The Project Gutenberg eBook of The heart of the railroad problem, by Frank Parsons

367. A number of witnesses declare that the delays and uncertainties and inadequacies of redress under existing laws discourage shippers from efforts to obtain relief. Mr. C. W. Robinson, representing the New Orleans Board of Trade and the Central Yellow Pine Association, says they had such bad luck with their lumber cases before the United States courts that they are discouraged.

“‘Don’t you think that the question of rebates and discriminations is already covered by law and can be stopped by summary proceedings?’

“Mr. Robinson. That they are not stopped is patent to every one who uses a railway company as a shipper and who keeps his eyes open.

“‘Has there been any suit brought within the last two or three years for rebates and discriminations in this section of the country?’

“Mr. Robinson. No; generally speaking, we have decided down there that life is too short to litigate with the railroad companies” (Sen. Com. 1905, p. 2492).

Governor Cummins of Iowa says that no suits have been brought in Iowa for discrimination under the Elkins Law because the remedy under that law is regarded as inadequate (Sen. Com. p. 2081). It appears that only one case, the Wichita sugar differential, is before the I. C. C. under the Elkins Law (Sen. Com. p. 2874).

368. Fifer, Adams, etc., Sen. Com. pp. 2923, 3338.

369. Vining, Sen. Com. p. 1691, Knapp, p. 3294, etc. Robbins, however, manager of the Armour Car-Lines, says they are opposed to being made common carriers (pp. 2384, 2397, 2400). He says they do not indulge in rebates, generally speaking (pp. 2382, 2387, 2403), and thinks they would be worse off if put under the Interstate Law (pp. 2390, 2397, 2401).

370. President Roosevelt, Governor La Follette, Governor Cummins, Sen. Com. p. 2046; Professor Ripley, pp. 2330, 2338: Commissioner Knapp, p. 3305, Commissioner Prouty, pp. 2794, 2873, 2881, and 2886, where he says: “I do not think the Commission has to-day in its docket a case that can be satisfactorily disposed of without determining the rate for the future.” Commissioner Clements, p. 3243, Commissioner Fifer, pp. 3344, 3350, and many other witnesses; also writers and speakers throughout the country.

On the other hand, James J. Hill, President of the Great Northern, says he cannot imagine a greater misfortune than to attempt to fix rates by law, p. 1486; it would hamper transportation and hinder development. President Tuttle says that rate-making is practically the only property right the railways have, p. 913. Railway men generally are strongly opposed to fixing rates by commissions.

371. Sen. Com. p. 3482, N. Y. Chamber of Commerce.

372. Several witnesses suggest this. See, for example, Sen. Com. p. 3280. But James J. Hill says that if present laws were enforced not one of the car-lines could exist a moment, p. 1486.

373. Professor Ripley, p. 2345, Fordyce, p. 2202, and many railroad men; see below, p. 265. But see p. 61, Cowan; p. 822, Victor Morawetz; pp. 973 and 1003, President Tuttle.

374. James J. Hill, p. 1521.

375. Knapp, p. 3299; without such a provision the old roads can cripple a new road unless it goes clear across the continent.

376. Morawetz, pp. 818, 824; Bacon, pp. 16, 23; Davies, p. 3470; and Report of Industrial Commission. Publicity is an excellent aid, but is insufficient alone. It must keep steady company with adequate legislation and efficient enforcement of it. What has been the effect of publicity on the Standard Oil Trust up to date?

377. Commissioner Prouty, p. 2912. “That would stop discriminations,” said the Commissioner. “Unless they got possession of the man,” said Senator Dolliver.

378. Judge Gaynor proposes that the traffic managers shall be appointed by the Government. The present writer has suggested that the public might be represented on the board of direction in consideration of the franchises, etc.

