President Roosevelt's Railway Policy: Ii Remedies

CLOUDS of forensic dust have been raised in public discussions, tending to obscure and magnify the real issue in the pending railroad legislation in Congress. The President’s remedy is not necessarily so complex, so radical, or so far-reaching as it has been depicted for campaign purposes. Under present conditions, the Interstate Commerce Commission may decide that a given rate is unreasonable, and should be changed. This original rate, thus adjudicated unfair, remains undisturbed, however, until the case has run (he gauntlet of three federal courts, and has been finally settled by the Supreme Court of the United States. This entails great expense, intolerable delay, and a substantial denial of remedy to the complainant. Even with the recently added amendments for facilitating a settlement by the courts, the shipper may well be discouraged, dead, or otherwise have abandoned the cause, before his rights are determined. And then, if these be upheld, he must again begin the Sisyphian task by prosecution of a suit for damages, before securing monetary satisfaction. And where, meantime, are the rights of the ninety and nine other shippers who have been compelled all this time to pay this unjust rate ? Each and every one must bring his own suit for repayment; which of course none of them in fact ever do. To meet this intolerable condition various bills have been presented in the House of Representatives during the last five years. The last one, the Esch-Townshend measure, was passed by the overwhelming majority of 322 to 17 in February of this year. The principle in all of these bills is relatively simple. Pending final adjudication, the government’s rate, and not the railroad rate, is to prevail. In any case, of course, property rights will be amply safeguarded in the last resort by the courts, as they must ever be under the wise provisions of the Constitution. The real, and in fact the only, vital new question, then, concerns the wisdom of replacing the railway rate by the government’s rate, until the courts have had time to pass upon the issue. Not permanent, but merely temporary and provisional ratemaking is all that is contemplated by the Administration policy in any event.

Two avenues of approach to a question are always open and may profitably be kept distinct: namely, the ideal, and the expedient or practical. On grounds of abstract justice, to take them up in order, which party, the railroad or the government, ought to prescribe these rates during the interval between the Commission’s decision and the final pronouncement of the courts ? The carriers have always enjoyed the privilege, — the word is used advisedly, for it has been a privilege and not a right. A railway is not a private business, like the sale of dry goods or molasses. Transportation is an absolute necessity for all trade; and the railways, in order to sell it, are dependent upon the government for powers granted by franchises and charters. A long line of cases has clearly established these principles beyond all measure of doubt. The present undisputed power to regulate is a natural result. Until issues are settled before the courts, the carriers have hitherto imposed the burden of disputed rates upon the public, not because they had any right to do so, but because no other more competent party was in sight. The real disputants are not the government and the railway company. The controversy lies between private parties and a public carrier. The government’s interest in the matter is, in a measure, analogous to that of an umpire in ordinary cases submitted for arbitration.

There is another peculiarity of railway transportation. Each shipper’s business is every shipper’s business; for each shipper’s rate is every other shipper’s rate. It ought to be; and under existing laws can practically be made so. Yet pending a definitive settlement of the dispute, the contestants cannot cease operations, withdraw from business, sit on a log, and whit - tle until the mandate of the final arbiter is ready. Transportation is a continuing business, as well as everybody’s business. Hence the government, in order to insure a “square deal,” must provide reasonable treatment in the interim, pending final arbitrament. Nor is such intervention by the government a mere matter of courtesy. It is its proper function to insure justice to all, irrespective of race, color, or previous condition of magnitude. Such being the case, unless it be proven that greater injustice will result from the change, the natural condition would seem to be this: that in cases of dispute the decision of the umpire, and not of the bigger contestant, should prevail, until final settlement of the cause. This seems to be the obvious, the natural, and the just conclusion from the premises.

