William Larrabee

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:

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:

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:

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:

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

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:

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

The above quotations from Mr. Davis' article hardly do it justice, and it should be read in full to appreciate its full force. Many of the predictions and estimates are undoubtedly in the main correct, yet upon the whole it must be admitted that it is a rather rosy and too hopeful view to take of Government ownership of our railroads.

4. State ownership with private management.

This is a compromise between a public and a private system of railway ownership and management. It is claimed by the advocates of this system that if the Government would acquire by purchase or through condemnation proceedings all of the railroads of the country, pay for them by issuing its bonds, and then lease the various lines to the highest responsible bidders, prescribing a schedule and rules of management, most of the benefits resulting from state ownership of railroads could be secured while nearly all its disadvantages would be avoided. It is proposed to purchase railroads at their actual value and to issue in payment bonds bearing the same rate of interest as other Government securities. This would deprive managers of every opportunity to manipulate the railroad business for purposes of stock speculation. It would also reduce the fixed charges of our railroads at least 50 per cent., the benefits of which reduction the public would chiefly share. The acquisition of the railroads by the Government would, moreover, afford the conservative capitalist a safe and permanent investment, which, with the gradual disappearance of our war debt, might become a national desideratum.

It is proposed by the advocates of this system that the Government fix rates of transportation for a certain period, to be reviewed at the end of that period upon an agreed basis. The operating companies would be required to keep their roads in repair and give sufficient bonds for the faithful performance of their contracts. If found guilty of persistent violations of the terms of their leases or of such laws as Congress might enact for their control, their bonds and leases might be declared forfeited. A new Government department or bureau would have to be established and charged with the duty of exercising the same control over railroads which the Government now exercises over national banks, and in addition to this complete publicity of the service would have to be relied upon to prevent the introduction of abuses.

There are at least two valid objections that can be urged against the adoption of such a system. Responsible companies could not be induced to lease a line for a valid consideration unless their rates were definitely fixed for a series of years. Such a course might, however, in time result in great hardship to the commerce of the country, as the great and unavoidable difference in the rates of the various railroad lines of the country would give to the commercial interests of some sections decided advantages over those of others. Besides this it would be very difficult to compel the different companies to keep the lines leased by them in repair. Controversies would constantly arise between the officers charged with the supervision of the roads and the operating companies, which could be ultimately determined only by the courts, causing to the Government loss, or at least delay in the adjustments.

5. National control.

Mr. A. B. Stickney, in his work, "The Railway Problem," holds that in the interest of uniformity it is desirable to transfer the entire control of railroads to the National Government. He assigns two reasons for the proposed change; one being that Congress would consider the subject of railroad control with more intelligence and greater deliberation; the other, that "the problem of regulating railway tolls and of managing railways is essentially and practically indivisible by the State lines or otherwise," and that the authority of Congress to deal with interstate traffic carries with it the right to regulate the traffic which is now assumed to be controlled by the several States.

It must be admitted that it is a difficult matter to draw the line of demarcation between National and State control, and that Congressional regulation of railways would remedy many evils which now affect our transportation system; yet there is reason to believe that the proposed change would in the end be productive of more evil than good. It is an essentially American maxim that the home government only should be trusted with the administration of home affairs. The people of each State know best their local needs, and it is safe to say that for a generation or two no serious effort will be made to amend the Federal Constitution in this respect or to secure from the courts an interpretation of the interstate commerce clause greatly differing from that which now obtains.

It is thus seen that nearly all the methods of railroad management which we have discussed are, at the present time at least, more or less impracticable on account of the radical changes which they would necessitate. It is not likely that for many years to come the American people could be induced to try any extensive experiments in state ownership of railroads; nor is it any more likely that the present generation will undertake the difficult task of separating the ownership of railroads from their operation.

A nation is, like the individual, inclined to follow beaten tracks. It finds it, as a rule, easier to improve these tracks than to abandon them and mark out a new course. Any proposition made for the improvement of our system of railroad transportation is in the same proportion likely to receive the approval of the masses in which it makes use of existing conditions. It will, therefore, be my aim, in making suggestions as to a more efficient control of this modern highway, to retain whatever good features the present system possesses, and to only propose such changes as may seem essential to restore to the railroad the character of a highway.

As has been indicated above, any system of railway regulation, to be applicable to our circumstances, must recognize the dual sovereignty of Nation and State. The great majority of our railroad corporations were originally created by the State, and are only responsible to the State as long as they do not engage in interstate commerce. Even foreign corporations must submit to all police regulations of the State in which they may do business, and as long as the American Constitution remains intact the individual States will, and should, assert their right to regulate local traffic and to exercise police supervision over all railroads crossing their boundaries.

All power should be kept as closely to the people as is consistent with efficiency in the public service. It may even be questioned whether entire transfer to the Federal Government of the supervisory powers now exercised by the States in railroad affairs would tend to correct existing railroad evils more speedily or more effectually than they can be corrected through the agency of local rule. The conditions, and therefore the wants, of the different States differ so greatly that general legislation must always fail when it attempts to regulate matters of merely local concern.

