"Railroads and the Public." It suggests nothing of humor, but
everything of gravity and involves considerations which affect the
prosperity of our whole people. The railroads, often berated in
legislatures and in congresses as leechlike and piratical, are, after
all, vital to the happiness of our people and to the progress of
our industries and commerce. The people are apt to forget that they
have been the greatest factors--I say the _greatest_ factors--in the
development of our resources and the enlargement of our commerce,
both in times of war and in times of peace. If one would stop
to think of what would have happened if, during the war for the
preservation of the Union, we had been without railroads, ready
and willing to serve the government upon its demand and at prices
fixed by it, how long would the war have continued? And what might
not have been its result? They carried troops from the North to the
places of rendezvous in the fields; they enabled the government
to transfer quickly from the East to the West, or the West to the
East, as emergency demanded, troops essential to successful military
operations. They carried munitions of war, they carried the mail
to our soldiers, they carried food and raiment to those who were
fighting under our flag.
And in time of peace, what would this country have been without the
railroads? The railroad has been the advance courier of progress, of
settlement, of production, of commerce. It is absolutely, and has
been, indispensable to the government, to the commerce and to the
happiness and comfort of our people. Its mission is not performed or
fulfilled. Considered solely with reference to construction, there
are new fields to be penetrated by them. Today men of courage and men
of means are building railways with characteristic American energy
in far off Alaska, to bring the gold mines and the coal mines and
the timber and the unknown resources of that distant territory into
the markets of the United States. If there is one instrumentality
which above another has been a factor, appreciable by all thoughtful
men, in making this country what it is, it is the railroad. And the
railroad has kept abreast with the demands of commerce. Every device
which ingenuity or invention has presented has been promptly adopted
by the railway companies of the country. They have kept abreast of
invention and improvement, until today the railway system of the
United States is the most luxurious, the safest, the best managed
railway system under the bending sky.
The first thing that would occur to one from this toast, the
railroads being first mentioned, is what do the railroad companies
owe to the public? That is easily defined. They owe it to the public
to furnish safe roadbeds and equipment; they owe it to the public
to furnish prompt service; they owe it to the public to treat all
men, with obvious limitations, passengers and shippers under the
same circumstances, equally and without unjust discrimination, and
they owe to the public the duty of, as far as it is possible, so
maintaining their roads and their equipment as to be able to meet
in a fair way all the demands of commerce and traffic at reasonable
rates. That excludes the rebate which never had any justification in
logic or in fair play. I think those who hated it most were those who
felt obliged to adopt it. When one railway company gave rebates it
is quite manifest that the competitor was obliged to, or go out of
business. And I believe that railway companies of the United States
were glad, and their officers were glad, when it was made a penal
offense for railway companies to give rebates. I think a railway
company owes to the public to be careful in the selection of its
employes; they should be capable, of course, and they should not
only be capable, but they should be courteous and polite. To sum it
up, you would say that what the railway in the enlarged sense--which
includes details--owes to the public is just and fair treatment.
What does the public owe to the railway companies? Precisely, as
I view it, the same thing, just and fair treatment. Only that and
nothing more. Everybody knows that the railway companies of the
United States--I won't put it that way--that the railway system
of the United States never could have been created without the
utilization of corporate entities. Partnerships never could have
concentrated the capital necessary to that end. Only corporations
could have achieved it. That was true in the past and it always
will be true. Now, why is the railway company different from other
corporations, most other corporations? One trouble with the general
public is that they don't seem to understand--and they are not
perhaps to be chided for it--their relation to the railway company.
They think, and they are told, they have been told it in Congress,
and they have been told it where one would least have expected it,
that railway corporations are public corporations, and they have
been taught to believe that their power over public corporations was
supreme, which is not far from the truth; but the railway corporation
is not a public corporation. The Supreme Court has many times decided
that a railway company is a private corporation, that its property
is private property, under the protection and safeguards of the
Constitution of the United States against the public as well as
against individuals who attack it. Then, wherein lies the difference
between a private corporation engaged in manufacture and a railway
corporation? Right here: A railway corporation can not construct its
railway without being clothed with a power which is not given to the
usual private corporation, a power which inheres in the sovereignty
of the state, the ultimate power of the people delegated to the
railway corporations and very few others, and that is the power to
take your land without your will at a price fixed not by you but by a
jury. Why? Because it is for the public use, and private interest and
private sentiment can not be permitted to obstruct the interest of
the state, and therefore the property of a railway company while it
is private property is, as the Supreme Court of the United States has
said, affected with the public interest.
