During the last fifty years the railroad has perhaps been most familiar
to the American people as a "problem." As a problem it has figured
constantly in politics and has held an important position in many
political campaigns. The details that comprise this problem have
been indicated to some extent in the preceding pages--the speculative
character of much railroad building, the rascality of some railroad
promoters, the corrupting influence which the railroad has too
frequently exerted in legislatures and even in the courts. The attempts
to subject this new "monster" to government regulation and control have
furnished many of the liveliest legislative and judicial battles in
American history. Farmers, merchants, manufacturers, and the traveling
public have all had their troubles with the transportation lines, and
the difficulties to which these struggles have given rise have produced
that problem which is even now apparently far from solution.
Railroads had been operating for many years in this country before it
dawned upon the farmers that this great improvement, which many had
hailed as his greatest friend, might be his greatest enemy. It had been
operating for several decades in the manufacturing sections before the
enterprising industrialist discovered that the railroad might not only
build up his business but also destroy it. From these discoveries arose
all those discordant cries of "extortion," "rebate," "competition,"
"long haul and short haul," "regulation," and "government ownership,"
which have given railroad literature a vocabulary all its own and have
written new chapters in the science of economics. The storm center of
all this agitation concerned primarily one thing--the amount which the
railroad might fairly charge for transporting passengers and freight.
The battle of the people with the railroads for fifty years has been
the "battle of the rate." This has taken mainly two forms, the agrarian
agitation of the West against transportation charges, and the fight of
the manufacturing centers, mainly in the East, against discriminations.
Perhaps its most characteristic episodes have been the fight of the
"Grangers" and their successors against the trunk lines and that of the
general public against the Standard Oil Company.
Even in the fifties and the sixties, the American public had its
railroad problem, but it was quite different in character from the one
with which we have since grown so familiar. The problem in this earlier
period was merely that of getting more railroads. The farmer pioneers
in those days were not demanding lower rates, better service, and no
discrimination and antipooling clauses; they asked for the building
of more lines upon practically any terms. This insistence on railroad
construction in the sixties explains to a great extent the difficulties
subsequently encountered. In a large number of cases railroad building
became a purely speculative enterprise; the capitalists who engaged in
this business had no interest in transportation but were seeking merely
to make their fortunes out of constructing the lines. Not infrequently
the farmers themselves furnished a considerable amount of money,
expecting to obtain not only personal dividends on the investment but
larger general dividends in the shape of cheap transportation rates and
the development of the country. Even when the builders were more
honest, their mistaken enthusiasm had consequences which were similarly
disastrous. The simple fact is that a considerable part of the
Mississippi Valley, five or ten years after the Civil War, found itself
in the possession of railroads far in excess of the public need. In the
long run this state of affairs was probably not a great economic evil,
for it stimulated development on a tremendous scale; but its temporary
effect was disastrous not only to the railroads themselves but to the
struggling population. The farmer had mortgaged his farm to buy stock
in the road; and his town or county or State had subsidized the line by
borrowing money which it frequently could not repay. When this property
became bankrupt, not only wiping out these investments but leaving the
agricultural population at the mercy of what it regarded as exorbitant
rates and all kinds of unfair discriminations with high interest charges
on its mortgages and high local taxes, the blind fury that resulted
among the farmers was not unnatural.
