Chapter XIV: Remedies (1)

The railroad in America is still in its infancy, both as regards extent of mileage and methods of operation. In 1860 the United States had in round numbers 30,000 miles of road; in 1870 this number had increased to 53,000; in 1880 to 93,000, and in 1890 to 167,000. It will thus be seen that the average increase during each of those three decades was nearly 80 per cent. Should this rate of increase continue during the next three decades there would be in the present territory of the United States a little over three hundred thousand miles in 1900, 550,000 miles in 1910 and close to one million miles in 1920, or about one mile of road for every three miles of territory. It is not likely that the rate of increase of the past will continue in the future; but even if this should be reduced from 80 to 40 per cent. it would be less than fifty-five years when the railroad mileage of the United States would reach the million point.

Even this might seem an extravagant estimate, but it must be remembered that there are already a number of States in the Union with a railroad mileage closely approaching this proportion. The District of Columbia has one mile of road for every 3.39 square miles of territory, New Jersey for every 3.79, Massachusetts for every 3.96, and Connecticut for every 4.96 square miles. Ohio, Pennsylvania, Rhode Island and Illinois follow with one mile of railroad for every 5.14, 5.20, 5.57 and 5.59 square miles of territory, respectively, and Indiana, New York, Delaware and Iowa are not far behind them.

It should also be borne in mind that many of the through lines have double, some triple, and some even quadruple tracks, which, if taken into the account, would increase the mileage much more; and still railroad construction in most of these States is far from being at a standstill. The United States will eventually be able to sustain a closer net of railways than any country in Europe, and we may rest assured that the time will come when the fertile prairie States of the Northwest will have a mile of railroad for every square mile of territory.

In view of the future magnitude of the transportation interest the importance of placing its control and management early upon sound principles should not be under-estimated. Abuses crept into railroad management in the past, not because the men who controlled it were necessarily worse than men engaged in other pursuits, but because the States failed to provide adequate legislation for the control of this new social and commercial force, and the license enjoyed by railroad men gradually turned into serious evils what seemed at first only harmless practices. It cannot be denied, however, that the absence of restraint in time attracted to the business unscrupulous men whose sharp practices frequently forced their colleagues of better conscience to do what their sense of honor and justice condemned. These evils and abuses have increased with the growth of the railroad system, and nothing short of the sovereign power can now correct them. It is incumbent upon the state not only to correct the evils of the past, but to base legislative control of railroads upon principles so wise and so broad as to endure for ages, permitting the unlimited growth of the system and at the same time insuring commercial liberty and prosperity to the generations to come.

As it is always easier to tear down than to build up, so it is likewise easier to point out evils than it is to provide proper remedies for their cure. Almost any one can criticise existing conditions, but it requires wise and constructive statesmanship to propose practical measures which will bring about desired improvement. The apparent magnitude of the work of correcting the evils and abuses connected with the transportation business, many of which have been in vogue for more than a generation, has discouraged many from seriously undertaking it. And yet we shall find the problem by no means a difficult one, if we properly analyze it and go to the root of the evil. Prof. Bryce, in his work "The American Commonwealth," refers to the fact that the people of this country have been equal to the task of solving the gravest problems which have been presented to them, and we need have no doubt of their ability to solve the railroad problem. Railroad regulation does not require the adoption of any new principle of law. If the common law is rightly applied and provision is made for its strict and systematic enforcement, it will meet every condition that is likely to arise in the transportation business. It should always be remembered that the railroad is an improved highway, and the principal reason for which it is built is to accommodate the people and promote their welfare, and not to serve the selfish ends of a few individuals, and that private companies were permitted to build and operate it only because the State believed that the public interests could best be served in this way.

It is one of the duties of the State to facilitate transportation by establishing highways. These highways may be built by the State directly or through municipalities or even private corporations. Thus, under authority derived from the State, cities lay out, construct and maintain streets within their limits. But these streets become public and are always subject to State control. The same rule applies to turnpikes and ferries. Although the State transfers to an individual or a company its right to maintain a ferry or to build and maintain a turnpike, and to compensate itself for its outlay by the collection of tolls, the ferry and turnpike nevertheless remain highways, subject to the control of the State.

