so sensitive to public opinion that publicity could be relied upon as a cure for all railroad evils. To what extent it is desirable to supplement publicity by other measures of State control will be considered hereafter.

It will, of course, be urged by railroad managers that the State has no right to pry into the privacy of their business and that they should be guaranteed the same protection against intrusion that is enjoyed by other branches of business. To this we must reply that not even banks or insurance companies are permitted to conduct their business as private, and that controlling the highway and levying a transportation tax upon every article of commerce passing over it is essentially public business and unquestionably subject to public control. Every citizen is as much interested in it as he is in the transactions of the custom-house, or of the public treasury, and any transaction of a railroad manager that shuns public inspection can be set down as a public evil and should be suppressed. It may safely be laid down as a general rule that the refusal of a railroad company to give publicity to its transactions is presumptive evidence of wrong. The people are not alone interested in such publicity. Stockholders have likewise a right to be protected against the sinister manipulations of dishonest managers, and publicity furnishes them the best guarantee of honest management.

Stockholders should attend the meetings of their companies and should obtain full knowledge of the management of their affairs. If they will make thorough examination and get at bottom facts the chances are that contracts will be found with owners of patents, white lines, blue lines, refrigerator car lines, coal companies, ferry companies, manufacturing companies, packing companies and other kindred organizations, by which hundreds of millions of dollars are diverted from the treasuries of the railroad companies to the pockets of influential persons connected with the management of the roads.

It has recently come to light that the officers of a Pennsylvania railroad company, during fifteen years, by some means of secret rebates and other allowances, have taken about $100,000,000 out of the treasury of the company and distributed it as largesses to about half a dozen iron and steel establishments.

This is a method of getting wealthy at the expense of others not unknown to many another great fortune accumulated in the last twenty years. Railroad discriminations have been a fruitful source of those gross inequalities in wealth distribution which now agitate society and call people's parties and the like into existence. The modern millionaire appears to be an entirely natural creation. Perhaps this money taken in special rates from the Pennsylvania railroad's treasury, or, rather, from the pockets of the road's other patrons, and of the men who may have sought, without special rates, to compete with the favored ones in their business, only to be crushed in financial ruin, will be spent in a praiseworthy way, in accord with the principles of "the gospel of wealth." What we need now is the gospel of distribution of facilities for the accumulation of wealth, as well as the gospel of distribution of great fortunes.

Whether inspired by a bull or a bear interest or neither, all will concede the ability of Mr. Henry Clews to picture the evils of railroad management; and his lack of generosity in accrediting ability or honesty to legislators who are called upon to provide remedies for the wrongs that he so well depicts will not deter me from indorsing the following statement made by him in a magazine article which is pertinent to this discussion:

"One great difficulty that present railroad legislators have to contend with is the evil methods of railroad building and extension. A great deal of the mileage of the last two years has been premature, and doubtless for speculative purposes. Most of it has been constructed, however, by old companies who had good credit to float bonds and could raise all the money required. Hence there has been but little financial embarrassment arising from the too rapid construction. But people are beginning to find out that a great deal of this building has been in the interest of speculative directors and their friends, who, for a mere song, had bought up barren lands considered worthless because there was no means of transportation. But these lands soon become immensely valuable for sites of villages, towns and cities. The construction companies, by which these roads were generally built, raised the cost to the highest possible figures, in order, I fear, to make dividends for the construction stockholders. It is noteworthy that the directors connected with these construction schemes have been exceedingly prosperous, while the stockholders of the roads have grown poor in an inverse ratio. The dividends of the latter have disappeared. The new mileage, much of which, I apprehend, has been made on this principle, was about twenty-one thousand miles, which is greater than the entire mileage of Great Britain. There should be additions to the Interstate Law, or a special law regulating the methods of construction companies, which are probably doing more to demoralize the railroad system—and doing it very insidiously, too—than any other factor connected with these great arteries of the country's prosperity.