But now suppose the Commission should order a rate reduced, as in the celebrated Maximum Freight Rate case; put a lower tariff into effect; and then the courts should ultimately decide that the original rate ought not to have been disturbed at all. The railroad meantime has suffered a corresponding loss of revenue on all traffic carried at the low rate. This is certainly a hardship, and incontrovertibly unjust. But is it more so than that the shipper should unjustly have borne the burden in the contrary case ? As matters now stand,the public is compelled to pay the high rate, even if the courts afterward decide it to have been unreasonable. The railway as an interested party en joys the benefit of the doubt, and imposes the burden of proof upon the public at all times. Is it not more in consonance with justice, that the government, an impartial umpire, should temporarily lay the burden upon that party against whose contention the greatest reasonable doubt exists?

The only just remedy would seem to be one which will insure final recovery for unreasonable rates, by whichever party paid, during the uncertain period of adjudication. One of the principal objections of the railways to the proposed change arises at this point. Large corporations are more responsible parties at law than most individual shippers. Suppose, through an unjustly low rate, a railway had suffered loss of revenue; could it as readily recoup itself by suits for damages against scores of shippers, large and small, as could the latter, in the contrary case, recover back from the railway company ? This cogent argument suggests a compromise measure. Why not permit the original railroad rate to continue in force, as at present, pending final adjudication; but require the carriers to give bond for prompt repayment of any surplus charges over those finally sanctioned by the courts. This would leave the business of rate-making in railway hands as now; and yet afford a substantial remedy for the disputatious shipper.

Would the railways accede to such a compromise measure, with all the financial burdens thereby entailed? They have just been forced to do so for intrastate business by the legislature of Indiana, in lieu of more radical propositions. Why not try the same experiment for the whole United States ? Unfortunately this scheme is woefully short of a just solution. The whole matter looms up larger at this point. Enter the interests of the real consumer! In most cases freight rates to some degree affect the price of commodities. Has the shipper, having paid a freight bill afterward adjudged unreasonably high, any right to sue for recovery of the amount ? Has he not, with his fellow merchants, supposing all to have had a “square deal,” probably shifted the burden upon t he public ? Kvidence shows that car-load rates on cattle from Texas to South Dakota have been increased since 1898 from $65 to $100. Probably part of this $35 increase has been taken from the profits of the cattlemen; but can there be doubt that a part of it has been added 1o the price of beef? No, tackle it as you will, from whatever point of view, and you return to the same proposition: that the damage of an unreasonable freight, rate, once paid, is irreparable. Particular shippers may recover what seem to be damages; but which are likely not to have been so to them individually at all. By standards of abstract justice, the real solution must distribute the temporary burdens incident to the delays of legal procedure, as nearly evenly as the laws of chance will permit. A recent compilation shows that, of 316 freight rate cases decided by the Interstate Commerce Commission, fifty-four per cent — practically one half —turned in favor of the complainant. Inasmuch as these complaints are practically all brought on behalf of shippers against the railroads, this shows how evenly balanced the issues have been. Were the orders of the Commission to become effective at once, the losses incident to errors afterward corrected by the courts would be distributed in about equal proportions. At present all the penalty of a mistake falls upon the shipper and the public; the railway always goes scot free. An impartial commission should be clothed with power to distribute these onerous burdens by prescribing the temporary rate. And if of sufficient ability and irreproachable integrity, it might be trusted to do so, even as we trust the judges of our Federal Courts.

The severely practical, rather than the ideal aspects of the case, constitute the principal defense of I the carriers against this proposed legislation. Their main contention is that such action, as practically applied, involves the usurpation by the government of all rate-making functions. One would think, to read some of the testimony before Congressional committees, that railway traffic managers would become extinct if this change were made: relegated to the limbo of departed shades, pterodactyls, and other monsters of the past. One can never be quite sure how seriously these assertions are made. The railways refuse to recognize any distinction between governmental prescription of all rates and temporary governmental control of disputed rates. They insist that the power to prescribe the new rate, replacing the old one, however modest were the Commission, could not fail to lead to the assumption of all rate-making functions. The freight schedules of the country, they allege, are so intricate, so interwoven, and so delicately adjusted, that to touch a single one, however lightly, would bring down all the rest about their heads. Although greatly exaggerated, there is sufficient force in this contention to require its consideration. President Hadley of Yale, for many years the best authority on transportation in the country, has met it summarily. “Nor need we,” he writes, “lay any great stress on the argument that such interference would be disastrous to the railroads. Theoretically it might be, if the Commission were composed of madmen and the courts of socialists. Practically, the number of changes in the rate schedule that would be made by any sensible commission would be very small indeed.”