The railroad partakes of two natures, that of a highway and that of a common carrier. Railroad companies therefore enjoy the privileges and assume the duties of both. The State justly exercises in behalf of such companies the right of eminent domain, _i. e._, the right of the sovereign to apply private property to public use; but it cannot rightfully appropriate private property for private use, even if legal compensation were to be made for it. It is only upon the theory that railroads are highways, constructed for the public good and subject to public control, that the State has authorized railroad companies to take private property for their own use by paying for it a reasonable compensation. A railroad may even take possession of and intersect a public road for the purpose of carrying on its functions. But while the sovereign may exercise the right of eminent domain, it cannot delegate it to any individual or number of individuals, except to its agents, performing its functions and being bound to comply with any rule which may be prescribed for the public good. Under the common law the individual is entitled to as full use of the railroad as he is of the common highway. If he is not allowed to put on his own vehicle, this restriction is simply due to the fact that the people believe that the business can be done most safely, most economically and most efficiently by one company or a limited number of companies operating the road for a reasonable compensation. Nor does this restriction differ materially from that which the law has placed upon the use of the common road. Without legislative sanction no one has a right to put upon it a team of elephants or a locomotive and train of cars, or other strange motors, and thereby obstruct the public travel. These restrictions might be removed by the legislative power, and there is also no doubt that under the common law the State has the right to permit the independent use of the railroad track by any person having motive power and cars adapted to it. The persons and freight transported on the railroad are taxed to maintain it, while in the case of the common road this tax is placed upon the people and the adjoining property. How to collect the tax necessary to sustain the road is simply a question of public policy, and it cannot be collected in any case except with the expressed permission of the State. If a company is permitted by the State to operate a railroad it should only be permitted to collect such tolls as are just and reasonable, and what is just and reasonable should be determined by the sovereign State, and not by the operating company. The railroads of the United States collect from our people in round numbers a transportation tax of eleven hundred million dollars annually. This tax is equal to a levy of $17 per head, or $85 per family; it is about as large as all our other taxes combined. In the State of Iowa it amounts to about $22 per head, or $110 per family, and is two and one-half times as large as all the State, county, school and municipal taxes collected within her borders.

When we consider how thoroughly other public charges are hedged about, by careful restrictions and limitations, and with what caution the amount to be collected is fixed after thorough public discussion, by agents of the people selected by them to serve only for short periods, and that those who collect and disburse the funds are under oath and bonds for a faithful performance of their duty, is it not preposterous to permit agents appointed by a few interested persons, and often serving for a long term of years, without any responsibility to the public, to fix the rate of this tax, and to collect and disburse the immense sums levied for the support of these highways without any supervision or restraint?

The Government might as well lease the post-office, waterways and the collection of import duties to the highest bidder and permit the lessees to reimburse themselves by the collection of such tolls as they might see fit, without any governmental restraint whatever, their franchises enabling the operating companies to tax each individual, each locality and each letter, parcel or article as they saw fit. How long would the people of this country endure such a condition of things? The collection of taxes has been farmed out, but not by any civilized nation in modern times. History shows that this system of taxation has always been productive of the gravest abuses, and prejudicial to the public welfare. As has already been shown, the railroad is an improved highway, and the railroad company in operating it is doing a public business and not a private business, and therefore it should be governed by rules applicable to public business, and not such as are applicable to private business. It is admitted by all that for the services which it performs the operating company should receive a reasonable compensation; but to say what a reasonable compensation is, how it shall be collected, and to prescribe rules regulating the business of the public carrier, is solely the right and the duty of the State. The people have never permitted the rate of any other public charge to be fixed by the beneficiary. Why, then, should privileges be conceded to one beneficiary which are denied to all others?

The assertion is often made by railroad managers that railroad transportation is a private business as much as any other branch of commerce. It is not likely that these same managers would wish to have their argument carried to its logical conclusion, for, should the courts at any time take their view, they would be under the necessity of declaring null and void all their charters, which were granted to them upon the assumption that the railroad was a highway operated under the authority and control of the State by private companies for the public good. If, on the other hand, railroad managers are, for their own protection, forced to recognize the public character of railroads, they can no longer question the right of the State to so control their business as the public good may demand. And this shows the absurdity of the claim often made by railroad managers, that, as long as the rates charged by them are reasonable, the State has no right to interfere with their business, or, in other words, that they may discriminate between individuals and localities, and that they may legally practice a thousand other abuses as long as individual shippers find it beyond their power to prove that they have been charged exorbitant rates.

Charles Fisk Beach, Jr., in his "Commentaries on the Law of Private Corporations," lays it down as a general principle of law that "whenever any person pursues a public calling and sustains such relations to the public that the people must of necessity deal with him, and are under a moral duress to submit to his terms if he is unrestrained by law, then, in order to prevent extortion and an abuse of his position, the price he may charge for his services may be regulated by law." And applying this principle to common carriers, and especially railroads, this author says:

"The sovereign has always assumed peculiar control over
common carriers as conducting a business in which the public
has an interest, and in the case of railway carriers an
additional basis of governmental control is grounded in the
extraordinary franchise of eminent domain conferred upon
these companies. For corporations engaged in carrying goods
for hire as common carriers have no right to discriminate in
freight rates in favor of one shipper, even when necessary
to secure his custom, if the discriminating rate will tend
to create a monopoly by excluding from their proper markets
the products of the competitors of the favored shipper."