"Legislative reform is greatly needed in the matter of railroad reports, especially for the safety of investors, and to prevent speculative abuses among railroad officials and their friends and favorites. There should be statements issued annually, or perhaps more frequently, upon the truth of which everybody might rely. These should be sworn statements, and should bear the signatures of at least three of the directors. These directors should be required to call to their aid expert accountants, and should have placed at their disposal all the books of the company or corporation and all the other papers necessary to verify the accuracy of their report. The correctness of the statement, when issued, would then be a foregone conclusion, and an investor in London, Paris or Berlin could buy or sell on his own judgment, an experiment which, under existing arrangements, might prove very costly. It is proverbial that a railroad statement now is defective in the most essential particulars, and, to put it mildly, usually covers a multitude of sins. According to one plan approved by railroad companies, the statement published to-day, for instance, is made to show a surplus of many millions, but there is nothing said about an open construction account to which the surplus is debtor. On this favorable showing (with this suppressio veri) the stock goes up and the insiders quickly unload upon the investment public. The following statement, which comes out six months later, shows that the surplus has been used to settle the construction indebtedness. The surplus has disappeared; consequently the stock suffers a serious decline. Those who bought on the strength of the large surplus sell out, on being informed of its distribution. Then the inside sharks come forward again and purchase at reduced prices, probably at a depreciation of from ten to fifteen points or more, and keep their stock until the next periodical appearance of the bogus surplus. Thus the insiders grow rich, while the outsiders become poor. The only remedy for this abuse is a sworn statement at regular intervals, and if the directors should commit perjury they would render themselves liable to State prison. If a few of them should be tempted to fall into the trap, and be made examples of in this way, nothing would do more to work a speedy reform in this contemptible method of book-keeping.

"I would also suggest a change in the character of the directors. Those usually chosen for this office now are men who have vast interests of their own, more than sufficient to absorb their entire time and thoughts. They are selected mainly on account of their high-sounding names, to give tone to the corporation and solidify its credit, in order that the lambs of speculation may have proper objects in whom confidence can be reposed and no questions asked. The management of the affairs of the corporation is frequently intrusted to one man, who runs the business to suit his own individual interests."

We can appreciate the force of the above remarks when we consider that last year seventy-five companies realized a gross income of $846,888,000, which is equal to about 80 per cent. of the total income received by all of the railroads of the United States.

2. Free competition upon all railroads.

Mr. Hudson, in his excellent work, "The Railways and the Republic," recommends the following remedy:

"Legislation should restore the character of public highways to the railways, by securing to all persons the right to run trains over their tracks upon proper regulations, and by defining the distinction between the proprietorship and maintenance of the railway and the business of common carriers."

Mr. Hudson proposes to leave the track in the possession of its present owners, but to permit any individual or company to run, upon the payment of a fixed toll, trains and cars over it, under the control of a train-dispatcher stationed at a central point. This train-dispatcher is to be notified by telegraph of the movement of each train, and is to give his orders to the officers in charge of each train, as to what points they are to go, where to pass one train and where to wait for another. Each transportation company is to own, load and forward its own trains; it is to be required to run its regular train on schedule time or to have it follow another train as an extra. They are to be liable to their shippers as well as to the railway company for all damages caused by their neglect, while the railroad company is to be held responsible for the condition of its track. It will not be necessary to go into the details of Mr. Hudson's plan. Suffice it to say that he proposes to establish free competition in the railway business by making the use of the railway track as free as that of the turnpike or canal, subject only to such control on the part of the public train-dispatcher as the paramount considerations of speed and safety may require.

The adoption of Mr. Hudson's plan would simply be a return to the first principle of railroad transportation. It has already been shown that the first English charters permitted the public to use their own vehicles and motive power upon the railroad track, but that shippers and independent carriers could not avail themselves of these provisions of the early charters because it was in the power of the railroad companies to make their tolls prohibitory. There is but little question as to the practicability of Mr. Hudson's plan from a purely technical standpoint, and its adoption might be advisable if it should be demonstrated that a monopoly of the track is inconsistent with the operation of the railways for the public good. It is seriously doubted, however, whether such ideal competition as Mr. Hudson desires to bring about could be secured except at the expense of true economy. Concentration, or, rather, consolidation in the railroad business has, under proper legal restriction, always resulted in a saving of operating expenses, and usually in a reduction of rates. Any step in the opposite direction, whatever other merits it may possess, is in the end not likely to give lower rates. If it is a settled principle that railroads are only entitled to a fair compensation for their services, it must be evident that what would be a fair compensation for the same or similar services to a large, well-organized, well-regulated and well-managed company cannot be sufficient compensation to an individual carrier or a small company, whose expenses will always be comparatively larger than those of its better-equipped rival. Monopoly and extortion need not necessarily be synonymous. In fact, States and municipalities in their public works often prefer monopoly to competition as the cheaper of the two. Nevertheless, should it ever be found that monopolies cannot be reconciled with justice and economy, a return to the first principles of railroading may become advisable.