Many of the railroad evils were inherent in the situation; they were
explained by the fact that both managers and public were dealing with a
new agency whose laws they did not completely understand. But the mere
play of personal forces in themselves aggravated the antagonism. The
fact that most of the railroad magnates lived in the East added that
element of absentee landlordism which is essential to most agrarian
problems. Many of the Western capitalists were real leaders; yet it is
only necessary to remember that the most active man in Western railroads
in the seventies was Jay Gould, to understand the suspicion in which the
railroad promoter of that day was generally held. It is significant
that of all the existing railroad abuses, the one which seemed to
arouse particular hostility was the free pass. There were many greater
practical evils than this, yet the fact that most editors and public
officials and politicians and legislators and even many judges rode
"deadhead" was a constant reminder of the influence which this "alien"
power exercised over the government and the public opinion of the
communities of which it was theoretically the servant. Many of these
roads had a greater income than the States they served; their payrolls
were much larger; their head officials received higher salaries than
governors and presidents. The extent to which these roads controlled
legislatures and, as it seemed at times, even the courts themselves,
alarmed the people. The stock-jobbing that had formed so large a part
of their history added nothing to their popularity. Yet, when all these
charges against the railroads are admitted, the fundamental difficulty
was one which, at that stage of public enlightenment, was beyond the
power of individuals to control. Nearly all the deep-seated evils arose
from the fact that the railroads were attempting to do something which,
in the nature of the case, they were entirely unfitted to do--that
is, compete against one another. When the great trunk lines were
constructed, the idea that competition was the life of trade held sway
in America, and the popular impression prevailed that this rule would
apply to railroads as well as to other forms of business. To the few
farseeing prophets who predicted the difficulties which subsequently
materialized, the answer was always made that competition would protect
the public from extortion and other abuses. But competition between
railroads is well-nigh impossible. Only in case different companies
operated their cars upon the same roadbed--something which, in the
earliest days, they actually did on certain lines--could they compete,
and any such system as a general practice is clearly impracticable. One
railroad which paralleled another in all its details might compete with
it, but there are almost no routes that can furnish business enough for
two such lines, and the carrying out of such an idea involves a waste
of capital on an enormous scale. Probably the country received its most
striking illustration of this when the West Shore Railroad in New York
State was built almost completely duplicating the New York Central, with
the result that both roads were nearly bankrupted.
While no one railroad can completely duplicate another line, two or more
may compete at particular points. By 1870 this contingency had produced
what was regarded as the greatest abuse of the time--the familiar
problem of "long and short haul." Two or more railroads, starting at an
identical point, would each pursue a separate course for several hundred
miles and then suddenly come together again at another large city. The
result was that they competed at terminals, but that each existed as an
independent monopoly at intermediate points. The scramble for business
would thus cause the roads to cut rates furiously at terminals; but
since there was no competition at the intervening places the rates at
these points were kept up, and sometimes, it was charged, were raised
in order to compensate for losses at the terminals. Thus resulted that
anomaly which strikes so strangely the investigator of the railroad
problem--that rates apparently have no relation to the distance covered,
and that the charge for hauling a load for seventy-five miles may be
actually higher than that for hauling the same load one hundred or one
hundred and fifty miles. The expert, looking back upon nearly a hundred
years of railroad history, may now satisfactorily explain this curious
circumstance; but it is not surprising that the farmer of the early
seventies, overburdened with debt and burning his own corn for fuel
because he could not pay the freight exacted for hauling it to market,
saw in the system only an attempt to plunder. Yet even the shippers
at terminal points had their grievances, for the competition at these
points became so savage and so ruinous that the roads soon entered
into agreements fixing rates or formed "pools." In accordance with
this latter arrangement, all business was put into a common pot, as
the natural property of the roads constituting the pool; it was then
allotted to different lines according to a percentage agreement, and the
profits were divided accordingly. As the purpose of rate agreements
and pools was to stop competition and to keep up prices, it is hardly
surprising that they were not popular in the communities which they
affected. The circumstance that, after solemnly entering into pools,
the allied roads would frequently violate their agreements and cut rates
surreptitiously merely added to the general confusion.
The early seventies were not a time of great prosperity in the newly
opened West, and the farmers, looking about for the source of their
discomforts, not unnaturally fixed upon the railroads. Their period of
discontent coincided with what will always be known in American history
as "the Granger movement." In its origin this organization apparently
had no relation to the dissatisfaction which its leaders afterward so
successfully capitalized. Its founder, Oliver Hudson Kelley, at the time
when he started the fraternity was not even a farmer but a clerk in
the Agricultural Bureau at Washington. Afterward, when the Grangers
had become an agrarian force to be feared, if not respected, it was
a popular jest to refer to the originators of this great farmers'
organization as "one fruit grower and six government clerks." Kelley's
first conception seems to have been to organize the farmers of the
nation into a kind of Masonic order. The Patrons of Husbandry, which
was the official title of his society, was a secret organization, with
signs, grips, passwords, oaths, degrees, and all the other impressive
paraphernalia of its prototype. Its officers were called Master,
Lecturer, and Treasurer and Secretary; its subordinate degrees for men
were Laborer, Cultivator, Harvester, and Husbandman; for women--and
women took an important part in the movement--were Maid, Shepherdess,
Gleaner, and Matron, while there were higher orders for those especially
ambitious and influential, such as Pomona (Hope), Demeter (Faith), and
Flora (Charity). Certainly these titles suggest peace and quiet rather
than discontent and political agitation; and, indeed, the organization,
as evolved in Kelley's brain, aimed at nothing more startling than
the social, intellectual, and economic improvement of the agricultural
classes. Its constitution especially excluded politics and religion as
not being appropriate fields of activity. It did propose certain forms
of business cooperation, such as the common purchase of supplies,
the marketing of products, perhaps the manufacture of agricultural
implements; but its main idea was to contribute to the social
well-being of the farmers and their families by frequent meetings
and entertainments, and to improve farming methods by collecting
agricultural statistics and by spreading the earliest applications of
science to agriculture. The idea that the "Grange," as the organization
was generally known, would ultimately devote the larger part of its
energies to fighting the railroads apparently never entered the minds of
its founders.