If railroads had no obligations or advantages beyond those of other common carriers, such as stage lines and steamship companies, their discriminations might be less objectionable, but, as keepers of the toll-gates of the public highways, they are no more at liberty to regulate their own business regardless of the public welfare than were their predecessors, the toll-collectors stationed along the public turnpikes and canals. As such public tax-collectors they are bound to give equal treatment to all persons and places.

Although the business of constructing and keeping in repair the turnpike roads was, as a rule, left to private persons, and the promoters of such enterprises were permitted to reimburse themselves for their outlay by the collection of tolls, their schedules of tolls were prescribed by the State and their business was placed under the supervision of public officers, whose duty it was to see that neither extortion nor discrimination was practiced in the collection of these tolls, and that the private management of a public business did not become the source of abuse. The State thus insisted upon exercising a restraining influence over the business of turnpike companies because it realized the danger of entrusting the management of a semi-public business to companies organized solely for private gain, with officers responsible only to their stockholders, who, under ordinary circumstances, could be relied upon to measure the usefulness of an employe by his ability to contribute to the increase of the annual dividends. It will scarcely be claimed, even by railroad men, that since the days of turnpikes and stage-coaches corporations have become more unselfish and their officers less servile. The temptations have increased, while human frailty remains the same.

Of course, if we consult the railroad managers as to the best policy to be adopted for the future control of railroad companies, we shall be informed that we have already gone too far in railroad legislation, that nearly all the present evils of transportation of which the public and the railroad companies complain may be traced to legislative restrictions, and especially to certain features of the Interstate Commerce Act. They reluctantly admit that this act has been instrumental for good inasmuch as it has corrected some of the abuses that formerly existed, but they insist that several of its provisions are too radical and do infinitely more harm than good, both to the railroad companies and the people; that these obnoxious provisions ought to be repealed, and that under such restrictions as would still remain railroad companies ought to be permitted to manage their own business. If we inquire what modification of the Interstate Commerce Act the railroads desire, we find that if the act were amended in conformity with their wishes there would be little of it left that is of value. But the features which are specially obnoxious to them are the long and short haul and the anti-pooling clauses. They even go so far as to demand that the Government should not only permit pooling, but should use its strong arm to enforce all pooling contracts which railroad companies might see fit to enter into. This means, in other words, that the Government should enforce an agreement to restrict competition, which is made in direct violation of the common law, and aid the companies in maintaining such rates as they see fit to establish. If the railroad manager is cross-examined and forced to confess the truth, he will have to admit that what he really desires is freedom from all restraint, or, if public opinion will not tolerate this, then only law enough in letter to satisfy a public clamor and permit him to violate its spirit, and to then trust to him and the future to bring it into disrepute and cause its repeal.

Some shrewd managers have recently expressed a willingness to submit their pooling arrangements to a public commission for approval, before they should go into effect. This is objectionable on the ground that they would then, more even than before, endeavor to control the making of the commission. It is far safer to absolutely prohibit pooling and all devices used as a substitute for it. No necessity for pooling exists, and no good reason can be given why it should be permitted unless complete government control is established.

State control of railroad transportation is as essential to the welfare of the companies as it is to that of the public. The history of the past twenty years has shown that railroad companies are utterly unable to regulate their relations with each other. They either cannot arrive at an understanding, and then the stronger companies resort to hostilities to bring the weaker ones to their terms; or, when an agreement has been reached among them, they find themselves unable to enforce it. Anarchy then reigns supreme, until finally a truce is patched up, to be again followed by evasions, defiance and "war." The nature of the railroad business is in fact such that, in the absence of strict State control, it is impossible for a conscientious manager to retain the business to which his road is naturally entitled, and do full justice to both the patrons and the stockholders of his road. Efforts have been made again and again by railroad companies to regulate their affairs and adjust their difficulties by resorting to pools, agreements, associations and combinations, formed with all the ingenuity of which men are capable, and supported by penalties and fines; but the unscrupulous railroad manager has always found a way to violate or subvert the agreement. There is a disposition among railroad companies to arrogate all the powers of sovereignty. They want to make their own laws, impose fines and declare war, and often go even so far as to openly defy the power of the State that has given them their existence.

When railroad managers are shorn of the power to practice abuses, they are at the same time deprived of the many advantages they now have to speculate in railroad securities and enrich themselves at the expense of the public and of other railroad stockholders. The great fortunes of this country have been amassed within a few years, and chiefly from manipulations of railroad property. If the people permit these practices to go on without restraint but a few years more, the property of the nation will be largely under the control of a few bold adventurers. The great fortunes of Europe which it has required centuries to accumulate are already outstripped by the "self-made" millionaires of this country. However persistently railroad managers may assure the people that abuses in the transportation business have been reduced to a minimum and that more stringent legislation will be an evil, it is a fact that many of the graver railroad abuses are still practiced and that much more reformation is needed in railroad management, or in railroad supervision, or in both, to make the railroad what it was designed to be, a highway operated for the public and open to all upon equal and equitable terms.