The means employed by the State for the regulation of the roads under its jurisdiction should be such as are least likely to lead to a conflict with Federal authority, and experience has shown that the authority of the General Government and that of an individual State over a railroad company, which is incorporated under the laws of the latter, but is engaged in interstate commerce, may be so harmonized as to avoid conflicts between the two sovereignties without any great sacrifice of power on the part of either. Judge Cooley said recently in reference to regulation by National and State commissions:

There has been during the past twenty years a tendency in a majority of the States to place the local control of railroads in the hands of executive boards, usually styled "railroad commissioners." Previous to this period the various States relied solely upon legislation for the regulation of the transportation business, but in time they became convinced that such laws were inoperative for the want of an enforcing power. It was found that the individual shipper was unable to cope with a powerful company and usually would rather suffer wrong than to enter into a contest which nearly always resulted in great pecuniary loss to him. On the other hand, it was apparent that if the claim of the individual were pressed by a railroad commission, even though such a body had but limited powers, it would, under ordinary circumstances, be honored, provided it was meritorious; and if the commission was compelled to enforce a demand through the courts, it would have the support of the State to poise the wealth and power of the corporation.

The term "railroad commissioner" in the United States is nearly as old as the railroad itself; but the first officials bearing that title were merely successors to the turnpike commissioners of yore; their duties consisted chiefly in supervising, passing or reporting upon the construction and condition of the highway.

The first railroad commission, in the present acceptation of the term, was created in the State of Massachusetts, in 1869. The commission consisted of three persons, whose principal duty was to "make an annual report to the General Court, including such statements, facts and explanations as will disclose the actual working of the system of railroad transportation in its bearing upon the business and prosperity of the commonwealth, and such suggestions as to its general railroad policy, or any part thereof, or the condition, affairs or conduct of any railroad corporation, as may seem to it appropriate." This board also had the general supervision of all railroads and power to examine the same. It was required to give notice in writing to any railroad corporation which, in its judgment, was guilty of any violation of the railroad laws of the State; and if such company continued the violation, after such notice, it became the duty of the commission to present the facts to the Attorney-General. It was further made the duty of the board to examine, from time to time, the books and accounts of all railroads, to see that they were kept in a uniform manner, and upon the system prescribed by the board. It was also required to investigate the cause of any accident on a railroad resulting in loss of life. These being the principal duties of the board, its powers were very limited; but its personnel supplied the power which the law had withheld. The success of this commission exceeded even the expectations of the advocates of the system, who, in view of the limited powers of the commission, had anticipated but meager results.

To quiet the Granger movement the railroads favored and finally secured the adoption of the commissioner system in the West, and South, in which sections it attained its highest development. It was soon found that a commission after the Massachusetts model, when composed of men less competent or less disposed to do their duty, was liable to dwindle into a statistical board or even become a pliant tool in the hands of the railroads. Furthermore, the conditions in Massachusetts, where railroad owners and railroad patrons lived side by side and were in many instances even identical, differed materially from those found in the West and South, where railroad patrons were made to pay excessive rates, to produce liberal dividends on fictitious stocks for non-resident stockholders. Here a conflict between the railroads and such commissions as were determined to do their duty became often unavoidable. Railroad companies were as a rule disposed to disregard the recommendation of a commission to reduce exorbitant rates. This led in those States which suffered most from unjust tariffs to a popular demand to endow the commission with the power to fix prima facie rates. While the number of States which have taken this step is at present still limited, public opinion in its favor is growing throughout the nation, and a general adoption of this policy is probably only a question of time. There is every reason for believing that a commission vested with the right to fix local rates, to require full and complete reports from railroad companies, and to make proper regulations for their control, aided by penal legislation to compel compliance with their orders, will be a sufficient aid to the State in exercising such control over the companies operating lines within its borders as its dignity and the welfare of its people demand.

Viewing the question from a national point of view, we find that, owing to the great and constantly increasing importance of interstate traffic, improved Federal agencies for railroad control are a pressing need. While much has been accomplished by the Interstate Commerce Act, much yet remains to be done. Violations of the act are still far too frequent, and they have been encouraged by unfriendly decisions by some of the inferior Federal courts.It must be admitted that nearly all the evils connected with interstate transportation could soon be remedied were it not for the difficulties which the Interstate Commerce Commission encounters in the enforcement of the law. On the one hand it is not possible with the machinery at present provided to detect and prove a considerable part of the violations of which railroad managers are daily guilty; and on the other hand, if these violations are brought to light, there would not, according to the testimony of a prominent railroad man, be courts enough in the country to try the violators. Besides this, such is the artfulness of railroad managers that in a majority of cases it would be impossible to reach the guilty party, and subordinates would have to answer for the transgressions of their superiors.