379. Arena, vol. 24, p. 569, Parsons.

380. Many of the States have strong laws, but the inharmonious, uncoordinated efforts of individual States have proved of little avail against the giant railway systems. Of the 31 States which have established railway commissions, 22 have given the commissions more or less of the rate-making power. For example, the Alabama Code, 1886, gives the Commission authority “to revise the tariffs and increase or reduce any of the rates.” The California Constitution, 1880, confers power “to establish rates;” Florida Laws, 1887, “to make and fix reasonable and just rates;” Georgia Code, 1882, “to make reasonable and just rates;” Illinois Laws, 1878, “to make for each railway a schedule of reasonable maximum rates;” Iowa, 1888, and South Carolina, 1888, the same as Illinois; Minnesota, 1887, power “to compel railways to adopt such rates and classification as the Commission declares to he equal and reasonable;” South Dakota, 1890, the same; Mississippi, 1884, “to revise tariffs;” New Hampshire, 1883, “to fix tables of maximum charges.” (See 63 N. H. 259.) Kansas: on complaint and proof of unreasonable charge Commission may fix reasonable rates, and if companies don’t comply they may be sued for damages. The Massachusetts Commission has “authority to revise the tariffs and fix the rates for the transportation of milk” (158 Mass. 1). In New York the board may notify the railways of changes in the rates, etc., it deems requisite, and the Supreme Court may in its discretion issue mandamus, etc., subject to appeal. In Nebraska the State Supreme Court has held that general language prohibiting unreasonable rates, and giving the Commission power to enforce the law, is sufficient to confer authority to fix reasonable rates in place of those found unreasonable, such authority being essential to the efficient execution of the law against excessive rates (22 Neb. 313).

In none of the States does the power to regulate rates appear to have produced results of much value. In some States, Georgia, Texas, Nebraska, Iowa, etc., the power has been at times vigorously used, but the effect has been to antagonize the railroads, which have so much power that is beyond the reach of any State Commission that they can arrange their tariffs and service so as to work against the aggressive States and disgust the people with the consequences of trying to control the rates. Senator Newlands, who is sincerely on the people’s side in the struggle for justice in transportation, voiced the common opinion when he said in the United States Senate, January 11, 1905, “As to the rate-regulating power, my judgment is, and it is the belief of almost all experienced men in this country, that the rate-regulating power exercised by the States has not, as a rule, been beneficially exercised.”

381. The Bill provides that “Whenever ... the Interstate Commerce Commission shall ... make any finding or ruling declaring any rate, regulation or practice whatsoever affecting the transportation of persons or property to be unreasonable or unjustly discriminatory the Commission shall have power and it shall be its duty to declare and order what shall be a just and reasonable rate, practice or regulation to be ... imposed or followed in the future in place of that found to be unreasonable” etc. It also provides that the order of the Commission shall take effect 30 days after notice, but may on appeal within 60 days be reviewed by a special transportation court having exclusive jurisdiction of all such cases. By Section 12, the case is to be reviewed on the original record, except when there is newly discovered evidence which was not known at the hearing before the Commission, or could not have been known with due diligence, and the findings of fact by the Commission are prima facie evidence of each and every fact found. The only appeal from the court of transportation is to the United States Supreme Court.

382. I. C. C. Rep. 1905, p. 9.

383. The granting of such power of inspection and publicity has been urged by the Commission upon Congress in previous reports. On page 11 of the Report for December, 1905, the Commission says: “We have also called attention to the fact that certain carriers now refuse to make the statistical returns required by the Commission. For example, railways are required, among other things, to indicate what permanent improvements have been charged to operating expenses. Without an answer to this question it is impossible to determine to what extent gross earnings have been used in improving the property and the actual cost of operation proper.... Certain important railways decline to furnish this information at all, and others furnish it in a very imperfect and unsatisfactory manner.”

384. I. C. C. Rep. 1905, pp. 9, 10.

385. This clause together with the words italicized in the next paragraph make the ruling of the Commission final so far as the merits of the case are concerned. (See Appendix B.)

386. As the galley proofs of this book go back to the printer, the Hepburn Bill has passed the House by a big majority. If passed by the Senate and put in force, it promises to operate as a serious check upon the abuses connected with private cars, terminal railroads and midnight tariffs, but it does not touch at all nine-tenths of the methods of discrimination. We have seen that between 60 and 70 different methods of unjust discrimination between persons and places are in use in our railway business to-day. The fixing of a maximum rate cannot prevent either secret rate cutting or favoritism in facilities and services, or even open discrimination in the arrangement of classifications and adjustment of rates between different localities.