The virtual ruler of the United States is public opinion. It is the power that controls the legislative as well as the executive and judicial departments of the Government. Enactments of legislatures and of Congress and decisions of the courts, even of the Supreme Court of the United States, not in harmony with an intelligent and determined public opinion, cannot endure, and executives not in accord with the masses of the people cannot long retain public confidence or official authority.

Under these circumstances no reform movement has any prospect of success unless it is supported by public opinion. It should therefore be the principal endeavor of all advocates of railroad reform to create public opinion in favor of the measures proposed by them. With an intelligent public on the alert, the Government may be relied upon to pursue a healthy and progressive railroad policy. Unfortunately, there are times when public opinion upon great questions is dormant, while pecuniary interests, like the force of gravity, never suspend their action. To arouse the masses at such times, we must rely largely upon an honest, independent and courageous press, not influenced by gift or patronage.

Many plans have been proposed for a better control of railroads. Some of these are merely theoretical; others have been tried in part, and a few have been tried in their entirety, but under circumstances radically different from those surrounding us. A system which may be well adapted to a monarchy with a centralization of governmental powers would probably prove a failure here, when brought in contact with the principles of dual sovereignty and local rule. Unless a revolution should change our system of government, a dual system of railroad control will always be necessary in the United States; for it is not at all likely that the individual States will ever voluntarily give up their right to regulate commerce carried on within their respective borders. On the other hand, the common welfare requires that the commerce which is carried on between the States should not be hampered by local interference, but should be regulated only by Congress. Our experience as a nation has shown that such a quality of sovereignty is not inconsistent with strength or efficiency, nor need it be productive of rivalry or friction. The fact that a certain mode of railroad management has been successful elsewhere is not sufficient proof that it would be successful here, nor is the fact that it has not been successful elsewhere sufficient proof that it would not be successful here. The more the conditions which exist here resemble those under which it was tested, the greater is the probability that it can be adapted to our circumstances. Independent thought and action is an essential element of progress, yet it is the part of wisdom to profit by the speculation and experience of others.

The following are the principal methods that have been tried or proposed for the control and management of railroads:

_1. Publicity of the railroad business._

It is held by some that the secrecy with which railroad business is at present transacted is the source of all evils. It is contended that if railroads were required to report to the public every item of income and expenditure, discrimination and extortion, as well as bribery and corrupt subsidizing, would soon cease. If the companies were compelled to render an account of all receipts, special rates and drawbacks could not safely be granted by railroad managers, or, if granted, would soon lose their charm for recipients, for it would be but a short time until others would demand and even exact the same privileges. An attorney would, as a member of the legislature, be slow to accept a retaining fee if the amount of such fee were made known to his constituents. Publishers would hesitate to apply for railroad subsidies if the companies were compelled to render periodically an itemized account of such expenditures, and railroad companies would, under similar circumstances, hesitate to pay subsidies, for the subsidized journal would soon be without patrons. If the items annually expended upon railroad lobbies were reported, these lobbies would soon be frowned, or even hissed, out of legislative halls. There can be no doubt that full and complete publicity in railroad business would correct a large number of existing abuses, and it should therefore be insisted upon as one of the first and essential features of railroad reform. It is questionable, however, whether railroad managers are so sensitive to public opinion that publicity could be relied upon as a cure for all railroad evils. To what extent it is desirable to supplement publicity by other measures of State control will be considered hereafter.

It will, of course, be urged by railroad managers that the State has no right to pry into the privacy of their business and that they should be guaranteed the same protection against intrusion that is enjoyed by other branches of business. To this we must reply that not even banks or insurance companies are permitted to conduct their business as private, and that controlling the highway and levying a transportation tax upon every article of commerce passing over it is essentially public business and unquestionably subject to public control. Every citizen is as much interested in it as he is in the transactions of the custom-house, or of the public treasury, and any transaction of a railroad manager that shuns public inspection can be set down as a public evil and should be suppressed. It may safely be laid down as a general rule that the refusal of a railroad company to give publicity to its transactions is presumptive evidence of wrong. The people are not alone interested in such publicity. Stockholders have likewise a right to be protected against the sinister manipulations of dishonest managers, and publicity furnishes them the best guarantee of honest management.

Stockholders should attend the meetings of their companies and should obtain full knowledge of the management of their affairs. If they will make thorough examination and get at bottom facts the chances are that contracts will be found with owners of patents, white lines, blue lines, refrigerator car lines, coal companies, ferry companies, manufacturing companies, packing companies and other kindred organizations, by which hundreds of millions of dollars are diverted from the treasuries of the railroad companies to the pockets of influential persons connected with the management of the roads.

It has recently come to light that the officers of a Pennsylvania railroad company, during fifteen years, by some means of secret rebates and other allowances, have taken about $100,000,000 out of the treasury of the company and distributed it as largesses to about half a dozen iron and steel establishments.

