CHAPTER X.

RAILROAD LITERATURE.

The cause of the railroad manager has never been without time-servers.

Not to speak of those newspaper editors who, for some consideration or

another, defend every policy and every practice inaugurated or approved

by railroad authorities, there has always been a school of literati who

felt it their duty to enlighten, from a railroad standpoint, their

fellow-men by book or pamphlet upon the transportation question, to

correct what they supposed to be false impressions, and to round up with

an apology or defense for the railroad manager, who is invariably

represented by them as the most abused and at the same time most

patriotic and most progressive man of the age.

The benefits derived from the railroad are great. It has been an

important factor in the development of our country's resources and the

advancement of our civilization. Its value is fully appreciated, but

there is no reason why the men who have utilized the inventions of

Stephenson and others, and have grown rich by doing so, should be

eulogized any more than those who are ministering to the wants of the

public by the use of the Hoe printing press, McCormick's reaper,

Whitney's cotton gin, or any of the thousands of other modern

inventions.

These authors doubtless are prompted by various motives. Some have been

educated in the railroad school and are therefore blind to railroad

evils. Others naturally worship plutocrats, because they hold the

opinion that capital is entitled to a larger reward than brains and

muscle, for the reason that the latter is more plentiful than the

former.

But there is a third class of railroad authors, who, there is reason to

believe, enter the literary arena in defense of railroad evils not

solely for the love they bear the cause, but as the paid advocates of a

class of men who feel that their cause is in need of a strong defense at

the bar of public sentiment. It would be difficult to account in any

other way for the extravagant statements and one-sided arguments made by

this class of writers. Yet railroad literature has not confined itself

to the retrospective field. Its scope has grown with the significance of

its contributors. In more than one instance have men at the head of

large railroad corporations, influenced by temporary interest, become

the authors of documents containing assertions and prophecies highly

pathetic at the time, but subsequently shown to be so replete with

falsehoods and absurdities that few railroad managers would to-day be

willing to father them. Thus Alexander Mitchell, the late president of

the Chicago, Milwaukee and St. Paul Railroad Company, addressed on the

28th of April, 1874, shortly after the passage of the Wisconsin Granger

Law, a letter to Governor Taylor, containing the following passages:

"That it [the Wisconsin law] has effectually destroyed all

future railroad enterprises, no one who is acquainted with

its effect in money centers will for a moment doubt.... The

whole amount received on the investment [Chicago, Milwaukee

and St. Paul Railroad] for interest and cash and stock

dividends, amounts to only six per cent. per annum of the

actual cost of the property. I submit to your Excellency,

and through you to the people of the State, whether this is

more than a fair and reasonable return for the capital

invested in these improvements. Is it not far below such

reasonable amount? The best and most careful economists

admit that no less than ten per cent. per annum should be

allowed on such investments.... The directors of this

company have at all times had a due regard to the interests

of the public, and a desire to furnish transportation at the

lowest possible figures, and, although not receiving a fair

and reasonable return on their investments, they have for

the last four years prior to 1873 steadily reduced their

rates of freight and passengers from year to year, as will

be seen from the following tables, showing the charge for

freight per mile, and the average per mile for passengers

for each year, from 1868 to 1873 inclusive:

Charges per ton Average passenger rate

per mile--cents. per mile--cents.

1864 .04

1868 .03 40-100 .03 86-100

1869 .03 10-100 .03 92-100

1870 .02 82-109 .03 85-100

1871 .02 54-100 .03 75-100

1872 .02 43-100 .03 54-100

1873 .02 50-100 .03 42-100

"The law in question proposes to reduce our passenger rates

twenty-five per cent. and our freight rates about the same,

thus deducting from our present tariff about twenty-five per

cent. of our gross earnings.... This act, as we have seen,

proposes to take from us twenty-five per cent. of our

passenger and freight earnings, and the additional tax of

one per cent. of our gross earnings, all of which is

equivalent to taking from us twenty-six per cent. of our

gross earnings. Therefore, deducting this amount, equal to

twenty-six per cent. of our entire gross earnings, from

thirty-three per cent., our average net earnings on

business, would leave us only seven per cent. of our gross

earnings as the entire net earnings of the road, out of

which must be paid the interest on the bonds and the

dividends to our stockholders. It is therefore manifest that

this law will take from us over three-fourths of the net

income received under our present tariff.... The board of

directors have caused this act to be carefully examined and

considered by their own counsel, and by some of the most

eminent jurists in the land, and after such examination they

are unanimous in their opinion that it is unconstitutional

and void.... The board of directors are trustees of this

property, and are bound faithfully to discharge their trust,

and to the best of their ability to protect it from

spoliation and ruin. They have sought the advice of able

counsel, and, after mature consideration, believe it their

duty to disregard so much of said law as attempts

arbitrarily to fix rates of compensation for freight and

passengers.... Being fully conscious that the enforcement of

this law will ruin the property of the company, and feeling

assured of the correctness of the opinions of the eminent

counsel who have examined the question, the directors feel

compelled to disregard the provisions of the law so far as

it fixes a tariff of rates for the company, until the courts

have finally passed upon the question of its validity."

The letter was at the time regarded by railroad men as a very strong

document, and the railroad journals were filled with lengthy editorials

in praise of the soundness of the doctrines and arguments which it

contained. The disinterested of the enlightened portion of the community

even then realized that the "eminent jurists" whom the company had

consulted were hired attorneys and greatly biased in their views as to

the constitutional rights of corporations, and that President Mitchell

on his part had painted by far too dark a picture of the situation. It

is now quite generally admitted that many of Mr. Mitchell's statements

were as false as his counsel's interpretation of the Constitution and

the law was erroneous. From the assertions made in this letter one is

led to infer that the then stock-and bondholders of the Milwaukee road

had paid in full every dollar of the capitalized value of the road, and

that they derived from their investment an income of only about six per

cent. on the money actually invested by them. The cost of the entire

Chicago and Milwaukee system in Wisconsin was stated in the letter as

being $38,000 per mile. It is not likely that this line of road ever

cost to exceed $25,000 a mile, or that those who then owned the road

paid much more than two-thirds of its actual cost for it. The road, as

the letter itself admits, was bought at sheriff's sale, and no mercy

whatever was shown to the farmers who had mortgaged their farms to aid

the railroad company in raising funds for the construction of its line.

The letter contains other misstatements equally grave. Mr. A. B.

Stickney, the president of the Chicago, St. Paul and Kansas City

Railroad, in his recent excellent work, "The Railway Problem," reviews

Mr. Mitchell's letter as follows:

"Mr. Mitchell states the average rate per mile in 1873 for

passengers at 3.42 cents. It was well understood that this

was an average rate received from those passengers who paid

anything, and that, had the average rate been obtained by

using as a divisor the total number of paying passengers

plus the number of those who rode free the average would

have been much below three cents, the price fixed by the

law, and consequently, if the company would collect the

legal rate from all alike and abolish the free list, its

revenues from the passenger business would be increased

rather than decreased. If the same test is applied to the

freight rates it becomes equally evident that this statute

did not reduce the rates in Wisconsin below the average rate

of 2.50 cents per ton per mile, which, according to Mr.

Mitchell's statement, was the average for the year 1873. For

proof, it may be stated that the law classified freight into

four general classes, to be designated as first, second,

third and fourth classes, and into seven special classes, to

be designated as D, E, F, G, H, I and J. The rates on the

four general classes were made the same as were 'charged

for carrying freights in said four general classes on said

railroads on the first day of June, 1873,' and the rate per

ton per mile was fixed at certain rates for the first

twenty-five miles, a less for the second twenty-five miles,

and a fixed rate per mile after, as follows:

1st 25 Miles 2nd 25 Miles. All Over 50 Miles.

D 4-4/5 cents 3-1/5 cents 1 3/5 cents.

E Same as class above.

F 4 cents 2 cents 1 cent.

G 3-1/5 cents 2 cents 1 cent.

H 4 cents 2-4/5 cents 1-3/5 cents.

I 4-2/5 cents 2-2/5 cents 1-1/5 cents.

J 3-1/5 cents 2-2/5 cents 1 cent.

"When it is considered, in connection with these figures,

that the four general classes were left by the legislature

under the same tariffs as had been enforced by the

companies, and, as a rule, first class is three times the

rate of class D, and third and fourth class materially

higher, the evidence seems conclusive that the rates fixed

by law would produce an average materially higher than the

average of the whole year, stated by Mr. Mitchell at 2-1/2

cents. It seems also probable that, had the rates fixed by

this law been applied to the whole business of the line, the

interstate as well as the State traffic, it would still have

produced a larger average. The latter of course is the

proper test. There are little inaccuracies in the material

facts as stated by Mr. Mitchell which were pointed out at

once. For example: In his tabulated statement of passenger

earnings per mile, averaging the gross earnings from

transportation of passengers who paid any fare, and omitting

the large number who went free, the rate is stated at 3

42-100 cents per mile; then he says: 'The law in question

proposes to reduce our passenger rate twenty-five per

cent.,' which would have reduced the rate to 2.57 cents per

mile, while, the rate fixed by the law complained of was

three cents per mile. Then Mr. Mitchell proceeds: 'And our

freight rates about the same; thus deducting from our

present tariff about twenty-five per cent. of our gross

earnings.' It was immediately pointed out that the law only

applied to strictly State business; that is, to traffic

that originated and ended in the State of Wisconsin. All

other traffic was interstate commerce, and could not be

controlled by State legislation. The volume of business

which would be affected by the law would therefore be

comparatively small--estimated at not over ten per cent., of

the total traffic of the line. Hence, if the rates fixed by

the law were twenty-five per cent. less than the rates the

company had been in the habit of collecting (which was

denied), it could not possibly have 'deducted from its

present tariff' more than two and one-half per cent.,

instead of twenty-five per cent. as stated by Mr. Mitchell.

"It was claimed that the facts were, that the Chicago,

Milwaukee and St. Paul Company, in its efforts to bankrupt

the Lake Superior and Mississippi Company, had many of its

interstate rates so low that it had resulted in loss, and

that its other rates had been made unreasonably high in

order to recoup this loss, and that the State of Wisconsin

was compelled to pay a part of the expense of the

transportation of favored sections of the State of

Minnesota."

All through the Granger contests the railways have weakened the force of

their arguments by their misrepresentation of facts and by their

extravagant predictions of ruin. The companies were continually

proclaiming: 'If this or that is done, it will ruin us; it will ruin the

State,' when, in fact, a road cannot be mentioned that has suffered from

State legislation. Nineteen years ago no railroad manager could have

written what Mr. Stickney writes to-day, and few railroad managers would

write to-day what Mr. Mitchell wrote then. And yet, such is the change

which public sentiment is undergoing upon these questions, that the

utterances of many of our present railroad authors will appear as absurd

a few years hence as Mr. Mitchell's letter of nineteen years ago appears

to us now.