The best guarantee that an administrative commission, clothed with real power, would not be inundated with complaints so numerous that an entire recasting of the freight tariffs of the country would result, is found in the first five years’ experience under the old law, from 1887 until it began to be nullified by the courts. Every one, even the railways, considered the law as effective; yet no widespread disturbance resulted. Complaints were filed, but no deluge of them appeared. An equally potent safeguard against panic is afforded by a political principle coeval with the rise of human institutions. Laws are made not to be broken, but to be observed. Statutes arise not so much to be invoked through infraction, as, by their mere enactment, to render it unnecessary to enforce them by legal process. Prisons are built, neither primarily to contain those within their walls, nor possibly all those outside; but by their presence to remind the latter of the advisability of containing themselves. The Commonwealth of Massachusetts will serve as an excellent example. It is continually cited as illustrating the success of a non-rate-making railroad commission. But the fact is that this body serves as the mouthpiece of a legislature keenly sensitive to perhaps the most enlightened public sentiment in the world. Potential power is so well recognized that its very existence renders actual interference unnecessary. Once in a while, as when the power to prescribe freight rates for milk was conferred, this reserve force may be invoked. But even in this instance, the railways in Massachusetts still promulgate their own tariffs, as before They merely take pains to avoid causes of offense. Similarly the Massachusetts Gras Commission is empowered by law to fix the price of gas; yet, despite the direst predictions, the gas companies outside of Boston continue to transact their own business without public interference in this regard. There is, however, one important difference. Knowing that they are under surveillance, with real power for control, they take care in the main not to invoke its exercise. Throughout the United States, many abuses now causing popular unrest would be speedily corrected by the railways themselves, without appeal to a Federal Commission, were the law ample and certain. This happened after 1887, when the trunk lines, believing the law to be really effective, all remodeled their local tariffs to conform to the Long and Short Haul clause. Not every abuse, but a few typical ones, promptly corrected, would speedily clear the docket of a large number of complaints.

It is quite true that rate-making is an extremely complicated matter, engaging the entire attention of a large corps of the ablest men in the country. But, on the other hand, it is equally certain that these men oftentimes do not make rates at all. Their energies are bent to the discovery of those circumstances by which their rates are made for them. Any decision of a Federal commission must of necessity conform to these same conditions. Thus it results that in the great complex of railway rates many of them are impossible of change. A large number, for instance, are “compelled” by water competition. Traffic is almost fluid in following the line of least resistance. As long as ships sail the sea, no transcontinental freight rate on many commodities can exceed the figure determined by carriage round Cape Horn. As long as the South produces more materials in bulk, like cotton and lumber, than it buys back in the form of merchandise of great value in small volume, coastwise vessels south-bound from New York, Boston, or Philadelphia, will take cargoes at almost nominal rates rather than go in ballast ; and competing railways must conform to that rate, so compelled. Until Canada is annexed to the United States, shoes from Boston to St. Paul or cotton cloth to the Orient must be carried by our domestic lines as cheaply as by the Canadian routes. A host of such conditions and interrelations of rates are now clearly recognized; so that a competent Federal commission would venture to disturb such existing conditions only in a very gingerly and tentative way. The Maximum Freight Rate case, in which the Interstate Commerce Commission laid hold with a heavy hand upon the rates into the South from Western cities, will probably be cited in contravention of this statement. That decision, if it had been upheld by the courts, would certainly have uprooted many long established trade adjustments. But many facts concerning railway competition in all its ramifications have been brought to light during the decade since elapsed. Judging by recent experience in the arbitration of the seaport differential question, the danger in future from a commission sobered by a sense of vast responsibility may be of conservatism and timidity rather than of impulsive zeal for change.