No doubt this law in the hands of an able and honest commission would do much good, but it cannot reach the heart of the railroad problem, which is the unjust discrimination between persons and places. No amount of maximum rate-fixing or prescribing of regulations can destroy discrimination so long as we have the pressure of great private interests driving the railroads into the practice of favoritism.

The history of railroad legislation in this country shows that the railways do not respect or obey the law when it conflicts with the fundamental financial interests and orders of the railway owners and trust magnates, whose gigantic power represents the real sovereignty and control in America to-day.

On page 3 of the House Report, 59th Congress, 1st Session, No. 591, January 27, 1906, accompanying the Hepburn Bill the Committee on Interstate and Foreign Commerce says: “It is proper to say to those who complain of this legislation that the necessity for it is the result of the misconduct of carriers.... If the carriers had in good faith accepted existing statutes and obeyed them there would have been no necessity for increasing the powers of the Commission or the enactment of new coercive measures.”

What reason is there to believe that the railroads will accept a new statute in good faith and obey it any more than any former law? On the contrary, the probability is that if the Hepburn Bill becomes a law the main effect will be to compel railway managers and counsel to sit up nights for a time planning methods to evade and overcome the new provisions. Even if Congress gave the full power at first demanded by the President, to fix the precise rate to be charged, the general effect would probably be that railways would exert themselves to control the Commission. They have always at hand the weapon of practically interminable litigation, and it is very doubtful whether the railroad representatives in the United States Senate will permit any law to pass until it is amended so that the review in the courts shall go to the merits of the Commission’s order in each case. Powerful interests are opposed to any provision that will permit the fixing of a rate, even a maximum, to go into effect before it is connected already with the Federal courts.

387. See statement earlier in this discussion.

388. Sen. Com. 1905, p. 3485.

389. Dept. of Commerce, Monthly Summary, April, 1900, p. 3991.

390. See Ind. Com. vols. iv and ix, and Hudson, Hadley, etc.

391. They tend to stability, economy, and efficiency, diminishing the fluctuation of rates, railroad wars, and the wastes of competition, and improving the service by better co-ordination, distribution of traffic, etc.

392. See the powerful statements of President Ingalls, President Fish, Paul Morton, Professor Seligman, Commissioner Prouty, etc., Ind. Com. vol. iv; and statements of Professor Ripley, Morawetz, Fordyce, etc., Sen. Com. 1905. It is absurd to forbid co-operation for the maintenance of reasonable rates and prevention of superfluous transportation, or any other honest purpose. Traffic agreements may secure a co-ordination of service approaching that which would be attained by unity of management. The fetish-worship of competition is one of the prime curses of our economic ignorance. We might as well worship destruction, injustice, and inefficiency. Moreover, competition of the kind that protects the public from oppressive rates cannot be maintained in the railway world. Let the railways unite, and then control them, insisting on the dominance of the public interest so far as necessary to accomplish justice.

393. The United States Supreme Court held in the Trans-Missouri Case, March 22, 1897, and the Joint Traffic Association Case, Oct. 24, 1898, that railroads cannot lawfully agree on rates to competitive points. But no law or decision can well prevent railroad managers from meeting and coming to an understanding that they will adopt the same rates to such points. No contract in restraint of trade or to limit competition is necessary,—if each railroad publishes the same rates between “competitive” points and maintains them, competition as to rates is killed as effectually as if there were a pool or a traffic association with a written agreement.

394. Sen. Com. 1905, pp. 2923, 3338.

395. Sen. Com. 1905, p. 3482.

396. Ibid., pp. 3485, 3486. The railroad managers decided to notify offending railroads that unless rates were restored, the lowest cut rates that had been made by any line would be adopted by all, to punish the rebaters and stop them from getting business thereby. At a meeting July 26, 1882, 30 railroads being represented, a resolution was unanimously adopted, directing agents at connecting points to examine waybills, and when rates were found to have been cut, to hold the freight at the expense of the initial line until the waybills had been corrected.

397. Sen. Com. 1905, p. 1908, and index, “Rate-Making.”

398. The Senate is too full of men interested in railroads in one way or another to make it easy to pass any measure that might seriously affect either the power or the profits of the roads.

