Chapter X: Railroad Literature (2)

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 £1,000 ($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
£21,968,000. 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, £330, 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."