This is a method of getting wealthy at the expense of others not unknown to many another great fortune accumulated in the last twenty years. Railroad discriminations have been a fruitful source of those gross inequalities in wealth distribution which now agitate society and call people's parties and the like into existence. The modern millionaire appears to be an entirely natural creation. Perhaps this money taken in special rates from the Pennsylvania railroad's treasury, or, rather, from the pockets of the road's other patrons, and of the men who may have sought, without special rates, to compete with the favored ones in their business, only to be crushed in financial ruin, will be spent in a praiseworthy way, in accord with the principles of "the gospel of wealth." What we need now is the gospel of distribution of facilities for the accumulation of wealth, as well as the gospel of distribution of great fortunes.

Whether inspired by a bull or a bear interest or neither, all will concede the ability of Mr. Henry Clews to picture the evils of railroad management; and his lack of generosity in accrediting ability or honesty to legislators who are called upon to provide remedies for the wrongs that he so well depicts will not deter me from indorsing the following statement made by him in a magazine article which is pertinent to this discussion:

"One great difficulty that present railroad legislators have
to contend with is the evil methods of railroad building and
extension. A great deal of the mileage of the last two years
has been premature, and doubtless for speculative purposes.
Most of it has been constructed, however, by old companies
who had good credit to float bonds and could raise all the
money required. Hence there has been but little financial
embarrassment arising from the too rapid construction. But
people are beginning to find out that a great deal of this
building has been in the interest of speculative directors
and their friends, who, for a mere song, had bought up
barren lands considered worthless because there was no means
of transportation. But these lands soon become immensely
valuable for sites of villages, towns and cities. The
construction companies, by which these roads were generally
built, raised the cost to the highest possible figures, in
order, I fear, to make dividends for the construction
stockholders. It is noteworthy that the directors connected
with these construction schemes have been exceedingly
prosperous, while the stockholders of the roads have grown
poor in an inverse ratio. The dividends of the latter have
disappeared. The new mileage, much of which, I apprehend,
has been made on this principle, was about twenty-one
thousand miles, which is greater than the entire mileage of
Great Britain. There should be additions to the Interstate
Law, or a special law regulating the methods of construction
companies, which are probably doing more to demoralize the
railroad system--and doing it very insidiously, too--than
any other factor connected with these great arteries of the
country's prosperity.

"Legislative reform is greatly needed in the matter of
railroad reports, especially for the safety of investors,
and to prevent speculative abuses among railroad officials
and their friends and favorites. There should be statements
issued annually, or perhaps more frequently, upon the truth
of which everybody might rely. These should be sworn
statements, and should bear the signatures of at least three
of the directors. These directors should be required to
call to their aid expert accountants, and should have placed
at their disposal all the books of the company or
corporation and all the other papers necessary to verify the
accuracy of their report. The correctness of the statement,
when issued, would then be a foregone conclusion, and an
investor in London, Paris or Berlin could buy or sell on his
own judgment, an experiment which, under existing
arrangements, might prove very costly. It is proverbial that
a railroad statement now is defective in the most essential
particulars, and, to put it mildly, usually covers a
multitude of sins. According to one plan approved by
railroad companies, the statement published to-day, for
instance, is made to show a surplus of many millions, but
there is nothing said about an open construction account to
which the surplus is debtor. On this favorable showing (with
this _suppressio veri_) the stock goes up and the insiders
quickly unload upon the investment public. The following
statement, which comes out six months later, shows that the
surplus has been used to settle the construction
indebtedness. The surplus has disappeared; consequently the
stock suffers a serious decline. Those who bought on the
strength of the large surplus sell out, on being informed of
its distribution. Then the inside sharks come forward again
and purchase at reduced prices, probably at a depreciation
of from ten to fifteen points or more, and keep their stock
until the next periodical appearance of the bogus surplus.
Thus the insiders grow rich, while the outsiders become
poor. The only remedy for this abuse is a sworn statement at
regular intervals, and if the directors should commit
perjury they would render themselves liable to State prison.
If a few of them should be tempted to fall into the trap,
and be made examples of in this way, nothing would do more
to work a speedy reform in this contemptible method of
book-keeping.

"I would also suggest a change in the character of the
directors. Those usually chosen for this office now are men
who have vast interests of their own, more than sufficient
to absorb their entire time and thoughts. They are selected
mainly on account of their high-sounding names, to give
tone to the corporation and solidify its credit, in order
that the lambs of speculation may have proper objects in
whom confidence can be reposed and no questions asked. The
management of the affairs of the corporation is frequently
intrusted to one man, who runs the business to suit his own
individual interests."

We can appreciate the force of the above remarks when we consider that last year seventy-five companies realized a gross income of $846,888,000, which is equal to about 80 per cent. of the total income received by all of the railroads of the United States.

