less complicity in evil between the people and the railroads, but
let me ask you to consider, for a moment, the question of free
transportation, or passes,--whether political or business. It is
only within the last year or two that the public conscience has been
awakened on this subject. It is true, the railroads have been abused
for several years by those who did not enjoy such favors, but is the
railroad more responsible for the conditions that existed than the
Government of the people, either in the National Congress or in the
State legislatures, and how could it be expected that the legislators
in one State could feel that they were doing very wrong in accepting
passes, when the legislators of another State enjoyed them by law of
the State? How could members of Congress be criticised for accepting
such privileges, or the railroads for extending them, when the
Presidents of the United States and member of their cabinets, and
other important officers of the Government not only accepted them,
but practically exacted them, and, further, expected that private
cars and private trains should be furnished without charge? Upon
one occasion within the past two years I called upon the Interstate
Commerce Commission to ask its assistance in eliminating the pass
abuse, and was very frankly told that it could make no move, nor
take any interest in the subject, in view of the fact that important
public officials including Senators and the members of Congress
felt that it was not improper for them to accept them. Out of this
situation grew a large part of the pass abuse, because, following the
national government and the legislatures, the large men of business
felt that they could properly accept similar privileges.
Therefore, I repeat, that while there were great abuses--especially
during the period referred to--embittering a large portion of
people, yet the railroads were no more responsible than the people
themselves; and yet, without doubt it was during this period that the
foundation was laid for the feeling of the present day.
RAILWAYS WELCOME JUST REGULATION.
But, as I stated, we were forced to bear the brunt of our past
sins--and more--in the campaign for increasing the powers of the
Interstate Commerce Commission. Do not misunderstand me. Many
thoughtful railroad men believed always, in the value, both to
the railroads and the public, of an interstate law, and, further,
considered it wise to strengthen the power of the Commission.
The distinction, however, between what railroad men did and did
not believe in, is very clear. We felt and we feel now that the
government is perfectly justified in regulating railroad practices
to the extent of preventing discriminations. Indeed, the government
should act as a sort of policeman to see to it that the weak and the
helpless are protected. If reasonably administered, the railroads
need the law. But the government should not have the right to
interfere with the proper play of the natural commercial forces of
the nation. The great distinction between police and commercial
powers should never be lost sight of.
The danger does not lie in the provisions of the new national
law. There is no substantial difference between its provisions
and those of the old law, except in respect to the powers of the
Commission. There was no necessity for the new law, so far as the
prevention of the old abuse of secret rates and discrimination was
concerned. The operation of this law does not involve any material
change in traffic operations of the railroads; the only danger is
as to how the Commission may exercise their power in influencing
reductions in rates, but even in that respect the railroads have
the right of appeal to the courts. It is from various other bills
being presented in Congress in which the immediate danger lies,
showing possible interference by the national government with the
operation of railroads, with respect to the hours of labor of its
employes, systems of signals, and other methods of operation, which
should properly be left to the railroads themselves. This threatened
interference of the federal government is having a powerful and
dangerous influence upon the legislatures of the various states, who
apparently are--in a slang term--"Seeing Congress and going them
five or six better"--in the bills for reduction of state rates, both
passenger and freight; for increase in taxation, and all sorts of
measures which tend to reduce the earnings and increase the expenses,
and hamper and delay the actual development necessary.
It was unfortunate that in the agitation and discussion following
the President's recommendations, until the present law was finally
adopted, there was a total misunderstanding upon the part of the
public at large as to this attitude of the railroads. It was most
unfortunate in that campaign that the principal point of contest
upon the part of the railroads was lost sight of--and that is--the
objection upon their part not to reasonable amendments to the law,
and not--if the people wanted it--to some increase of power to the
Commission, but to the attempt to make a commission of five or seven
men--in many respects a political body--the final arbiters as to the
rates and fares of the railroads.
DIFFICULTIES UNDER THE PRESENT LAW.
Yet even with the new law on the statute books, our traffic problems
are still with us. We are forbidden by law to make formal agreements
as to rates, yet it is universally recognized that in order to secure
an equitable adjustment of rates, it is absolutely necessary that the
traffic managers of the railroads shall confer frequently. It is well
known that such conferences are held and must be held to prevent
discriminations, yet no definite agreements can be made.
The present law stipulates that there shall be no discrimination by
railroads against persons or communities. Right here, however, the
railroads are face to face with a problem all their own, which is
a very serious one, and that is: How shall a particular railroad
prevent discrimination against a community on its own line by
some other railroad seeking to specially favor a community on its
line? Is it not absolutely essential that there should be both
an understanding and a virtual agreement on the part of the two
railroads concerned for the purpose of protecting both communities?