Many railroad attorneys have since been guilty of resorting to the

sophistry employed by President Mitchell in that strange letter which he

addressed to the Governor of Wisconsin. Even so distinguished a

gentleman as Hon. James W. McDill, now a member of the Interstate

Commerce Commission, made in 1888, as a member of a railroad lobby, the

following remarkable statements before the Railroad Committee of the

General Assembly of Iowa, in a speech opposing a proposed reduction of

the passenger rate of first-class roads from three to two cents per

mile:

"The proposition, if confined to the first-class roads of

Iowa, proposes a one-third reduction of their revenues from

passenger business.... We have earned in Iowa by first-class

roads annually about $13,000,000, and a reduction of one

cent, or from a rate of three cents to two, will reduce

their revenues about $5,000,000 a year.... Thus it is seen

that it is proposed to take from the revenues of a part of

the railroads of Iowa, annually, almost as much as all the

railroads of Iowa have paid for taxes in nine years

($6,549,505.84)."

Mr. McDill was a member of the Iowa Railroad Commission for several

years. He may, therefore, be presumed to have known that the State of

Iowa could not, and did not propose to, regulate interstate traffic, and

that the thirteen million dollars railroad revenue to which he referred

was derived both from interstate and State traffic; that the latter was

only about one-fourth of the former, and that therefore the proposed

reduction on the basis of schedule rates would have cut down the net

revenue of the roads only about one million instead of five million

dollars. But Mr. McDill himself states that the average rate earned by

all the railroads of the United States was, for the year 1886, only

2.181 cents per passenger per mile. It certainly was not over 2-1/2

cents per mile for the first-class roads of Iowa. Thus the proposed

reduction, instead of being one cent per mile, as stated by Mr. McDill,

was only one-half cent per mile; and it only applied to the local

business of the first-class roads. In other words, the bill under

consideration, had it been enacted into law, would have caused a

reduction of 20 per cent. on about 25 per cent. of the total revenue

from passenger business of the first-class roads, or of five per cent.

on their total income from passenger traffic in the State of Iowa. It

will be noticed that Mr. McDill in his calculation made no allowance

whatever for the increase of business which would have followed such a

reduction. The gain from this source would probably have greatly

exceeded the loss due to this small reduction in the fare. In the same

address Mr. McDill made many other equally fallacious statements.

One of the most devoted advocates of the interests of railroad managers

is Marshall M. Kirkman. He is the author of a number of books and

pamphlets upon railway subjects, among them a pamphlet entitled "The

Relation of the Railroads of the United States to the People and the

Commercial and Financial Interests of the Country."

Mr. Kirkman introduces his subject with the following rather remarkable

statement:

"I shall show that while the railways of the United States

are designated as monopolies, they are not so in fact.

Accused of disregarding the interests of the community, I

will show that they are abnormally sensitive to their

obligations in this direction. While legislatures claim the

right to fix rates, I shall show that the abnormal

conditions under which the railway system has grown up and

its chaotic nature render the exercise of such a privilege

impossible. I will show that while it is assumed that rates

may be fixed arbitrarily, they must, on the contrary, be

based on natural causes, the competition of carriers, their

necessities and the rivalries of conflicting markets and

trade centers; conditions manifestly impossible to determine

or regulate in advance, and therefore beyond the control of

legislation.... While a division of business (by pooling) is

thought to be contrary to the interests of the people, I

shall show that it is the legitimate fruit of indiscriminate

railway building and offers the only escape from the

conditions such practice engenders. I shall show that, while

it is assumed that rates may be based progressively or

otherwise on distance, the enforcement of such a principle

would restrict the source of supply, and, in so far as this

was the case, render great markets or centers of industry

impossible."

Speaking of the importance of the railroad, Mr. Kirkman says:

"Superseding every other form of inland conveyance, it determines the

location of business centers, and vitalizes by its presence, or blasts

by its absence." He contends that rigid and scrutinizing supervision

should be exercised by the Government over the location of railroads,

and that only such lines should be permitted to be built as afford

reasonable grounds for profitable enterprise. "It should be," he says,

"an axiom in our day that a government that permits or encourages the

construction of two railways where one would suffice is, to the extent

that it does this, a public nuisance." Mr. Kirkman here makes it the

duty of the Government to arbitrarily meddle with railroad affairs. He

would give the Government the power to determine when and where an

additional railroad is needed, and to prohibit the construction of any

new road that has not the Government sanction. The interests of a

thousand towns might suffer for want of adequate transportation

facilities, individuals and communities might be anxious to build their

own lines for the development of local resources, but all railroad

enterprise is doomed to a standstill until a conservative governmental

commission has been entirely satisfied that a prospected road will pay

and not deprive existing roads of any part of their revenue. There can

be no doubt that if such a policy were ever adopted in America, few

roads would be built without having first passed the ordeal of a legal

injunction, and many a prospected road, though greatly needed, would

remain unbuilt because its promoters would be discouraged by the delay

and cost of litigation.

But while this author is perfectly willing to trust the Government with

the great responsibility of prohibiting the construction of proposed

roads, he is not willing to have it exercise the power to determine what

are reasonable rates. He tries to sustain his objection by the following

argument: "The fixing of rates upon a railroad is as delicate a process

as that of determining the pulse of a sick man. They cannot be

determined abstractly, or in advance of the wants of business, but must

be adjusted from hour to hour to conform to its fluctuations. Five

thousand men find active employment in the United States in connection

with the important duty of making rates. Each case requires particular

investigation and involves, in many instances, prolonged study and

research. The duty requires men of marked experience and capacity. They

and men like them are the silent, unseen power that moves great

enterprises of every nation. In the case of railroads we may enumerate

those having official positions, but the experts from whom the official

heads derive information and assistance cannot be classified. They

comprise a vast army of experienced and able men familiar with railway

traffic and quick to respond to its requirements. Such a body of men

could not be organized by a government, or, if organized, would rapidly

deteriorate under conditions so unfavorable for their support and

development. Whatever authority exercises the duty of fixing rates must

take up the subject in the same methodical way and, acting through

skilled agents, pursue its inquiries and determine its results with the

same experience, minute care and _conscientious regard_ for the

technical requirements of business that the railway companies observe.

No government can possess the facilities for perfecting so vast and

intricate an organization and at the same time render it responsive to

the public good. The labor is too great and the responsibility too

remote. It could not move with sufficient quickness to respond to the

actual requirements of trade, and too many restrictions would

necessarily govern its actions. For these and other equally important

reasons governments must always be satisfied to restrict their offices

in this direction."

Speaking of the men who are commonly termed railroad magnates, Mr.

Kirkman says: "They alone possess the needed administrative ability that

the situation demands. They not only provide largely the capital, but

they discover the fields wherein it may be used most advantageously.

They are the advance guard of all great enterprises, the natural leaders

of men. They are an integral part of the country, a necessary and

valuable element, without which its natural resources would avail

little." This is a very strong statement in the face of the fact that

but very few of the class of men to whom Mr. Kirkman refers ever built a

line of road. They have usually found it more profitable to "gobble"

roads already built than to construct new lines.

According to this author the public have no reason to complain of

railroads; on the contrary, the latter have always been the victims of

public persecution, and "every species of folly, every conceivable

device of malice, the impossible requirements of ignorance, the selfish

cunning of personal interests, the ravings of demagogues, the

disappointments, envies, prejudices and jealousies of mankind have each

in turn and in unison sought to injure the railway interest."

But probably the most extravagant passage in the whole treatise is the

one referring to special rates, which he calls "the foundation and

buttress of business," without which it could not be carried on. He

expresses the opinion that without the continued and intelligent use of

such rates "our cities would soon be as destitute of manufactories as

one of the bridle paths of Afghanistan," and then continues: "The

special rate of carriers is like the delicate fluid that anoints and

lubricates the joints of the human body. It is an essential oil. Without

it the wheels of commerce would cease and we should quickly revert to

the period when the stage-coach and the overland teamster fixed the

limits of commerce and the stature of cities."

The most recent and probably the most radical of Mr. Kirkman's books is

"Railway Rates and Government Control." It would lead us too far from

our subject to enter into a discussion of Mr. Kirkman's errors; in fact,

it might prove an endless task. Suffice it to say that in discussing his

subject he revels in such phrases as: "Subject too vast to be

comprehended." "Acts of agrarian legislation and foolish manifestations

of disappointment and hate." "The rabble will avail itself of every

excuse to pass laws that would, under other circumstances, be called

robberies." "Ignorance and demagogism." "Government interference, the

panacea of cranks and schemers." "Only understood by the few." "These

people are as sincere as they are ignorant." "Governments have no

commercial sense." "Those who condemn them are not so dishonest as

ignorant, and not so malicious as foolish." "Silly people." "Justice and

common honesty are systematically denied [the railroads]." "Legal means

of plundering them." "The intelligence and facilities of Government are

but one step above the barbarian." "Those who use railroads should pay

for them," etc., etc.

Mr. Kirkman's argument is in substance: Rate-making is a difficult

subject. The people are too ignorant to understand it. Those who carry

on the Government are for the most part fools and demagogues, and are

utterly unfit to do justice to such a task. Railroad men are wise and

just, and neither the people nor the Government should meddle with the

railroad business. In order to place a true estimate upon Mr. Kirkman's

utterances, one should remember that he is a railroad employe as well as

the patentee and vendor of a number of railroad account forms which are

extensively used by railroad companies.

The Chicago _Tribune_, in reviewing this last literary production of Mr.

Kirkman, says:

"The great fault of Mr. Kirkman's statements is that they

are often so general in character as to be both true and

false at the same time.... He does not seem to comprehend

the nature of the railroad, or to perceive the danger of

allowing a railroad to exercise its powers uncontrolled. He

denies the State's right to interfere with any

discriminations which a railway corporation chooses to

adopt. He would allow railways to fix whatever charges they

please for long hauls and short hauls.... Mr. Kirkman does

not adduce a single fact in support of these remarkable

views. He simply says: 'Railroads cannot, if they would,

maintain any inequitable local tariff.' This is not

argument, it is simply assertion. Every one who has learned

the alphabet of this question knows that railways have been

exceedingly unjust wherever competition or the law did not

restrict their powers. If this were the proper place for it

we would give the author instances of this injustice by the

hundred, and almost any book on the subject refers to such

cases by the thousand.... When confronted with the facts

substantiating such charges the author answers the argument

by exclaiming: 'But how absurd! But how untrue! Our

commercial morals are equal to the highest in the world....'

Scarcely an assertion can be taken without qualification.

The author fairly revels in half-truths.... The book may

have its merits, but they are too modest to reveal

themselves."

It is a failing of mankind to take for truth without further

investigation any assertion that has often been reiterated. Most people

are prone to believe that an assertion made by a thousand hearsay

witnesses is true, overlooking the possibility of their drawing from a

common false source. But it is surprising that an author like Prof.

Arthur T. Hadley should fall into such an error. In his otherwise

excellent work, "Railroad Transportation, Its History and Its Laws," Mr.