399. President Tuttle agrees with the Commission on this point. In his testimony to the Senate Committee, 1905, he said that the company’s books would not show rebates, etc., “unless they wanted them to. I will say to you frankly that if a company intended to evade the law by giving rebates and commissions they would find some way of so covering them up that all the experts on the face of the earth could not find them. If you assume at the beginning that the railroad management is deliberately going into violations of the law it is not going to make records of those things which can ever be found out.” (Sen. Com. 1905, p. 952.) But President Tuttle said: “There is ample opportunity to ascertain if rebates exist. There are always opportunities. The competitive shipper knows about it. There is always enough of the loose end hanging out somewhere so that if the Interstate Commerce Commission or whoever is authorized to move in those matters will take the time to proceed upon the lines of information that they can always get they will be easily ferreted out and punished. I do not think there is any evidence that the Interstate Commerce Commission has tried to enforce the Elkins Law.” (Same, p. 951.) Shippers have, however, often stated that they felt sure some concession was being made to their rivals, but they could not tell what, and in many cases there is simply a vague suspicion; no one knows whether others are paying the tariff rates or not. And railroad men have admitted, as in the B. & A. case, that no shipper knew what rates others were getting.

400. Sen. Com. 1905, p. 3644.

401. Out of 37 passenger cases (20 rate cases and 17 miscellaneous) the decision was favorable to the complainant in 9; and in 316 freight cases the decision was for the complainant in 185 cases. In 70 of the freight cases the complaint was of excessive charges (half of them charging discrimination also, or relative excess as well as absolute excess); 119 related to charges relatively unreasonable; 52 concerned long and short haul abuses; 20 unreasonable classification, 8 unfair distribution of cars, 41 miscellaneous. Ninety-six of the 316 freight cases were dismissed, 13 settled while pending, 4 left without a general statement and no order, and 17 held for further action. Nearly 90 percent of all the cases, passenger and freight, related directly to some form of discrimination, and indirectly discrimination of some sort was an element in practically every case.

402. The 8 cases are the New York and Northern Case (3 I. C. C. 542) the Social Circle Case (4 I. C. C. 744) the Minneapolis Case (5 I. C. C. 571) the Colorado Fuel and Iron Case (6 I. C. C. 488) the St. Cloud Case (89 I. C. C. 346) the Savannah Case (8 I. C. C. 377) the Tifton Case (9 I. C. C. 160) and the California Orange Routing Case (9 I. C. C. 182). Mr. Willcox thinks the Minneapolis Case and the Colorado Case should be crossed off because the carriers complied with the orders while suit was pending, so that there was no decision on the merits. He says the decision was not on the merits in the New York Case, the St. Cloud Case, or the Tifton Case. In the Social Circle Case the Supreme Court sustained the order in respect to discrimination, but reversed it so far as it attempted to fix a maximum rate. In the Orange Case the Circuit Court sustained the Commission, but an appeal was taken at once to the Supreme Court. In the Savannah Naval Stores Case the Circuit Court sustained the Commission and no appeal was taken. Two cases in favor of the Commission in the Court of Appeals and one-half a case in the Supreme Court, and one of the circuit decisions is on appeal—one and one-half final affirmatives on the merits out of 34. One would think that Mr. Willcox might allow the Commission the three cases that were decided in their favor although the court did not find it necessary to go into the merits of the matter, and he seems to be less generous about the Colorado Case than Mr. Newcomb, who says the Commission was sustained by the court.

403. Work of the Interstate Commission, p. 14, 1905. (See Appendix A.)

404. As the average time required to reach a final decision in a case that goes from the Commission through the Federal courts up to the United States Supreme Court is 7½ years, it is clear that there is plenty of time for the accumulation of a congregation of cases, birds of a feather, waiting for judgment, on the same point.

405. Sen. Com. 1905, p. 2888.

406. The railroads would prefer a court to a Commission if any public body is to have power over rates. They know that proceedings in court are likely to be troubled with long delays, and great expense, and that courts are very delicate about determining what is a reasonable rate. In the Reagan case (154 U. S. 362) the Supreme Court says: “It has always been recognized that if the carrier attempted to charge a shipper an unreasonable sum the courts had jurisdiction to inquire into that matter and award to the shipper any amount exacted from him in excess of a reasonable rate; and, also, in a reverse case, to render judgment in favor of the carrier for the amount found to be a reasonable rate.”

In any case of suit by a shipper to recover damages for unreasonable charges the court would have to determine what was a reasonable rate in order to fix the measure of damages, but Chairman Knapp of the I. C. C. says he does not know of a case in which suit was ever brought (Sen. Com. 1905, p. 3301). The fact that very many complaints have been made of unreasonable rates and no suits brought in the courts indicates that court procedure is regarded as inadequate. Courts are by nature judicial, not legislative or executive. And the remedy which can be administered by them in these railroad cases is uncertain, limited, and indirect. (Sen. Com. p. 3362.)

407. Sen. Com. 1905, pp. 3297, 3298.

408. Sen. Com. 1905, p. 975.

409. 9 I. C. C. Decis. 318, Nov. 17, 1902.

410. 10 I. C. C. Decis. 590; Rep. 1905, p. 31.

411. Essex Milk Producers’ Association v. Railroads, 7 I. C. C. Decis. 92, March 13, 1897. See also Howell v. New York, Lake Erie, and Western, 2 I. C. C. Decis. 272, equal milk rates from all distances unlawful.

412. 11 I. C. C. Decis. 31.

413. Sen. Com. 1905, p. 1339.

414. Sen. Com. 1905, p. 1165. The fact is that neither the Elkins Bill nor the Esch-Townsend Bill reaches the private car abuses or terminal railroads, or flying tariffs, or other evasive forms of discrimination, and neither adds much to the power of the Commission to deal with the subject. (See Sen. Com. pp. 2889, 2905, 2911).

415. Sen. Com. 1905, pp. 1675, 1676.

416. See Chamber of Commerce v. C. M. & St. P. Rd., 7 I. C. C. Decis. 1898, p. 510 and I. C. C. Rep. 1898, p. 24.

417. The reasons for and against public ownership of railroads are dealt with in the testimony of the writer before the Industrial Commission, vol. ix., pp. 123–193, 883–890. President Roosevelt had the possibility of public ownership in mind when he said in his message that we must choose between an increase of existing evils, or increased Government supervision, or a “still more radical policy.”

418. The railways of Italy were operated by private companies when I was there; since then, in 1905, the Government has undertaken the operation of them.

419. A few illustrations of the vigorous manner in which this law works out in practice may be of advantage here:

The Hungarian Government at a single stroke, in 1889, reduced State railway fares 40 to 80 percent. Austria and Prussia have also made great reductions in railway charges. Belgium started in the thirties with the very low rate of ⅘ of a cent on her public railways. In New Zealand and Australia also the Government managements have adopted the settled policy of reducing railroad rates as fast as possible.

When England made the telegraph public in 1870, rates were lowered 30 to 50 percent at once, and still further reductions were afterwards made.

When France took over the telephone in 1889, rates were reduced from $116 to $78 per year in Paris, and from $78 to $39 elsewhere, except in Lyons, where the charge was made $58.50.

Private turnpikes, bridges and canals levy sufficient tolls to get what profit may be possible; but when the same highways, bridges and canals become public the tolls are often abolished entirely, rendering such facilities of transportation free, and when charges are made they are lower than the rates of private monopolies under similar conditions, and generally reach the vanishing point as soon as the capital is paid off or before.

When Glasgow took the management of her street railways in 1894, fares were reduced at once about 33 percent, the average fare dropped to about 2 cents, and 35 percent of the fares were 1 cent each. Since then further reductions have been made, and the average fare now is little more than a cent and a half; over 50 percent reduction in 6 years, while we pay the 5 cent fare to the private companies in Boston and other cities of the United States the same as we did 6 years ago, instead of the 2½ cent fare we would pay if the same percentage of reduction had occurred here as in Glasgow.

According to Baker’s Manual of American Waterworks, the charges of private water companies in the United States average 43 percent excess above the charges of public waterworks for similar service. In some states investigation shows that private water rates are double the public rates.

For commercial electric lighting Prof. John R. Commons says that private companies charge 50 to 100 percent more than public plants.

We could offer many other illustrations of the law that public ownership tends to lower rates than private monopoly, but this discussion may be sufficient to indicate the complexion of the facts.