Cases of dispute between railroads as to proper rate adjustments
have, indeed, been referred to Interstate Commerce Commissioners
as arbitrators and their findings have been observed. This shows
how absolutely vital to all business is the necessity for that
co-operation which can only be secured by agreement and conference
between all interested parties. The President of the United States
recognized the necessity for this fact in his last annual message
and recommended that some legislation be passed which would permit
agreements between railroads as to rates.
We are thus in the presence of this ridiculous situation; that on the
one hand we are being threatened with prosecution by the Government
for violation of the Sherman Act in respect to methods which on the
other hand the President of the United States and the Interstate
Commerce Commissioners agree must be followed in order to properly
discharge our responsibility to the public--in other words, we are
"between the devil and the deep sea," or we are damned if we do, or
we are damned if we don't.
So much for the moment, for our national problem. As to State
regulation: while not believing--now that we have a national
law--that it is necessary or desirable for the public to establish
state commissions and special railroad laws, at the same time, if
the people desire such commissions, we have no right to look upon
such a demand as "anarchistic," but we feel that the working of such
commissions will be unsatisfactory to the business interests.
CONFIDENCE AND JUSTICE NEEDED.
These are but a few of our problems and difficulties. While I do
not wish to minimize the dangers of the present situation, while I
recognize that it is now to some extent, by adding to the timidity of
investors, retarding our ability to secure funds necessary to make
extensions and buy equipment required for the ever-increasing traffic
of the country, and if continued will make it impossible, yet I am
firmly of the opinion that the good sense of the people will prevail
and the unjust attacks cease. Confidence of investors both here and
abroad is needed to furnish funds, and, if this is seriously shaken,
the prosperity of the railroads, which are the keystone of the arch
of business, will be destroyed.
To avoid these dangers a regime of confidence and fairness on the
part of the public toward the railroads must be restored, and to
accomplish this we must place our case, as it were, before the
legislators and the people and make clear our difficulties and the
complications which beset us. Few, after all, understand the railroad
problem, and we have not made it plain to the people, either because
it was the fashion not to do so, or because we could not realize that
things simple to us were not understood by the public. We must not
stop at one statement, but discourse upon and elucidate every subject
which the public misunderstands.
Let us be frank and take the public into our confidence as fully
as is consistent with the proper conduct of our business. Let
us approach the subject with the feeling that the railroads are
not absolutely perfect, that we have to some extent brought this
condition of affairs upon ourselves, and that we should govern
ourselves in the future accordingly. Let us undertake to go frankly
before the people and present the actual facts in connection with our
affairs.
THE PENNSYLVANIA AS AN ILLUSTRATION.
Let me illustrate: The Pennsylvania Legislature is in session.
Numerous bills have been presented, of a most radical nature. It
is our purpose to appear before every committee that will hear us,
and tell our side of the story. I doubt very much if the average
legislator--and certainly not the average citizen--understands
whom he is injuring in unjust acts towards the railroads. Take our
company, for example. It is not a small group of rich capitalists;
it is not Mr. McCrea and myself and a few others; the Pennsylvania
Railroad is owned by more than 50,000 people, 30 per cent of whom
live in Pennsylvania. Forty-seven per cent of our shareholders are
women; and in many cases the dividend is their only source of
income. Then there are thousands of bondholders; beyond them are
nearly 100,000 employes in the State of Pennsylvania dependent upon
the prosperity of the Pennsylvania Railroad for their livelihood.
Therefore, by the usual computation, it is safe to say that
approximately half a million people--men, women and children--are
actually dependent upon the welfare of this company in the State of
Pennsylvania alone.
Upon the Pennsylvania Railroad's prosperity depends the prosperity of
the other lines in its system, and including the employes of these
lines, there are 200,000 men, who, with their families, constitute an
army of a million or more. Behind them, again, are the thousands of
men, with their families, who produce the coal and other materials
which the railroads use. Anything that cripples the railroads injures
every one of these people.
When we make these and other facts plain, I cannot but feel that
no injustice will be done. In the meantime, let us keep our minds
well balanced, and not allow ourselves to believe that chaos is
coming; let us meet the issue fairly and squarely and frankly. While,
therefore, necessary for the present, at least, to suspend many
improvements, let us keep our courage, trusting to the ultimate good
sense of the lawmakers and the people for that sympathy and support
to which we feel that we are entitled.
THE RELATION OF RAILROADS TO THE STATE.
BY W. M. ACWORTH, M. A.
Delivered before the British Association at Dublin, Ireland,
September 2, 1908.
I propose to treat the subject in two aspects; first, the history in
outline of the relations between railroads and the state in different
countries, and, second, the question of the factors which are of
primary importance in any consideration of the matter.
Ever since the year 1830, when the dramatic success of the Liverpool
& Manchester Railway first revealed to a generation less accustomed
than our own to revolutionary advances in material efficiency the
startling improvements in transport that railroads were about to
effect, theorists have discussed the question whether state or
private ownership of railroads be in the abstract the more desirable.
But it is safe to say that in no country has the practical question,
"Shall the state own or not own the railroads?" been decided on
abstract considerations. The dominant considerations have always been
the historical, political and economic position of the particular
country at the time when the question came up in concrete shape for
decision.
BELGIUM.
The Belgian railroads have belonged to the state from the outset,
because they were constructed just after Belgium separated from
Holland, and (the available private capital being in Holland and
not in Belgium) King Leopold and his Ministers felt that, if the
railroads were in private hands, that would mean in Dutch hands,
and the newly acquired independence of Belgium would be thereby
jeopardized. Within the last few years this history has repeated
itself, and the fact that the bulk of the Swiss railroad capital was
held in France and Germany was one main reason, if not _the_ main
reason, which induced the Swiss people to nationalize their railroads.
GERMANY.
In Germany 70 years ago the smaller states were regarded as the
personal property of their respective Sovereigns, almost as
definitely as Sutherlandshire is the property of the Duke of
Sutherland. And it was therefore as natural that the Dukes of
Oldenburg or Mecklenburg should make railroads for the development of
their estates as that the Duke of Sutherland should build a railroad
in Sutherland.
AUSTRALASIA.
Take, again, Australasia. In that region the whole of the railroads,
with negligible exceptions, now belong to the different state
governments, and the public sentiment that railroads ought to be
public property is today so strong that it is impossible to imagine
any serious development of private lines. But at the outset the
traditional English preference for private enterprise was just
as strong there as it was at home, and it was only the fact that
the whole of the available private capital was absorbed in the
development of the gold fields and that, therefore, if railroads were
to be built at all, public credit must be pledged and English capital
must be obtained, that caused the state to go into the railroad
business.
ITALY.
Take, once more, the case of Italy. In the days when Italy was only a
geographical expression, the various Italian states experimented with
railroad management of all sorts and kinds. When, after 1870, Italy
was unified, it was necessary to adopt a national railroad policy,
and the Italian government instituted an inquiry whose exhaustiveness
has not since been approached. The force of circumstances has indeed
already compelled the government to acquire the ownership of the
railroads, but the Commission reported that it was not desirable
that the government should work them. The railroads were accordingly
leased for a period of 60 years, running from 1884, to three
operating companies, and it was provided that the leases might be
broken at the end of the 20th or the 40th year. From the very outset
a condition of things developed which had not been contemplated when
the leases were granted, and for which the leases made no provision.
Constant disputes took place between the government and their
lessees. Capital for extensions and improvements was urgently needed;
neither party was bound to find it; and agreement for finding it on
terms mutually acceptable was impossible of attainment. In the end
the government has been forced to cut the knot, to break the lease at
the end of the first 20 years' period, and for the last two years the
Italian government has operated its own railroads. But it is safe to
say that an _a priori_ preference for state management over private
management played but scant part in the ultimate decision.
GENERAL INCREASE OF STATE CONTROL.
It is impossible to review, even in the merest outline, the railroad
history of all the countries in the world, but the instances already
given will serve to illustrate my proposition that the position in
each country depends not on abstract considerations, but on the
practical facts of the local situation. Yet one cannot look round
the world and fail to recognize that the connection between the
railroads and the state is everywhere becoming more intimate year by
year. Whatever have been the causes, the fact remains that Italy and
Switzerland have converted their railroads from private to public. In
Germany the few remaining private lines are becoming still fewer. In
Belgium the process is practically completed. In Austria it is moving
steadily in the same direction; four-fifths of the total mileage is
now operated by the state. In Russia the story would have been the
same, had it not been for the war with Japan. Even in France, whose
railroads have a very definite local and national history of their
own, an act for the purchase of the Western Railway by the state was
passed last year by the Chamber of Deputies, and has now, after much
contention, been passed by the Senate within the last few weeks. But
it is not without interest to note that, though a majority both of
deputies and of senators supported the bill, the representatives of
the district served by the company were by a large majority opposed
to it, while the commercial community of the whole of France, as
represented by the Chambers of Commerce, were almost unanimously
hostile.[I] So far as can be seen at present, the purchase of the
Western Railway by the state is not likely to be made a precedent
for the general nationalization of the French railroads. Still, the
broad fact remains that a series of railroad maps of the continent
of Europe, constructed at intervals of ten years, would undoubtedly
show an ever-increasing proportion of state lines, and that the last
of the series would exhibit the private lines as very far below the
state lines both in extent and in volume of traffic.
A word ought to be said of Holland, not only because Holland is a
country with free institutions like our own, but because the railroad
position of Holland is unique. The railroads of that country were
built partly by the state and partly by private enterprise, but the
working has always been wholly in private hands. Some ten years
ago, however, the Dutch government bought up the private lines and
rearranged the whole system. The main lines of the country are now
leased to two operating companies, so organized that each company
has access to every important town, and railroad competition is now
practically ubiquitous throughout Holland. So far there are no signs
that the Dutch people are otherwise than satisfied with their system.
Now compare this with France. The French government, though it has
hitherto, except on the comparatively unimportant state railroads in
the southwest of the country, stood aloof from the actual operation,
has always kept entire control of railroad construction and of the
allocation of new lines between the several companies. And the French
government has proceeded on a principle diametrically opposed to
the Dutch principle. In France railroad competition has, as far as
possible, been definitely excluded, and the various systems have
been made to meet, not, as in Holland, at the great towns, but at
the points where the competitive traffic was, as near as might
be, a negligible quantity. Now that questions of competition and
combination are to the fore in England, and seem likely to give
very practical occupation to Parliament in the session of 1909, the
precedents on both sides are perhaps not without interest.
AMERICA.
When we turn from the continent of Europe to the continent of America
the position of affairs is startlingly dissimilar. The railroads of
America far surpass in length those of the continent of Europe, while
in capital expenditure they are equal. State ownership and operation
of railroads on the continent of America is as much the exception
as it is the rule in Europe. In Canada there is one comparatively
important state railroad, the Intercolonial, about 1,500 miles in
length. Though its earnings are quite considerable--about £20 per
mile per week--it barely pays working expenses. I may add that in
all the voluminous literature of the subject I have never seen this
line cited as an example of the benefits of state management. There
is another small line, in Prince Edward Island, which is worked at a
loss; and a third, the Temiskaming & Northern Ontario Railway, owned
not by the Dominion but by the Provincial government, which is too
new to afford any ground for conclusions.
The Federal government of the United States has never owned a
railroad, though some of the individual states did own, and in
some cases also work, railroads in very early days. They all burnt
their fingers badly. But the story is so old a one that it would be
unreasonable to found any argument on it today.
In Mexico, of which I shall have more to say directly, the state
owns no railroads. As for Central America, Costa Rica and Honduras
have some petty lines, which are worked at a loss. Guatemala had a
railroad till 1904, when it was transferred to a private company.
Nicaragua has also leased its lines. Colombia owns and works at a
profit, all of which is said to be devoted to betterment, 24 miles of
line.
In South America, Peru and Argentina own, as far as I am aware, no
railroads. The Chilian government owns about 1,600 miles out of the
3,000 miles in the country. Needless to say private capital has
secured the most profitable lines. The government railroad receipts
hardly cover the working expenses. The Brazilian government formerly
owned a considerable proportion of its railroad network of nearly
11,000 miles. Financial straits forced it some years ago to dispose
of a large part to private companies, to the apparent advantage at
once of the taxpayer, the shareholder and the railroad customer.
About 1,800 miles of line are still operated by the government, the
receipts of which, roughly speaking, do a little more than balance
working expenses. But it may be broadly said that the present
Brazilian policy is adverse to state ownership and in favor of the
development of the railroad system by private enterprise.
THE UNITED STATES SITUATION.
The question of public ownership and operation was, however, raised
very definitely in the United States only two years ago, when
Mr. Bryan made a speech stating that his European experience had
convinced him that it was desirable to nationalize the railroads of
the United States. For many weeks after, Mr. Bryan's pronouncement
was discussed in every newspaper and on every platform, from Maine
to California. Practically, Mr. Bryan found no followers, and today,
though he is the accepted candidate of the Democratic party for the
Presidency, the subject has been tacitly shelved. To some extent
this may have been due to the ludicrous impossibility, if I may
say so with all respect for a possible President, of Mr. Bryan's
proposals. In order, presumably, not to offend his own Democratic
party, the traditional upholders of the rights of the several states,
he seriously suggested that the Federal government should work the
trunk lines, and the respective state governments the branches. Even
if anybody knew in every case what is a trunk line and what is a
branch, the result would be to create an organism about as useful for
practical purposes as would be a human body in which the spinal cord
was severed from the brain. Mr. Bryan's proposal was never discussed
in detail: public sentiment throughout the Union was unexpectedly
unanimous against it, and it is safe to say that the nationalization
of the railroads of the United States is not in sight at present.