Elasticity and quick adaptation to the exigencies of business are peculiarities of American railroad operation. This is due to the progressiveness of our railway managers in seeking constantly to develop new territory and build up business. The strongest contrast between Europe and the United States lies in this fact. European railroads take business as they find it. Our railroads make it. A quarryman in Georgia, wishing to bid on a public building in Chicago, is granted a special rate to enable him to take the job. Or contrariwise, a Northern contractor, through special rates, is admitted to the field of competition for building or equipping a cotton mill in the South. California is enabled by the same expedient to put fruit into Chicago and New York in competition with Florida or Michigan. Much of this business is made possible only by special rates adapted to the case in hand. These are not secret. They are open to all comers, although made with reference to a particular case. The railway can afford to make a low rate, which leaves a bare margin of profit above the extra cost of adding this traffic to that which is already in motion. These rates cannot exceed a definite figure based upon what the traffic will bear. A higher rate than this would kill the business. The new traffic contributes something toward fixed charges, and enables the shipper to enlarge his operations. Yet such a rate, if offered to the whole traffic, might be ruinous in the extreme. The domestic shipper of merchandise may often be helped rather than hindered by a special rate on grain for Liverpool, without which the railroad would lose the business entirely. To transport California fruit for a mere fraction of the rate per ton mile which is laid upon other traffic may enable those other goods to be carried more cheaply than before. Railway representatives rightfully instance these practices as a boon to the commercial world. They contrast them with the hard and fast schedules of European railroads. They allege that such elasticity loosens the joints of competition, “ keeps every one in business,” equalizes prices over large areas, and is, in fact, the life of trade. Government regulation, they allege, will put an end to all this, “substitute mile posts for brains,” and produce stagnation in place of activity.

In reply to these contentions, we should distinguish between special rates which create new business, and those which merely wrest business from other carriers or markets. Any expedient which will make two blades of grass grow where one grew before; which puts American wheat into Liverpool in competition with India and Argentina; which cheapens California fruit on the Eastern markets; which offers a wider choice of building stone for Chicago; which will establish new industries for the utilization of local raw materials, deserves the greatest encouragement. No commission would conceivably interfere with it. Our country has been unprecedentedly developed in consequence of the energy and progressiveness of its railway managers. But thousands of other special rates have no such justification, even where they are public and open to all shippers alike. These are the expression of railway ambition to build up trade by invading territory naturally tributary to other railroads or traders. An enormous waste of transportation may be involved in such practices. Agricultural implements from Iowa are sold in Massachusetts on such rates, while the greatest manufacturers of some of these products, selling goods all over the world, are located in the East. Arkansas is a great fruit-growing state; yet so cheap is transportation that dried fruits, sometimes its own, are distributed by wholesale grocers from Chicago throughout its own fruit-growing territory. The Interstate Commerce Commission recently discovered a case wherein a sash and blind manufacturer in Detroit, trying to build up a market in New England, found himself embarrassed both there and in his own home territory by other manufacturers in Vermont. His complaint recited that on his goods shipped to Boston, his rate was approximately double the rate which his Vermont competitor, westbound, had to pay for the same service to Detroit. Is not something wrong here.? Is it not open to question, whether each had better not confine his attention to his own natural territory, instead of both paying unnecessary freight ? It all makes business, of course, for the railroads, but the ultimate sufferer is the public. The Colorado Fuel and Iron Company seeks special rates in order to sell goods over in Pittsburg territory; while its great rival, the United States Steel Corporation, has an equal ambition for the trade of the Pacific Slope. Superfluous transportation is the result; a fact fully appreciated by those industrial combinations which are seeking to effect economies in production by strategically locating their factories in order to divide the field.