Hadley bases a number of his deductions upon false premises advanced by

railroad managers, and arrives at conclusions which appear strange when

their source is considered. In the chapter on railroad legislation

Professor Hadley says: "But a more powerful force than the authority of

the courts was working against the Granger system of regulation. The

laws of trade could not be violated with impunity. The effects were most

sharply felt in Wisconsin. The law reducing railroad rates to the basis

which competitive points enjoyed left nothing to pay fixed charges. In

the second year of its operation, no Wisconsin road paid a dividend;

only four paid interest on their bonds. Railroad construction had come

to a standstill. Even the facilities of existing roads could not be kept

up. Foreign capital refused to invest in Wisconsin; the development of

the State was sharply checked; the very men who had most favored the law

found themselves heavy losers.... By the time the Supreme Court

published the Granger decisions, the fight had been settled, not by

constitutional limitations, but by industrial ones."

These statements are either utterly untrue or greatly misleading. Mr.

Hadley ought to know that the railroad companies in the Granger States

never complied with the letter, much less with the spirit of the law.

Whenever they made an apparent effort to live up to it they only did so

to make it odious. Rates were never reduced by the legislature to the

basis previously enjoyed by competitive points, but merely to the

average charge which had obtained before the passage of the law. As a

rule the railroad revenues increased. If any companies failed to earn

enough to pay fixed charges it was simply because they were determined

not to do so. A non-payment of dividends did not injure the managers,

but simply other stockholders of the road. A permanent establishment of

the principle of non-discrimination, on the other hand, would have

benefited stockholders, while prejudicing the speculative interest which

managers had in the roads. Railroad construction came, after the

financial panic of 1873, to a practical standstill throughout the United

States; and if the Granger States did not get their share of the very

small total increase during the five years following the panic, it was

due solely to a conspiracy on the part of the railroad managers to

misrepresent and pervert the legislation of these States. The laws, as

has already been stated, were finally repealed, not because the people

had tired of them or regarded them unwise or unjust, but because it was

hoped that the commissioner system would prove more efficient. It was

offered as a compromise measure and was accepted as such by the railroad

managers, who, in their eagerness to rid themselves of the restrictions

imposed by the Granger laws, gave every assurance of complete submission

to the requirements of the proposed legislation.

Mr. Hadley even goes so far as to defend railroad pools. "Unluckily," he

says, "we place these combinations outside of the protection of the law,

and by giving them this precarious and almost illegal character we tempt

them to seek present gain, even at the sacrifice of their own future

interests. We regard them, and we let them regard themselves, as a means

of momentary profit and speculation, instead of recognizing them as

responsible public agencies of lasting influence and importance." We can

partially account for this author's defense of pooling when we are

informed that he accepts it as an axiom that "combination does not

produce arbitrary results any more than competition produces beneficent

ones." Referring to railroad profits, Mr. Hadley says: "The statement

that corporations make too much money is scarcely borne out by the

facts. The average return of the railroads of this country is only four

per cent., the bondholders receiving an average of four and a half per

cent., the stockholders of two and a half per cent. True, much of the

stock is water, not representing any capital actually expended; but,

even making allowance for this, it is hardly probable that the roads are

earning more than five per cent. on the total investment. This assumes

an average cost of $45,000 per mile, implying that about half of the

stock and one-sixth of the bonds are water." Mr. Hadley would probably

have come much nearer the truth if he had assumed three-fourths of the

stock and one-fourth of the bonds to be water. Even Mr. Poor, who

certainly cannot be accused by railroad men of being inimical to their

interests, places the average cost of the railroads of this country no

higher than at $30,000 per mile; and this estimate, it should be

remembered, includes the value of the large donations made to railroad

companies by the public. With a full understanding of all the

circumstances, Mr. Poor said of railroad investments several years ago

that if the water were taken out of them no class of investments in this

country would pay as well. In the face of this statement Mr. Hadley

would do well to revise his figures.

We find, however, in Prof. Hadley's book also eminently sound views,

like the following: "If the object of a railroad manager is simply to

pay as large a dividend as possible for the current year, he can best do

it by squeezing his local tariff, of which he is sure, and securing

through traffic at the expense of other roads by specially low rates;

that is, by a policy of heavy discrimination. But the permanent effect

of such a policy is to destroy the local trade, which gives a road its

best and surest custom, and to build up a trade which can go by another

route whenever it pleases. The permanent effect of such a policy is

ruinous to the railroad as well as the local shipper." And he continues:

"By securing publicity of management you do much to prevent the

permanent interests of the railroads from being sacrificed to temporary

ones. By protecting the permanent interests of the public you enlist the

stockholders and the best class of railroad managers on the side of

sound policy."

Edward Atkinson, in an essay entitled "The Railway, the Farmer and the

Public," endeavors to prove that the farmers have no cause for

complaining against the railroad, because rates of transportation have

been greatly reduced during the past twenty years. Speaking of the

reductions made in freight rates in the State of New York, he says: "Had

the rate of 1870 been charged on the tariff of 1883 the sum would have

been at 1.7016 cents on 9,286,216,628 tons, carried one mile,

$158,014,262; the actual charge was $83,464,919, making a difference of

$74,549,343 saved on one year's traffic on the lines reported in New

York." It either did not occur to Mr. Atkinson, or, if it did occur to

him, he failed to mention it, that these freight reductions were forced

upon the railroads chiefly by water competition, and that if the

railroad companies had not saved these seventy-four million dollars for

the people, the canal lines, always subject to competition, would have

saved a large part of it. With equal propriety might it be said that the

railroads, by meeting canal competition, saved for themselves in the

year mentioned a goodly share of their gross earnings. Such reasoning is

absurd, and it is high time that the bubble of an argument so often used

by railroad advocates be pricked. As Mr. Atkinson has introduced the

farmer, let us apply his rule to him. There was a time when the farmer

sold his corn for a dollar a bushel. To-day he sells it for thirty

cents. He therefore saves to the people of this country, on

2,000,000,000 bushels, the enormous sum of $1,400,000,000. There is

scarcely an industry in existence to which this argument does not apply

with equal force. Mr. Atkinson virtually admits that railroads charge

all the traffic will bear when he says: "The charge which can be put

upon the wheat of Dakota or Iowa for moving it to market is fixed by the

price at which East Indian wheat can be sold in Market Lane." He is

opposed to the Interstate Commerce Law, which he regards as "obnoxious

measures of national interference and futile attempts to control this

great work." He would rely chiefly upon the publicity of accounts made

by railway officers, as secured by the private publication of Poor's

Railway Manual, for all needed regulation, but concedes the

establishment of a figurehead commission, concluding his remarks upon

the subject as follows: "A commission which may bring public opinion to

bear upon railway corporations may well be established, and there the

work of the legislator may well cease." When we consider the powerful

agencies employed by railroads to create public sentiment in their favor

we can well understand the inefficiency of such a milk-and-water method

of control.

One of the most radical books ever published at the instigation of

railroad managers appeared in 1888, under the title "The People and the

Railways." Its author is Appleton Morgan, who attempts to "allay the

animosity towards the railway interests" as shown in Mr. James F.

Hudson's book, "The Railways and the Republic." The means which Mr.

Morgan chooses are not well calculated to accomplish his purpose, for

the masses of the people prefer in such a controversy arguments to

ridicule and sarcasm, weapons of literary warfare to which this author

resorts altogether too freely. Mr. Morgan's opinion as to the benefits

of centralized wealth and trade combinations differs greatly from that

held by the great majority of the American people. He says: "The fact,

the truth is, that (however it may be in other countries) the

accumulation of wealth and centralization of commerce in great

combinations has never, in the United States, been a source of

oppression or of poverty to the non-capitalist or wage-worker." There is

scarcely an evil in railroad management which Mr. Morgan does not

defend. Pools, construction companies, rebates, discriminations and

over-capitalization all find favor in Mr. Morgan's eye. "Rebates and

discriminations," he says, "are neither peculiar to railways nor

dangerous to the 'Republic.' They are as necessary and as harmless to

the farmer as is the chromo which the seamstress or the shop girl gets

with her quarter-pound of tea from the small tea merchant, and no more

dangerous to the latter than are the aforesaid chromos to the small

recipients." Pools and combinations receive an unusually large share of

Mr. Morgan's attention. A few selections from his effusions in their

favor may be given here, viz.:

"These pools are the legitimate and necessary results of the

rechartering over and over again of railway companies to transact

business between the same points by paralleling each other. So long as

the people in their legislatures will thus charter parallel lines

serving identical points--thus dividing territory they once granted

entire--it is not exactly clear how they can complain if the lines built

(by money invested, if not on the good faith of the people, at least in

reliance upon an undivided business) combine to save themselves from

bankruptcy." And again: "Against the inequality of their own rates and

the hardship of the long and short haul (in other words, against the

discrimination of nature and of physical laws) no less than against the

peril of bankruptcy and the consequent speculative tendency of their

stocks (after which may come the wrecking, the watering, and the vast

individual fortunes), the railways of this republic have endeavored, by

establishment of pool commissions, to defend both the public and

themselves.... The honest administration of railways for all interests,

the payment of their fixed charges, the solvency of their securities,

the faithful and valuable performance of their duties as carriers, can

be conserved in but one way--by living tariffs, such as the pools once

guaranteed."

In the following passage this author denies to the State the right to

regulate rates: "Granting that they [the railroads] must carry freights

for the public in such a way as not to injure either the public or the

freight in the carrying, most emphatically (it seems to me) it does not

follow that they must add to the value of the freights they carry by

charging only such rates as the public or the owners of the freight

insist on."

But Mr. Morgan's indignation rises to the highest pitch in his

discussion of the Interstate Commerce Act. He fears that it will cause

the downfall of our liberties and sees in the background the Venetian

Bridge of Sighs and the French Bastille. He asks: "Why should for any

public reasons--for any reason of public safety--the Interstate Commerce

Law have come to stay?" He then berates the act as follows: "To begin

with, the present act abounds in punishments for and prohibitions

against an industry chartered by the people, but nowhere extends to that

industry a morsel of approval or protection. It bristles with penalties,

legal, equitable, penal, and as for contempt, against railway companies,

but nowhere alludes to any possible case in which a railway company

might, by accident, be in the right, and the patron, customer, passenger

or shipper in the wrong.... The constitutions of civilized nations, for

the last few centuries at least, have provided that not even guilt

should be punished except by due process of law, and have uniformly

refused to set even that due process in motion except upon a complaint

of grievance. But the Interstate Commerce Law denies the one and does

away with the necessity for the other. That statute provides that the

commission it creates shall proceed 'in such manner and by such means as

it shall deem proper,' or 'on its own motion,' and that 'no complaint

shall at any time be dismissed because of the absence of direct damage

to the complainant.' Even the Venetian council often provided for a

certain and described hole in the wall through which the anonymous

bringers of charges should thrust their accusations. Even the court of

star chamber was known to dismiss inquisitions when it found that no

wrong had been done. But the statute of interstate commerce appears to

issue _lettres de cachet_ against anything in the shape of a railway

company--to scatter them broadcast, and to invite any one who happens to

have leisure to fill them out, by inserting the name of a railway

company. It says to the bystander: 'Drop us a postal card, or mention to

any of our commissioners, or to a mutual friend, the name of any railway

company of which you may have heard, and so give us jurisdiction to

inquire if that company may have by chance omitted to dot an i or cross

a t in its ledgers, or whether any one of its hundreds of thousands of

agents--in the rush of a day's business, or in a shipper's hurry to

catch a train--may have named a rate not on the schedule then being

prepared at headquarters, or charged a sixpence less than some other

agent 250 miles down the line may have accepted a week ago for what

might turn out to be a fraction more mileage service in the same general

direction. No particular form is necessary. Drop in to luncheon with our

commission any day between twelve and one, and mention the name of a

railway company. The railway company may have done you no damage, nor

grieved you in any way; just mention the railroad, and we will take

jurisdiction of its private (or quasi-public) affairs. Or, if you don't

happen to have time to mention it, we will take jurisdiction anyhow, 'of

our own motion,' of any railway company whose name we find in the

Official Gazette. It really does not matter which; any one will do."