3. State ownership and management.

A number of European states, notably Prussia, France and Belgium, as well as Australia, British India and the British colonies in Southern Africa, have adopted government ownership of railroads. The motives which led to this step in the various countries differ greatly. While in Europe military and political considerations predominated, in Africa and Australia it was more the want of private capital and energy which led the government to engage in railroad enterprises. There has in most of these states been a desire to avoid the evils usually connected with private management. The experiment of state ownership and management of railroads has been longest tried in Belgium, and with the best results. With an excellent service the rates of the Belgian state roads are the lowest in Europe. Their first-class passenger tariffs are, next to the zone tariff recently adopted on the state roads of Hungary, the lowest in the world, and are, for the same distance, lower than those of American roads. In Prussia the state service, upon the whole, is also superior to that of private companies, and is probably equal to the public demand. In France the government only owns and operates less important lines, but furnishes upon these a more efficient and cheaper service than private companies would either be able or disposed to furnish. The oft-repeated statement of those opposed to government regulation to the contrary notwithstanding, government ownership and management of railroads is a decided success in Europe, Mr. Jeans says of state railroads:

"Notwithstanding the superior financial result, the lines worked by the state are those kept in the best order, and the working of which gives the greatest satisfaction to the commercial world and the public in general as regards regularity of conveyance, cheapness of transit and the comfort of travelers."

It is difficult to see how any unbiased person can travel on any of the state roads of Europe without coming to the same conclusion. State management offers certainly some decided advantages to the public. Above all, the business of the roads is not conducted for the pecuniary advantage of a few, but for the common good. Commerce is not arbitrarily disturbed to aid unscrupulous managers in their stock speculations. New lines are not built for speculative purposes, but for the development of the country. Rates are based more upon the cost of service than upon what the traffic will bear, and the ultimate object of the state's policy is not high profits, but a healthy growth of the country's commerce, while the sole aim of a private company is to get the largest revenue possible. The permanent way of the state road is kept in better condition, the public safety and convenience being paramount considerations. Rates are stable and uniform, instead of being changeable and discriminating, and all persons and places are as equal before the railroad tax collector as before the law. It may be laid down as a general rule that under private management of railroads efforts will be made to secure the highest rates possible, while it is the aim of the Government to grant the lowest rates possible. Mr. Jeans proves by statistics that the cost of maintenance of way is generally higher on the state lines, and that traffic expenses are higher on the lines of private companies. In commenting upon this difference he says:

"It might easily be contended, and even proved beyond all doubt, that the first characteristic is a result of the better condition in which the state keeps the permanent way; and, so far as this is the case, the public convenience, safety and general advantage are promoted.

"The highest range of traffic expenses on companies' lines undoubtedly argues greater laxity of management, since, as we have already shown, this is one of the most elastic of items, and may be either very high or very low, according as economy or extravagance is the prevailing system.... The experience of Continental Europe points unmistakably to the exercise of greater economy in state management."

Judge Dillon, of the United States Court, in his order appointing Hon. J. B. Grinnell receiver for the Central Railroad of Iowa, in 1876, said:

"The railroads in the hands of the court—and in the circuit there are eight or ten—have all been run with less expense, and have made more money, than when they were operated by the companies; and we hope and believe under your supervision that this road will prove no exception, and that the property will be worth more at the end of the litigation."

Upon Mr. Grinnell's resignation, after nearly three years of service, Judge Grant said, in asking for the discharge of his bondsmen:

"I concur entirely in the opinion of the State commissioners that he has very much improved the condition of the road, and he left it in far superior condition to that in which he received it."