A railway company serves the public, that is what it is organized
to do. Those who apply for the corporate franchises do not apply
for an altruistic purpose. They wish it because they think they can
make profit out of it, and that is legitimate, but the state grants
it for the public use. And so it comes about that the state has the
power to regulate it. Mark what I say, to regulate it, to prevent it
from exacting extortionate rates from the people; to prevent it from
putting upon the people abuses in its management, but that does not
mean that the state may take its property. That does not mean that
the state may take its management out of the hands of its owners.
It means simply that the state may protect the public from any
abdication by it or violation by it of its duty as a common carrier,
and this principle is too often forgotten.
In these days regulation has apparently achieved a wider field for
operation, and is deemed to be broad enough to regulate not only the
property and the management of the property, but the management of
everybody connected with it. That won't do. Why, I see it is stated
in the report of your Business Association that commissions which
have been organized by the states and the Commission organized under
the act of Congress, have come to stay. Of course they have come--we
know that, and we know another thing, that whenever a governmental
commission comes, it stays. The commissions in the states, most
of the states--God knows I wish I could say all the states, but
I can not truthfully--have subserved a useful purpose. The state
lays down the rule and the commission administers the law. There
is one thing about a commission in the regulation under the law of
railway carriers which places it in respect of proprietary, fairness
and fitness for that function, far above Congress or any other
legislative body, and that is this: That they have time to listen,
to investigate, to get at the truth, which a legislative body does
not have time to do in the very nature of things. I do not know, but
I think nothing added more to the reputation of Governor Charles E.
Hughes, of New York, than the fact that he refused to sign a bill,
but vetoed it, reducing the rates which railway companies might
charge, upon the ground that there had been no investigation which
enabled fair judgment as to what was fair treatment to the railway
corporations.
I was in public life a good many years and I am a firm believer in
the sober second thought of the American people, for it represents
the average judgment of every class of our people; but they get
wrong, they get wrong about men, and they get wrong about policies
and measures. They are subject, en masse, as men are individually,
to moments of passion and excitement, and they know it. As Mr.
Webster said, and as the Supreme Court of the United States has said,
the fundamental object of a constitution adopted by the people is
that they may protect themselves against themselves in moments of
excitement and passion. And the American people will always give heed
to the popular translation of the phrase, "Due process of law," that
is, hear before you strike.
Now the Commission, the Interstate Commerce Commission, was intended
by the Congress which created it to be an absolutely independent
body. It was to report to the Congress, it was not to be subject to
the command of either House of Congress, or of the Executive of
the United States. It was intended to be a quasi-judicial body. I
know all of its members, and I do not depreciate to the slightest
extent the services which it has rendered. The only criticism I
would have of it, and that does not arise from its membership, but
it is inherent in the system, is that it is never satisfied with the
powers it has got. It is as insatiable as death for power. It has
been proposed that they shall have the power to regulate the issue
of stocks and bonds by railway corporations created by the states,
that is, if the state which creates the railway company authorizes
it, desiring it to utilize its privileges for the construction of
a new railroad, to issue stock, or issue bonds, that it shall not
be permitted to do that thing until the act of the legislature and
the approval of the governor shall have been supplemented by the
approval of the Interstate Commerce Commission. Now I am getting
along in years, and I am a little old-fashioned, and I have not yet
been able to satisfy myself that where one government creates a stock
corporation, another government shall regulate the amount of its
capital stock and its bonded indebtedness.
I have seen it proposed lately that the Commission should have
the power to fix a rate, and that that rate should be final until
a final judgment setting it aside was reached. What becomes of
the constitution under such a law as that? A railway company, as
I have said, owns its property. It renders a compulsory service
to the public over its own property, with its own equipment, with
its own employes, and at its own risk, and is entitled to a fair
compensation, based upon the fair value of the property which it
devotes to the public convenience, and the Supreme Court has held
that that property can not be taken--because the use of property
is the property--can not be taken for the public use without just
compensation, and if the state, the legislature, or the Congress may
authorize a commission to fix a rate as reasonable and fair, beyond
which the railway company may not charge for services it renders, and
require it to observe that rate until the final adjudication as to
whether the rate is reasonable or not, and after the lapse of months
it is decided that it was unreasonable, how can the railway company
recover the great sum in unreasonable rates which it had lost? It
is a taking of a private property for a public use without just
compensation, and I deny the constitutional power of Congress to do
that thing. I admit the power, and the exercise of it to the fullest
extent to so far regulate railway corporations as to secure to the
public a faithful discharge of all their duties to the public at
reasonable rates, and under fair regulations; beyond that I believe
that the owners of the property ought to be permitted to manage the
property.