This is a fair example of the literature on the Interstate Commerce Law

paid for by railroad men.

Mr. Stickney, although a railroad president, takes an entirely different

view of the situation. He considers the law inadequate to bring about

the reforms needed. He says: "This enormous business is now in the

control of several hundred petty chieftains, who are practically

independent sovereigns, exercising functions and prerogatives in

defiance of the laws, and practically denying their amenability to the

laws of the country. If the Government would seek to bring them to terms

and compel them to recognize and obey the laws, it must use the means

necessary to accomplish the end. It must have executive officers

sufficient in number as well as armed with an adequate power and dignity

to command their respect.... The power conferred upon them [the

Interstate Commerce Commission] to enforce their judicial orders is the

power 'to scold.' The penalties of the law which the courts are in power

to impose are certainly severe, but the law has been operated for about

four years without any convictions, and yet no well-informed person is

ignorant of the fact that the law has not been obeyed. The president of

a large system is said to have remarked that 'if all who had offended

against the law were convicted there would not be jails enough in the

United States to hold them.' It is evident that the Government has not

provided adequate machinery for enforcing the law."

Mr. Stickney is correct in his statement that adequate machinery for

enforcement of the law has not been provided, but he does not give

sufficient credit to the law or the commission. While much work remains

to be done, much progress has been made.

He is of the opinion that the public welfare would be furthered if the

National Government assumed the sole control of railroads. He gives his

reasons for the change which he proposes, as follows:

"There are many reasons besides these in the interest of

uniformity which make it desirable to transfer the entire

control of this important matter to the regulation of the

Nation. First, because of its constitution and more extended

sessions, Congress is able to consider the subject with

greater deliberation, and therefore with more intelligence,

than can a legislature composed of members who, as a rule,

hold their office for but one short session of about sixty

days' duration. There would also be removed from local

legislation a fruitful source of corruption, which is

gradually sapping the foundations of public morality.... In

the second place, the problem of regulating railway tolls

and managing railways is essentially and practically

indivisible, by State lines or otherwise, and therefore it

is not clear but that whenever the question may come before

the courts it may be held that the authority of Congress to

deal with interstate traffic carries with it, as a necessary

and inseparable part of the subject, to regulate the traffic

which is now assumed to be controlled by the several States.

The courts have held that the States have authority to

regulate strictly State traffic in the absence of

Congressional action, but their decisions do not preclude

the doctrine that Congress may have exclusive jurisdiction

whenever it may choose to exercise the authority. There is a

line of reasoning which would lead to that conclusion. It

may be that many will not care to follow the lead of the

writer as to the measure of aggregate net revenue which

railway companies are entitled to collect in tolls, but it

is evident that before the tolls can be intelligently

determined some measure of such aggregate revenue must be

ascertained. The question would then arise, what proportion

must be levied upon State and interstate traffic

respectively? If the State should refuse to levy its share

(and how could such share be ascertained?), then more than

its share would have to be levied on interstate traffic, and

thus the State by indirection would be able to do what the

Constitution prohibits. Of course, when the Constitution was

adopted railways and railway traffic were unknown. But it

was a similar question which brought the thirteen original

States together into one nation, under the present

Constitution. At least the first movement toward amending

the original Articles of Confederation was to give Congress

enlarged power over the subject of commerce."

In reply to this it may be said that it will be an unfortunate day for

the States when they surrender the power to control their home affairs.

Differences between State and interstate rates could easily be adjusted

by the National and State commissions and by the courts. It certainly

ought not to be difficult for such tribunals to see that a rate which is

made higher or lower, as it may be for State or interstate traffic, is

wrong.

Mr. Stickney has fallen into the error common to railroad men in

believing that lower rates of transportation will not prevail in the

future. There are many reasons why it is probable that they will be

lower. Present rates are highly profitable on well located lines.

Labor-saving inventions will increase, and roads will be built and

operated more cheaply. Lines will be located with lower grades, lighter

curvature and more directness. Business will increase largely, and the

ratio of expenses will decrease. Steel will be improved in quality and

will be substituted for iron. A heavier rail and more permanent roadway

will be used. Rates of interest will rule lower, and there will be much

more economy in superintending. Extravagant salaries to favorites will

be reduced, and sinecures and parasites will be cut off from the

payrolls. Lower wages are inevitable as our population becomes more

dense.

A very interesting and instructive author upon railroad subjects is

Charles Francis Adams, Jr., ex-president of the Union Pacific Railroad

and formerly a member of the Board of Railroad Commissioners of the

State of Massachusetts. After twenty years' constant association with

railroad men, Mr. Adams should certainly know the character of his

quondam colleagues. In his book, "Railroads, Their Origin and Problems,"

he says of them: "Lawlessness and violence among themselves [_i. e._,

the various railroad systems], the continual effort of each member to

protect itself and to secure the advantage over others, have, as they

usually do, bred a general spirit of distrust, bad faith and cunning,

until railroad officials have become hardly better than a race of

horse-jockeys on a large scale. There are notable exceptions to this

statement, but, taken as a whole, the tone among them is indisputably

low. There is none of that steady confidence in each other, that easy

good faith, that _esprit du corps_, upon which alone system and order

can rest. On the contrary, the leading idea in the mind of the active

railroad agent is that some one is always cheating him, or that he is

never getting his share in something. If he enters into an agreement,

his life is passed in watching the other parties to it, lest by some

cunning device they keep it in form and break it in spirit. Peace is

with him always a condition of semi-warfare, while honor for its own

sake and good faith apart from self-interest are, in a business point of

view, symptoms of youth and a defective education." And again, in an

address delivered before the Commercial Club of Boston in December,

1888, Mr. Adams expressed his opinion concerning the average railroad

manager of to-day as follows: "That the general railroad situation of

the country is at present unsatisfactory is apparent. Stockholders are

complaining; directors are bewildered; bankers are frightened. Yet that

the Interstate Commerce Act is in the main responsible for all these

results, remains to be proved. In my opinion, the difficulty is far more

deep-seated and radical. In plain words, it does not lie in any act of

legislation, State or National; and it does lie in the covetousness,

want of good faith and low moral tone of those in whose hands the

management of the railroad system now is; in a word, in the absence

among men of any high standard of commercial honor. These are strong

words, and yet, as the result of a personal experience stretching over

nearly twenty years, I make bold to say they are not so strong as the

occasion would justify. The railroad system of this country, especially

of the regions west of Chicago, is to-day managed on principles

which--unless a change of heart occurs, and that soon--must inevitably

lead to financial disaster of the most serious kind. There is among the

lines composing that system an utter disregard of those fundamental

ideas of truth, fair play and fair dealing which lies at the foundation,

not only of the Christian faith, but of civilization itself. With them

there is but one rule--that, many years ago, put by Wordsworth into the

mouth of Rob Roy:

"'The simple rule, the good old plan,

That he shall take who has the power,

And he shall keep who can.'"

As regards the causes of the Granger movement, Mr. Adams says, in the

work above mentioned: "That it [the Granger episode] did not originate

without cause has already been pointed out. It is quite safe to go

further, and to say that the movement was a necessary one, and through

its results has made a solution of the railroad problem possible in this

country. At the time that movement took shape the railroad corporations

were in fact rapidly assuming a position which could not be tolerated.

Corporations, owning and operating the highways of commerce, claimed for

themselves a species of immunity from the control of the law-making

power. When laws were passed with a view to their regulation they

received them in a way which was at once arrogant and singularly

injudicious. The officers entrusted with the execution of those laws

they contemptuously ignored. Sheltering themselves behind the Dartmouth

College decision, they practically undertook to set even public opinion

at defiance. Indeed, there can be no doubt that those representing these

corporations had at this juncture not only become fully educated up to

the idea that the gross inequalities and ruinous discriminations to

which in their business they were accustomed were necessary incidents to

it which afforded no just ground of complaint to any one, but they also

thought that any attempt to rectify them was a gross outrage on the

elementary principles both of common sense and of constitutional law. In

other words, they had thoroughly got it into their heads that they, as

common carriers, were in no way bound to afford equal facilities to all,

and, indeed, that it was in the last degree absurd and unreasonable to

expect them to do so. The Granger method was probably as good a method

of approaching men in this frame of mind as could have been devised."

Speaking of the educational value of railroad competition, Mr. Adams

says: "Undoubtedly the fierce struggles between rival corporations

which marked the history of railroad development, both here and in

England, were very prominent factors in the work of forcing the systems

of the two countries up to their present degree of efficiency. Railroad

competition has been a great educator for railroad men. It has not only

taught them how much they could do, but also how very cheaply they could

do it. Under the strong stimulus of rivalry they have done not only what

they declared were impossibilities, but what they really believed to be

such."

Mr. Adams has, from his long association with railroad managers, imbibed

one heresy which is in strange discord with the general soundness of his

opinions. He holds that the railroad system was left to develop upon a

false basis, inasmuch as the American people relied for protecting the

community from abuses upon general laws authorizing the freest possible

railroad construction everywhere and by any one. It can therefore not be

surprising that Mr. Adams is an advocate of the legalized pool. He is of

the opinion that secret combinations among railroads, inasmuch as they

always have existed, always will exist as long as the railroad system

continues as it now is. Hence he proposes to legalize a practice which

the law cannot prevent, and by so doing to enable the railroads to

confederate themselves in a manner which shall be at once both public

and responsible. The reply might be made that there are many other

conspiracies which the law cannot always prevent, but that this is no

reason why conspiracies should be legalized. If pools and other railroad

abuses had, since the beginning of the railroad era, been treated as

crimes and misdemeanors, and punished as such by the imposition of heavy

fines, few people would to-day be ready to offer apologies for them. If

the time shall ever come when pools must be legalized it will be time

for railroad control equivalent to Government ownership.