_2. Free competition upon all railroads._

Mr. Hudson, in his excellent work, "The Railways and the Republic," recommends the following remedy:

"Legislation should restore the character of public highways
to the railways, by securing to all persons the right to run
trains over their tracks upon proper regulations, and by
defining the distinction between the proprietorship and
maintenance of the railway and the business of common
carriers."

Mr. Hudson proposes to leave the track in the possession of its present owners, but to permit any individual or company to run, upon the payment of a fixed toll, trains and cars over it, under the control of a train-dispatcher stationed at a central point. This train-dispatcher is to be notified by telegraph of the movement of each train, and is to give his orders to the officers in charge of each train, as to what points they are to go, where to pass one train and where to wait for another. Each transportation company is to own, load and forward its own trains; it is to be required to run its regular train on schedule time or to have it follow another train as an extra. They are to be liable to their shippers as well as to the railway company for all damages caused by their neglect, while the railroad company is to be held responsible for the condition of its track. It will not be necessary to go into the details of Mr. Hudson's plan. Suffice it to say that he proposes to establish free competition in the railway business by making the use of the railway track as free as that of the turnpike or canal, subject only to such control on the part of the public train-dispatcher as the paramount considerations of speed and safety may require.

The adoption of Mr. Hudson's plan would simply be a return to the first principle of railroad transportation. It has already been shown that the first English charters permitted the public to use their own vehicles and motive power upon the railroad track, but that shippers and independent carriers could not avail themselves of these provisions of the early charters because it was in the power of the railroad companies to make their tolls prohibitory. There is but little question as to the practicability of Mr. Hudson's plan from a purely technical standpoint, and its adoption might be advisable if it should be demonstrated that a monopoly of the track is inconsistent with the operation of the railways for the public good. It is seriously doubted, however, whether such ideal competition as Mr. Hudson desires to bring about could be secured except at the expense of true economy. Concentration, or, rather, consolidation in the railroad business has, under proper legal restriction, always resulted in a saving of operating expenses, and usually in a reduction of rates. Any step in the opposite direction, whatever other merits it may possess, is in the end not likely to give lower rates. If it is a settled principle that railroads are only entitled to a fair compensation for their services, it must be evident that what would be a fair compensation for the same or similar services to a large, well-organized, well-regulated and well-managed company cannot be sufficient compensation to an individual carrier or a small company, whose expenses will always be comparatively larger than those of its better-equipped rival. Monopoly and extortion need not necessarily be synonymous. In fact, States and municipalities in their public works often prefer monopoly to competition as the cheaper of the two. Nevertheless, should it ever be found that monopolies cannot be reconciled with justice and economy, a return to the first principles of railroading may become advisable.

_3. State ownership and management._

A number of European states, notably Prussia, France and Belgium, as well as Australia, British India and the British colonies in Southern Africa, have adopted government ownership of railroads. The motives which led to this step in the various countries differ greatly. While in Europe military and political considerations predominated, in Africa and Australia it was more the want of private capital and energy which led the government to engage in railroad enterprises. There has in most of these states been a desire to avoid the evils usually connected with private management. The experiment of state ownership and management of railroads has been longest tried in Belgium, and with the best results. With an excellent service the rates of the Belgian state roads are the lowest in Europe. Their first-class passenger tariffs are, next to the zone tariff recently adopted on the state roads of Hungary, the lowest in the world, and are, for the same distance, lower than those of American roads. In Prussia the state service, upon the whole, is also superior to that of private companies, and is probably equal to the public demand. In France the government only owns and operates less important lines, but furnishes upon these a more efficient and cheaper service than private companies would either be able or disposed to furnish. The oft-repeated statement of those opposed to government regulation to the contrary notwithstanding, government ownership and management of railroads is a decided success in Europe, Mr. Jeans says of state railroads:

"Notwithstanding the superior financial result, the lines
worked by the state are those kept in the best order, and
the working of which gives the greatest satisfaction to the
commercial world and the public in general as regards
regularity of conveyance, cheapness of transit and the
comfort of travelers."

It is difficult to see how any unbiased person can travel on any of the state roads of Europe without coming to the same conclusion. State management offers certainly some decided advantages to the public. Above all, the business of the roads is not conducted for the pecuniary advantage of a few, but for the common good. Commerce is not arbitrarily disturbed to aid unscrupulous managers in their stock speculations. New lines are not built for speculative purposes, but for the development of the country. Rates are based more upon the cost of service than upon what the traffic will bear, and the ultimate object of the state's policy is not high profits, but a healthy growth of the country's commerce, while the sole aim of a private company is to get the largest revenue possible. The permanent way of the state road is kept in better condition, the public safety and convenience being paramount considerations. Rates are stable and uniform, instead of being changeable and discriminating, and all persons and places are as equal before the railroad tax collector as before the law. It may be laid down as a general rule that under private management of railroads efforts will be made to secure the highest rates possible, while it is the aim of the Government to grant the lowest rates possible. Mr. Jeans proves by statistics that the cost of maintenance of way is generally higher on the state lines, and that traffic expenses are higher on the lines of private companies. In commenting upon this difference he says:

"It might easily be contended, and even proved beyond all
doubt, that the first characteristic is a result of the
better condition in which the state keeps the permanent way;
and, so far as this is the case, the public convenience,
safety and general advantage are promoted.