The business of railway management has become one of the learned
professions. It calls for some of the brightest intellects in the
country. It calls for the exercise of powers which, if devoted to
the law or to finance or to any other business, would place those
who exercise it among those at the head. It is one of infinite
complication, and it is not to be supposed that railway commissions
can manage railway properties as well as the men who have been
trained from boyhood to that business. I have never questioned that
the Interstate Commerce Commission, the Commission in Wisconsin, and
other commissions, earnestly set out to do the just and fair thing,
but the trouble with this whole question is, and has been through
many a year, that it gets too often into politics. I do not believe
myself that questions of business ever ought to find their way into
the political platform of the party, any more than I believe that the
relations of the employer to the employe, whatever the business may
be, ought to become the football of party politics.
This Association was born out of a happy inspiration. I think these
troublesome problems are approaching solution. The railway companies
must obey the law. The people ought to see to it that the law which
the railway corporations are obliged to obey is a just law, and that
is to be ascertained only on painstaking inquiry, and not through
the speeches of enthusiastic orators or on the floors of Congress.
It has got to be at times that where there was no other issue upon
which a political contest could be fought out, the easy, obvious and
last resort was "let us go for the railroads," or, as a Governor of
Minnesota once expressed it, "Let's shake the railroads over hell."
The truth is that the interest of the railroads is the interest of
the people. The railroad company is dependent upon the people for its
life and its sustenance, and the people are no less dependent upon
the railway company, and between the two there should be even-handed
justice. They should be dealt with calmly, and legislation should
only follow deliberation and investigation, and a law once enacted
should be impersonally enforced, not enforced against some and left
to fall into innocuous desuetude as to others.
RAILROAD PROBLEMS OF TODAY
BY J. B. THAYER,
Vice-President Pennsylvania Railroad Company.
Address delivered before the Traffic Club of New York, Saturday
Evening, February 16, 1909.
Problems--both many and varied--have always confronted the railway
manager. Particular problems come to the front from time to time that
tax all of our resources. They differ with different periods of our
history. Today one of the most serious depends more for its solution
upon our lawmaking bodies, both State and national, than upon the
railroad men, and for the present, at least, we must feel like the
old Arkansas darky, who said he was "in the hands of an all-wise and
unscrupulous Providence."
In the early days of railroads the chief problem was that of
construction and equipment; later, when more railroads had been built
than there was traffic to feed, there came the traffic problem, and
all the abuses which followed in its train. These, in turn, led
to the legislative problem accompanied by the Interstate Commerce
Law of 1887, and through the '90s all sorts of problems--including
bankruptcy for many. Now, within the past few years has come the
great problem of enlargement--the construction period again, but in
a different shape. Not experimental, for we had learned how to build
and how to equip; not the building so much into new country, but to
take care of the traffic which was overflowing our rails.
Events of the past year have proved the absolute necessity for
almost all the large railroads in this country to enlarge their
trackage, their terminals, and their equipment; and yet, here again,
when in considering where to obtain the necessary funds for such
purposes,--which must, of course, come from the public,--the railroad
managers find themselves confronted with great difficulties. This,
of course, is largely due to the tremendous demands for capital,
in the development that is going on in all parts of the world, but
it is increased, at the moment, by the natural timidity of capital
to invest its funds in railroad securities, in view of the violent
attacks that are being made against corporations through Congress and
the State legislatures.
POPULAR HOSTILITY TO THE RAILROADS.
This brings us, then, to our greatest and most perplexing
problem--that of how to restore a state of reciprocal understanding
and fairness between the carriers and the public. Many railroad
officials believe that so deep-seated is the apparent hostility
of the people that the management of the railways will be taken
practically out of the hands of their owners, and that great
disasters are to follow. I do not share this view, principally for
the reason that whatever may have been the faults in the past, the
methods and practices of railroad management are now based upon a
decent regard for their public responsibilities. Sooner or later the
people will recognize this--as I believe they are already beginning
to do. But by no means can we minimize the actual situation of today.
It is, indeed, a time of great anxiety to all those entrusted with
railroad management, and who have the interests of their country at
heart as well.