Among the more recent writers upon railroad subjects is W. D. Dabney,

late chairman of the Committee on Railways and Internal Navigation in

the Legislature of Virginia. Mr. Dabney favors State control, and is, on

the whole, friendly to the Interstate Commerce Act. He sees danger in

the pool, but inclines to the belief that the public benefit derived

from the pooling system outweighs the danger of public detriment from

its existence. The following is his chief argument for a legalized pool:

"Perhaps, so long as railroad companies continue to enjoy an absolute

monopoly of transportation over their own lines, so that free

competition is restricted in its operation to a comparatively few

favored points, it may be worthy of serious consideration whether it

would not be better to legalize than to prohibit pooling, taking care to

put the whole matter under strict public supervision and control. The

companies would then be left comparatively free to bring their local

rates into something like harmony with the long-distance rates, and

should they fail to do so where the needs of the local community and

their revenues make it proper to be done, then it is the function of

public regulation to compel it to be done."

Of the Interstate Commerce Act Mr. Dabney says: "The legislation

recently enacted by Congress for the regulation of commerce by railway

is the result of more careful and intelligent deliberation perhaps than

any other measure of similar character, and it is not unlikely that the

legislation of many of the States will sooner or later be conformed to

it."

He speaks at some length of the drift toward railroad centralization. A

few extracts from this passage may be here given: "That the tendency

towards the unification and consolidation of different and competitive

lines has been decidedly increased by the anti-pooling and the long and

short haul sections of the Interstate Commerce Law can hardly be

doubted.... The modern device of the 'trust' as a means of unifying

industrial interests and eliminating competition had not yet been

applied in the field of railroad transportation.... The scheme of trust

here briefly outlined would probably require for its successful

operation the concurrence of the entire stockholding interest of each

company embraced in it; and herein, it seems likely, will be found the

chief difficulty in perfecting such a scheme. Should it ever be

perfected, a far more stringent public supervision and control of the

railroad transportation of the country will be demanded."

Another author, Charles Whitney Baker, associate editor of the

_Engineering News_, suggests in his book, "Monopolies and the People," a

plan for the reorganization of our railroad system, to remedy the evils

of monopoly which are at present connected with railroad management. The

following quotation from his work outlines the system proposed: "Let the

Government acquire the title of the franchise, permanent way and real

estate of all the railway lines in the country. Let a few corporations

be organized under Government auspices, and let each, by the terms of

its charter, receive a perpetual lease of all the railway lines built,

or to be built, within a given territory. Let the territory of each of

these corporations be so large, and so planned with regard to its

neighbors, that there shall be, so far as possible, no competition

between them. For instance, one corporation would operate all the lines

south of the Ohio and east of the Mississippi River; another all lines

east of the Hudson and of Lake Champlain, etc. Let the terms of rental

of these lines be about 3-1/4 per cent. on the road's actual 'present

cost' (the sum of money it would cost to rebuild it entirely at present

prices of material and labor), less a due allowance for depreciation.

The corporations would be obliged to keep the property in as good

condition as when received, and would own absolutely all their

rolling-stock, machinery, etc." The proposed reform measures, it must be

admitted, are very good in theory, but their practical application is

unfortunately entirely out of the question under our system of

government.

Mr. John M. Bonham is the author of a recent work entitled "Railway

Secrecy and Trusts." This writer, upon the whole, takes advanced ground

in dealing with the question of railroad reform. He deems the present

interstate legislation inadequate to correct all the graver railroad

evils, expressing his views upon this subject as follows:

"Railway construction continues to increase in the United

States with immense rapidity. Concurrent with this increase,

and notwithstanding all the efforts that have been made at

restraint, the aggressions upon political and industrial

rights increase also. Nor is it likely that without more

rigorous control than is now exercised these aggressions

will be any less active than they are to-day. It is coming

to be pretty generally realized that the Interstate Commerce

legislation has not fulfilled the expectation of its

friends. But this is a frequent trait of tentative

legislation. It is not reasonable to expect that the first

efforts to solve a problem the factors of which are so

hidden and complex will be followed by complete success."

Concerning the changes needed to make Government regulation in the

United States more effective, he says:

"A reform which would deal with an elaborate system of evil

cannot, therefore, be confined to treating consequences,

the separate instances of the system. There must be a power

which can go behind these and grapple with causes. There

must, therefore, be something more than a court. There must

be a commission, a department of government which will

provide organized supervision and inspection against which

the quasi-public corporation can claim no privacy as

inviolable. Such a department must be clothed with the power

to ascertain precisely where and how the evils of the

present methods originate, and when these are ascertained it

must be able to apply the remedy at the source of evil. The

remedial force must be of a preventive kind."

A few grave misstatements of historical facts greatly mar Mr. Bonham's

book. He makes, for instance, the following statement:

"Following this came restrictive legislation, which, in some

instances, was so unreasonable as to make any railway

management impossible. Some of the Granger legislation, and

especially that of Iowa, was of this character, as were also

some of the earlier efforts to secure Congressional

legislation."

It was left to Mr. Bonham to discover that legislation ever made

railroad management impossible in Iowa. The General Assembly of Iowa

passed at two different times railroad laws that were greatly obnoxious

to railroad managers. In 1874 it passed a maximum tariff act which, at

the urgent solicitation of the railroad forces, was repealed four years

later; and in 1888 it passed an act containing the principles of the

Interstate Commerce Act and in addition authorizing the Board of

Railroad Commissioners to fix _prima facie_ rates. Strange as it may

seem to Mr. Bonham and other people inclined to believe without

investigation the statements of railroad men, the earnings of the Iowa

roads greatly increased immediately after the enactment of the so-called

Granger laws in 1874, as the following table will show:

Year. Miles of Railroad. Gross Receipts.

1871 2,850 $12,395,826

1872 3,642 14,534,408

1873 3,728 15,430,619

1874 3,765 15,568,907

1875 3,823 18,422,587

1876 3,938 17,221,032

1877 4,075 20,714,496

1878 4,157 21,294,275

When the Granger law was repealed in 1878, the railroads were earning

$1,000 per mile more than they were earning when the law was enacted.

The present railroad law, which was passed in 1888, and has also been

the subject of extreme criticism on the part of railroad organs, has had

the same beneficial effect. The law, owing to the obstacles thrown in

its way by the railroad managers, did not become operative until 1889.

From July 1st, 1889, to June 30th, 1892, the gross railroad earnings of

the Iowa roads, which for three years had been at a standstill,

increased and were over $7,000,000 more in 1892 than they had been any

year previous to 1889, as will be seen from the table below:

Gross Railroad Earnings in Iowa.

1886-87 $37,539,730

1887-88 37,295,586

1888-89 37,469,276

1889-90 41,318,133

1890-91 43,102,399

1891-92 44,540,000

The net earnings per mile of the Iowa roads were $1,421.91 in the year

1888-89, and $1,821.37 the year following. The total net earnings of all

Iowa roads during the year ending June 30th, 1891, were $14,463,106,

against $11,861,310 during the year ending June 30th, 1889, and were

still greater for the year ending June 30, 1892. No further vindication

of the Iowa law is necessary. These figures show plainly that the

lowering and equalizing of the rates not only increased the roads'

business and income, but also their net earnings. And it must be

remembered that the reports showing these facts were made by the

railroad companies and were certainly not made with any intention of

prejudicing the cause of the railroad manager.

James F. Hudson, the author of "The Railways and the Republic," is a

very exhaustive and instructive writer upon the subject of railroad

abuses. His material is well selected, and the subject ably presented.

To the assertion of railroad managers, that railroad regulation

injuriously affects the value of railroad property, he makes the

following reply:

"Suppose that it were true, as these jurists and writers

claim, that by the assertion of the public right to regulate

the railways the value of their property is decreased, are

there no other property rights involved? Do railway

investments form the only property in the land which

requires the protection of the law? Are we to understand

these judgments and their indorsers to mean that because

railroad property will depreciate if certain principles of

justice prevail, therefore justice is to be set aside for

the benefit of railway property? If the magnitude of

interests involved is to be of weight in deciding such

questions, let us put against 'the hundreds of millions' of

railway property on the one side the thousands of millions

of private property on the other. Railway regulation,

according to a writer in the _Princeton Review_, is

'confiscation of railroad property;' but this puts wholly

out of the question the idea of private property which is

rendered possible by leaving unchecked the power of the

railways over commerce and manufactures through the

manipulation of freight rates. Of the two parties in

interest the shippers represent far greater property

interests than the carriers, although the latter, by their

organization, are more powerful. I have yet to hear of a

single case where restrictive railway legislation has

seriously damaged the honest valuation of any railway. I

have yet to learn of any seriously proposed scheme of

regulation that has proposed to cut down railway profits

below a fair dividend on capital actually invested. But the

entire Nation knows of one notorious case in which the

discriminating policy of the leading railways of the country

has resulted in the wholesale confiscation of private

property for the benefit of a favored corporation."

Concerning the inconsistency presented by the plea of railroad managers

for a legalized pool, Mr. Hudson says:

"It has been argued for years that the subject is so

delicate and vast that it must not be touched by legislation

in the public interest. To protect the rights of the

ordinary shipper against the favorite of the railway would

so hamper the operations of trade, it has been repeated

times without number, as to take away the independence of

the railways and destroy the freedom of competition. Yet,

after years of argument that Government has no

constitutional power to interfere with the railways, and of

demonstration that all such interference must be ill-advised

and injurious, the railway logic comes to the surprising

climax of appealing to legislation for the aid of the law in

upholding their efforts to prevent competition."

Mr. Hudson maintains that if the pool were legalized it would only be a

means of swelling railroad earnings. He says:

"If the pool would maintain equitable rates its success

might be desired, but what guarantee is there that the

complete establishment of its power would make such rates?

Its very character, the functions of the men who control its

policy, and its avowed object of swelling the earnings of

railways by artificial methods, forbid such an expectation.

Make the success of the pool absolute, so that it can work

without fear of competition, and its rates will be uniform,

but of such a character that their uniformity will be a

public grievance and burden.... A grave effect of this

policy, though not easily calculable, is the ability it

gives to railway officials to control the prices of stocks,

and the temptation to enhance their fortunes by so doing....

It is a heavy indictment against the pooling system that it

gives power to avaricious and unscrupulous men in railway

management to enrich themselves at the cost of shareholders

and investors, both by forming combinations and by exciting

disputes or ruptures in them."

The question whether the common law does not protect the public

sufficiently is well answered by Mr. Hudson as follows:

"The common law is sufficient in theory, but it has failed

in practice.... In practice, legal remedies against railway

injustice can be applied to the courts only by fighting the

railways at such disadvantages that the ordinary business

man will never undertake it except in desperate cases. Every

advantage of strength and position is with the railways....

This [the railroad] power has kept courts in its pay; it

defies the principles of common law and nullifies the

constitutional provisions of a dozen States; it has many

representatives in Congress and unnumbered seats in the

State legislatures. No ordinary body of men can permanently

resist it."

But the remedy which Mr. Hudson proposes for the correction of railroad

evils is one of doubtful efficacy. It is this:

"Legislation should restore the character of public highways

to the railways by securing to all persons the right to run

trains over their track under proper regulations, and by

defining the distinction between the proprietorship and

maintenance of the railway and the business of common

carriers."