New York and Chicago demand railway tariffs enabling them to distribute their goods in every hamlet, South or West, regardless of the rights of the smaller provincial centres. Cities of the next grade contest this claim, but in their turn seek to outdo the still smaller places. This process goes on until certain states, like Iowa, for example, as voiced by Governor Cummins before the Senate Committee on Interstate Commerce, are threatened with the entire extinction of their own local distributive trade. Who shall draw the line between the elements of economic good and those of social evil in this great competitive struggle ? The days of laisser faire are long since gone by, what with our protective tariffs, our banking laws, our labor legislation, our attempts at the control of industrial corporations and insurance companies. Are railways, the arteries of trade, the great common carriers, indispensable for every operation of life or business, to be exempt ? Or shall the government assert its prerogative, and demand a solution of the disputed questions, in accordance with the broad principles of justice and social peace?

Special rates for long-distance business, when unreasonably low, are of public concern in yet another way. Where unduly developed, they entail increased burdens upon the local constituency of each railroad. It is confessedly the case that three fourths of American railway tonnage moves on such special or commodity rates. In the United Kingdom the proportion is not more than one half. Now each shipment which fails to bear its due proportion of fixed charges, even though contributing something thereto, leaves the weight of interest and maintenance upon the shoulders of the local shipper. To be sure, these special rates which permanently create new business operate otherwise. But in the vast complex, each railroad often wrests from competing carriers only about as much tonnage as it loses. It invades rival territory, but its own constituency is invaded in retaliation. Thus there is rolled up an inordinately large proportion of such special traffic; leaving the regular shipment and the local trade to bear the brunt of fixed charges. Momentous social consequences may result. Not only the cost of doing business, but the expense of living in the smaller places is increased. One of the most dangerous social tendencies at the present time is the enormous concentration of population and wealth in great cities. Increased efficiency and economy in production are much to be desired; but social and political stability must not be sacrificed thereto. Is it not possible that a powerful decentralizing influence may be exerted by checking this indiscriminate and often wasteful long-distance competition, through insistence upon the rights of geographical location ?

“Keeping every one in business” everywhere, regardless of distance, has been an important influence in the past in promoting the material advancement of the United States. It constitutes the principal reason why railway tariffs are so interlocked to-day that to modify an evident in justice in a particular rate threatens to affect thousands of other rates over large areas. No sooner has the Interstate Commerce Commission, under the present emasculated statute, sought to remedy an evil of discrimination, than every carrier, and,be it said also, every shipper and competing city, so remodels its rates as to nullify the advantage conferred. If Wichita, Kansas, complaining that goods are carried through and beyond it to more distant points for lower and discriminatory rates, secures an order for a reduction in its tariffs, pressure is immediately exerted by all the formerly favored cities for a corresponding reduction. Each railway, aiming to “keep every one in business” everywhere, accedes to the demand; and there you are, just where you started. Any change in rate adjustments must, of course, operate to put somebody out of business. You cannot preserve the old relativity and still do justice all round. Authority competent not only to order an injustice corrected, but at the same time to protect that order against nullification, seems to be an essential consideration.

The assumption in these discussions seems oftentimes to be made gratuitously that railway rate regulation is going to be all against the carriers. Much may be advanced to show that the power to regulate means in many cases the power not to injure, but rather to protect the railways. For it must be remembered that rate regulating power implies the prescription of a minimum as well as a maximum rate. Many instances in our railway history could be cited showing how the refusal of an irresponsible or bankrupt railroad management to agree to a reasonable rate adjustment jeopardizes the revenues of all its competitors. Freight rates between important points by all routes, however circuitous, must be practically the same. For in any other event the traffic will follow the line of least financial resistance with surprising quickness. It is the existence of cut-rate railways, persistently in the field for business at low rates, which forces and will always force the larger railways to meet this competition by the same means. The only other alternative, of course, is to resort to consolidation. The existence of a commission with full power to prohibit an unreasonably low rate should perform just the function which the railroads, could they be permitted to pool, might exercise themselves. As the rate war of 1896 in the Southern states was stopped by an injunction from a Federal Court, so might this commission stand ready at all times to enforce that equality of rates between carriers which alone can offer a safeguard against secret discrimination and rebates.