To provide adequate machinery for the supervision of the transportation business, a national bureau of commerce and transportation should be established. As its chief a director-general of railroads should be appointed by the President, on the recommendation of the Secretary of the Interior, by and with the advice and consent of the Senate. This officer should hold his office for a term of at least six years, unless sooner removed by the President, upon reasons to be communicated by him to the Senate. He should not be interested either directly or indirectly in railroad securities. The Interstate Commerce Commission should be continued as an advisory board. It should upon the whole retain its present functions and should be consulted by the director-general in all matters requiring expert investigation. A number of divisions or sub-bureaus should be established, and each should be entrusted, under the supervision of the director-general, with such duties as may be deemed necessary to secure the greatest efficiency.There should be a division charged with the duty of carefully examining and compiling the detailed reports which the various companies should by law be required to make to the bureau. An inspection service should also be established, similar to that now maintained by the Treasury and Post-office Departments. Its officers should be empowered to enter all railroad offices and examine the companies' books, board trains and employ other legal means to detect violations of the railroad law and report them to the chief of the bureau.

Railroad companies might be permitted to make interstate rates, but all schedules should be submitted to the bureau for approval or revision. Legal provision should be made against every sort of speculation in railroad stocks on the part of railroad officers, who should, in addition, be prohibited from sharing in the profits of favorite rates, as at present. All executive officers and directors of railroad companies should, like officers of national banks, be required to qualify by taking an oath of office, and should be held to strict accountability for their official acts. Officers of railroad companies should not be allowed to receive and use proxies at stockholders' meetings.

The director-general should have the power, when he has proof that a railroad manager is persistently violating the law, to remove him and to appoint a receiver to take charge of the road until its owners can make provision and furnish sufficient guarantee for a more responsible management. Such a procedure would not be without analogy in the sphere of Federal authority. The Comptroller of the Currency is authorized by law to remove the derelict officials of a national bank and place its business in charge of a receiver. The beneficial effect of this provision is evinced in the extreme rareness of such a step. When railroad managers are held responsible for their own official acts, as well as for those of their subordinates, and when all railroad transgressions are visited upon their source in such a manner as to be remembered by the stings of disgrace and of a blighted career, unfaithful railroad managers will be extremely rare.

The plan here outlined is of course capable of being greatly improved. Experience only is a reliable guide as to the merits of the various details of such a system of control. What is needed above all things is a beginning, the establishment of the principle of complete control of railroad transportation by the State and the Nation. When this step is once taken, the friends of railroad reform may safely trust to time for the solution of the subordinate questions of this important problem.

By thorough State and Federal supervision of the railroad business many of the present abuses can be prevented. But the temptations of railroad managers to violate the law will continue to exist as long as the speculative element is permitted to remain in railroad securities. To remove the fountain-head of the evil eventually, the way should gradually be paved for a change in railroad organization and ownership which would also greatly increase the responsibility and efficiency of railroad management. In the beginning of the railroad era, nearly all, and not unfrequently all the capital needed for the construction of a new line was supposed to be furnished by the company's stockholders. But as it often happened that the cost of construction considerably exceeded the original estimate, the State authorized railroad companies to mortgage their property for the purpose of raising the money necessary to complete the road. In time this provision of the law was taken advantage of by speculative stockholders to such an extent that roads were often bonded for the full amount necessary to construct them, and even for more, while the stock was issued simply as a bonus to the promoters and the bondholders of the road. But as the bonds and shares scarcely ever remain in the same hands, such a condition was eventually brought about that roads were controlled by those who had little or nothing invested in the enterprise, and their real owners were deprived of all influence in their management, retaining only the right to foreclose their mortgages when things came to the worst. It is evident that men who have only a speculative interest in property cannot have the same concern for its permanent value and prosperity as those who hold it as a permanent investment. Many of the railroad abuses of the past had their origin in the law permitting the bonding of railroad property. Were it desirable to make a property for the sole use and convenience of speculators and gamblers, a better scheme could hardly be devised than the present system of our railroad organizations. Were railroad companies organized like national banks, were each shareholder required to pay the full amount of the face value of his shares, and were mortgaging railroad property entirely prohibited, it is not likely that the proportion of bankrupted railroads would be any larger than that of bankrupted banks. Few, if any, railroads would be built for purely speculative or blackmailing purposes.

Capital is naturally conservative, and speculation is only invited where the chances of gain are greatly out of proportion to the capital invested. Were the principle of ownership which applies to national banks and other well regulated corporations also applied to the railroads, and were bonds entirely abolished, only such persons would by the shareholders be placed in charge of their property as could give to them the best assurance of honest and conservative management. Such a change would greatly increase public confidence in, and the value of, railroad securities, and would eventually place them above bank stock as desirable investments. With the great fluctuations which under present circumstances obtain in railroad stocks, these securities are regarded as unsafe and unsatisfactory investments by conservative people. During a period of less than twelve months in 1891 and 1892 the stock of the Atchison, Topeka and Santa Fe fluctuated from 28-1/2 to 43-1/2, or 53 per cent.; that of the Chesapeake and Ohio from 15-1/4 to 25-7/8, or 70 per cent.; of the Chicago and Northwestern from 101 to 118, or 17 per cent.; of the Chicago, Saint Paul, Minneapolis and Omaha from 20-1/2 to 38-1/2, or 88 per cent.; of the Chicago, Milwaukee and St. Paul from 48-3/4 to 78-1/2, or 61 per cent.; of the Iowa Central from 6-1/2 to 13, or 100 per cent.

If we look over the stock quotations of the past ten or twelve years we find still greater fluctuations. The following table, taken from the United States Investor, shows the range of prices of a few of the principal stocks during this period:

And such fluctuations have always been rather the rule than the exception. It is a gross outrage upon the investing public to let this state of affairs continue. It should be corrected without delay.

How many high officials in charge of railroad property will under these circumstances resist the temptation to speculate in the stock of their companies, and, so long as it is permitted, how many will resist the temptation to adopt such policies in the government of their roads as will cause such fluctuations? It is a common report that it is not an unfrequent occurrence for Senators and members of Congress to receive information from railway officials that enables them to raise their campaign funds by speculation in Wall Street.

Mr. Henry C. Adams, statistician of the Interstate Commerce Commission, says in his third annual report:

There is no safer business in the world than railroad transportation; there is none that has less elements of uncertainty; none whose returns in the aggregate are less varying. Every other business in the country, whether prospering or struggling, pays tribute to it. It rests on a cash basis, and suffers probably less from hard times than any business of its magnitude. Both the merchant and the manufacturer run large risks in doing business largely on a credit basis. The farmer sows in the spring, harvests in the fall, and often cannot realize on his products until winter; but the railroad company always receives its pay as soon as its work is done, and not unfrequently even before it is done. Statistics show that railroad revenues are, in the aggregate, remarkably uniform, and there is no reason why railroad securities should be less stable than bank or insurance stocks. Mr. Jeans says:

There may be some arguments in favor of bonding railroads, but this practice is, upon the whole, productive of infinitely more evil than good. The State should, therefore, compel railroad companies to liquidate all of their bonded indebtedness without unnecessary delay. In the proportion in which this is accomplished railroad shares will gain in stability and value.

Railroad men complain that the small savings of the poor invested in railroad securities do not yield adequate returns and are often lost in consequence of the foreclosing of the roads in which these investments have been made. Others complain that railroads are bankrupted in the interest of designing bondholders. Still others charge that rich and powerful roads contrive to obtain a controlling interest in the depreciated stock of weaker roads and then manage these roads in their own interest and greatly to the detriment of other stockholders. All these evils would disappear if the law required the identity of actual and virtual ownership. "Freezing-out" processes could no longer be resorted to by expert directors to obtain without compensation the property of their less sophisticated fellow stockholders. One railroad could no longer obtain control of another by acquiring an insignificant part of the sum total of its securities. There would be no longer any clashing between the interests of bondholders and stockholders, and railroads would no longer be managed in the interest of a small minority of their owners.

In addition to the cancellation of all railroad mortgages the State should require that all railroad stocks should, in the future, be paid in full. Furthermore, roads should be built only from the proceeds of the capital stock, and the expense of repairs should be defrayed from the revenues of the road. Dividends should only be paid from surplus earnings and should in no case exceed a fair rate of interest on the actual present value of the road. The statistician to the Interstate Commerce Commission suggests the creation of a special commission charged with the duty of converting the actual capitalization of railroad lines into a just value of their property. To do justice to both the railroads and their patrons in the fixing of rates, it is important that the just value of railroad property be ascertained, but the work could probably be done with less friction by a coÖperation of National and State commissions. A number of reforms are needed within the province of railroad management. Passenger rates are, as a rule, too high, and out of all proportion to freight rates. Many passenger tariffs still recognize the old stage-coach principle of fixing the fare in an exact proportion to the distance traveled. Thus a passenger who takes the train for a five-mile trip pays only fifteen cents for his own transportation and that of one hundred pounds of baggage, while the passenger who buys a ticket for a journey of one hundred miles pays, on most American lines, exactly twenty times the amount paid by the five-mile passenger. Here the principle of collecting terminal charges is entirely ignored. Sufficient inducements are not held out to the passenger to prolong his journey, and as a consequence of this short-sighted policy of the railroad companies the average distance traveled in the United States by each passenger, instead of having gradually increased, has gradually decreased of late years until it is now only 24.18 miles. The average freight haul in the United States is 120 miles, or about five times as long as the average journey per passenger. How can such a difference be accounted for except by the dissimilarity in the principles which govern the computation of passenger and freight charges? The same rule should be adopted in fixing passenger rates that is recognized by railroad men in fixing freight rates: the rate per mile should decrease with the increase of the number of miles traveled.

The principle of arranging passenger tariffs on a sliding scale has found recognition in Europe. In Denmark first-class passenger fare is 3.13 cents for each of the first 47 miles, 2.67 cents for each of the next 47 miles, and only 2.22 cents for every additional mile. The practical application of this principle is, in fact, only limited by the extent of the kingdom. In nearly all European countries a uniform reduction, ranging from 20 to 30 per cent., is made from regular rates for return trip tickets, and coupon tickets are issued to tourists almost everywhere at largely reduced rates.

Hungary recently adopted a new method of making passenger and freight tariffs for its state lines. This is now generally called the zone system. There are two classes of tickets sold, one for short trips on suburban or branch lines, the other for longer journeys on the main lines. The distances that can be traveled on short or suburban lines are divided into two zones of stations, and those on main lines into fourteen zones. The division of the kingdom into zones is made with Buda-Pesth as the center. A ticket purchased for a particular zone carries the passenger to the end of that zone or any nearer station.

The following table will show the extent of each zone and the fares paid:

(The florin is a little more than one-third of a dollar.)

A ride from a city to the first suburban station costs from 3 to 10 cents, according to class of car, and to the second station 5 to 13.6 cents. On through trains a person may travel 15 miles at a cost of from 8-1/2 to 20 cents, according to kind of train and class of car, a hundred miles for from 85 cents to $2.00; 140 miles for from $1.15 to $2.80 and any distance above 140 miles for from $1.35 to $3.25. A person may thus travel from Buda-Pesth to Predeal, a distance of 472 miles, with a third-class ticket for zone 14, purchased at a cost of $1.35, or 28-100 of a cent per mile.

Our railroad men with much complacency point to the fact that these rates do not cover the forwarding of passengers' baggage and that this service must be paid for separately. These charges, however, are very moderate, being on 120 pounds of baggage 8-1/3 cents a distance of 34 miles or less, about 17 cents for a distance of more than 34 and less than 62 miles, and about 34 cents for any distance over 62 miles. The additional charge for carrying 120 pounds of baggage from Buda-Pesth to Predeal is therefore about one-fourteenth of one cent per mile. It must be admitted that this system of charging separately for passenger and baggage is eminently just, for there is no good reason why the passenger without baggage should be taxed to pay for the carriage of that of his fellow-traveler.

The zone tariff was introduced on the state railways of Hungary by M. Barosz, the Hungarian Minister of Commerce, on the 1st of August, 1889. The adoption of the new tariff was ridiculed and condemned as visionary by road experts, who even went so far as to prove to the satisfaction of practical railroad men that the innovation was destined to be a failure. For a month or two it almost seemed as if their prediction might be fulfilled, the number of passengers carried remaining behind the number carried during the corresponding period of previous years. But soon the reaction set in. The month of November, 1889, already witnessed an increase in the number of passengers as well as in receipts over the same month of the year previous. The result of the first year's trial demonstrated the wisdom of the "innovation." The number of passengers carried, which had been only 5,186,227 in 1888-89, rose to 13,060,751 in 1889-90, and the total receipts for passengers and baggage rose from 9,138,715 florins to 11,186,321 florins, a gain of 2,047,606 florins, or 22 per cent., during the first year. There is a continued increase both in the number of passengers and in receipts, and the success of the system must be pronounced phenomenal. The railroad experts of Europe, who had predicted the signal failure of the zone system, now that the unexpected has happened, are trying to discover the particular favorable conditions which made the success of the system possible in Hungary. It will probably be a decade, or even two, before the railroad experts of both hemispheres will be entirely reconciled to this new application of the old principle that a reduction in the price of a commodity increases the demand for it.

It is strange, indeed, that intelligent men should be so slow in recognizing an economic principle for which both history and daily experience furnish an unlimited number of illustrations. The post-office receipts everywhere have increased with a reduction in postage. The Government telegraph in England did not become self-supporting until Parliament made a sweeping reduction in its rates. The revenue from the Brooklyn bridge never paid a fair interest on the capital expended in its construction until its tolls were cut down. Were it necessary, hundreds of other examples could be added to these.

Hungary has also applied the zone system to its freight traffic. Three zones are fixed for the carrying of goods, viz.: Zone I, for distances less than 200 kilometers (124 miles); Zone II, for distances over 200 and less than 400 kilometers, and Zone III, for distances over 400 kilometers. A uniform tariff is established for each zone, which is one-third less than the average freight rates for equal distances formerly in force. American railroads should profit by the wisdom and experience of the Hungarian Government, and adopt at an early day such features of its system as upon our soil and under our institutions may be made practicable. The Hungarian system, with some modifications, is now being tried by Austria and a few of the German states, and is increasing railroad revenues wherever adopted.

There is a growing demand for lower fares. This demand increases in the same proportion in which the desire and the necessity for travel increase. European states have not been slow to meet it. Reductions are made everywhere, and chiefly favor the lower classes. Thus, when France, within the last year, changed her passenger tariff, she reduced first-class fare 9 per cent., second-class fare 18 per cent., and third-class 27 per cent.

The European passenger reports show the numbers of first and second-class passengers are continually falling off, while those of the third-class passengers are fast increasing. In England and Wales the number of first-class passengers fell between 1875 and 1889 from 37,000,000 to 24,000,000 while the number of third-class passengers increased during that same period from 350,000,000 to 601,000,000, and this increase still continues. In the United Kingdom the number of third-class passengers for 1891 was over 750,000,000. Furthermore, passenger revenue comes chiefly from the third class. In the United Kingdom the receipts from first-class passengers were in 1889 £3,188,000; from second-class passengers, £2,705,000; and from third-class passengers, £19,785,000. It is thus seen that receipts from third-class passengers are nearly 3-1/2 times as large as those from the first and second-class passengers combined. A similar proportion is found in nearly every country on the continent. European roads discovered some years ago that first and second-class passengers were carried at a loss, and all the passenger earnings were derived from third-class passengers. The profits from this source show a considerable increase every year.

The average fare per mile is 2.15 cents in the United States, and only 1.17 cents in Germany, 1.67 cents in Austria, 1.18 cents in Belgium, 1.29 cents in Denmark, 1.45 cents in France, 1.64 cents in Italy, and 1.45 cents in Russia. It is often claimed by railroad men that we travel more luxuriously than the people of any other country in the world, but it should not be forgotten that traveling in the United States is also more expensive than anywhere else. It is contended that class distinctions are odious in America, and that second and third-class cars would not be patronized. The same argument might be applied to theaters, hotels, clothiers, grocers, etc. It is difficult to see why distinction here should be less odious than on the railroad train. The truth is, Americans are just like other people and will avail themselves of accommodations in keeping with their means if they have the opportunity. Many passengers who will not travel in an uncouth smoking-car would, if clean second-class cars were provided, gladly dispense with the luxury of an upholstered seat if by doing so they could save from $5 to $10 a day.

A common laborer in this country earns from a dollar to a dollar and a half a day, and in the performance of his labor as a rule suffers greater inconvenience than does the traveler who travels the country in a second-class car. Is it under these circumstances at all likely that the American would hesitate to travel for a day in a plain but clean car, if by doing so he could save a week's earnings? We may even go further and say that it is a very reasonable assumption that the man who earns his bread by the sweat of his brow would choose the cheaper car if the difference in one day's fare were equal to one day's wages. It is a common saying in Europe that the first-class passengers consist of lords and fools, and few of the hundreds of thousands of American tourists traveling abroad give the natives occasion to class them with either. The first-class car has almost fallen into disuse in Europe, and even the patronage of the second-class is less than ten per cent, of that of the third.

Reduced rates for return tickets should be provided under rules and regulations of commissioners.

The Massachusetts legislature recently passed a law requiring the railways of that State to sell interchangeable thousand-mile tickets for $20. The State commission is given power to except any company from its requirements if the public welfare or the financial condition require or demand it. This is a step in the right direction and should be followed by other States. Michigan also requires certain roads to carry first-class passengers at two cents per mile.

Railroad companies should be compelled to discard the pass as a courtesy as well as a consideration. The giving of passes under the guise of mileage books, or tickets for pretended or unnecessary services, is very pernicious and should be prohibited. Such a reform would soon enable them to offer low fares to all. An employe may be furnished free transportation while actually engaged in the business of his company, and it should be made the duty of the State and National commissions to make proper regulations governing such free transportation of employes. Half-fare tickets for adults should also be abolished. The pauper ticket is given to the minister of the gospel to secure for the railroads the influence of the pulpit, though offered under the pretense of charity or support of the church. The State should not permit the railroad companies to practice this or any other kind of charity at the expense of the general public. The railroad is a highway, and the company operating it is entitled to rates sufficient to pay operating expenses and a fair interest on the value of the property. It can therefore easily be seen that the so-called gifts show no liberality on the part of the railroad company, but are made at the expense of other people. Donations made by railroad companies should be made from the pockets of their stockholders and not from the pockets of their patrons.

All perquisites of railroad officers should be abolished. When a railway official has become so pompous and consequential that he requires a special car, it is about time to look about for his successor. If we are to have a special-car aristocracy in this country let it be supported at the expense of some other interest.

Another railroad reform is needed on this side of the Atlantic. While the great majority of railroad officials are courteous and considerate, and perform their duties in the most agreeable and acceptable manner, there are a few who do not properly appreciate the relation which they sustain to the patrons of their companies. They are inclined to forget that they are quasi-public servants, and that the public has a right to demand courteous treatment at their hands. All railroad employes should realize that their first duty is to administer to the welfare and the convenience of the public, and each one should have the full protection of the law in his efforts to do so. The American public objects much less to an inferior car than to rude treatment by the companies' agents. Railroad superintendents may justly be blamed for the incivilities of their subordinates. It is their duty to know the character of those whom they employ, and not to retain in their employ those who are derelict in their duty to the public. Nothing offends the feelings of a true American more than the display of a bureaucratic spirit on the part of public servants. Nothing more commends a line of railroad to the public than uniform painstaking kindness and courteous treatment on the part of its employes. It is made the duty of railroad employes of France "to so treat the public as if they were eager to oblige it," and the very first paragraph of the official instructions to the railroad employes of Germany enjoins them "to assume a modest and polite demeanor in their intercourse with the public." In this connection it might be stated that the second paragraph of those instructions positively forbids the acceptance of any gratuity by a railroad employe. If our American sleeping and dining-car companies would give their employes adequate compensation and then adopt and enforce the German rule concerning "tipping," their service would gain popularity and their employes self-respect.Entrance into the railway service should be by agreement for a definite time, and dismissals and resignations should be governed by rules agreed upon by boards of commissioners and the companies.

The use of the corporation has done so much to secure for capital so large a share of the profits of industrial enterprises, and large salaries also for the officers who manage them, that laborers have been led to organize themselves into associations for like purposes, and ambitious men have not been slow in availing themselves of the advantages afforded them in this new field.

It is right and proper for laborers to organize such associations when they can do so under wise and economical management, for the purpose of securing greater intelligence, better education, higher culture, higher wages, a shorter work-day, and a general ameliorating of their condition, all of which will tend to make them more efficient workmen and also better enable them to resist the aggression of centralized wealth; for, in the absence of organization, the single-handed employe of the great modern employer is comparatively helpless. But if these organizations are allowed to be controlled by ignorant, unreasonable or designing men, who will, at trifling provocations, resort to violent and unlawful measures, they are sure to prove harmful, and a great detriment, instead of a help, to their members, and the sooner they are abandoned the better for all.

Great conflicts are sure to arise between organized capital and organized labor, and they must be settled in a reasonable way, or anarchy will prevail. They cannot be left for headstrong or inconsiderate men representing either side to determine, but the line must be drawn by the public authorities.Each year affords accumulated evidence of the necessity of extending legal restrictions over the management of the railway business, and the law, as laid down by Judge Ricks to the Ann Arbor strikers last March, in the United States Circuit Court, at Toledo, is undoubtedly correct and will meet with general approval from the public.

He says:

Mr. Powderly, in commenting upon the above decision, does not complain of it, but says:

There is but little doubt, if the judges of the Federal courts would show the same zeal in holding railroad managers amenable to the law as Judge Ricks has displayed in this case with the employes, they would secure increased confidence from the people in the tribunals over which they preside.

All fair-minded persons will agree that labor as well as capital must be subjected to proper restraints, and that the public will demand nothing unreasonable from either.

Accidents are too frequent upon American railroads. The reports of the Interstate Commerce Commission give the following as the numbers killed and injured during the years named:

For the year ending June 30, 1890, the total number of employes was 749,801. There was, therefore, one death for every 306 men employed and one injury for every 33 men employed. For the previous year one was killed for every 357 men employed, and one was injured for every 35 men employed. While trainmen represent but 20 per cent, of the total number of employes, the casualties among them represent 58 per cent. of the total number of casualties.

For the year 1888, one passenger was killed in every 1,523,133 passengers carried, and one injured in every 220,024 carried.

The corresponding rate in England for the year 1888 is one passenger killed for every 6,942,336 carried, and one injured for every 527,577 carried.

Railroads doing a large business should be compelled to adopt the most improved appliances for avoidance of accidents.The occupation of trainmen is especially hazardous, and too long continued service should not be required, but proper intervals of rest should be allowed. It is to the want of this, undoubtedly, that a great many of the serious accidents are owing.

No more Sunday trains should be run than are absolutely necessary. Provision should be made by law to enable trainmen to procure insurance at the lowest rate possible, for indemnity against loss of health, life or limb.

It was only a few days before the great disaster occurred on the Hudson River Railroad at Hastings, over a year ago, that an announcement had been made to the public of the extreme prosperity of the road during the year. The great slaughter that occurred there is another illustration of the disregard of public duty, and another instance of the sacrifice of life and limbs of passengers and employes by a railway corporation in order to secure large dividends on watered stock. It is not only gross, but criminal neglect for a company with such an immense income not to provide greater safety appliances, and the coroner's jury in this case was too modest when it decided that the management of the road was morally responsible for the disaster.

Parliament has compelled the British railways to adopt, in the interest of the public safety, the block system and continuous brake, and great lines like the New York Central and Hudson River companies should be compelled to adopt such improvements.

The traveling public has another grievous cause for complaint. There are but few companies that make any efforts to have their trains connect with those of rival roads. On the contrary, a good deal of scheming is often done by railroad companies to so arrange their time-tables with reference to those of their rivals as to inconvenience passengers as much as possible by delays at competing points. To remedy this evil the State should require that every time-table should have the approval of proper authorities, and no change should be permitted without their approval.

Railroad companies are chartered for the purpose of promoting the public welfare, and every violation of their charter should be punished.

It should be the main object of railroad legislation to compel companies to fulfill their public obligations without depriving them of their efficiency. Above all things these companies should be stripped of the power to use their great wealth for the purposes of corruption or the attainment of political influence. Our railroads to-day probably represent no less than one-fourth of the personal property of the country, and this vast wealth is controlled by a comparatively small number of men, many of whom have in the course of time become so arrogant and despotic that they have little regard for popular rights or the expressed will of a free people.

It is reported that when, a few years ago, a representative of the press directed Mr. Vanderbilt's attention to the fact that the public disapproved of his railroad policy, the latter gave vent to his contempt for public opinion by the no less profane than laconic reply: "The public be damned." Ex-Railroad Commissioner Coffin called on one of the Goulds to urge the adoption of the automatic car-coupler and other safety appliances for the roads controlled by them. He was very curtly told that not a cent would be expended by the Gould roads for such a purpose until the West had repealed its obnoxious railroad laws. The Gould dynasty thus intends to accomplish the repeal of these laws by coercion. Railroad magnates and their lieutenants often show still greater arrogance in dealing directly with their employes.

It may be difficult for railroad managers of the present school to adapt themselves to new conditions; it may be impossible for them to understand how any other practices than those which have long been established can succeed; yet in spite of them both the law and public sentiment have already undergone great changes, and still greater changes will follow. It may take years to accomplish this work; to bring about any great reform requires time and a deter, mined purpose on the part of its advocates. Yet I believe the era is not far off when railroads will be limited to their legitimate sphere as common carriers, when they will treat all persons and all places as impartially as does the Government in the mail service, when their chief factor in rate-making will be the cost of service, when they will respect the rights of the public and those of their stockholders, insuring perfect service to the former and fair profits upon the actual value of the lines operated to the latter.

The fact should, finally, not be overlooked that it is in the power of the General Government to prevent many railroad abuses, and especially excessive freight charges, by the improvement of our rivers and harbors. That our water-courses act as levelers of interstate rates is apparent from the fact that railroad rates invariably rise with the freezing of the water-ways and fall with the opening of river and lake navigation. By connecting, wherever feasible, our large Western rivers with the great lakes, the Government could greatly extend the reign of competition in transportation, and thereby keep freight rates within reasonable bounds. Lake transportation even now plays an important role. In 1892 it was not less than 20,000,000,000 ton miles during the season of eight months' duration, and it is almost equal to one-fourth of the total ton mileage of all the railroads in the country for the entire year. The average rate of lake transportation has been reduced to 1.3 mills per ton per mile, which is only about one-seventh of the average railroad freight rate in the United States.

Where the masses hold the sovereign power, there, if anywhere, the welfare of the people should be the supreme law. Violent political commotions never disturb the government whose policy is to secure the greatest good to the greatest number. Thorold Rogers justly remarks that the strength of communism lies in the misconduct of administrations, the sustentation of odious and unjust privileges and the support of what are called vested interests. Lord Coleridge, in a remarkable article published not long ago, recommended a revision of the laws relating to property and contract, in order to facilitate the inevitable transition from feudalism to democracy, and laid down the rule that the laws of property should be made for the benefit of all, and not for the benefit of a class.

During the middle ages, and even up to the beginning of the present century, nearly all the laws on the statute books looked towards the protection of the rights of the feudal lord. Provision was made for the expeditious collection of his dues and a severe punishment of his delinquent debtor. The peasant was forced to labor fifteen hours per day and three hundred and sixty-five days in the year to pay the baron's rentals and sustain life. The law permitted him to be flogged for failing to courtesy the feudal lord, and to be executed for injury to the lord's person, while to kill a peasant was no worse a misdemeanor than to kill his lordship's favorite dog or falcon. In short, all laws were made to protect and perpetuate the wealth and power of the few by impoverishing, humbling and enslaving the masses.

The age of feudalism has given way to an age of democratic liberty, but there is many a feudal feature left in our statutes and many a feudal doctrine is enunciated by our judges and learned expounders of modern jurisprudence. In his decision in the Iowa tariff case Judge Brewer said:

Had Judge Brewer taken the pains to read on, he would have found in section 2 of the Bill of Rights the following:

It is strange that the learned Judge failed to see the difference between "men," the creatures of God, "by nature free and equal," and "possessing certain inalienable rights," and corporations, the creatures of man, having no rights except those which the State sees fit to give them. Had the learned Judge perused the whole of the document to which he refers, he would have found in article VIII, section 12, the following provision:

It should thus have been plain to the learned Judge that in Iowa corporations have not human or inalienable rights, and government was not instituted for their special protection, but for the protection, security and benefit of her people. Nor should it be otherwise.

The corporation for pecuniary gain has neither body nor soul. Its corporeal existence is mythical and ethereal. It suffers neither from cold nor from hunger, has neither fear of future punishment nor hope of future reward. It takes no interest in schools or in churches. It knows neither charity nor love, neither pity nor sympathy, neither justice nor patriotism. It is deaf and blind to human woe and human happiness. Its only aim is pecuniary gain, to which it subordinates all else.

Should the State sacrifice the welfare of all her people rather than lay its "withering or destroying" hand on a single dollar of corporate wealth? Are there no human rights, for the protection of which government was established, more sacred than the rights of a wealthy corporation's dollar? Have the people made the judiciary a coÖrdinate branch of the Government in order that it may protect the vested or rather usurped rights of corporations against legislative attempts to curtail them? If the courts so interpret the power which has been delegated to them, they will awake one day to the painful reality that popular convictions of right are more potent than judicial decrees.

It is the duty of the State not so much to defend the so-called vested rights of corporations as to make such just and beneficial laws as will temper inequality, mitigate poverty, protect the weak against the strong, preserve life and health, and, in short, promote the welfare and the happiness of the masses. Constitutions have been made to accomplish these ends, to protect the lives, the liberty and the conscience of human beings, while laws have been sufficient to protect the dollars of corporations. It is a short-sighted policy on the part of the latter to take unfair advantage of their wealth and influence, for "As ye sow, so shall ye reap," is the inexorable law of Providence. There is no dynasty so mighty, no class so privileged, no interest so influential or wealthy as to obtain immunity from its operation.