Yet Government ownership and management of railroads also has its drawbacks. It is claimed by some that such management is more expensive than that of lines owned by private companies. It has already been shown that the permanent way is kept in better condition by the state than by private corporations. In Russia, Germany, Austria-Hungary, France and Italy the state expends from 15 to 30 per cent. more for the maintenance of the permanent way than the private companies. It is perhaps also true that the rank and file of railroad employes fare, on an average, better under government than they do under private management; but, as an offset to this, it should be remembered that quite a saving is effected by the state in the salary account of general officers. The people will not consent to pay the manager of a railroad line a salary six times as large as that of a cabinet officer, and provide at the same time sinecures for his sons, brothers, nephews and cousins.

It is furthermore claimed that, as government is organized, it cannot, all other things being equal, respond to the demands of commerce as promptly as private companies. This feature, however, may be an advantage to the country at large rather than a detriment. But the strongest argument that can be produced against state ownership of railroads is that under a democratic form of government it might exert a demoralizing influence in politics. The 1,700 railroad companies of the United States have at present an army of about 800,000 employes. This number is constantly increasing, and it is more than probable that before the end of the present century it will have reached a million. When it is considered what importance is at present attached to the political influence of a hundred thousand Federal officers, it is not surprising that conservative citizens should hesitate to add to the ranks of these officeholders a six or seven times larger force. Dangerous as the railroad influence now is in politics, it would be ten times more dangerous if under a system of Government management considerations of self-interest should induce a million railroad employes to act as a political unit and political parties should vie with each other in bidding for the railroad vote. Could our civil service ever be so organized as to divest it entirely of political power, state management of railroads might still offer the best solution of the railroad problem.

Mr. T. B. Blackstone, president of the Chicago and Alton Railroad Company, has recently created somewhat of a surprise by declaring in favor of Government ownership of railroads. That Mr. Blackstone's programme will eventually receive the approval of a large number of his colleagues there can be but little doubt. With the people wide-awake upon this subject, the opportunities for railroad speculation are lessening, and the scheme to early unload the railroads of the country on the Government at a highly inflated value speaks well for the financial farsightedness of its author. Mr. Blackstone proposes to have railroad stockholders do here what the former owners of the telegraph did in Great Britain, i. e., dispose of their property to the Government, at a price representing several times its original cost or even several times the cost of duplication.

Mr. C. Wood Davis, formerly general freight and passenger agent of one of the leading roads east from Chicago, is one of the best informed and clearest-headed writers upon the railroad question. He has, after much experience and long study, been converted to the advocacy of national ownership as a solution of the railroad problem. In a recent article published by the Arena Publishing Company, entitled "Should the Nation own the Railways?" he presents the objections and advantages of national ownership. He says:

"The objections to national ownership are many, that most frequently advanced, and having the most force, being the possibility that, by reason of its control of a vastly increased number of civil servants, the party in possession of the Federal administration at the time such ownership was assumed would be able to perpetuate its power indefinitely.... This objection would seem to be well taken, and indicates serious and far-reaching results unless some way can be devised to neutralize the political power of such a vast addition to the official army.... In the military service we have a body of men that exerts little or no political power, as the moment a citizen enters the army he divests himself of political functions; and it is not hazardous to say that 700,000 capable and efficient men can be found who, for the sake of employment, to be continued so long as they are capable and well behaved, will forego the right to take part in political affairs. If a sufficient number of such men can be found, this objection would, by proper legislation, be divested of all its force....

"2. That there would be constant political pressure to make places for the strikers of the party in power, thus adding a vast number of useless men to the force, and rendering it progressively more difficult to effect a change in the political complexion of the administration.

"That this objection has much less force than is claimed is clear from the conduct of the postal department, which is unquestionably a political adjunct of the administration; yet but few useless men are employed, while its conduct of the mail service is a model of efficiency after which the corporate-managed railways might well pattern. Moreover, if the railways are put under non-partisan control, this objection will lose nearly, if not quite, all its force.