Another combination of circumstances prominent in our railway history demonsi rates the utility to the railways themselves of such rate-making power by the government. All intelligent railway men agree as to the power of great industrial combinations to extort secret rebates from the railways. This originates from the inability of the carriers unanimously to enforce resistance to tempting offers of large volumes of business to be moved at those secret rates. For example, in 1894 all the trunk lines out of Chicago made a determined effort to reduce the mileage paid to private companies for the use of special cars from three fourths of a cent per mile to six mills. All went well until it appeared that one railway had secured the entire tonnage to the exclusion of all its competitors by offering to pay the old rate. Every road immediately had to fall into line. The power of the trust was too firmly fixed to be shaken thereafter. Precisely similar tactics have fastened the beef trust like an old man of the sea upon the shoulders of the railway managers. The most feasible, and perhaps the only way to shake off this incubus and restore equality between all shippers, lies in the existence of a powerful governmental veto which shall force the weakest railway to maintain such reasonable rates as will yield a fair return to all the companies concerned. Had this been possible five or six years ago, many of the gigantic consolidations might have been obviated. If the Erie — hoary old disturber of railway peace — could be thus controlled, no plans for its absorption or control by stock ownership through other companies need be contemplated in future. Either effective regulation, repeal of the prohibition against pooling, or entire absorption by consolidation of all competing companies, must be chosen as the alternative. Is not control, all things considered, the safest expedient under the circumstances ?

One of the most persistent and plausible arguments against an extension of the powers of the Interstate Commerce Commission is that, on the basis of its record, it cannot be entrusted with the vast powers incident to the control of rate-making. This contention is well stated in a brief prepared by two railroad presidents and filed with the Committee on Interstate Commerce of the House of Representatives. This recites that “since 1887, fortythree suits have been instituted to enforce final orders of the Commission as to rates. . . . The net result of the action of the Courts . . . shows two affirmances and thirty reversals.” It continues later, “as over ninety per cent of the Commission’s orders as to rates which have gone before the courts have been overruled, it is impossible to foretell what havoc would follow from the exercise of such powers.” This statement is entirely true, but it is not the entire truth. Not to expand this discussion unduly, we may content ourselves with examination of the cases which, after protracted review in the two lower Federal courts, have emerged as final decisions of the Supreme Court of the United States. These cases, important enough to have engaged the attention of this august tribunal, are certainly typical of all the rest. Since 1887, sixteen such decisions have been rendered on cases appealed for enforcement by the Interstate Commerce Commission. Fifteen of these have been decided in favor of the carriers, while only one sustained in part the contention of the Commission. At first sight, this record appears to sustain the contention of the advocates of the railways in condemning the attempt at governmental railway regulation. A commission so persistently on the wrong side of a great question as this record indicates would surely invite distrust. There are two answers to this contention, however, which merit consideration before a final judgment can be rendered. One of these is that these court cases have nearly all involved, not so much the administrative application of the law to economic abuses, as the purely judicial interpretation of the law itself; the other is the irregularity of procedure by which the courts have overruled the Commission on entirely different statements of fact from those upon which the original decision of the Commission was rendered.