"The highest range of traffic expenses on companies' lines
undoubtedly argues greater laxity of management, since, as
we have already shown, this is one of the most elastic of
items, and may be either very high or very low, according as
economy or extravagance is the prevailing system.... The
experience of Continental Europe points unmistakably to the
exercise of greater economy in state management."

Judge Dillon, of the United States Court, in his order appointing Hon. J. B. Grinnell receiver for the Central Railroad of Iowa, in 1876, said:

"The railroads in the hands of the court--and in the circuit
there are eight or ten--have all been run with less expense,
and have made more money, than when they were operated by
the companies; and we hope and believe under your
supervision that this road will prove no exception, and that
the property will be worth more at the end of the
litigation."

Upon Mr. Grinnell's resignation, after nearly three years of service, Judge Grant said, in asking for the discharge of his bondsmen:

"I concur entirely in the opinion of the State commissioners
that he has very much improved the condition of the road,
and he left it in far superior condition to that in which he
received it."

Yet Government ownership and management of railroads also has its drawbacks. It is claimed by some that such management is more expensive than that of lines owned by private companies. It has already been shown that the permanent way is kept in better condition by the state than by private corporations. In Russia, Germany, Austria-Hungary, France and Italy the state expends from 15 to 30 per cent. more for the maintenance of the permanent way than the private companies. It is perhaps also true that the rank and file of railroad employes fare, on an average, better under government than they do under private management; but, as an offset to this, it should be remembered that quite a saving is effected by the state in the salary account of general officers. The people will not consent to pay the manager of a railroad line a salary six times as large as that of a cabinet officer, and provide at the same time sinecures for his sons, brothers, nephews and cousins.

It is furthermore claimed that, as government is organized, it cannot, all other things being equal, respond to the demands of commerce as promptly as private companies. This feature, however, may be an advantage to the country at large rather than a detriment. But the strongest argument that can be produced against state ownership of railroads is that under a democratic form of government it might exert a demoralizing influence in politics. The 1,700 railroad companies of the United States have at present an army of about 800,000 employes. This number is constantly increasing, and it is more than probable that before the end of the present century it will have reached a million. When it is considered what importance is at present attached to the political influence of a hundred thousand Federal officers, it is not surprising that conservative citizens should hesitate to add to the ranks of these officeholders a six or seven times larger force. Dangerous as the railroad influence now is in politics, it would be ten times more dangerous if under a system of Government management considerations of self-interest should induce a million railroad employes to act as a political unit and political parties should vie with each other in bidding for the railroad vote. Could our civil service ever be so organized as to divest it entirely of political power, state management of railroads might still offer the best solution of the railroad problem.

Mr. T. B. Blackstone, president of the Chicago and Alton Railroad Company, has recently created somewhat of a surprise by declaring in favor of Government ownership of railroads. That Mr. Blackstone's programme will eventually receive the approval of a large number of his colleagues there can be but little doubt. With the people wide-awake upon this subject, the opportunities for railroad speculation are lessening, and the scheme to early unload the railroads of the country on the Government at a highly inflated value speaks well for the financial farsightedness of its author. Mr. Blackstone proposes to have railroad stockholders do here what the former owners of the telegraph did in Great Britain, _i. e._, dispose of their property to the Government, at a price representing several times its original cost or even several times the cost of duplication.

Mr. C. Wood Davis, formerly general freight and passenger agent of one of the leading roads east from Chicago, is one of the best informed and clearest-headed writers upon the railroad question. He has, after much experience and long study, been converted to the advocacy of national ownership as a solution of the railroad problem. In a recent article published by the Arena Publishing Company, entitled "Should the Nation own the Railways?" he presents the objections and advantages of national ownership. He says:

"The objections to national ownership are many, that most
frequently advanced, and having the most force, being the
possibility that, by reason of its control of a vastly
increased number of civil servants, the party in possession
of the Federal administration at the time such ownership was
assumed would be able to perpetuate its power
indefinitely.... This objection would seem to be well taken,
and indicates serious and far-reaching results unless some
way can be devised to neutralize the political power of such
a vast addition to the official army.... In the military
service we have a body of men that exerts little or no
political power, as the moment a citizen enters the army he
divests himself of political functions; and it is not
hazardous to say that 700,000 capable and efficient men can
be found who, for the sake of employment, to be continued so
long as they are capable and well behaved, will forego the
right to take part in political affairs. If a sufficient
number of such men can be found, this objection would, by
proper legislation, be divested of all its force....