With the old rebates and secret discriminations things of the
past, with all kinds of business in a most prosperous condition,
we all know that within the past three years, suddenly, out of an
almost cloudless sky, there has burst forth upon the railroads of
this country a torrent of the most bitter and violent attacks--by
political orators upon the stump; in magazines and newspapers; in
Congress and State legislatures. It is fair to say, I think, that
this onslaught had its origin in the agitation of 1904 for changes
in the Interstate Commerce law. It was based upon a misunderstanding
of existing railroad conditions and the position of the railroad in
regard to the points at issue, which I shall presently explain.
Following the agitation surrounding the passage of the rate bill has
come a swarm of bills in Congress and State legislatures, which, if
they become laws, and are enforced, will prove disastrous to the
railroads, and, equally so, to the public at large. The question is,
What is to be done to prevent it? The old method of influence has
been abandoned, and, I hope, forever. Has it left us unequipped to
meet the issue? To answer this question let us get a perspective.
RAILROADS NOT BLAMELESS.
We must not imagine, to begin with, that we are entirely blameless.
We are in some respects only realizing the wages of past sins. We
have done many of "those things which we ought not to have done,"
and we have left undone many of "those things we ought to have done."
Most of the evils date back many years and many of them might have
been prevented had the government done its duty and enforced the
law. Yet even in most recent years we can find some mistakes with
which to concern ourselves. It is not strange that many men who have
suffered loss through delays in their traffic, or in their personal
transportation, or who saw themselves deprived of profitable business
because they could not secure cars, should have become exasperated
and, not having time to properly analyze the difficulty, thought that
the railroads were lacking in foresight and management.
But let us go back a few years. It is a great mistake to hold the
railroads responsible for such practices as rebating in those days,
when it would have been impossible to throw a stone in a commercial
community without hitting somebody who was taking rebates and
wanting more. Many men are today running for office on anti-railroad
platforms who if you were to say "Rebates" would duck their heads
very much as David Harum said his Newport friends would do if he
called out "Low bridge!" That rebates were wrong nobody questions,
but to pillory a man today for accepting rebates at that time is a
farce.
Many persons believe that the so-called discriminations, resulting
in the secret arrangements, were largely influenced by the desire
upon the part of railroad officials to favor one man against another,
but no thoughtful man who has at all studied the problem believes
this. Rebates and other forms of discrimination,--whatever may have
been the result in specific instances,--had their origin mainly in
the competition between carriers for the traffic. Incidentally, in
transacting railroad business through secret arrangements, as became
the custom in that period, there were many cases of discrimination in
favor of the strong and against the weak.
There was a strong feeling upon the part of many men, both in and
out of railway service, that the larger shipper, under the ordinary
rules of business, was entitled to a lower rate, and they could
not conceive the real principle which should govern the making of
railroad rates,--which, however, has come clearly to be realized
since that time. The railroad systems, generally, were not more
anxious to pay rebates than they were to pay higher prices for their
supplies, and simply pursued the course of their competitors because,
otherwise, they saw nothing but loss and probable bankruptcy staring
them in the face. The railroads were forbidden by law to meet and
make formal agreements for the maintenance of rates, and by another
law were required to compete. We all thought that the old plan _was_
competition.
Had the Government, through its Interstate Commerce Commission,
vigorously undertaken to enforce the law--passing if necessary,
long before it did, the Elkins Act--I think we should have seen a
correction of these abuses long before the reform came; but, as a
matter of fact, neither the Government authorities nor many of those
managing the railroads had yet reached a clear conception of the
significance of the abuses which existed and of the proper legal
method of uprooting those evils.
GETTING AWAY FROM OLD ABUSES.
Upon the resumption of business activity, in 1898 and 1899, and,
later, following the passage of the Elkins Act, the opportunity was
presented,--and in general accepted by the railroads,--to get away
from the old methods. While since then there have been some cases of
violation of the law, in the matter of secret arrangements, yet I
think that, at least within the last four or five years, it is safe
to say that they have been of small importance, and perhaps, in many
of the cases--while a technical violation of the law--were actually
not discriminations. I say this advisedly, so far as the eastern
situation is concerned, because I know that the Pennsylvania Railroad
Company has not paid a rebate for years, and it is fair to believe
that as that company held its traffic,--in fact, largely increased
it,--without the necessity for such arrangements, its competitors
must have to a large extent pursued the same policy.