: The Railroad Question A historical and practical treatise on railroads and remedies for their abuses by Larrabee William - Railroads; Railroads United States; Railroads and state United States

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eretofore had, had a very limited territory for the sale of his products well realized that he could with the aid of a railroad enlarge his territory and increase his output, and with it his profits. The pioneer merchant found that he could no longer compete with former rivals in adjoining towns, since the iron horse had reached them and lowered their freights, and he also became a convert to the new order of things and clamored loud for railroad facilities. Railroads seemed the panacea for industrial and commercial ills, and every inducement was held out and every sacrifice made by communities to become participants of their blessings. So great was the estimate of the conveniences afforded by them and so strongly was public opinion prejudiced in their favor that it is no exaggeration to say that railroad companies as a rule were permitted to prepare their own charters, and that these charters almost invariably received legislative sanction.

To such an extent was the public mind prepossessed in favor of railroads that any legislator who would have been instrumental in delaying the granting of a railroad charter for the purpose of perfecting it, to protect the people against possible abuses, would have been denounced as a short-sighted stickler and obstructor of public improvements. Anxious for railroad facilities, the people were deaf to the warnings of history. Their liberality knew no bounds. National, State and county aid was freely extended to new railroad enterprises. Communities taxed themselves heavily for their benefit, and municipalities and individuals vied with each other in donating money, rights of way and station buildings. This was especially true of the West, whose undeveloped resources had most to gain by railroad extension. So large were the public and private donations in several of the Western States that their value was equal to one-fifth of the total cost of all the roads constructed. To still more encourage promoters of railroad enterprises, general incorporation laws were passed which permitted companies to be formed and roads to be built practically without State supervision. In their admiration for the bright side of the picture, the people entirely overlooked the shady side.

Besides this, there was virtually an absence of all law regulating the operation of railroads. It was, under these circumstances, not strange that abuses early crept into railroad management which, long tolerated by the people and unchecked and even encouraged by public officers, finally assumed such proportions as to threaten the very foundation of free government. Great discoveries that add rapidly to the wealth of a country tend to overthrow a settled condition of things, and organized capital and power, if not restrained by wholesome laws and public watchfulness, will ever take advantage of the unorganized masses. The people of those regions which the railroad stimulus had caused to be settled thrived for years so well upon a virgin soil that they gladly divided their surplus with the railroad companies. They looked upon the railroads as the source of their prosperity and upon railroad managers as high-minded philanthropists and public benefactors, with whom to quarrel would be an act of sordid ingratitude, and they paid but little attention to the means employed by them to exact an undue share of their earnings. Railroad men did whatever they could to foster through their emissaries this misplaced adoration. They posed before the public as the rightful heirs of the laurels of Watt and Stephenson, insisting that their genius, capital and enterprise had built up vast cities and opened for settlement and civilization the boundless prairies of the West. These claims have been persistently repeated by railroad men, though they are so preposterous that they scarcely deserve refutation. The railroad, gradually developed by active minds of the past, and greatly improved by the inventions of hundreds of men in the humbler walks of life, is the common inheritance of all mankind, though no class of people have derived greater benefits from it than railroad constructors, managers and manipulators. Railroad managers are no more entitled to the special gratitude of the public for dispensing railroad transportation at much more than remunerative rates than is the Western Union monopoly for maintaining among us an expensive and inefficient telegraph service. No one believes that the disbanding of the Western Union would leave us long without telegraphic communication. In like manner railroads will be built whenever and wherever they promise to be profitable. If one company does not take advantage of the opportunities offered, another will. That large cities have been built up by the railroads is true, but it is equally true that these cities by their commerce and manufactures administer to the prosperity of the railroads as much as the railroads administer to theirs. Commercial centers in days gone by existed without railroads, but railroads could not long exist without the stimulating influence of these busy marts of trade. The same argument applies with still greater force to the agricultural sections of our country, especially the great Northwest. The dry-goods merchant might as well boast of having clad the public as the railroad manager of having built up farming communities by selling to them transportation.

And yet the American people have never ceased to be mindful of the conveniences afforded to them by this modern mode of transportation. On the contrary, they have been but too prone to credit railroad men with being benefactors, when they were but beneficiaries, and this liberality of spirit made them overlook, or at least tolerate, the abuses which grew proportionately with the wealth and power of the companies.