Had it not been for the increasing agricultural discontent against
railroads and corporations in general, the Patrons of Husbandry would
probably have died a painless death. But in the early seventies this
hostility broke out in the form of minority political parties, the
principal plank in whose platform was the regulation of the railroads.
Farmers' tickets, anti-monopoly parties, and anti-railroad candidates
began to appear in county and even state elections, sometimes
achieving such success as to frighten the leaders of the established
organizations. The chief aim of the discontented was "protection from
the intolerable wrongs now inflicted onus by the railroads." "Railroad
steals," "railroad pirates," "Wall Street stock-jobbers," and like
phrases supplied the favorite slogans of the spirited rural campaigns.
These parties, though much ridiculed by the metropolitan press, started
a political agitation which spread with increasing force in the next
forty years and in recent times eventually gained the ascendency in both
the old political parties.
The panic of 1873 and the unusually hard times that followed added fuel
to the flame. It was about this time that the Patrons of Husbandry gave
evidences of a new vitality, chiefly manifested in a rapidly increasing
membership. On May 19, 1873, there were 3360 Granges in the United
States, while nineteen months later, on January 1, 1875, there were
21,697, with a total membership of over seven hundred thousand. In the
Eastern States the movement had made little progress; in the South it
had become somewhat more popular; in such States as Missouri, Iowa,
Kansas, Nebraska, Montana, Idaho, and Oregon, it had developed into
almost a dominating influence. It is not difficult to explain this
sudden and astonishing growth: the farmers in the great grain States
seized upon this organization as the most available agency for remedying
their wrongs and rescuing them from poverty. In their minds the National
Grange now became the one means through which they could obtain that
which they most desired--cheaper transportation. Not only did its
membership show great increase, but money from dues now filled the
treasury to overflowing. At the same time the organs of the capitalist
press began to attack the Grange violently, while the politicians in
the sections where it was strongest sedulously cultivated it. But the
leaders of the movement never made the fatal mistake of converting their
organization into a political party. It held no political conventions,
named no candidates for office, and even officially warned its members
against discussing political questions at their meetings. Yet, according
to a statement in the "New York Tribune", "within a few weeks the Grange
menaced the political equilibrium of the most steadfast States. It had
upset the calculations of veteran campaigners, and put the professional
office-seekers to more embarrassment than even the Back Pay." The
Grangers fixed their eyes, not upon men or upon parties, but upon
measures. They developed the habit of questioning candidates for office
concerning their attitude on pending legislation and of publishing their
replies. Another favorite device was to hold Granger conventions in
state capitals while the legislature was sitting and thus to bring
personal pressure in the interest of their favorite bills. This method
of suasion is an extremely potent political force and explains the fact
that, in certain States where the Granges were most powerful, they had
practically everything their own way in railroad legislation.
The measures which they thus forced upon the statute books and which
represented the first comprehensive attempt to regulate railroads have
always been known as the "Granger Laws." These differed in severity
in different States, but in the main their outlines were the same.