While it is admitted that the opening of the railroads to the free use

of competing carriers is not necessarily impractical from a technical

point of view, it cannot be admitted that the proposed remedy would cure

the evil. There would certainly be nothing to hinder carrying companies

forming a trust which might prove more dangerous to the interests of

shippers than are to-day the combinations of the railroad companies.

Mr. Hudson devotes a chapter to the railroad power in politics, and

shows how corporations, through their wealth, have secured the greatest

and most responsible offices in the executive, legislative and judiciary

departments of the Government. Speaking of their influence in the

Supreme Court of the United States, he says:

"The assertion that Jay Gould paid $100,000 to the

Republican campaign fund in 1880, in return for which Judge

Stanley Mathews was nominated to the Supreme Bench, is

denied as a political slander; but the fact remains that

this brilliant advocate of the railway theories of law has

been placed in the high tribunal, and that his presence

there together with Justice Field, long a judicial advocate

of the corporations, is expected to protect the railways in

future against such constructions of law as the Granger

decisions."

An English writer, Mr. J.S. Jeans, presents, in his "Railway Problems,"

a great deal that is of interest to American readers. The statistical

data of his work are especially interesting. We learn that the United

Kingdom has nearly twenty railroad employes per mile of road operated,

to less than five in the United States, and that the average number of

employes per L1,000 ($4,850) of gross earnings is on the railroads of

the United Kingdom 5.4 to only about half as many in the United States.

We further learn that the average earnings per train mile in America are

over 25 per cent. higher than they are in the United Kingdom, and exceed

those of most European countries.

Of the remarkable increase in number and the profitableness of the

third-class passenger traffic in England Mr. Jeans says:

"There has hitherto been a great lack of knowledge in this

country as to the extent to which the different classes of

passenger traffic yield adequate profit to the railroad

companies. English passenger traffic differs from that of

most other countries in this respect, that the chief

companies attach third-class carriages to almost every

train. The accommodation provided for third-class passengers

in England is also much superior to what is found in other

countries where there is the same distinction of classes.

The effect of those two distinguishing features of the

English railway system is that third-class carriages are

much more and first-class carriages much less utilized than

in other countries. The tendency appears to be towards an

increasing use of third-class, and a decreasing use of

first-class vehicles. But, all the same, the leading English

lines continue to provide a large proportion of first-class

accommodation in every train, and it is no unusual thing to

find the third-class carriages of express trains absolutely

full, while first-class carriages are almost empty. The

natural result is that third-class travel is a source of

profit, while first-class travel is not.... So far as

passenger traffic is a source of net profit, that profit is

contributed by the third-class. The total receipts from

passenger traffic in England and Wales amounted in 1885 to

L21,968,000. But if the average receipts per carriage over

the whole had been the same as in the case of the Midland

first-class vehicles, namely, L330, the total receipts from

passenger traffic would only have been about nine millions.

It is not necessary to be an expert in order to see that

traffic so conducted must be attended with a very serious

loss."

Of the stock-watering of American railroad companies Mr. Jeans says:

"It seldom happens that in the United States the cost of a

railway and its equivalent corresponds, as it ought to, to

the total capital expenditure. There is no country in the

world where the business of watering stocks is better

understood or carried out more systematically and on so

large a scale. For this reason there is liable to be a great

deal of error entertained in reference to the natural cost

of American lines."

There are many financial journals that are so closely identified with

the speculative interests of the country, and many railway papers that

depend so largely upon railway men for support, that railway managers

are never without a medium through which they can present their views to

the public. A systematic and concerted effort is also constantly made by

the railroads to pervert the press of the country at large. The great

city papers generally yield to their influences and enlist in their

service, and yet there are notable exceptions to this.

In speaking of the extravagant sums which the railroads paid to the

great dailies, ostensibly for advertising, but in fact for their good

will and other services, a railroad superintendent recently said that it

was an infamous outrage, and yet it was the best investment of money

that his company could make. The country papers have shown more

integrity in maintaining their independence, but the railroads are not

without their organs among them. It is not unfrequent to find some of

them defending railroad abuses with all the apparent zeal of a Wall

Street organ, and a glance at their columns often reminds one of Mr.

Lincoln's story of the Irishman and the pig. Mr. Lincoln defended an

Irishman against the charge of stealing a pig. After the testimony was

taken in court, Mr. Lincoln called his client aside and told him that

the testimony was so strong against him, and that the case was so clear,

that it was impossible for him to escape conviction, and he advised him

to plead guilty and throw himself on the mercy of the court. "No, Mr.

Lincoln," said Patrick, "you go back and make one of your great speeches

and swing your long arms and talk loud to the jury, and you will win

the case." Mr. Lincoln, in accordance with that disposition to

accommodate so strongly characteristic of him, did as he was directed by

his client, and to his great surprise the jury promptly brought in a

verdict of not guilty. After it was all over, Mr. Lincoln said: "Now,

Patrick, tell me why that jury acquitted you. I know that you stole the

pig, and my speech had nothing to do in securing your acquittal."

Patrick replied: "And sure, Mr. Lincoln, every one of those jurymen ate

a piece of the pig."

CHAPTER X.

RAILROAD LITERATURE--CONTINUED.

Railroad questions have become of such general interest that their

discussion has become a prominent factor of magazine literature. It is a

significant fact that these contributors are usually railroad men, and

under these circumstances an unbiased discussion of the questions at

issue is indeed a rare occurrence. It is but too frequently the sole

object of the contributor, and not unfrequently even of the publisher,

to create a public sentiment in favor of the unjust demands of railroad

managers.

During the last few years systematic efforts have been made by the

railroad interests to influence public opinion against the Interstate

Commerce Law and restrictive State legislation through the leading

magazines of the country. Mr. Sidney Dillon, president of the Union

Pacific Railroad, in an article which appeared in the April (1891)

number of the _North American Review_, under the title "The West and the

Railroads," endeavors to show that the West is indebted to the railroad

managers for nearly all of the blessings which its people enjoy, and

that therefore railroad legislation in the West is a symptom of rank

ingratitude. He prefaces his argument with the remark that the elder

portions of our commonwealth have already forgotten, and the younger

portions do not comprehend or appreciate, that but for the railroads

what we now style the Great West would be, except in the valley of the

Mississippi, an unknown and unproductive wilderness. He then argues

that, inasmuch as the railroads carry the wheat of Dakota and Minnesota

to the sea-coast, and bring those sections of our community into direct

relation with hungry and opulent Liverpool, the world should "thank the

railway for the opportunity to buy wheat, but none the less should the

West thank the railway for the opportunity to sell wheat." It does not

seem to occur to Mr. Dillon that the railway might, with equal

propriety, thank the world in general, and the Great West in particular,

for its opportunity to carry wheat.

We are also told that the railway has reclaimed from nature immense

tracts of land that were worthless except as to their possibilities,

which once seemed too vague and remote to be considered and are to-day

valuable; that it has changed the character of the soil as well as the

climate of the West, and we are almost given to understand that in many

respects it has assumed the functions of Providence. Mr. Dillon

generously admits, however, that railways have not been built from

philanthropic motives and that we find among railroad promoters and

contractors men of large fortunes. He then proceeds to reprimand the

States west of the Mississippi for their "ungrateful" legislation,

which, he says, interferes with the business of the railway, even to the

minutest detail, and always to its detriment. Such legislation

exasperates Mr. Dillon the more because it originated in States "which

happened to be the communities that owe their birth, existence and

prosperity to these very railways." Mr. Dillon then gives vent to his

wrath by the use of such terms as impertinence, ignorance and

demagogism. He holds that legislative enactments as to the rights and

liabilities of railway corporations are useless, "because the common law

has long since established these as pertaining to common carriers, and

the courts are open to redress all real grievances of the citizen." Upon

this theory we might as well dispense with the legislative department of

the Government, for there is no relation in the community to which the

principles of the common law can not be applied. Besides this, Mr.

Dillon entirely ignores the fact that the railway company is not only a

common carrier, but the keeper of the highway, and as such is subject to

Government control as much as the turnpike tollgate keeper or the

collector of customs. "Then as to prices." Mr. Dillon continues: "These

will always be taken care of by the great law of competition, which

obtains wherever any human service is to be performed for a pecuniary

consideration. That any railway, anywhere in a republic, should be a

monopoly, is not a supposable case."

Like the rest of railway men, Mr. Dillon excels in painting dark

pictures of railroad catastrophes. A sample production of his art is

here presented:

"One of the greatest dangers to the community in a republic

is this: that it is in the power of reckless, misguided or

designing men to procure the passage of statutes that are

ostensibly for the public interest and that may lead to

enormous injuries. Let us imagine for a moment that all

railways in the United States were at once annihilated. Such

a catastrophe is not, in itself, inconceivable; the

imagination can grasp it, but no imagination can picture the

infinite sufferings that would at once result to every man,

woman and child in the entire country. Now, every step taken

to impede or cripple the business and progress of our

railways is a step towards just such a catastrophe, and

therefore a destructive tendency."

Mr. Dillon, losing sight of all other interests, did not think that his

nonsensical mode of reasoning would apply equally well to them. Let us,

for instance, imagine for a moment that all of the farms of the United

States were at once annihilated. Can the imagination picture the

infinite sufferings that would at once result to every man, woman and

child in the whole country? Now, is not any step taken to impede or

cripple the business of farming a step towards just such a catastrophe,

and therefore of a destructive tendency? Mr. Dillon then avails himself

of an opportunity to give the people of the United States some

gratuitous advice when he says:

"We do not arrogate superior wisdom or intelligence to

ourselves when we suggest to the people of the United

States, and especially that portion of the country where

railroads have been the subject of what we consider to be

excessive legislation, that the rational mode of treating

any form of human industry that has for its object the

performance of desired and lawful service is to let it

alone, and that the railway is no exception to this

principle."

This is the very plea that Jefferson Davis made when he kindled the

flame of treason.

* * * * *

In the March, 1891, number of the _Forum_, Mr. W. M. Acworth discusses,

under the title "Railways under Government Control," the working of the

railway systems of the different nations. He holds that the management

of railroads which are the property of the State is, as a rule, greatly

inferior to the management of those roads which are the property of

private trading corporations; he assigns to the railway experts of

England and America the first places among the railway experts of the

world, and appears to attribute all the good in the railroad management

of these countries to the absence of State interference, and all the

evil in the management of the railroads of other countries to the fact

that such interference exists. He says of the railroads of England and

the United States:

"In speed and accommodation, in the energy which pushes

railways into remote districts, and in the skill which

creates a traffic where no traffic existed before, they

stand to-day in the front rank, as they have stood for the

last half century. To say that they are very far from

perfect is nothing; it is only to say that they are worked

by human agency. Their worst enemies will scarcely deny that

they are at least alive; so long as there is life there may

be growth, and we may hope to see them outgrow the faults of

their youth. The charge made against State railway systems

is that they are incapable of vigorous life. The old adage

which proclaimed that 'necessity is the mother of invention'

has been re-stated of late years as the law of the survival

of the fittest in the struggle for existence. If the

doctrine is true, the State railway system, relieved from

the necessity of struggle, must cease to be fit and will

fail to survive."