The first railroad acts of England had contemplated to make the roads highways, like turnpikes and canals. These roads were established by the power of eminent domain. Companies were empowered to build and maintain them and to reimburse themselves by the collection of fixed tolls. Had the owners of the roads from the beginning been deprived of the privilege of becoming carriers over their own lines, the system might have so adjusted itself as to become entirely practicable; but as they were allowed to compete with other carriers in the transportation of passengers and merchandise, they were soon able to demonstrate, at least to the satisfaction of Parliament, that the use of the track by different carriers was impracticable and unsafe. A number of circumstances combined to aid the railroad companies in their efforts to monopolize the trade on their lines. In the first place, when the early railroad charters were granted, but few persons had any conception of the enormous growth of commerce which was destined to follow everywhere the introduction of railways. The tolls as fixed in the charters soon yielded an income out of proportion to the cost of the construction and maintenance of the roads. Their large margins of profit enabled the owners of the roads to transport goods at lower rates than other carriers and to thus compel the latter to abandon their business. Another defect of the original charters worked greatly to the disadvantage of independent carriers. They contained no provision as to the use of terminal facilities. The railroad companies claimed that these facilities were not affected by the public franchise and were therefore their personal property. This placed independent carriers at a great disadvantage and made in itself competition on a large scale impossible. These carriers were thus at the mercy of the railroad companies for the transportation of their cars, and the companies never permitted their business to become lucrative enough to induce many to engage in it. It soon became apparent that under the charters granted to the railroad companies such competition as existed on turnpikes and canals was out of the question on their roads. In England the great abundance of water-ways exercised for many years a wholesome control over the rates of railway companies, until these companies, greatly annoyed by such restraint, absorbed many of the larger canals by purchase and made them tributary to their systems. These companies have also acquired complete control over many important harbors.

In the United States the people depended from the beginning of the railroad era on free competition for the regulation of railroad charges. This desire to maintain free competition led to the adoption of general incorporation acts, it being quite generally believed that such competition as obtains between merchants, manufacturers and mechanics was possible among railroads and would, when allowed to be operative, regulate prices and prevent abuses. The remedy was applied freely throughout the country, but for once it did not prove successful. Stephenson's saying, that where combination was possible competition was impossible, was here fully verified. The great ingenuity of the class of men usually engaged in railroad enterprises succeeded in thwarting this policy of commercial freedom. The opportunities for those in control of railroads to operate them in their own interest, regardless of the interests of their patrons or stockholders, were so great that men of a speculative turn of mind were attracted to this business, which indeed soon proved a most productive field for them. One road after another fell into the control of men who had learned rapidly the methods employed to make large fortunes in a short time.

As the roads multiplied, transportation abuses increased. A considerable number of people early favored State control of railroads as the best means of regulating transportation, but a majority looked upon the existing abuses as being merely incidental to the formative period, and hoped that with a greater expansion of the railroad system they would correct themselves. And this doctrine was industriously disseminated by railroad managers and their allies. They lost no opportunity to impress upon the people that State regulation was an undue interference with private business and that such a policy would soon react against those who hoped to profit by it, inasmuch as it would prevent the building of new roads and would thus hinder, rather than aid, in bringing about the right solution of the railway question, viz., regulation by competition. They contended, in short, that State regulation would be destructive to railroads as well as to every other class of property.

Railroad sophistry for many years succeeded in preventing the masses from realizing that an increased supply of transportation does not necessarily lower its price, or, in other words, that railroad abuses do not necessarily correct themselves through the influence of competition. A large capital is required to build and maintain a railroad, which must necessarily be managed by a few persons. Besides this, the construction of a railroad practically banishes at once from its field all other means of land transportation. The railroad has thus a practical monopoly within its territory, and its managers, if left to follow their instinct, will despotically control all the business tributary to it, with unlimited power to build up and tear down, to punish its enemies and to reward its friends.

It is not true that State control checks railroad building. While it may prevent the construction of useless lines and discourage speculation, it will encourage the building of roads for which there is a legitimate demand. Stockholders as a whole do not participate in the management of the roads and do not profit by railroad abuses, the origin of which may almost invariably be traced to selfish designs on the part of a few entrusted with the management of the property. Where through wise legislation these abuses are prevented, the roads are managed in the interest of all the stockholders, develop business and enjoy lasting prosperity.

It may be laid down as a general rule that the policy which best subserves the interests of the patrons of a road is always the best policy for its owners. Injustice to a railroad will interfere with its usefulness; injustice to shippers depresses production and consumption; and in either case both the road and its patrons will suffer. State control is therefore as much needed in the interest of the owners of railroads as in the interest of their patrons. What should be the nature of such control will be discussed hereafter. A full understanding of the question at issue, however, makes necessary an inquiry into the various abuses which unrestrained railroad management of the past has developed. Perhaps no better presentation of the evils and abuses of railroads and their consequences can be found than that contained in the report of the Senate Committee on Interstate Commerce, submitted by Senator Cullom, in 1886. This report charges:

Under the operation of the Interstate Commerce Law some of these evils have, so far at least as interstate commerce is concerned, disappeared, and others have been considerably mitigated. It cannot be expected, however, that a bad system of railroad management, to the development of which the ingenuity of railroad managers has contributed for two generations, could be entirely reformed in a few years. It is a comparatively easy task for shrewd and unscrupulous men, assisted by able counsel and unlimited wealth, to evade the spirit of the law and to obey its letter, or to violate even both its letter and spirit, and escape punishment by making it impossible for the State to obtain proof of their guilt.

It is a humiliating spectacle to see the self-debased railroad officials confessing their own guilt by refusing to testify before the Interstate Commerce Commission on the ground that they would thereby criminate themselves. Congress should have sufficient respect for this commission and for itself to provide a way to punish such recusant witnesses who are willing to degrade themselves in so base a manner. Whether the law will eventually be respected by all depends upon the vigilance and courage of the people.

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