Practically all the Granger legislatures prohibited free passes to
members of the legislatures and to public officials. A law fixing the
rate of passenger fares--the maximum ranging all the way from two and
one-half to five cents a mile--was a regular feature of the Granger
programme. Attempts were made to end the "long and short haul" abuse by
passing acts which prohibited any road from charging more for the short
distance than for the long one. More drastic still were the laws passed
by Iowa in 1874 and the famous Potter bill passed by Wisconsin in the
same year. Both these measures, besides fixing passenger fares, wrote
in the law itself detailed schedules of freight rates. The Iowa act
included a provision establishing a fund of $10,000 which was to be used
by private individuals to pay the expenses of suits for damages under
the act, and this same act made all railroad officials and employees
who were convicted of violations subject to fine and imprisonment.
The Potter act was even more severe. It not only fixed maximum freight
rates, but it established classifications of its own. The railroads
asserted that the framers of this law had simply taken the lowest rates
in force everywhere and reduced them twenty-five per cent. But Iowa and
Wisconsin and practically all the States that passed the Granger
laws also established railroad commissions. For the most part these
commissions followed the model of that established by Massachusetts
in 1869, a body which had little mandatory authority to fix rates or
determine service, but which depended upon persuasion, arbitration, and,
above all, publicity, to accomplish the desired ends. The Massachusetts
commission, largely owing to the high character and ability of
its membership--Charles Francis Adams serving as chairman for many
years--had worked admirably. In the most part these new Western
commissions were limited in their activities to regulating accounting,
obtaining detailed reports, collecting statistics, and enforcing the new
railroad laws.
These measures, following one another in rapid succession, produced
a national, even an international sensation. The railroad managements
stood aghast at what they regarded as demagogic invasions of their
rights, and the more conservative elements of the American public looked
upon them as a violent attack upon property. Up to this time there had
been little general understanding of the nature of railroad property. In
the minds of most people a railroad was a business, precisely like
any other business, and the modern notion that it was "affected with a
public interest" and that the public was therefore necessarily a partner
in the railroad business had made practically no headway. "Can't I do
what I want with my own?" Commodore Vanderbilt had exclaimed, asserting
his exclusive right to control the operations of the New York Central
system; and that question fairly well represented the popular attitude.
That the railroad exercised certain rights of sovereignty, such as that
of eminent domain, that it actually used in its operations property
belonging to the State, and that these facts in themselves gave the
State the right to supervise its management, and even, if necessity
arose, to control it--all this may have been recognized as an abstruse
legal proposition, but it occupied no practical place in the business
consciousness of that time. Naturally the first step of the railroads
was therefore to contest the constitutionality of the laws, and while
these suits were pending they resorted to various expedients to evade
these laws or to mitigate their severity. A touch of liveliness and
humor was added to the situation by the thousands of legal fare cases
that filled the courts, for farmers used to indulge in one of their
favorite agricultural sports--getting on trains and tendering the
legal two and a half cents a mile fare, a situation that usually led to
ejectment for nonpayment and then to a suit for damages. The railroads
easily met the laws forbidding lighter charges for long than for short
hauls by increasing the rates for the longer distances, and the laws
fixing maximum rates within the State by increasing the rates outside
the State. When the courts decided the cases against the railroads,
as in most cases they did, these corporations set about to secure the
repeal of the laws. They started campaigns of education, frequently
through magazine or newspaper articles pointing out the injustice of the
Granger laws and insisting that they were working great public damage.
It is a fact that a decrease in railroad construction followed the
Granger demonstration, and the friends of the railroads insisted that
timid capital hesitated to embark in an enterprise that was constantly
subject to legislative attack. These campaigns succeeded much better
than the more violent opposition to which the railroads had first
resorted. The Western States in the majority of cases repealed their
most drastic legislation. Nearly all the laws fixing maximum rates
disappeared from the books, and even Iowa and Wisconsin substituted
for these measures supervisory and advisory commissions after the
Massachusetts model.
While the Granger movement thus failed effectively to curb the
railroads, it succeeded in arousing great popular interest in the
railroad problem and in placing before the public several of the most
important details of that problem. Not the least of its achievements
were the decisions which it obtained from the Supreme Court of the
United States. The Granger cases are among the most epoch-making in
American history, and they fixed for all time the principles of American
policy in dealing with the railroad question. They are particularly
worthy of study by those who have regarded the Supreme Court as the
bulwark of social injustice and as a body which can always be relied
upon to protect the rights of property against the interests of the
masses. In its railroad decisions this charge hardly holds; for these
Granger cases sustain practically all the legal contentions made by the
Granger legislatures. * The cases fixed for all time the point that
a State, acting under the police power, may regulate the charges of a
railroad even to the extent of fixing maximum rates. They even went
so far as to hold that the right to fix rates is not subject to any
restraint by the court on the ground of unreasonableness, a principle
which the Supreme Court has reversed in more recent times. The courts
also held that a State, at least until Congress acted, could regulate
interstate commerce, but this decision also has since then been
reversed. These subsequent reversals of decisions which were exceedingly
popular at the time, however, not only constituted sound law but
promoted the public interest, for they established that body of law
which has made possible the present more comprehensive system of Federal
regulation of railroads.