Only by means of concrete cases decided by the Commission as an administrative body could the scope and meaning of the original law be determined. This was a most difficult task, hinging upon the utmost legal technicalities and refinements. Even the most learned judges failed to agree among themselves. Thus in eight of the sixteen cases above mentioned the decisions in the lower Federal courts failed of agreement with the final decree of the Supreme Court. In the Cartage case, — involving the legality of a railway giving one shipper free cartage of goods to a railway station as an inducement to ship over its line, while withholding the privilege from another, — the Commission was sustained in the Circuit Court and reversed in the two higher tribunals. In other instances, like the Social Circle case, — turning upon the discrimination in freight rates against small towns in favor of large competitive centres, — the first court ruled adversely, while the Circuit Court of Appeals and the Supreme Court sustained the Commission in part. Or yet again, as in the Chattanooga case, — wherein this city complained against a higher freight rate from New York than the rival city of Nashville enjoyed, although the goods for Nashville passed through Chattanooga and were hauled one hundred and fifty-one miles further, — both lower tribunals sustained the Commission only to be finally overruled by the Supreme Court. The fact that in only eight of these most important cases the courts could agree among themselves indicates the nicety of the legal issues comprehended. All parties were in fact working much in the dark, both as to the intention of the original law and as to the. possible effects of its interpretation. The charge of incompetence, if it holds good for the Commission, must apply equally well to a large number of the most learned judges in the Federal courts.

Another indication of the extreme delicacy of the legal issues involved is found in the lack of unanimity even among the justices of the Supreme Court itself. In nine of the sixteen Supreme Court cases the final decision was not rendered without dissent. As the lower courts were divided among themselves, so the justices of the Supreme Court were apparently somewhat at sea. The minority, to be sure, was small, in most cases being due to the failure of Justice Harlan to concur. But in the far-reaching Import case, the court was more evenly divided. The issue raised concerned the legality of lower through rates on imports from Liverpool to San Francisco via New Orleans, than were granted on domestic shipments from New Orleans to the same destination. Thus the rate on books, buttons, and hosiery from Liverpool to San Francisco through New Orleans was $1.07 per hundred pounds. At the same time the domestic shipper was compelled to pay $2.88, or two and one half times as much, for a haul from New Orleans to San Francisco alone. In another important case, tin plate was carried from Liverpool by steamer and rail through Philadelphia to Chicago for twenty-four cents per hundred pounds. For the American merchant in Philadelphia the rate to the same market was twenty-six cents. For the inland haul alone the Pennsylvania Railroad was receiving sixteen cents on the foreign goods, while coincidently charging American merchants ten cents more for the same service. Discrimination against the American merchant in favor of foreign competition, not infrequently more than sufficient to overbalance any supposed protection afforded by the tariff, has been repeatedly proved in such cases as this. The duty on imported cement is eight cents per hundredweight. In one instance, this duty with the total freight rate added amounted to only eighteen cents, as against a rate of twenty cents for the domestic producer from New York to the same point. There are reasons for this grievous discrimination against the domestic shipper, mainly concerned with the vagaries of ocean freight rates. Steamers must have ballast for the return trip to equalize outgoing shipments of grain and other exports, and they will carry heavy commodities, such as salt, cement, crockery, and glass, at extremely low rates. Nevertheless, such imported commodities can be sold to advantage in competition with domestic goods only when the railways will contribute equally low rates to complete the shipment.

The Interstate Commerce Commission in these Import Rate cases originally held that such discriminations were unlawful. Finally, however, the Supreme Court decided, with three members, including the Chief Justice, dissenting, that the Interstate Commerce Law as phrased did not expressly prohibit the practice. Everything turned upon the interpretation of certain clauses in the law. No question was ever raised as to the economic issues involved, nor was it competent to these tribunals to pass upon such issues. The question was simply and solely this: when the Act to Regulate Commerce forbade inequality or discrimination between shippers, did it contemplate competition between one shipment originating within the country and others from foreign ports? Was the Interstate Commerce Commission, in other words, empowered, in interpreting this act, to consider circumstances and conditions without as well as within the boundaries of the United States? If it was entitled to consider solely domestic conditions, it was certainly right and economically sound in forbidding such practices; if, on the other hand, it was required to take account of commercial conditions the world over, irrespective of the effect upon the domestic producer and internal trade, its decision should have been favorable to the railroads. To appreciate fully the extreme nicety of the legal points involved and the delicacy of the economic interests at issue, one must needs read the extended opinions both of the majority of the Supreme Court and of the three dissenting justices, including Chief Justice Fuller. But to interpret the reversal of the original decision of the Interstate Commerce Commission by this tribunal as in the slightest degree involving incompetence or judicial unfairness is a misrepresentation of all the facts involved. As in the preceding cases touching the interpretation of the Long and Short Haul clause, it may fairly be said that the consensus of opinion among business men, and certainly among the professional economists of the country, is on the side of the Commission in condemning such practices. As to the law, that has been decided otherwise by a narrow majority. An important question before the country is, as to whether a law thus construed should not be amended so as to permit a reasonable limitation of such abnormal traffic in future.