"3. That the service would be less efficient and cost more than with continued corporate ownership. This appears to be bare assertion, as from the very nature of the case there can be no data outside those furnished by the government-owned railways of the British colonies, and such data negative these assertions; and the advocates of national ownership are justified in asserting that such ownership would materially lessen the cost, as any expert can readily point out many ways in which the enormous costs of corporate management would be lessened. With those familiar with present methods, and not interested in their perpetuation, this objection has no force whatever.

"4. That with constant political pressure unnecessary lines would be built for political ends. This is also bare assertion, although it is not impossible that such results would follow; yet such has not been the case in the British colonies where the governments have had control of construction....

"5. That, with the amount of red tape that will be in use, it will be impossible to secure the building of needed lines. While such objection is inconsistent with the fourth, it may have some force, but as the greater part of the country is already provided with all the railways that will be needed for a generation, it is not a very serious objection even if it is as difficult as asserted to procure the building of the new lines. It is not probable, however, that the Government would refuse to build any line that would clearly subserve public, convenience, the conduct of the postal service negativing such a supposition....

"6. That lines built by the Government would cost much more than if built by corporations. Possibly this would be true, but they would be much better built and cost far less for maintenance and betterments, and would represent no more than actual cost; and such lines as the Kansas Midland, costing but $10,200 per mile, would not, as now, be capitalized at $53,024 per mile, nor would the president of the Union Pacific (as does Sidney Dillon, in the North American Review for April) say that "a citizen, simply as a citizen, commits an impertinence when he questions the right of a corporation to capitalize its properties at any sum whatever," as then there would be no Sidney Dillons who would be presidents of corporations, pretending to own railways built wholly from Government moneys and lands, and who have never invested a dollar in the construction of a property which they have now capitalized at the modest sum of $106,000 per mile....

"7. That they are incapable of as progressive improvement as are corporate-owned ones, and will not keep pace with the progress of the nation in other respects; and in his Forum article Mr. Acworth lays great stress upon this phase of the question and argues that as a result the service would be far less satisfactory.

"There may be force in this objection, but the evidence points to an opposite conclusion. When the nation owns the railways trains will run into union depots, the equipment will become uniform and of the best character, and so sufficient that the traffic in no part of the country would have to wait while the worthless locomotives of some bankrupt corporation were being patched up, nor would there be the present difficulties in obtaining freight cars growing out of the poverty of corporations which have been plundered by the manipulators, and improvements would not be hindered by the diverse ideas of the managers of various lines in relation to the adoption of devices intended to render life more secure or to add to the public convenience.... Existing evidence all negatives Mr. Acworth's postulate that "state railway systems are incapable of vigorous life."

"8. An objection to national ownership which the writer has not seen advanced is that States, counties, cities, townships and school districts would lose some $27,000,000 of revenue derived from taxes upon railways. While this would be a serious loss to some communities, there would be compensating advantages for the public, as the cost of transportation could be lessened in like measure.

"Many believe stringent laws, enforced by commissions having judicial power, will serve the desired end, and the writer was long hopeful of the efficacy of regulation by State and National commissions; but close observation of their endeavors and of the constant efforts—too often successful—of the corporations to place their tools on such commissions, and to evade all laws and regulations, have convinced him that such control is and must continue to be ineffective and that the only hope of just and impartial treatment for railway users is to exercise the 'right of eminent domain,' condemn the railways, and pay their owners what it would cost to duplicate them; and in this connection it may be well to state what valuations some of the corporations place upon their properties.

"Some years since the Santa Fe filed in the counties on its line a statement showing that at the then price of labor and materials—rails were double the present price—their road could be duplicated for $9,685 per mile, and, the materials being much worn, the actual cash value of the road did not exceed $7,725 per mile.

"In 1885 the superintendent of the St. Louis and Iron Mountain Railway, before the Arkansas State Board of Assessors, swore that he could duplicate such a railway for $11,000 per mile, and yet Mr. Gould has managed to float its securities, notwithstanding a capitalization of five times that amount."

Among the advantages to be derived from Government ownership he names the following:

"First would be the stability and practical uniformity of rates, now impossible, as they are subject to change by hundreds of officials, and are often made for the purpose of enriching such officials....