* The cases of particular interest were: Munn vs. Illinois, 94
U.S. 114; Peik vs. Chicago and Northwestern Railway Company, 94 U.S.
164; and Chicago, Burlington and Quincy Railway Company vs. Cutts, 94
U.S. 155.
Meanwhile the demand for regulation was gaining strength in the Eastern
States, but for somewhat different reasons. The farmers of New England,
New York, and the Eastern region in general had not particularly
sympathized with the Granger legislation; they already had great
difficulty in competing with the large Western farms, and a reduction
in rates to the seaboard would have made their position even less
endurable. This attitude was unquestionably selfish but entirely
comprehensible. The agitation for railroad reform in the East came
chiefly from the manufacturing and commercial classes. Here the main
burden of the complaint was the railroad rebate. This was a method of
giving lower rates to large shippers than to small--charging the favored
shipper the published rate and then, at stated periods, surreptitiously
returning part of the payment. This was perhaps the most vicious abuse
of which the railroads have ever been guilty. That the common law
forbade the practice and that it likewise violated the implied contract
upon which the railroad obtained its franchise was hardly open to
dispute; yet up to 1887 no specific law in this country prohibited the
practice. For many years the rebate hung over the American business
world, a thing whose existence was half admitted, half denied, a kind
of ghostly economic terror that seemed persistently to drive the small
corporation to bankruptcy and the large corporation to dominating
influence. The Standard Oil Company was the "monster" that was believed
especially to thrive upon this kind of sustenance, though this was by no
means the only industry that maintained such secret relations with the
railroads; the Carnegie Steel Corporation, for example, accepted
rebates almost as persistently. It was not until 1879, when the Hepburn
Committee in New York State had its hearings, that all the facts
concerning the rebate were exposed officially to public view. The
contracts of the Standard Oil Company with the railroads were placed
upon the records and these showed that all the worst suspicions
regarding this practice were justified. This disclosure made the
railroad rebate one of the most familiar facts in American industrial
life; and in consequence a demand arose for Federal legislation that
would definitely make the practice a crime and also for some kind
of Federal supervision to do effectively the work which the state
commissions had failed to do.
By this time it was clear enough that the only hope of adequate
regulation lay with the Federal Government. Congressman Reagan, of
Texas, had for years been pushing a bill to regulate interstate commerce
and to prohibit unjust discriminations by common carriers; other
measures periodically made their appearance in the Senate; but the
Houses had been unable to agree and nothing had been done.
Two facts presently gave great impetus to the movement; in 1886 the
United States Supreme Court, reversing its previous decision, decided
that no State could fix rates for railroad lines outside its own
borders, in other words, that interstate rates were exclusively within
the jurisdiction of the Federal authority *; and a Senate committee,
under the chairmanship of Shelby B. Cullom, conducted an investigation
of railroad conditions which made clear the need of immediate reform.
As a consequence, Congress passed the Interstate Commerce Act, which
received President Cleveland's signature on February 4, 1887. This
measure specifically made illegal rebates, pools, higher charges for
short than for long hauls (when the hauls in question were upon the same
road); it required railroads to file their tariffs, and it established
a commission of five members, who had powers of investigation, including
the right to make the companies produce their books. This commission
received power to establish systems of accounting and the like, but it
had no prerogative to fix rates. Inadequate as this measure seemed to
the radical element, it was generally hailed as marking the beginning
of an era in the Federal control not only of railroads but of other
corporations, and this impression was increased by the high character of
the men whom President Cleveland appointed to the first board.
* Wabash, St. Louis and Pacific Railway Company vs. Illinois, 118
U.S. 557.
The Interstate Commerce Commission lasted essentially in this form
for nearly twenty years. On the whole it was a failure. Such was the
judgment passed by Justice Harlan of the United States Supreme Court
when he remarked in one of his decisions that the commission was "a
useless body for all practical purposes"; and such, indeed, was the
judgment of the commission itself, for in its report of 1898 it declared
that the attempt at Federal regulation had failed. The chief reasons
for this failure, the commission said, were the continued existence of
secret rates and the fact that published tariffs were not observed. *
The managers of the great American railroad systems would not yet
admit that the fixing of railroad rates was the concern of any one but
themselves, and they still regarded railroad management as essentially
a private business. If they could obtain large shipments by granting
special rates, even though they had to do it by such underhanded ways
as granting rebates, they believed that they were entirely justified in
doing so. Thus rebates flourished almost as much as ever, passes were
still liberally bestowed, and pools were still formed, though they
sometimes took the shape of "gentlemen's agreements."
* But it should be added that the effectiveness of the commission
as an administrative and regulating body was diminished by decisions
of the courts, notably the decision of the Supreme Court in the maximum
rate case. See 160 U.S. 479.
In 1906, when President Roosevelt became intensely active in the
railroad problem, conditions were fairly demoralized. Attempts to
enforce the anti-pooling clause had led railroads to purchase competing
lines, and when the United States Supreme Court pronounced this illegal,
the situation became chaotic. The evils of overcapitalization also
became an issue of the times. The Interstate Commerce Commission had
become almost moribund, and there was a general sentiment that the
trouble arose from the fact that the commission had no power to fix
rates and that the solution of the railroad problem would come only when
such power was vested in it. * The Interstate Commerce Act which became
a law on June 29, 1906, was the outcome of one of the greatest
battles of President Roosevelt's political life. The act increased the
membership of the commission from five to seven members, placed under
its jurisdiction not only railroads but pipe lines, express companies,
and sleeping-car companies, added to the other familiar restrictions a
"commodities clause," which prohibited any railroad from transporting
a product which it had produced or mined, "except such articles or
commodities as may be necessary and intended for its use in the conduct
of its business as a common carrier"--this clause was intended to end
the railroad monopoly of the coal mines--and made the failure to observe
published tariffs a crime punishable with imprisonment. The amended law
did not give the commission the right to fix rates in the first instance
but did empower it, on complaint, to investigate charges and on
the basis of this investigation to determine just maximum rates,
regulations, and practices, though carriers were given the right of
appeal to the courts.
* The Elkins Act of 1903 had, it is true, increased the
effectiveness of the commission in dealing with discriminations, but it
had not solved the problem of securing reasonable rates.
Thus, in essence, the public had obtained the reform which it had been
demanding for years. The reorganized commission did not hesitate to
exercise its new powers. It soon began actually fixing rates, and from
being a half-alive despised institution it rapidly developed into one
of the most powerful agencies of administration. In the succeeding ten
years its powers were still further enlarged by acts of Congress and the
privilege of fixing charges practically passed out of the hands of the
railroads into the control of the Interstate Commerce Commission. The
railroads, that is, practically lost the power to regulate their own
income. Meanwhile, the progressive movement in American politics had
led to the creation of commissions in most of the States, with similar
authority over rate making within the States, besides exercising
numerous other powers over service and capitalization. Many railroads
fell upon evil days and receiverships again became common. Naturally the
railroad managers attributed these calamities to the fact that they were
so constantly being regulated; but they probably pushed this claim too
far, for the causes of their troubles were more complex.
In 1916, in the heat of a political campaign, the Federal Government
took a step which introduced a new principle into railroad management
and made the roads practically helpless. The four brotherhoods of
railroad operatives were making demands for a so-called eight-hour day,
and threatened a general strike that would paralyze all business and
industry and throw the whole life of the nation into chaos. Properly to
appreciate the consequences of this event, it is necessary to keep in
mind the fact that the plea for an "eight-hour day" was spurious. An
eight-hour day cannot be rigidly enforced on railroads; the workmen well
knew this, and indeed they did not really demand such working hours.