While it is not intended to enter here into a defense of a State railway

system, it may justly be questioned whether "the State railway system,

relieved from the necessity of struggle, must cease to be fit and will

fail to survive." The growth of the State system in Europe is in itself

a sufficient refutation of Mr. Acworth's theory. The mail service has

for several hundred years been a monopoly of the government; but, while

it is far from being perfect, it remains to be demonstrated that private

enterprise could give to the public a better service in the long run.

Mr. Acworth is an Englishman who in former years wrote many bitter

things concerning the abuses which he then thought he saw in the

management of the railroads of his native country, which, according to

his own statement, are, besides those of the United States, the only

roads in the world for whose regulation competition has been relied upon

in the past. Mr. Acworth has become a convert to the _laissez faire_

theory of dealing with railroads and now evinces an unusual, but perhaps

pardonable, zeal in the defense of his new position. In the preface to

his book, "The Railways of England," he says upon the subject:

"I have published before now not a few criticisms (which

were meant to be scathing) on English railways anonymously.

I find myself using, under my own name, the language of

almost unvarying panegyric. This is partly to be explained

by the plan of the book, which professes to set before the

reader those points on each line which best merit

description--its excellencies, therefore, rather than its

defects. Much more, however, is it due to a change of

opinion in the writer.... I have found in so many cases that

a satisfactory reply existed to my former criticisms, that I

have perhaps assumed that such an answer would be

forthcoming in all; and if I have taken up too much the

position of an apologist, where I should have been content

to be merely an observer, let me plead as my excuse that I

am only displaying the traditional zeal of the new-made

convert."

Prof. Hadley, of whose work, "Railroad Transportation, its History and

its Law," mention has been made above, contributed an article to the

April, 1891, number of the _Forum_, under the title "Railway Passenger

Rates." He endeavors to show that the high passenger rates of American

railroads are due solely to superior service. He says:

"Continental Europe pays two-thirds as much as America or

England and gets an inferior article. India pays still less

and gets still less. The difference is seen both in quality

and quantity of service. In India express trains rarely run

at a greater speed than 25 miles an hour. In Germany and

France their speed ranges from 25 to 35 miles an hour, and

only in exceptional instances is more than 40 miles an hour.

In the United States and in England the maximum speed rises

as high as 50, or, in exceptional instances, 60 miles an

hour. With regard to the comfort of the cars in different

countries, there is more room for difference of opinion;

but there can be no doubt that the average traveler in the

United States, or even in the English third-class car, fares

better than he would in the corresponding class on

continental railroads, and infinitely better than the bulk

of travelers in British India."

It may be admitted that upon the whole the speed of American and English

railroads is greater than that of continental roads, yet the difference

is much less than Mr. Hadley would make us believe. The fast trains of

the Berlin and Hamburg Railroad, according to Roell's "Railroad

Encyclopedia," make the distance of 179 miles in three hours and

forty-four minutes. The average speed is therefore 48 miles an hour.

There are but few lines in the United States whose regular express

trains run at a greater speed. The express trains of the Berlin and

Brunswick line make 45-1/2 miles an hour. Trains are run on the Vienna

and Buda-Pesth Railway at the rate of 42 miles an hour and on the Paris

and Calais Railway at a rate of over 40 miles an hour. Official reports

give the average speed of express trains in Northern Germany as 32.2

miles per hour, which is considerably more than the average speed of our

Western trains, upon which the rates charged are twice as high as those

charged by German roads. The average speed of the express trains in

England was 35.7 miles per hour in 1890, in the Netherlands 30.7 miles,

in France 30 miles, in Denmark and Southern Germany 28.8 miles and in

Austria 27.8 miles per hour. Accurate statistics showing the average

speed in America are not in existence, but it may well be questioned

whether the difference between the speed of American and European trains

is sufficient to justify upon that score any essential difference in the

rates. Mr. Hadley's statement that the average traveler in the United

States, or even in the English third class, fares better than he would

in the corresponding class on continental railroads, is far too sweeping

to be true. It is certain that the Belgian, German, Austrian or French

second-class coupes are much to be preferred to the smoking and emigrant

cars which in America are made to take their places.

To prove that much more work is demanded of American railroads than of

European railroads, Mr. Hadley presents the following table:

Annual Train

Miles run Service per

by Trains head of

Countries. Population. annually. Population.

United States (1889) 61,000,000 724,000.000 12

Great Britain (1889) 38,000,000 303,000,000 8

Germany (1889) 48,000,000 181,000,000 3-3/4

France (1888) 38,000,000 145,000,000 3-3/4

Austria-Hungary (1887) 40,000,000 66,000,000 1-2/3

India (1889) 200,000,000 51,000,000 0-1/4

And he adds: "These figures are for passenger trains and freight trains

together, as some countries do not give statistics of the two

separately; but the general results would be nearly the same if

passenger trains alone could be considered. The figures show that, for

every man, woman and child, a train is run twelve miles annually in the

United States, in Great Britain eight miles, in Germany or France a

little less than four miles, in Austria not much more than a mile and a

half, and in British India less than a quarter of a mile."

This statement, even if correct, is certainly misleading. No allowance

is made for the greater distances and the greater average haul in

America, and none for our bulky raw products, which require more car

room than the manufactured goods predominating as freight in Europe.

If Mr. Hadley's statement of miles run by trains annually is used in

connection with Mr. Poor's statement showing the length, for 1889, of

the railroads of the countries given in the above table, it can be shown

that the average number of trains run annually per mile is considerably

less here than in Europe:

Length of Average Number

Railroad Miles run of Trains

in miles by Trains per mile per

Countries. (1889). annually. annum.

United States 161,396 724,000,000 4,485

Great Britain 19,930 303,000,000 15,203

Germany 25,360 181,000,000 7,137

France 21,910 145,000,000 6,618

Austria-Hungary 15,990 66,000,000 4,127

It is seen that while the average number of trains run per mile per

annum is only 4,485 in the United States, it is 6,618 in France, 7,137

in Germany, and 15,203 in Great Britain. In Austria-Hungary it is

somewhat less than here. It is not claimed that this is in every respect

a fair argument; but it is at least as fair as Mr. Hadley's. As has been

stated before, the average earnings per train mile are larger in the

United States than in most nations, and, excepting Sweden, railway

capital has the highest gross earnings of any nation in the world; and

when Mr. Hadley bases his argument in favor of higher rates for American

railroads than for those of Europe upon the claim that the latter secure

larger train loads, he simply reasons from false premises.

Mr. Hadley then continues:

"But why cannot our railroad men, with our present train

service, secure larger loads by making lower rates, and give

us cheap service as well as plenty of it? Why cannot we

secure two good things instead of one? For two reasons:

First, because it is not certain that low rates will be

followed by greatly increased travel; second, because such

increased travel would not be so economical to handle in

America as it is in Europe. It is wrong to assume that,

because reductions of charges in Europe have increased travel

enormously, they would have a proportionate effect in America

and a corresponding advantage in American railroad economy.

It is a somewhat significant fact that second-class trains at

reduced rates have been extremely successful in Europe and

not at all so in America. Other things being equal, the

American public would be glad to have its travel at lower

fares; but it cares more for comfort and speed, and for being

able to travel at its own times, than for a slight difference

in charge. The assumption so frequently made, that a

reduction in fares would cause an enormous increase in travel

in this country, is for the most part a pure assumption, not

borne out by the facts."

The great increase in business which has everywhere followed reductions

in postage rates, telegraph rates and street-car fares, as well as

railroad rates, sufficiently refutes the assertion that it is not

certain that low rates would be followed by greatly increased travel. If

the second class has not been as successful here as in Europe this is

solely due to the fact that the American railroad companies have

systematically discouraged second-class travel by forcing passengers

into filthy and over-crowded cars. The statement that increased travel

would not be so economical to handle in America as in Europe scarcely

needs a reply. If, as Prof. Hadley says, the American public demand more

frequent trains than the people of Europe, and if these frequent trains

are not at present profitable to our railroad companies, it would seem

to be plainly to their interest to hold out every inducement to the

public to increase travel and thus fill their trains.

Mr. Hadley does not aid his argument when, referring to the Hungarian

zone system, he says: "The importance of the zone system in Austria and

in Hungary lies in the fact that its adoption was accompanied by a great

reduction in rates. The unit rate for slow, third-class trains, which

had previously been nearly a cent and a half a mile, was reduced to less

than one cent.... The use of railroads under the new system, though

vastly greater than it was before, is vastly less than that of a

well-managed American road at American rates." Mr. Hadley inadvertently

presents here one of the very best reasons why our passenger rates

should be reduced.

The fact is, railroad men are opposed, and always have been opposed, to

reduction of rates, and to all progressive movements that require

increased expenditures or threaten to temporarily reduce their revenues.

When the introduction of the zone system was first advocated in Hungary

it was opposed by just such men and just such arguments.

No one can contradict the following facts, viz.: That the average cost

of European roads is much greater than that of American roads; that the

number of railroad employes per mile is much greater there than here;

that much larger sums are expended for repairing and improving the

roads, and that therefore the lives of passengers are much safer in

Europe than in America; and that the average speed and corresponding

accommodations of European trains, and especially those of England,

Germany, France and Austria-Hungary, compare quite favorably with the

average speed and corresponding accommodations of our roads. It is,

under these circumstances, absurd to claim that the higher prices

charged by American roads are due to the greater cost of service.

Mr. Hadley's labors as a railroad author have, it seems, greatly

increased his corporation bias. In an address which he delivered before

the American Bankers' Association at New Orleans in November, 1891, upon

the subject of "Recent Railroad Legislation and its Effects upon the

Finances of the Country," he made a number of assertions which ill

comport with the fairness of a public statistician or the wisdom of a

Yale professor. After a few introductory remarks, Prof. Hadley made the

following statement:

"Every one knows that railroad property has fallen in value since the

passage of the Interstate Commerce Act four years and a half ago; few

have made any accurate estimate of the amount of that fall. Let us take

the stock of the leading railroad systems centering in Chicago as a

type. Here we find an aggregate shrinkage of over $60,000,000, or more

than one-quarter of the par value of the stocks.

Par Value. Price. Shrinkage.

Apr. 4, Nov. 4,

1887. 1891.

C., M. & St. P. $30,904,261 93 75 $5,560,000

" " Preferred 21,555,900 122 119 647,000

C. & N. W. 31,365,900 121 116 1,568,000

" " Preferred 22,325,454 148 139 2,009,000

C., R. I. & P. 41,960,000 126 82 18,462,000

C., B. & Q. 77,540,500 140 98 32,567,000

----------- ----------

Total. $225,651,000 $60,815,000"

The table shows that fifty-one million of these sixty million dollars

are the shrinkage of the Chicago, Rock Island and Pacific and the

Chicago, Burlington and Quincy stocks. It is surprising that Prof.

Hadley should be ignorant of the real causes of this depreciation, which

are known to nearly every Granger in the West. In 1887 the Chicago, Rock

Island and Pacific Railroad Company owned 1,121 miles of road, only 172

of which were outside of the States of Illinois and Iowa. In 1891 the

same company owned 2,725 miles of road, with 1,776 miles outside of

Illinois and Iowa and scattered through Missouri, Kansas, Nebraska,

Colorado, Indian Territory and Oklahoma. In Kansas alone the Rock Island

system grew from two miles in 1887 to 1,059 miles in 1891. In other

words, to a little over a thousand miles of _good_ road the company's

managers added nearly 2,000 miles of poor road and a proportionate

amount of new stock, and the depreciation in the company's stock which

followed was no greater than one should have expected under such

circumstances. The managers of the Rock Island and the promoters of

these new lines found the transactions to their advantage, while the

original stockholders of the company had to bear the imposition, as

hundreds of thousands of railroad stockholders had done before them. But

neither the law of Congress nor that of any State was to blame for this

depreciation of the Rock Island stock.

Since 1891, railroad stocks have advanced on an average at least twenty

per cent., and during the last sixty days have declined about

twenty-five per cent., although there has been no essential change in

interstate or State legislation. It is certainly as fair to call the

advance the ultimate result of restrictive railroad legislation as to

attribute to that legislation the shrinkage above referred to. Extensive

speculations similar to those just mentioned were, during the same

period, indulged in by the managers of the C., B. & Q. Railroad Company

and its protege, the C., B. & N., who, in addition to this, greatly

injured their road in 1888 by the unjust provocation of the engineers'

strike. So destructive were this strike and its consequences to the

company's business that it is difficult to account for the motives of

those who provoked and stubbornly prolonged it except upon the theory

that it played an important role in their stock manipulations.

But the recent legislation of a considerable number of States has, in

Prof. Hadley's opinion, been still more detrimental to railroad

interests than that of Congress. He says;

"In the second place, the legislatures of several States,

stimulated by the example of Congress, hastened to pass in

imitation, of the Interstate Commerce Act, laws which, in

many instances, went far beyond their model in point of

stringency. Examples are furnished by the statutes of Iowa,

Maryland, Minnesota and South Carolina in 1887-88; of

Florida in 1888-89, and of no less than thirteen States in

1889-90, viz.: Georgia, Iowa, Kentucky, Massachusetts,

Mississippi, New Hampshire, New Jersey, North Dakota, Ohio,

Rhode Island, South Dakota, Virginia, Wyoming; as well as by

the recently adopted Constitution of Kentucky. The

legislation of 1890-91 shows a slight reaction against the

movement of the three years previous.

"In two respects the State legislatures went quite beyond

the scope of the Interstate Commerce Act. They tried to

prescribe safety appliances to the operating department, and

rates to the traffic department. Of the first of these

groups little need be said, except that as a rule they have

failed to accomplish any great progress toward the result in

view, and have in some instances actually hindered such

progress. The attempt at prescribing rates was more serious.

It involved a return to the methods of the Granger

legislation, fifteen years earlier, which had operated so

disastrously upon the railroads and the public alike. The

system of commissioners with powers to make schedules which

should be at least _prima facie_ evidence of reasonable

rates had, during the intervening period, never been wholly

abandoned; but the powers thus conferred had been sparingly

exercised. It was either left unused, as was generally the

case in the North from 1877 to 1887, or the schedule rates

were put so high as not to interfere with good railroad

economy, of which examples are seen in Georgia and other

parts of the South. But from the year 1887 onward there was

a pressure upon the Commissioners to make schedules, and to

make them low; and lest these boards should not be able to

reflect the popular feeling directly enough, they were, in

some instances, no longer to be appointed by the Governor,

but elected by popular vote. The law which was most severely

applied and attracted most public attention was that of

Iowa.... The agitation against the railroads has many points

in common with the land agitation in Ireland. Absentee

ownership is at the bottom of the trouble in either case.

Property is owned in one place and used in another, and the

users, not satisfied with the conditions of use, insist on

taking the business direction into their own hands. They

claim the right to fix rates in Iowa for the same general

reasons by which they claim the right to fix rents in

Ireland."

It must be presumed that Mr. Hadley is ignorant of the fact that under

the Iowa Commissioners' tariff the gross earnings of the Iowa railroads

increased $7,000,000, or more than 17 per cent., in about three years,

and their net revenue increased in proportion. Never have the railroads

or the people of Iowa enjoyed a healthier prosperity than they do at

present. It is true that the State of Iowa denies to the railroad

companies the right to charge what they please; but this claim does not

prevent them from doing justice to the absentee owner of railroad

property. That absentee owners of property are disposed to take undue

advantage of those who use it is illustrated in the very case which Mr.

Hadley cites. So flagrant was the injustice done by the English landlord

to the Irish tenant that the English Parliament was constrained to

interfere and correct it.

Mr. Hadley says further:

"It is seen in Iowa to-day, where, as a result of radical

legislation with regard to rates, railroad construction has

almost entirely ceased, the average for the years 1888-90

being less than fifty miles."

Now Professor Hadley hails from the State of Connecticut, where

railroads are permitted to make their own tariffs and where legislators

are supposed not to be hostile to them. According to Poor's Manual, that

State had 1,004.02 miles of railroad in 1888, and just 2.52 miles more

in 1891, while Iowa had 8,364 miles in 1888, 8,436 in 1891, and 8,505

miles on January 1, 1893. Will Mr. Hadley please explain why railroad

construction has ceased in Connecticut? Iowa has one mile of railroad

for every 227 inhabitants, and Connecticut has one for every 741

inhabitants, although the per capita valuation is $473 in the latter,

and only $273 in the former State. Nor have other Eastern States done

much better than Connecticut. During the three years 1888-1891 there

were built 74 miles of railroad in New Hampshire, 50 in Vermont, 23 in

Massachusetts and 9 in Rhode Island. Iowa has an area of 56,000 square

miles and a population of 1,911,896, an assessed valuation of

$520,000,000; New England has an area of 66,400 square miles, a

population of 4,700,745, and an assessed valuation of $3,500,000,000.

Yet Iowa has 1,576 miles of railroad more than all the New England

States together. She has a railroad net as close as that of the Empire

State, having one mile of road to about 6-1/2 miles of territory,

although the population of that State is three times as dense as hers.

Nevertheless, railroad construction is at present active in Iowa,

several lines of road are in the process of construction at the present

writing, and there is every indication of still greater activity in the

near future. The _Railway Age_ of March 17, 1893, in a detailed list of

new lines projected or under construction in the United States, gives

for Connecticut only 32 miles, while it gives for Iowa 930 miles.

Mr. Hadley continues:

"It is seen to some extent in the Northwest as a whole. At

the close of the year 1887 the States included by Henry V.

Poor in the Central, Northern and Northwestern groups had

25,040 miles of road, while those of the South Atlantic,

Gulf and Mississippi Valley had but 24,567. To-day this

relation is reversed: the Northwest has but 27,294 miles,

while the South has 30,696."

Had Mr. Hadley taken the pains to look up the population of these groups

he would have found that the "South" is fully three times as populous as

the "Northwest," and that therefore his figures prove nothing beyond the

fact that at the present rate of gain the railroad facilities of the

South will in a quarter of a century be equal to those of the Northwest

to-day.

But the argument is weak in another respect. The State in the Southern

group that made by far the greatest gain in railroad mileage during the

period mentioned by Mr. Hadley is Georgia, which gained about 1,000

miles in three years, yet that State prescribed rates for railroad

companies six years before Iowa did, and has for many years exerted a

more thorough control over her railroads than perhaps any other State in

the Union. The smallest increase is in West Virginia, which during the

period given gained an average of only 69 miles per annum; and yet in

West Virginia railroads charge their own rates and usually have their

own way.

Finally Prof. Hadley says:

"Where are we to find the limit to such unwise action? The

United States Supreme Court can do something and has shown a

disposition to do something. In the Minnesota cases it

repudiated the doctrine of uncontrolled rights on the part

of the legislature to make rates, as emphatically as it

repudiated the doctrine of uncontrolled rights on the part

of agents of the corporation in the Granger cases, twelve

years before."

It is evident that Mr. Hadley is as much mistaken in his interpretation

of the decision of the court as he has been in his other assertions, as

will be seen from the following extract from Judge Blatchford's opinion

in Budd vs. New York, in which he says, "The main question involved is

whether this court will adhere to its decision in Munn vs. Illinois."

The court first quoted from the opinion of Judge Andrew of the Court of

Appeals of New York, as follows: "The opinion further said that the

criticism to which the case of Munn vs. Illinois had been subjected

proceeded mainly upon a limited and strict construction and definition

of the police power; that there was little reason, under our system of

government, for placing a close and narrow interpretation on the police

power, or restricting its scope so as to hamper the legislative power in

dealing with the varying necessities of society and the new

circumstances as they arise calling for legislative intervention in the

public interest; and that no serious invasion of constitutional

guarantees by the legislature could withstand for a long time the

searching influence of public opinion, which was sure to come sooner or

later to the side of law, order and justice, however it might have been

swayed for a time by passion or prejudice or whatever aberrations might

have marked its course."

Judge Blatchford then said: "We regard these views, which we have

referred to as announced by the Court of Appeals of New York, so far as

they support the validity of the statute in question, as sound and

just.... We must regard the principle maintained in Munn vs. Illinois as

firmly established."

General Horace Porter has made a contribution to the railway rate

literature by an article which appeared in the December, 1891, number

of the _North American Review_. Unfortunately many of the General's

statements are either false or misleading. Thus, in a table which he

presents for the purpose of comparing the passenger rates of Europe with

those of the United States, he gives the regular first-class schedule

rates for the United Kingdom, France and Germany and the average

earnings per passenger per mile for this country. That this is an unfair

comparison needs no further argument, especially when it is remembered

that in Europe from 85 to 90 per cent, of all passengers are carried in

the third class at a regular rate averaging about 1-1/2 cents per mile,

and that considerable reductions are made for excursion, commutation and

return tickets.

But General Porter says concerning American rates:

"When we take into consideration the excursion and the

commutation rates, we find first-class passengers carried as

low as half a cent a mile."

Now the question arises whether American railway companies carry

passengers at such rates with or without loss to themselves. If they are

carried at a loss, an injustice is done to the regular passengers, whose

fare must not only make up the loss, but yield a larger profit than

would otherwise be necessary. If, on the other hand, a rate of half a

cent a mile can be made remunerative, there is certainly no justice in

maintaining rates five and six times as large on well-patronized lines.

General Porter places stress upon our superior accommodations in the way

of lighting, ventilation, ice-water, lavatories, and free carriage of

baggage, etc., and then adds:

"In this connection we must also recollect that the cost of

fuel, wages and all construction materials is considerably

higher here than in Europe, while the population from which

the railways derive their support is much more sparse; the

United States having 166,000 miles of railway with a

population of 63,000,000, while Europe has only 135,000

miles with a population of 335,000,000."