"It would place the rate-making power in one body, with no inducement to act otherwise than fairly and impartially, and this would simplify the whole business and relegate an army of traffic managers, general freight agents, soliciting agents, brokers, scalpers and hordes of traffic association officials to more useful callings, while relieving the honest user of the railway of intolerable burdens.

"Under corporate control, railways and their officials have taken possession of the majority of mines which furnish the fuel so necessary to domestic and industrial life, and there are few coal fields where they do not fix the price at which so essential an article shall be sold, and the whole nation is thus forced to pay undue tribute.

"Controlling rates and the distribution of cars, railway officials have driven nearly all the mine owners, who have not railways or railway officials for partners, to the wall.

"With the Government operating the railways, discriminations would cease, as would individual and local oppression; and we may be sure that an instant and absolute divorce would be decreed between railways and their officials on one side, and commercial enterprises of every name and kind on the other.

"The failure to furnish equipment to do the business of the tributary country promptly is one of the greater evils of corporate administration, enabling officials to practice most injurious and oppressive forms of discrimination, and is one that neither Federal nor State commission pays much attention to. With national ownership a sufficiency of cars would be provided. On many roads the funds that should have been devoted to furnishing the needed equipment, and which the corporations contracted to provide when they accepted their charters, have been divided as construction profits, or, as in the case of the Santa Fe, Union Pacific, and many others, diverted to the payment of unearned dividends, while the public suffers from this failure to comply with charter obligations.

"There would be such an adjustment of rates that traffic would take the natural short route, and not, as under corporate management, be sent around by the way of Robin Hood's barn, when it might reach its destination by a route but two-thirds as long, and thus save the unnecessary tax to which the industries of the country are subjected. That traffic can be sent by these roundabout routes at the same or less rates than is charged by the shorter ones is prima facie evidence that rates are too high.

"There would be a great reduction in the number of men employed in towns entered by more than one line. For instance, take a town where there are three or more railways, and we find three or more full-fledged staffs, three or more expensive up-town freight and ticket offices, three or more separate sets of all kinds of officials and employes, and three or more separate depots and yards to be maintained. Under Government control these staffs—except in very large cities—would be reduced to one, and all trains would run into one centrally located depot; freight and passengers be transferred without present cost, annoyance and friction, and public convenience and comfort subserved, and added to in manner and degree almost inconceivable.

"The great number of expensive attorneys now employed, with all the attendant corruption with the fountains of justice, could be dispensed with, and there would be no corporations to take from the bench the best legal minds, by offering three or four times the Federal salary....

"Every citizen riding would pay fare, adding immensely to the revenues. Few have any conception of the proportion who travel free, and half a century's experience renders it doubtful if the evil—so much greater than ever was the franking privilege—can be eliminated otherwise than by national ownership. From the experience of the writer, as an auditor of railway accounts, and as an executive officer issuing passes, he is able to say that fully ten per cent. travel free, the result being that the great mass of railway users are yearly mulcted some thirty millions of dollars for the benefit of the favored minority; hence it is evident that if all were required to pay for railway services as they are for mail services, the rates might be reduced ten per cent, or more, and the corporate revenues be no less, and the operating expenses no more. In no other country—unless it be under the same system in Canada—are nine-tenths of the people taxed to pay the traveling expenses of the other tenth. By what right do the corporations tax the public that members of Congress, legislators, judges and other court officials and their families may ride free? Why is it that when a legislature is in session passes are as plentiful as leaves in the forest in autumn?...

"The corporations have ineffectually wrestled with the commission evil, and any number of agreements have been entered into to do away with it; but it is so thoroughly entrenched, and so many officials have an interest in its perpetuation, that they are utterly powerless in the presence of a system which imposes great and needless burdens upon their patrons, but which will die the day the Government takes possession of the railways, as then there will be no corporations ready to pay for the diversion of traffic.

"As a rule, American railways pay the highest salaries in the world for those engaged in directing business operations, but such salaries are not paid because transcendent talents are necessary to conduct the ordinary operations of railway administration, but for the purpose of checkmating the chicanery of corporate competitors. In other words, these exceptionally high salaries are paid for the purpose, and because their recipients are believed to have the ability to hold up their end in unscrupulous corporate warfare where, as one railway president expressed it, 'the greatest liar comes out ahead....'

"Government control will enable railway users to dispense with the services of such high-priced umpires as Mr. Aldace F. Walker, as well as of all the other officials of sixty-eight traffic associations, fruitlessly laboring to prevent each of five hundred corporations from getting the start of its fellows, and trying to prevent each of the five hundred from absorbing an undue share of the traffic. It appears that each of these costly peace-making attachments has an average of seven corporations to watch....

"With National ownership the expenditures involved in the maintenance of traffic associations would be saved and railway users relieved of a tax that, judging from the reports of a limited number of corporations of their contribution towards the support of such organizations, must annually amount to between $4,000,000 and $5,000,000.

"Of the six hundred corporations operating railways, probably five hundred maintain costly general offices, where president, secretary and treasurer pass the time surrounded by an expensive staff. The majority of such offices are off the lines of the respective corporations, in the larger cities, where high rents are paid and great expenses entailed, that proper attention may be given to bolstering or depressing the price of the corporation's shares, as the management may be long or short of the market. So far as the utility of the railways is concerned, as instruments of anything but speculation such offices and officers might as well be located in the moon, and their cost saved to the public....

"Railways spend enormous sums in advertising, the most of which National ownership would save, as it would be no more necessary to advertise the advantages of any particular line than it is to advertise the advantages of any given mail route.... A still greater expense is involved in the maintenance of freight and passenger offices off the respective lines, for the purpose of securing a portion of competitive traffic. In this way vast sums are expended in the payment of rents and the salaries of hordes of agents, solicitors, clerks, etc., etc....

"Under Government control discriminations against localities would cease, whereas now localities are discriminated against because managers are interested in real estate elsewhere, or are interested in diverting traffic in certain directions....

"Another, and an incalculable benefit, which would result from National ownership, would be the relief of State and National legislation from the pressure and corrupting practices of railway corporations, which constitute one of the greatest dangers to which republican institutions can be subjected. This alone renders the nationalization of the railways most desirable, and at the same time would have the effect of emancipating a large part of the press from a galling thraldom to the corporations....

"Estimated net annual saving to the public which would result from Government control:

From consolidation of depots and staffs $20,000,000 From exclusive use of shortest routes 25,000,000 In attorneys' fees and legal expenses 12,000,000 From the abrogation of the pass evil 30,000,000 From the abrogation of the commission evil 20,000,000 By dispensing with high-priced managers and staffs 4,000,000 By disbanding traffic associations 4,000,000 By dispensing with presidents, etc 25,000,000 By abolishing all but local offices, solicitors, etc. 15,000,000 Of five-sevenths of the advertising account 5,000,000 —————- Total savings by reason of better administration $160,000,000

"It would appear that, after yearly setting aside $50,000,000 as a sinking fund, there are the best reasons for believing that the cost of the railway service would be some $310,000,000 less than under corporate management.

"That $6,000,000,000 is much more than it would cost to duplicate existing railways will not be questioned by the disinterested familiar with late reductions in the cost of construction, and that such a valuation is excessive is manifest from the fact that it is much more than the market value of all the railway bonds and shares in existence."

The above quotations from Mr. Davis' article hardly do it justice, and it should be read in full to appreciate its full force. Many of the predictions and estimates are undoubtedly in the main correct, yet upon the whole it must be admitted that it is a rather rosy and too hopeful view to take of Government ownership of our railroads.

4. State ownership with private management.

This is a compromise between a public and a private system of railway ownership and management. It is claimed by the advocates of this system that if the Government would acquire by purchase or through condemnation proceedings all of the railroads of the country, pay for them by issuing its bonds, and then lease the various lines to the highest responsible bidders, prescribing a schedule and rules of management, most of the benefits resulting from state ownership of railroads could be secured while nearly all its disadvantages would be avoided. It is proposed to purchase railroads at their actual value and to issue in payment bonds bearing the same rate of interest as other Government securities. This would deprive managers of every opportunity to manipulate the railroad business for purposes of stock speculation. It would also reduce the fixed charges of our railroads at least 50 per cent., the benefits of which reduction the public would chiefly share. The acquisition of the railroads by the Government would, moreover, afford the conservative capitalist a safe and permanent investment, which, with the gradual disappearance of our war debt, might become a national desideratum.

It is proposed by the advocates of this system that the Government fix rates of transportation for a certain period, to be reviewed at the end of that period upon an agreed basis. The operating companies would be required to keep their roads in repair and give sufficient bonds for the faithful performance of their contracts. If found guilty of persistent violations of the terms of their leases or of such laws as Congress might enact for their control, their bonds and leases might be declared forfeited. A new Government department or bureau would have to be established and charged with the duty of exercising the same control over railroads which the Government now exercises over national banks, and in addition to this complete publicity of the service would have to be relied upon to prevent the introduction of abuses.

There are at least two valid objections that can be urged against the adoption of such a system. Responsible companies could not be induced to lease a line for a valid consideration unless their rates were definitely fixed for a series of years. Such a course might, however, in time result in great hardship to the commerce of the country, as the great and unavoidable difference in the rates of the various railroad lines of the country would give to the commercial interests of some sections decided advantages over those of others. Besides this it would be very difficult to compel the different companies to keep the lines leased by them in repair. Controversies would constantly arise between the officers charged with the supervision of the roads and the operating companies, which could be ultimately determined only by the courts, causing to the Government loss, or at least delay in the adjustments.

5. National control.

Mr. A. B. Stickney, in his work, "The Railway Problem," holds that in the interest of uniformity it is desirable to transfer the entire control of railroads to the National Government. He assigns two reasons for the proposed change; one being that Congress would consider the subject of railroad control with more intelligence and greater deliberation; the other, that "the problem of regulating railway tolls and of managing railways is essentially and practically indivisible by the State lines or otherwise," and that the authority of Congress to deal with interstate traffic carries with it the right to regulate the traffic which is now assumed to be controlled by the several States.

It must be admitted that it is a difficult matter to draw the line of demarcation between National and State control, and that Congressional regulation of railways would remedy many evils which now affect our transportation system; yet there is reason to believe that the proposed change would in the end be productive of more evil than good. It is an essentially American maxim that the home government only should be trusted with the administration of home affairs. The people of each State know best their local needs, and it is safe to say that for a generation or two no serious effort will be made to amend the Federal Constitution in this respect or to secure from the courts an interpretation of the interstate commerce clause greatly differing from that which now obtains.

It is thus seen that nearly all the methods of railroad management which we have discussed are, at the present time at least, more or less impracticable on account of the radical changes which they would necessitate. It is not likely that for many years to come the American people could be induced to try any extensive experiments in state ownership of railroads; nor is it any more likely that the present generation will undertake the difficult task of separating the ownership of railroads from their operation.

A nation is, like the individual, inclined to follow beaten tracks. It finds it, as a rule, easier to improve these tracks than to abandon them and mark out a new course. Any proposition made for the improvement of our system of railroad transportation is in the same proportion likely to receive the approval of the masses in which it makes use of existing conditions. It will, therefore, be my aim, in making suggestions as to a more efficient control of this modern highway, to retain whatever good features the present system possesses, and to only propose such changes as may seem essential to restore to the railroad the character of a highway.

As has been indicated above, any system of railway regulation, to be applicable to our circumstances, must recognize the dual sovereignty of Nation and State. The great majority of our railroad corporations were originally created by the State, and are only responsible to the State as long as they do not engage in interstate commerce. Even foreign corporations must submit to all police regulations of the State in which they may do business, and as long as the American Constitution remains intact the individual States will, and should, assert their right to regulate local traffic and to exercise police supervision over all railroads crossing their boundaries.

All power should be kept as closely to the people as is consistent with efficiency in the public service. It may even be questioned whether entire transfer to the Federal Government of the supervisory powers now exercised by the States in railroad affairs would tend to correct existing railroad evils more speedily or more effectually than they can be corrected through the agency of local rule. The conditions, and therefore the wants, of the different States differ so greatly that general legislation must always fail when it attempts to regulate matters of merely local concern.