What they asked for was a full day's pay for eight hours and "time and
a half" pay for all in excess of that amount; that is, they demanded
an increase in wages. President Wilson, having failed in his attempt to
settle the difficulty by arbitration, compelled a Democratic Congress
over which his sway was absolute to pass a law-sponsored by Chairman
Adamson of the House Committee on Interstate Commerce--which granted
practically what the unions demanded. In passing this law, Congress
asserted an entirely new power which no one had ever suspected that
it possessed--that of fixing the wages which should be paid by common
carriers and possibly by other corporations engaged in interstate
commerce. The railroads immediately took the case to the United
States Supreme Court, which promptly sustained the law. This decision,
unquestionably the most radical in the history of that body, declared
virtually that Congress could pass any law regulating railroads which
the public interest demanded.
And thus, after fifty years of almost incessant struggle with the
public, was the mighty railroad monster humbled. It had lost power to
regulate the two items which represent the existence of a business--its
income and its outgo. The Interstate Commerce Commission was now fixing
railroad rates, and Congress was fixing the amounts of railroad wages.
It remained for the Great War to precipitate the only logical outcome
of this situation--government control. The steadily increasing
responsibilities of war soon told heavily upon all lines until, in the
latter part of 1917, the whole railroad system of the United States had
all but broken down. The unions were pressing demands for wage increases
that would have added a billion dollars a year to their annual budgets.
The fact that so large a part of the output of American locomotive works
was being shipped to the Allies made it difficult for the American lines
to maintain their own supply. Nearly all coastwise ships and tugs were
utilized for war work, a large part of them had been sent to the other
side, and this put an additional strain upon the railroads. The movement
of troops, the heavy building operations in cantonments and shipbuilding
plants, the manufacture and transportation of munitions, all put an
unprecedented pressure upon them. Everywhere there was great shortage of
cars, equipment, and materials. Possibly the railroads might have risen
to the occasion except for the fact that the enormous increase in the
cost of labor and supplies made demands upon their treasuries which they
could not meet. They repeatedly asked the Interstate Commerce Commission
for an increase in rates, but this request was repeatedly refused. The
roads were therefore helpless, and their operations became so congested
as to create a positive military danger. Under these circumstances there
was profound relief when President Wilson took over the roads and placed
them under government control, with William Gibbs McAdoo, Secretary of
the Treasury, in active charge.
McAdoo immediately took the step which the Administration, while the
railroads were under private control, had steadily refused to sanction,
and now increased the rates. These increases were so great that they
made the public fairly gasp, but, under the impulse of patriotism, there
was a good-natured acquiescence. McAdoo also increased wages by hundreds
of millions of dollars. His administration on the whole was an able one.
He ignored for the moment the prevailing organization and managed
the roads as though they constituted a single system. He instituted
economies by concentrating ticket offices, establishing uniform freight
classifications, making common the use of terminals and repair shops,
abolishing circuitous routes, standardizing equipment, increasing the
loads of cars and by introducing a multitude of other changes. All these
reforms greatly increased the usefulness of the roads, which now became
an important element in winning the war. Properly regarded, the American
railroads became as important a link in the chain of communications
reaching France as the British fleet itself. It is not too much to say
that the fate of the world in the critical year 1918 hung upon this
tremendous railroad system which the enterprise and genius of Americans
had built up in three-quarters of a century. In February, 1918, Great
Britain, France, and Italy made official representations to the American
Government, declaring that unless food deliveries could be made as they
had been promised by Hoover's food administration, Germany would win
the war. McAdoo acted immediately upon this information. He gathered all
available cars, taking them away from their ordinary routes, and rushed
them from all parts of the country to the great grain producing States.
All other kinds of shipments were discontinued; officials and employees
from the highest to the lowest worked day and night; and presently the
huge supplies of the indispensable food started towards the Atlantic
coast. So successful was this operation that, on the 12th of March,
the supplies so exceeded the shipping capacity of the Allies that
6318 carloads of food stood at the great North Atlantic ports awaiting
transportation. This dramatic movement of American food supplies was an
important item in winning the war and fairly illustrated the great part
which the American railroads played in turning the tide of battle from
defeat to victory.
BIBLIOGRAPHICAL NOTE
General literature on the history of American railroads is surprisingly
scarce. While numerous volumes have been written in recent years on
special phases of the railroad question, few histories of any real value
are available. Probably the best outline history of American
railroad development as a whole is still Arthur T. Hadley's "Railroad
Transportation, its History and its Laws" (1885), but this necessarily
covers only the earlier periods of railroad growth and its discussions
are limited to the problems which confronted the carriers many years
ago. An extremely valuable book (now out of print) giving a very
complete picture of railroad building and expansion in the pre-Civil
War period is "The Book of the Great Railway Celebration of 1857", by
William Prescott Smith. This is primarily a description of the opening
of the Ohio and Mississippi Railway, which connected the Mississippi
Valley for the first time with the Eastern seaboard. A volume of real
value, but somewhat technical, giving a complete and accurate view of
the reorganization period of the great railroad systems, from 1885 to
1900, is "Railroad Reorganization", by Stewart Daggett (1910). This book
contains outline sketches of the histories of nearly all of the
large systems, as well as very accurate details of the financial
reorganizations of all of the defaulted properties. The most
comprehensive history of any American railroad system is "The Story of
Erie", by H. S. Mott (1900), but even this is partially unreliable and
much of it is compiled from unofficial sources. On the financial history
of the Erie Railroad, the really valuable authority is Charles Francis
Adams in his "Chapters of Erie" (1871). This book furnishes a full and
accurate account of the regime of Daniel Drew, Jay Gould, James Fisk,
Jr., and the famous "Erie ring," including "Boss" Tweed, and also throws
side lights on the character and career of Commodore Vanderbilt.
Among other important histories of particular railroad systems may
be mentioned "The Union Pacific Railway", by John P. Davis (1894) and
"History of the Northern Pacific Railroad", by Eugene V. Smalley (1883);
but neither of these volumes covers the recent and more interesting
periods in the development of these properties. To get a complete and
satisfactory view of the later development of the Northern Pacific
system, one must turn to modern biographical works, such as the "Life of
Jay Cooke", by E. P. Oberholtzer (1910), the "Memoirs of Henry Villard"
(1909), and the "Life of James J. Hill", by Joseph Gilpin Pyle (1916),
which also recounts at length the rise and development of the Great
Northern Railway system. But in these volumes, as in many biographies of
great men, the authors often betray a bias and misrepresent facts
vital to an understanding of the development of both of these railroad
systems. A recent volume entitled the "Life Story of J. P. Morgan",
by Carl Hovey, although extremely laudatory and therefore in many ways
misleading, contains valuable information about the development of the
Vanderbilt lines after 1880 and also about the financial vicissitudes
and rehabilitation of the many Morgan properties, such as the Southern
Railway, the modern Erie system, the Northern Pacific, the Reading, and
the Baltimore and Ohio.
Some of the railroad companies many years ago themselves published
histories of their lines, but most of these attempts were of little
value, as they were always too laudatory and one-sided and evidently
were usually written for political purposes. The best of this class of
railroad histories was a book issued by the Pennsylvania Railroad many
years ago, giving a record (largely statistical) of the growth and
development of its lines. But this book has been long out of print and
covers the period prior to 1885 only.
For original material on American railroad history, one must depend
almost entirely on financial and railroad periodicals and official and
state documents. By far the most valuable sources for all aspects of
railroad building and financing during the long period from 1830 to 1870
are the "American Railroad Journal" (1832-1871) and "Hunt's Merchant
Magazine" (1831-1870). Both of these periodicals are replete with
details of railroad building and growth. And for the period from 1870
to the present time the best authority is the "Commercial and
Financial Chronicle", with its various supplements. The story of modern
railroading is so intertwined with finance and banking that to get any
broad and complete view of the subject one must consider it largely
from the viewpoint of Wall Street. For facts regarding operation and
management of modern railroads, the "Railroad Age-Gazette" also
is extremely useful. By far the most valuable sources for railroad
statistics, railroad legislation, and all related facts, are the annual
reports and bulletins of the Interstate Commerce Commission, which
have been regularly issued since 1888. Many state commissions also have
issued volumes of value.
The best account of the origin of the Granger laws is contained in S.
J. Buck's "The Granger Movement" (1913). The beginnings of Federal
regulation are traced in L. H. Haney's "A Congressional History of
Railways in the United States, 1850-1887" (1910). The history of recent
railroad regulation by state and Federal legislation, and of court
decisions affecting the railroads, is clearly and succinctly told in
William Z. Ripley's "Railroads: Rates and Regulation" (1912), and in
Johnson and Van Metre's "Principles of Railroad Transportation" (1916).