"2. That there would be constant political pressure to make
places for the strikers of the party in power, thus adding a
vast number of useless men to the force, and rendering it
progressively more difficult to effect a change in the
political complexion of the administration.

"That this objection has much less force than is claimed is
clear from the conduct of the postal department, which is
unquestionably a political adjunct of the administration;
yet but few useless men are employed, while its conduct of
the mail service is a model of efficiency after which the
corporate-managed railways might well pattern. Moreover, if
the railways are put under non-partisan control, this
objection will lose nearly, if not quite, all its force.

"3. That the service would be less efficient and cost more
than with continued corporate ownership. This appears to be
bare assertion, as from the very nature of the case there
can be no data outside those furnished by the
government-owned railways of the British colonies, and such
data negative these assertions; and the advocates of
national ownership are justified in asserting that such
ownership would materially lessen the cost, as any expert
can readily point out many ways in which the enormous costs
of corporate management would be lessened. With those
familiar with present methods, and not interested in their
perpetuation, this objection has no force whatever.

"4. That with constant political pressure unnecessary lines
would be built for political ends. This is also bare
assertion, although it is not impossible that such results
would follow; yet such has not been the case in the British
colonies where the governments have had control of
construction....

"5. That, with the amount of red tape that will be in use,
it will be impossible to secure the building of needed
lines. While such objection is inconsistent with the fourth,
it may have some force, but as the greater part of the
country is already provided with all the railways that will
be needed for a generation, it is not a very serious
objection even if it is as difficult as asserted to procure
the building of the new lines. It is not probable, however,
that the Government would refuse to build any line that
would clearly subserve public, convenience, the conduct of
the postal service negativing such a supposition....

"6. That lines built by the Government would cost much more
than if built by corporations. Possibly this would be true,
but they would be much better built and cost far less for
maintenance and betterments, and would represent no more
than actual cost; and such lines as the Kansas Midland,
costing but $10,200 per mile, would not, as now, be
capitalized at $53,024 per mile, nor would the president of
the Union Pacific (as does Sidney Dillon, in the _North
American Review_ for April) say that "a citizen, simply as
a citizen, commits an impertinence when he questions the
right of a corporation to capitalize its properties at any
sum whatever," as then there would be no Sidney Dillons who
would be presidents of corporations, pretending to own
railways built wholly from Government moneys and lands, and
who have never invested a dollar in the construction of a
property which they have now capitalized at the modest sum
of $106,000 per mile....

"7. That they are incapable of as progressive improvement as
are corporate-owned ones, and will not keep pace with the
progress of the nation in other respects; and in his _Forum_
article Mr. Acworth lays great stress upon this phase of the
question and argues that as a result the service would be
far less satisfactory.

"There may be force in this objection, but the evidence
points to an opposite conclusion. When the nation owns the
railways trains will run into union depots, the equipment
will become uniform and of the best character, and so
sufficient that the traffic in no part of the country would
have to wait while the worthless locomotives of some
bankrupt corporation were being patched up, nor would there
be the present difficulties in obtaining freight cars
growing out of the poverty of corporations which have been
plundered by the manipulators, and improvements would not be
hindered by the diverse ideas of the managers of various
lines in relation to the adoption of devices intended to
render life more secure or to add to the public
convenience.... Existing evidence all negatives Mr.
Acworth's postulate that "state railway systems are
incapable of vigorous life."

"8. An objection to national ownership which the writer has
not seen advanced is that States, counties, cities,
townships and school districts would lose some $27,000,000
of revenue derived from taxes upon railways. While this
would be a serious loss to some communities, there would be
compensating advantages for the public, as the cost of
transportation could be lessened in like measure.

"Many believe stringent laws, enforced by commissions
having judicial power, will serve the desired end, and the
writer was long hopeful of the efficacy of regulation by
State and National commissions; but close observation of
their endeavors and of the constant efforts--too often
successful--of the corporations to place their tools on such
commissions, and to evade all laws and regulations, have
convinced him that such control is and must continue to be
ineffective and that the only hope of just and impartial
treatment for railway users is to exercise the 'right of
eminent domain,' condemn the railways, and pay their owners
what it would cost to duplicate them; and in this connection
it may be well to state what valuations some of the
corporations place upon their properties.

"Some years since the Santa Fe filed in the counties on its
line a statement showing that at the then price of labor and
materials--rails were double the present price--their road
could be duplicated for $9,685 per mile, and, the materials
being much worn, the actual cash value of the road did not
exceed $7,725 per mile.

"In 1885 the superintendent of the St. Louis and Iron
Mountain Railway, before the Arkansas State Board of
Assessors, swore that he could duplicate such a railway for
$11,000 per mile, and yet Mr. Gould has managed to float its
securities, notwithstanding a capitalization of five times
that amount."

Among the advantages to be derived from Government ownership he names the following: