AggregateAveragePer cent.percentagechanges,Item.Number.of total.of changes.per cent.Prices—Advanced20489.0811,34055.59Reduced135.6833025.38Unchanged125.24——Total229100.00——Rates advanced—Prices advanced4419.2260613.77Prices reduced31.313010.00Prices unchanged2.8784.00Total4921.4064413.14Rates reduced—Prices advanced4218.3470816.86Prices reduced31.313311.00Prices unchanged31.314816.00Total4820.9678916.44Rates unchanged—Prices advanced11851.52——Prices reduced73.06——Prices unchanged73.06——Total13257.64——
The foregoing shows that while prices were advanced for 204 out of 229 articles, or 89.08 per cent. of the entire number included in the table, the freight rates on the same articles, as expressed in money, were advanced in but forty-nine instances, or 21.40 per cent. of the total, money rates were reduced in forty-eight instances, or 20.96 per cent. of the total, and remained stationary in 118 instances, or 57.64 per cent. of the total. Of the rates advanced forty-four were in cases in which the prices had also advanced, and of the rates reduced forty-two applied to articles which had advanced in price. Even as to the commodities which had advanced in price, the average advance being over fifty-five per cent., money rates were advanced in but forty-four instances out of 204 and the average advance was but 13.77 per cent. and there were forty-two reductions in money rates, such reductions averaging 16.86 per cent.
SIGNIFICANCE OF THE DEPRECIATION OF MONEY.
It has now been fully demonstrated (first) that the railways have to pay much more, probably not less on the average than twenty-five per cent. more, for everything they require in the conduct of their business, including labor, than they did ten years ago, (second) that those who make use of railway services receive much more, probably not less on the average than twenty-five per cent. more, for their labor or for the commodities which they produce than they did ten years ago, (third) that average rates per ton per mile for railway freight transportation, expressed in money, that is to say, in dollars and decimal fractions of dollars, are now somewhat lower than they were in 1897 or formerly, and (fourth) that the ton-mile unit is a highly stable one as to quality and that in consequence of this stability the ton-mile rates accurately answer the question whether rates, expressed in money, have remained stationary, have advanced or have declined. The latter conclusion has been supplemented and re-enforced by data from the classifications and rate schedules which tend strongly to prove the same fact. Therefore, it has been made plainly apparent that there has been a decline in money rates since 1897. But railways require money only to remunerate the highly skilled labor they employ, to purchase necessary materials and supplies, to pay taxes and to compensate the capital they use. Consequently money is worth to the railway corporation, as to the wage-earner, only what it will buy for the satisfaction of wants. A dollar which will pay for less labor or buy less fuel for locomotives is worth less tothe railway just as a dollar that will buy less bread or clothing is worth less to the man who works for wages or receives it as interest on his savings. It has long been realized that any effort to study the question of wages, throughout an extended period, which fails to take into consideration the purchasing power of the money received is worse than valueless, because it is deceptive and misleading. It has been generally recognized also that any effort to consider the condition of particular classes of producers by comparisons of the prices obtained for their products at different periods, as that of farmers by the prices of corn and wheat, is similarly dangerous unless these prices are turned into quantities of the commodities which such producers must purchase.
[In elucidating this obvious point Mr. McCain cites such authorities as Adam Smith, John Stuart Mill, President Hadley of Yale, Professor Frank W. Taussig of Harvard, and then continues.]
A rapid decrease in the purchasing power of the money they receive has brought about, within a single decade, a reduction in railway freight rates that cannot be less than twenty-five per cent. This reduction began almost imperceptibly at a time when American railway rates were already lower than ever before in the history of railways and lower than anywhere else in the world. It has proceeded, concurrently with the fall in the real value (that is in the purchasing power) of the American dollar, but in such subtle form that only when its consequences threaten the stability of the American railway system, the wages of railway employes and the prosperity of the great rail-manufacturing, car-building and other allied industries is its real significance and extent perceived even by those most immediately interested. That such a threat now hangs over the railway industry of America and every employe and industry dependent upon it is too plain for argument. The situation is acute and nothing but a prompt adjustment of the rates obtained for the services rendered to offset, partially, at least, the loss in the value of the money received will prevent disaster. That such an adjustment, if effected now, will, at best, be tardy and belated is evident from the facts herein presented, which show that prices in every other industry and the wages of all artisans were long ago adjusted to this fundamental condition.
APPENDIX B
Statement showing prices of railway supplies purchased in 1897 and 1907 as disclosed by the records of various Eastern railways. It should be noted that the quality of the supplies, made the basis of this statement, may have changed somewhat between 1897 and 1907, but in few instances would the allowance for this source of variation materially affect the results.
Prices.Increase.Class.1897.1907.Per cent.Locomotives—Mogul$10,181.00$14,111.0038.610-Wheel passenger11,026.0015,734.0042.7Atlanticnot built16,236.00Pacificnot built19,580.00Prairienot built16,468.008-Wheel passenger10,243.0013,581.0032.56-Wheel switcher9,392.0012,098.0028.8Cars (1899-1907)—Hopper475.001,185.00Box783.001,110.00490.00844.00519.00897.00Note.—The prices of cars shown above are typical prices paid by different roads in the respective years and employed in the same service. As the cars purchased in 1907 are of more modern construction, better quality and larger capacity than those purchased in 1899, no accurate comparison can be made or percentage of increased cost shown.(1902-1907)—100,000 lbs. Capacity Box Car with Steel Underframe and wood superstructure$1,043.49$1,148.8810.09100,000 lbs. Capacity Composite Gondola Car with Steel Underframe and wood superstructure1,021.621,148.4512.42100,000 lbs. Capacity Composite Flat Car with Steel Underframe and wood floor953.231,010.606.02100,000 lbs. Capacity, all steel Hopper Cars1,002.221,076.057.47Angle BarsCwt.1.021.5552.0Axles—LocomotiveCwt.$ 2.75$ 2.957.2Cwt.2.722.854.7TenderCwt.1.402.3567.8CarCwt.1.601.9521.9Cwt.1.452.2051.7Cwt.1.682.2534.0Bar IronCwt.1.191.7849.5Cwt.1.101.8063.6Cwt.1.051.5042.8Brick—CommonM4.506.0033.3PavingM8.0011.0037.5Castings—BrassLb.0.110.25127.3BrassLb.0.120.25¾114.6SteelCwt.3.506.0071.4M. IronCwt.2.504.2570.0Cwt.2.703.6033.3Cwt.2.352.8521.2GrayCwt.1.152.0074.0Cwt.1.201.6537.5CoalTon1.461.7620.5Ton1.321.8238.0Ton1.171.5229.8Ton1.832.0713.1Run of MineTon.651.0561.5¾Ton.751.1553.3Couplers—FreightSet14.0015.007.1PassengerSet20.5027.0031.7TenderSet18.0018.502.8FencingM. Ft.12.0025.00108.3M. Ft.10.0018.1581.5FluesFt.0.130.15½19.2Ft.0.140.157.1Forgings—AxlesLb.0.020.0350.0Crank PinsLb.0.050.10100.0Piston RodsLb.0.060.1066.6Main RodsLb.0.080.1025.0Side RodsLb.0.080.1025.0Lead—WhiteCwt.4.956.2526.3Lumber—Large Bridge TimbersM. Ft.$ 13.12$ 25.6295.3M. Ft.23.0038.0065.2M. Ft.20.0033.0065.0M. Ft.17.0028.0064.7M. Ft.22.5038.0068.9M. Ft.15.0027.0080.0Car SidingsM. Ft.17.0035.00105.9M. Ft.18.0033.0083.3StringersM. Ft.18.0028.0055.5M. Ft.16.0034.00112.5M. Ft.18.0026.0044.4M. Ft.17.0028.0064.7Car FlooringM. Ft.17.0024.0041.2M. Ft.20.0033.0065.0M. Ft.11.0025.00127.2M. Ft.14.0019.7140.8Piles (Soft)Ft.0.080.1475.0Ft.0.080.1137.5(Hard)Ft.0.120.1741.7Heavy PlanksM. Ft.14.0022.0057.1M. Ft.14.0030.00114.3M. Ft.16.0027.0068.8Cross Ties (Hardwood)Each0.470.8070.2Each0.600.8541.7Each0.550.7536.4Each0.370.7089.2Each0.450.6033.3Each0.450.5522.2Each0.480.9087.5Each0.380.80110.5Each0.380.6776.4SoftwoodEach0.220.60172.7Each0.200.2840.0Each0.230.48108.7Each0.480.5820.8Nails—Cwt.1.602.2037.5Cwt.1.332.1662.4Cwt.1.102.15104.5WireCwt.1.271.8545.7Cwt.1.482.1142.6Oil—KeroseneGal.$0.06$0.09½58.3SignalGal.0.280.3628.6Gal.0.200.3680.0300 degreeGal.0.090.1011.1Paint—Gal.0.771.0333.8Gal.0.500.6530.0Cwt.4.756.6239.4Cwt.5.506.5018.2Pipe—Cast IronTon16.0034.00112.5Ton16.7529.1574.0Ton13.5021.0055.6Ton16.0032.00100.0CopperLb.0.310.349.7Lb.0.300.3310.0Lb.0.300.3516.7Rails—SteelGross Ton19.0028.0047.4Gross Ton18.0028.0055.6Gross Ton18.0526.6047.4Rubber Hose—1 InchFt.0.340.4120.61¼ inchFt.0.400.4615.0Springs—Loco.Cwt.4.054.101.2Switches—Comp. 8031.9040.7727.8Frogs 8018.7527.5046.7Switch LampsDoz.45.0065.0044.4TileRod0.400.6050.0Track BoltsCwt.1.702.4544.1Cwt.1.652.6057.6Cwt.2.202.7525.0Cwt.1.652.4548.5Cwt.1.752.7657.7Track SpikesCwt.1.852.5236.2Cwt.1.351.7025.9Cwt.1.502.6073.3Cwt.1.652.2536.4Cwt.1.501.9026.7Cwt.1.451.9031.0Cwt.1.752.0014.3Track Tools—AxesDoz.$8.00$9.0012.5DrillsEach0.350.4631.4RatchetsDoz.5.136.6529.6ShovelsDoz.5.005.6513.0Lamp BarsEach0.520.6525.0Waste—ColoredLb.0.0470.05517.0WhiteLb.0.060.0833.3Wheels—CarEach5.607.8039.29Each6.008.3539.17Each7.509.3024.0Each4.788.4676.9Each4.509.00100.0Each6.758.0018.5Each6.509.0038.5Each6.009.0550.833-in SteelEach50.0056.0012.0Each42.5044.504.736-in. SteelEach42.5050.5018.8Each54.0060.0011.1Wire—BarbedCwt.1.702.5047.0IronCwt.1.502.2046.7CopperLb..13.26100.0Lb..13.1838.5
Note.—The prices of cars shown above are typical prices paid by different roads in the respective years and employed in the same service. As the cars purchased in 1907 are of more modern construction, better quality and larger capacity than those purchased in 1899, no accurate comparison can be made or percentage of increased cost shown.
FOOTNOTES:[E]A partial list of the articles in each class in 1807 which are still in the same class, as shown by Official Classifications Nos. 16 and 32, is given in Appendix A to Mr. McCain's pamphlet. There were approximately 3,000 various articles bearing the same classification or rating in 1908 as in 1898.[F]Appendix C occupies pages89 to 95of Mr. McCain's pamphlet.[G]Appendix D occupies pages 96 to 101 of McCain's pamphlet.[H]Details from which the table was derived are given in Appendix E to Mr. McCain's pamphlet, pp. 102-106.
[E]A partial list of the articles in each class in 1807 which are still in the same class, as shown by Official Classifications Nos. 16 and 32, is given in Appendix A to Mr. McCain's pamphlet. There were approximately 3,000 various articles bearing the same classification or rating in 1908 as in 1898.
[E]A partial list of the articles in each class in 1807 which are still in the same class, as shown by Official Classifications Nos. 16 and 32, is given in Appendix A to Mr. McCain's pamphlet. There were approximately 3,000 various articles bearing the same classification or rating in 1908 as in 1898.
[F]Appendix C occupies pages89 to 95of Mr. McCain's pamphlet.
[F]Appendix C occupies pages89 to 95of Mr. McCain's pamphlet.
[G]Appendix D occupies pages 96 to 101 of McCain's pamphlet.
[G]Appendix D occupies pages 96 to 101 of McCain's pamphlet.
[H]Details from which the table was derived are given in Appendix E to Mr. McCain's pamphlet, pp. 102-106.
[H]Details from which the table was derived are given in Appendix E to Mr. McCain's pamphlet, pp. 102-106.
By Edward P. Ripley, President Atchison, Topeka and Santa Fe Railway Company.
Address delivered at the annual dinner of the Railway Business Association, New York, November 10, 1909.
Circumstances over which I had no control caused me to be born with a distinct inability to think consecutively, or talk coherently, in a standing position and before an audience.
Seated on the small of my back with my feet on the desk I sometimes think I am thinking, but when I get before an audience I am like the little steamer plying on the Sangamon River that had a 10-foot boiler and a 12-foot whistle—when she whistled she stopped. But my weakness, or rather one of my weaknesses, is susceptibility to flattery, and when one of your officers represented in honeyed phrase the importance of your organization and of this meeting, and laid particular stress upon the importance of my saying something, I weakly yielded. I know the result will be disappointment, but the responsibility is only partly mine, and you know we railroad men get so little flattery that when properly administered the result is intoxicating.
Also, let me state in extenuation of the crime I am about to commit that the subject was not my own selection, but was chosen for me. My natural disposition in discussing railroads and the public is to growl, while, if I understand your officers' wishes, I am here expected to "purr."
But while a better man might have been selected to say it, there is much to be said as to the railroads and public opinion.
In this country the people rule—and in the long run that system, that method or that personality that does not meet the approbation of the public can not succeed. True, the public is often fooled; true, it "gets on the wrong feet," as often perhaps as on the right; true, it has to be guided, controlled, and at times abruptly stopped by those authorities which it has selected for that purpose; yet the fact remains that the government of the people, that Congress, the legislatures and even the courts are keenly alive to public sentiment and anxious not to stray far from the line of public opinion.
Our forefathers recognized the danger that the majority would not necessarily be right, but might often be wrong, and sought to provide safeguards for the rights of the minority. But these safeguards are obviously growing less efficient; obviously growing weaker; obviously more sensitive to the public clamor which for the moment stands for public opinion, and when all safeguards have been exhausted it is to public opinion that we must look at last.
There are two things about which the public is most critical—one is the management of the newspaper, the other the management of the railroad. In his heart the average citizen believes that he could operate either his daily newspaper or the railroad passing through his town much better than it is being operated; he would perhaps hesitate to announce this opinion, but his attitude is coldly critical, and it is to be remembered that the railroad is all out of doors—all out in the weather, everything about it exposed to the limelight and visible to anybody's naked eye. There is no human activity the operation of which is attended with so much publicity. All our earnings and expenses are published; all our charges and all our methods the subject of regulation, intelligent or otherwise.
Many years ago Mr. W. K. Vanderbilt, journeying to Chicago, was met on the outskirts of the city by an enterprising reporter for a daily paper, who boarded the train and forced himself into the presence of Mr. Vanderbilt and his party, and demanded news on behalf of "the public." Probably Mr. Vanderbilt, resenting the intrusion, said something uncomplimentary to the reporter and possibly to the "public" he claimed to represent, and the next issue of that paper quoted him in scare headlines as using the phrase, "The public be damned." Mr. Vanderbilt subsequently denied having said it, but whether he did or not and whatever may have been his provocation, the phrase has for nearly forty years been used as indicative of the railway man's attitude toward his patrons.
Many years ago also the late George B. Blanchard, being on the witness stand at Albany, was asked what was thecorrectbasis for making freight rates, and replied, "What the traffic will bear"—a most excellent answer, but a most unfortunate one—for it has passed into history as meaning "all the traffic will bear," which is a very different thing.
Such things as these, distorted as they have been, conspired to inflame public opinion, but that is not all.
It is the custom and privilege of men past middle age to be reminiscent and I ask your indulgence for a very brief history of the events that have led us to our present status. My railroad experience began about forty years ago and the railroad business was then much like any other business—it had its price list as did the merchant; but, like the merchant, it had its discounts for large shippers and for special conditions, and the discounts were irregular and various. The larger shippers demanded concessions as a right, and the principle was generally admitted. Naturally the result was favoritism, not because the railroads desired especially to favor one as against another, but because in the nature of things secret rates could not well be given to everybody.
Nobody regarded these secret rates as criminal or objectionable. But as time passed and these discriminations became more frequent and greater there arose a demand from the less favored portion of the shipping community for legislation forbidding the discrimination and providing for like opportunity for all. This was strenuously opposed by the favored shippers and by those railroad men who believed the railroad to be purely a private institution and not amenable to law as to its charges. It was common enough to hear it seriously argued that the larger shipper was entitled to the lower rate—this view was held by many shippers and, I believe, by most railroad managers. They argued that the business was like any other business—that each interest must look out for itself, and that competition between the roads would prevent rates from ever being too high.
For myself I may say that I realized from an early period that discrimination as to rates was unjust and at no time objected to laws forbidding it.
The interstate commerce law was passed in 1887. It was crude in its provisions and was the result of compromises between radicals and conservatives; it sought both to foster competition and to abolish it, and in that respect remains still contradictory and impossible.
Upon the passage of the law, that which had been looked upon as perfectly proper and as the working of natural competitive forces became illegal and criminal. The railroads generally accepted the law and made an honest effort to observe it—the mercantile community did not—indeed, they openly defied it, soliciting rebates unblushingly and threatening with the loss of their tonnage those roadswho would not succumb. The Interstate Commission, new to its duties, contented itself with comparatively unimportant decisions and practically did nothing to help those railroads who desired honestly to carry out the provisions of the law; and, as a result, within a year of the passage of the law it was quite generally disregarded. A few railroad men were fined, a few shippers convicted—and almost immediately pardoned—and the law fell into disrepute, a condition disgraceful alike to the government, the shippers and the railroads and especially distasteful to the latter, but exactly what was to be expected.
The result was the passage of the so-called Elkins bill, and later the Hepburn bill, which, while amateurish and in many ways vicious, have effectually stopped the rebate system—a result for which we may all be thankful.
In all the controversies that have led up to this almost complete control of railroad earnings and railroad policies by governmental agencies, the railroads have, as a rule, acted in active opposition. They have not been unanimous—some of us were willing to accept it long before it became a fact, but the majority could see nothing in it but disaster—it is too early to say which was right—perhaps an earlier acceptance of control would have made the control more lenient; perhaps its earlier acceptance would, on the other hand, have bound the chains more tightly. But the fact remains that while the basic principle of absolute equality as to rates has been accepted by the railroads gladly and in all good faith, and they have also accepted the principle of government regulation, the scars of the conflict remain and a large section of the public still suspects and misjudges us. It is true, of course, that in the rapid development of our business and in the exigencies of a most exacting profession there have been abuses and lapses, but I am here to maintain that the standards of fair dealing and commercial honesty in our business have been as high as in any other, and I appeal to you who sit around this table to say if it be not so.
But whatever sins may be laid at our door, however much we may have once believed that ours was a private business to be controlled exclusively by its owners, however much we have resented or still resent the interference of the public as manifested in the various governing bodies, it is, after all, the public that is master and we must all recognize it. It is, however, still our privilege to exercise our right as citizens and members of the body politic touse our efforts to guide it. Acknowledging as we must that the public is all-powerful, the question is, How may we satisfy our masters and thus mitigate our woes and preserve our properties?
First. We must realize, as I think we all do (after a series of very hard knocks), that the railroads are not strictly private property, but subject to regulation by the public through its regularly constituted authorities—that the Government may reduce our earnings and increase our expenses has been sufficiently proved.
Second. To meet this situation we must endeavor to get in touch with public opinion. Perhaps you will smile when I say that for years I have read every article on railroad matters in each of the papers published along our ten thousand miles of road—not an easy task for a busy man—but while I have waded through much chaff I am sure it has resulted in some reforms.
Third. The avoidance of action seriously counter to public opinion, except for compelling reasons.
Fourth. The disposition to explain these reasons through officers and employes of all grades. Generally, the loudest criticisms come from those who are not anxious to know the truth.
Fifth. Efforts to improve service in many cases without hope of reward and for the deliberate purpose of winning public approval, such as better stations, improved heating and lighting devices, better equipment, better terminal facilities, separation of grades, etc.—all with due regard to the rights of those whose money we are spending.
As we do all these things, meet us half way. Encourage the habit of not rushing into abuse. Try to consider the facts and the difficulties—this is for the public interest as well as ours. Oppose unnecessary and restrictive legislation and give us a chance.
Most of our railroads are mere imitations of what a railroad should be, and what it must be to keep abreast of the country—yet even the poorest serves a useful purpose and can not be spared. An eminent authority has said that five thousand millions of dollars would be required to supply the transportation needs of the next decade, and I do not believe it is an over-estimate. Can private capital be found to that amount unless "public sentiment" is willing to assure it of return? A portion of the public is clamoring for facilities involving great additions to expenses; another portion for limitation of earnings; will the investor consent to accept the risks while strictly limited as to his return? Since the public may do as it will with us and since we are necessary to the public, we mayproperly call attention to the fact that railway investments already pay less than any other line, and to ask what is to be done—really, it is quite as much the public's affair as ours.
Is it certain that the mixture of private ownership and public regulation which is now prevalent will succeed? Is it not contrary to all rules of political economy and to all the teachings of history? Starting as a purely private industry it has been appropriated in part and other parts are apparently to follow. Granting whatever may be claimed for the advantages of regulation by government, do not equity and ordinary commercial decency require that such close restriction and supervision should be accompanied by some guaranty of return?
I have endeavored to sketch briefly what should be the attitude of the railway manasa railway man toward the public. I am sure I voice the sentiment of all managing railroad officers when I say that our great desire is to please the public and to give it the best possible service for the least possible compensation consistent with reason. Discriminations have long since passed away and nobody is better pleased than the railroad man that it is so. There is no desire to escape either responsibility or regulation. We desire to accord only justice and we ask in return only justice. May I now, as a citizen, appeal to the railway employe, to the members of this Association, and to all other good citizens, to resist to the utmost of their powers the encroachment of government on private rights?
Mr. Elbert Hubbard, of East Aurora, N. Y., recently remarked that "when God sent a current of common sense through the universe most of the reformers wore rubber boots and stood on glass." Our troubles are with this class—well-meaning men who have zeal without knowledge and enthusiasm without sanity; these we may not reach, but the great mass of the solid and substantial citizenship may perhaps be induced to stop and consider whither we are drifting and whether this greatest of all the country's industries is being fairly treated.
By Hon. John C. Spooner.
From the address delivered at the annual dinner of the Railway Business Association, New York, November 10, 1909.
The topic which has been assigned to me is brief, but very large: "Railroads and the Public." It suggests nothing of humor, but everything of gravity and involves considerations which affect the prosperity of our whole people. The railroads, often berated in legislatures and in congresses asleechlikeand piratical, are, after all, vital to the happiness of our people and to the progress of our industries and commerce. The people are apt to forget that they have been the greatest factors—I say thegreatestfactors—in the development of our resources and the enlargement of our commerce, both in times of war and in times of peace. If one would stop to think of what would have happened if, during the war for the preservation of the Union, we had been without railroads, ready and willing to serve the government upon its demand and at prices fixed by it, how long would the war have continued? And what might not have been its result? They carried troops from the North to the places of rendezvous in the fields; they enabled the government to transfer quickly from the East to the West, or the West to the East, as emergency demanded, troops essential to successful military operations. They carried munitions of war, they carried the mail to our soldiers, they carried food and raiment to those who were fighting under our flag.
And in time of peace, what would this country have been without the railroads? The railroad has been the advance courier of progress, of settlement, of production, of commerce. It is absolutely, and has been, indispensable to the government, to the commerce and to the happiness and comfort of our people. Its mission is not performed or fulfilled. Considered solely with reference to construction, there are new fields to be penetrated by them. Today men of courage and men of means are building railways with characteristic American energy in far off Alaska, to bring the gold mines and the coal mines and the timber and the unknown resources of that distant territory into the markets of the United States. Ifthere is one instrumentality which above another has been a factor, appreciable by all thoughtful men, in making this country what it is, it is the railroad. And the railroad has kept abreast with the demands of commerce. Every device which ingenuity or invention has presented has been promptly adopted by the railway companies of the country. They have kept abreast of invention and improvement, until today the railway system of the United States is the most luxurious, the safest, the best managed railway system under the bending sky.
The first thing that would occur to one from this toast, the railroads being first mentioned, is what do the railroad companies owe to the public? That is easily defined. They owe it to the public to furnish safe roadbeds and equipment; they owe it to the public to furnish prompt service; they owe it to the public to treat all men, with obvious limitations, passengers and shippers under the same circumstances, equally and without unjust discrimination, and they owe to the public the duty of, as far as it is possible, so maintaining their roads and their equipment as to be able to meet in a fair way all the demands of commerce and traffic at reasonable rates. That excludes the rebate which never had any justification in logic or in fair play. I think those who hated it most were those who felt obliged to adopt it. When one railway company gave rebates it is quite manifest that the competitor was obliged to, or go out of business. And I believe that railway companies of the United States were glad, and their officers were glad, when it was made a penal offense for railway companies to give rebates. I think a railway company owes to the public to be careful in the selection of its employes; they should be capable, of course, and they should not only be capable, but they should be courteous and polite. To sum it up, you would say that what the railway in the enlarged sense—which includes details—owes to the public is just and fair treatment.
What does the public owe to the railway companies? Precisely, as I view it, the same thing, just and fair treatment. Only that and nothing more. Everybody knows that the railway companies of the United States—I won't put it that way—that the railway system of the United States never could have been created without the utilization of corporate entities. Partnerships never could have concentrated the capital necessary to that end. Only corporations could have achieved it. That was true in the past and it always will betrue. Now, why is the railway company different from other corporations, most other corporations? One trouble with the general public is that they don't seem to understand—and they are not perhaps to be chided for it—their relation to the railway company. They think, and they are told, they have been told it in Congress, and they have been told it where one would least have expected it, that railway corporations are public corporations, and they have been taught to believe that their power over public corporations was supreme, which is not far from the truth; but the railway corporation is not a public corporation. The Supreme Court has many times decided that a railway company is a private corporation, that its property is private property, under the protection and safeguards of the Constitution of the United States against the public as well as against individuals who attack it. Then, wherein lies the difference between a private corporation engaged in manufacture and a railway corporation? Right here: A railway corporation can not construct its railway without being clothed with a power which is not given to the usual private corporation, a power which inheres in the sovereignty of the state, the ultimate power of the people delegated to the railway corporations and very few others, and that is the power to take your land without your will at a price fixed not by you but by a jury. Why? Because it is for the public use, and private interest and private sentiment can not be permitted to obstruct the interest of the state, and therefore the property of a railway company while it is private property is, as the Supreme Court of the United States has said, affected with the public interest.
A railway company serves the public, that is what it is organized to do. Those who apply for the corporate franchises do not apply for an altruistic purpose. They wish it because they think they can make profit out of it, and that is legitimate, but the state grants it for the public use. And so it comes about that the state has the power to regulate it. Mark what I say, to regulate it, to prevent it from exacting extortionate rates from the people; to prevent it from putting upon the people abuses in its management, but that does not mean that the state may take its property. That does not mean that the state may take its management out of the hands of its owners. It means simply that the state may protect the public from any abdication by it or violation by it of its duty as a common carrier, and this principle is too often forgotten.
In these days regulation has apparently achieved a wider field for operation, and is deemed to be broad enough to regulate not only the property and the management of the property, but the management of everybody connected with it. That won't do. Why, I see it is stated in the report of your Business Association that commissions which have been organized by the states and the Commission organized under the act of Congress, have come to stay. Of course they have come—we know that, and we know another thing, that whenever a governmental commission comes, it stays. The commissions in the states, most of the states—God knows I wish I could say all the states, but I can not truthfully—have subserved a useful purpose. The state lays down the rule and the commission administers the law. There is one thing about a commission in the regulation under the law of railway carriers which places it in respect of proprietary, fairness and fitness for that function, far above Congress or any other legislative body, and that is this: That they have time to listen, to investigate, to get at the truth, which a legislative body does not have time to do in the very nature of things. I do not know, but I think nothing added more to the reputation of Governor Charles E. Hughes, of New York, than the fact that he refused to sign a bill, but vetoed it, reducing the rates which railway companies might charge, upon the ground that there had been no investigation which enabled fair judgment as to what was fair treatment to the railway corporations.
I was in public life a good many years and I am a firm believer in the sober second thought of the American people, for it represents the average judgment of every class of our people; but they get wrong, they get wrong about men, and they get wrong about policies and measures. They are subject, en masse, as men are individually, to moments of passion and excitement, and they know it. As Mr. Webster said, and as the Supreme Court of the United States has said, the fundamental object of a constitution adopted by the people is that they may protect themselves against themselves in moments of excitement and passion. And the American people will always give heed to the popular translation of the phrase, "Due process of law," that is, hear before you strike.
Now the Commission, the Interstate Commerce Commission, was intended by the Congress which created it to be an absolutely independent body. It was to report to the Congress, it was not to be subject to the command of either House of Congress, or of theExecutive of the United States. It was intended to be a quasi-judicial body. I know all of its members, and I do not depreciate to the slightest extent the services which it has rendered. The only criticism I would have of it, and that does not arise from its membership, but it is inherent in the system, is that it is never satisfied with the powers it has got. It is as insatiable as death for power. It has been proposed that they shall have the power to regulate the issue of stocks and bonds by railway corporations created by the states, that is, if the state which creates the railway company authorizes it, desiring it to utilize its privileges for the construction of a new railroad, to issue stock, or issue bonds, that it shall not be permitted to do that thing until the act of the legislature and the approval of the governor shall have been supplemented by the approval of the Interstate Commerce Commission. Now I am getting along in years, and I am a little old-fashioned, and I have not yet been able to satisfy myself that where one government creates a stock corporation, another government shall regulate the amount of its capital stock and its bonded indebtedness.
I have seen it proposed lately that the Commission should have the power to fix a rate, and that that rate should be final until a final judgment setting it aside was reached. What becomes of the constitution under such a law as that? A railway company, as I have said, owns its property. It renders a compulsory service to the public over its own property, with its own equipment, with its own employes, and at its own risk, and is entitled to a fair compensation, based upon the fair value of the property which it devotes to the public convenience, and the Supreme Court has held that that property can not be taken—because the use of property is the property—can not be taken for the public use without just compensation, and if the state, the legislature, or the Congress may authorize a commission to fix a rate as reasonable and fair, beyond which the railway company may not charge for services it renders, and require it to observe that rate until the final adjudication as to whether the rate is reasonable or not, and after the lapse of months it is decided that it was unreasonable, how can the railway company recover the great sum in unreasonable rates which it had lost? It is a taking of a private property for a public use without just compensation, and I deny the constitutional power of Congress to do that thing. I admit the power, and the exercise of it to the fullest extent to so far regulate railway corporations as to secure to thepublic a faithful discharge of all their duties to the public at reasonable rates, and under fair regulations; beyond that I believe that the owners of the property ought to be permitted to manage the property.
The business of railway management has become one of the learned professions. It calls for some of the brightest intellects in the country. It calls for the exercise of powers which, if devoted to the law or to finance or to any other business, would place those who exercise it among those at the head. It is one of infinite complication, and it is not to be supposed that railway commissions can manage railway properties as well as the men who have been trained from boyhood to that business. I have never questioned that the Interstate Commerce Commission, the Commission in Wisconsin, and other commissions, earnestly set out to do the just and fair thing, but the trouble with this whole question is, and has been through many a year, that it gets too often into politics. I do not believe myself that questions of business ever ought to find their way into the political platform of the party, any more than I believe that the relations of the employer to the employe, whatever the business may be, ought to become the football of party politics.
This Association was born out of a happy inspiration. I think these troublesome problems are approaching solution. The railway companies must obey the law. The people ought to see to it that the law which the railway corporations are obliged to obey is a just law, and that is to be ascertained only on painstaking inquiry, and not through the speeches of enthusiastic orators or on the floors of Congress. It has got to be at times that where there was no other issue upon which a political contest could be fought out, the easy, obvious and last resort was "let us go for the railroads," or, as a Governor of Minnesota once expressed it, "Let's shake the railroads over hell." The truth is that the interest of the railroads is the interest of the people. The railroad company is dependent upon the people for its life and its sustenance, and the people are no less dependent upon the railway company, and between the two there should be even-handed justice. They should be dealt with calmly, and legislation should only follow deliberation and investigation, and a law once enacted should be impersonally enforced, not enforced against some and left to fall intoinnocuousdesuetude as to others.
By J. B. Thayer,Vice-President Pennsylvania Railroad Company.
Address delivered before the Traffic Club of New York, Saturday Evening, February 16, 1909.
Problems—both many and varied—have always confronted the railway manager. Particular problems come to the front from time to time that tax all of our resources. They differ with different periods of our history. Today one of the most serious depends more for its solution upon our lawmaking bodies, both State and national, than upon the railroad men, and for the present, at least, we must feel like the old Arkansas darky, who said he was "in the hands of an all-wise and unscrupulous Providence."
In the early days of railroads the chief problem was that of construction and equipment; later, when more railroads had been built than there was traffic to feed, there came the traffic problem, and all the abuses which followed in its train. These, in turn, led to the legislative problem accompanied by the Interstate Commerce Law of 1887, and through the '90s all sorts of problems—including bankruptcy for many. Now, within the past few years has come the great problem of enlargement—the construction period again, but in a different shape. Not experimental, for we had learned how to build and how to equip; not the building so much into new country, but to take care of the traffic which was overflowing our rails.
Events of the past year have proved the absolute necessity for almost all the large railroads in this country to enlarge their trackage, their terminals, and their equipment; and yet, here again, when in considering where to obtain the necessary funds for such purposes,—which must, of course, come from the public,—the railroad managers find themselves confronted with great difficulties. This, of course, is largely due to the tremendous demands for capital, in the development that is going on in all parts of the world, but it is increased, at the moment, by the natural timidity of capital to invest its funds in railroad securities, in view of the violent attacks that are being made against corporations through Congress and the State legislatures.
POPULAR HOSTILITY TO THE RAILROADS.
This brings us, then, to our greatest and most perplexing problem—that of how to restore a state of reciprocal understanding and fairness between the carriers and the public. Many railroad officials believe that so deep-seated is the apparent hostility of the people that the management of the railways will be taken practically out of the hands of their owners, and that great disasters are to follow. I do not share this view, principally for the reason that whatever may have been the faults in the past, the methods and practices of railroad management are now based upon a decent regard for their public responsibilities. Sooner or later the people will recognize this—as I believe they are already beginning to do. But by no means can we minimize the actual situation of today. It is, indeed, a time of great anxiety to all those entrusted with railroad management, and who have the interests of their country at heart as well.
With the old rebates and secret discriminations things of the past, with all kinds of business in a most prosperous condition, we all know that within the past three years, suddenly, out of an almost cloudless sky, there has burst forth upon the railroads of this country a torrent of the most bitter and violent attacks—by political orators upon the stump; in magazines and newspapers; in Congress and State legislatures. It is fair to say, I think, that this onslaught had its origin in the agitation of 1904 for changes in the Interstate Commerce law. It was based upon a misunderstanding of existing railroad conditions and the position of the railroad in regard to the points at issue, which I shall presently explain.
Following the agitation surrounding the passage of the rate bill has come a swarm of bills in Congress and State legislatures, which, if they become laws, and are enforced, will prove disastrous to the railroads, and, equally so, to the public at large. The question is, What is to be done to prevent it? The old method of influence has been abandoned, and, I hope, forever. Has it left us unequipped to meet the issue? To answer this question let us get a perspective.
RAILROADS NOT BLAMELESS.
We must not imagine, to begin with, that we are entirely blameless. We are in some respects only realizing the wages of past sins. We have done many of "those things which we ought notto have done," and we have left undone many of "those things we ought to have done." Most of the evils date back many years and many of them might have been prevented had the government done its duty and enforced the law. Yet even in most recent years we can find some mistakes with which to concern ourselves. It is not strange that many men who have suffered loss through delays in their traffic, or in their personal transportation, or who saw themselves deprived of profitable business because they could not secure cars, should have become exasperated and, not having time to properly analyze the difficulty, thought that the railroads were lacking in foresight and management.
But let us go back a few years. It is a great mistake to hold the railroads responsible for such practices as rebating in those days, when it would have been impossible to throw a stone in a commercial community without hitting somebody who was taking rebates and wanting more. Many men are today running for office on anti-railroad platforms who if you were to say "Rebates" would duck their heads very much as David Harum said his Newport friends would do if he called out "Low bridge!" That rebates were wrong nobody questions, but to pillory a man today for accepting rebates at that time is a farce.
Many persons believe that the so-called discriminations, resulting in the secret arrangements, were largely influenced by the desire upon the part of railroad officials to favor one man against another, but no thoughtful man who has at all studied the problem believes this. Rebates and other forms of discrimination,—whatever may have been the result in specific instances,—had their origin mainly in the competition between carriers for the traffic. Incidentally, in transacting railroad business through secret arrangements, as became the custom in that period, there were many cases of discrimination in favor of the strong and against the weak.
There was a strong feeling upon the part of many men, both in and out of railway service, that the larger shipper, under the ordinary rules of business, was entitled to a lower rate, and they could not conceive the real principle which should govern the making of railroad rates,—which, however, has come clearly to be realized since that time. The railroad systems, generally, were not more anxious to pay rebates than they were to pay higher prices for their supplies, and simply pursued the course of their competitors because, otherwise, they saw nothing but loss and probable bankruptcy staring them in the face. The railroads were forbidden by law to meet and make formal agreements for the maintenance of rates, and by another law were required to compete. We all thought that the old planwascompetition.
Had the Government, through its Interstate Commerce Commission, vigorously undertaken to enforce the law—passing if necessary, long before it did, the Elkins Act—I think we should have seen a correction of these abuses long before the reform came; but, as a matter of fact, neither the Government authorities nor many of those managing the railroads had yet reached a clear conception of the significance of the abuses which existed and of the proper legal method of uprooting those evils.
GETTING AWAY FROM OLD ABUSES.
Upon the resumption of business activity, in 1898 and 1899, and, later, following the passage of the Elkins Act, the opportunity was presented,—and in general accepted by the railroads,—to get away from the old methods. While since then there have been some cases of violation of the law, in the matter of secret arrangements, yet I think that, at least within the last four or five years, it is safe to say that they have been of small importance, and perhaps, in many of the cases—while a technical violation of the law—were actually not discriminations. I say this advisedly, so far as the eastern situation is concerned, because I know that the Pennsylvania Railroad Company has not paid a rebate for years, and it is fair to believe that as that company held its traffic,—in fact, largely increased it,—without the necessity for such arrangements, its competitors must have to a large extent pursued the same policy.
But not alone in reference to freight rates was there more or less complicity in evil between the people and the railroads, but let me ask you to consider, for a moment, the question of free transportation, or passes,—whether political or business. It is only within the last year or two that the public conscience has been awakened on this subject. It is true, the railroads have been abused for several years by those who did not enjoy such favors, but is the railroad more responsible for the conditions that existed than the Government of the people, either in the National Congress or in the State legislatures, and how could it be expected that the legislators in one State could feel that they were doing very wrong in accepting passes, when the legislators of another Stateenjoyed them by law of the State? How could members of Congress be criticised for accepting such privileges, or the railroads for extending them, when the Presidents of the United States and member of their cabinets, and other important officers of the Government not only accepted them, but practically exacted them, and, further, expected that private cars and private trains should be furnished without charge? Upon one occasion within the past two years I called upon the Interstate Commerce Commission to ask its assistance in eliminating the pass abuse, and was very frankly told that it could make no move, nor take any interest in the subject, in view of the fact that important public officials including Senators and the members of Congress felt that it was not improper for them to accept them. Out of this situation grew a large part of the pass abuse, because, following the national government and the legislatures, the large men of business felt that they could properly accept similar privileges.
Therefore, I repeat, that while there were great abuses—especially during the period referred to—embittering a large portion of people, yet the railroads were no more responsible than the people themselves; and yet, without doubt it was during this period that the foundation was laid for the feeling of the present day.
RAILWAYS WELCOME JUST REGULATION.
But, as I stated, we were forced to bear the brunt of our past sins—and more—in the campaign for increasing the powers of the Interstate Commerce Commission. Do not misunderstand me. Many thoughtful railroad men believed always, in the value, both to the railroads and the public, of an interstate law, and, further, considered it wise to strengthen the power of the Commission. The distinction, however, between what railroad men did and did not believe in, is very clear. We felt and we feel now that the government is perfectly justified in regulating railroad practices to the extent of preventing discriminations. Indeed, the government should act as a sort of policeman to see to it that the weak and the helpless are protected. If reasonably administered, the railroads need the law. But the government should not have the right to interfere with the proper play of the natural commercial forces of the nation. The great distinction between police and commercial powers should never be lost sight of.