The apparent, though unreal, incompetency of the Interstate Commerce Commission, judging by the reversal of its decisions in the Federal courts, is partly due to another reason. Opinions in cases appealed to these tribunals have been based upon testimony as to facts not introduced, and in some cases deliberately withheld, in the initial proceedings before the Commission. Knowing that the decisions of this body were of no force and effect in themselves, the carriers refused to open up their cases fully until the issue had gone on appeal to the Federal courts. This placed the Commission in the unenviable position of being compelled to decide cases, knowing full well that their action would be reviewed on perhaps entirely different evidence. Small wonder that the Supreme Court has pointedly discountenanced this practice of late years, refusing to condemn the Commission except upon facts laid before it when the case was first decided. Nevertheless, the fruits of these unfair proceedings, consisting of a certain number of reversed judgments, are still garnered in statistical arraignment. To the disinterested and unbiased student, the record of the Interstate Commerce Commission stands as a manful and on the whole successful attempt at the interpretation of a merely tentative, often obscure, and extremely intricate statute.

It has been said that this Commission has failed in its functions because “it has sought to wear ermine when it ought to have been putting on its overalls.” The time to don overalls and render yeoman service could only follow a protracted period of judicial interpretation. The Federal judges repeatedly recognized the existence of abuses, but disclaimed responsibility for their correction, alleging that this was a matter appropriate only to the legislative branch of the government. The law, however, has now been defined. The ermine period has come to an end. The Commission is ready for overalls, but it lacks tools. While it was being constrained by circumstances to wear ermine, the Federal judges have stolen away whatever implements it formerly possessed. The demand of the President is either for a return of the stolen tools, or for a new outfit with which the Commission may manfully set to work.

Certain constitutional objections have been raised against the President’s programme. The railway lawyers allege that, no matter how fair or able an administrative commission, its hands would be tied in rate-making by provisions of the Constitution, which prohibit Congress from granting preferences as between any ports of the United States. This, they say, would compel all rates to be adjusted strictly on the basis of distance. It would compel the substitution of rigid mileage tariffs in place of the elastic schedules now in force. This reasoning is a fair sample of the extraordinary efforts being made to prevent legislation. After prolonged litigation and divided opinions, the Federal courts have completely emasculated the Long and Short Haul clause of the Act of 1887. This clause, intended to give effect to distance as an element in rate-making, was copied from the preëxisting statutes of some seventeen states. The final death blow was dealt in the Alabama Midland case. The Supreme Court held that the existence of railroad competition at a more distant point created such dissimilarity of circumstances as to grant exemption from the law; and, moreover, made the railroad itself a competent judge as to its existence and force. The Import Rate case, as we have already sought to show, has also ruled out distance as a factor in determining rates. The Interstate Commerce Commission originally decided it to be illegal for a Liverpool shipper to enjoy lower through rates to an inland point in the United States than were granted to domestic shippers from the port of entry to the same destination. The Supreme Court barely overruled this by holding that in the making of rates, all circumstances and conditions of competition, not only at home, but over sea, must be taken into consideration. If distance is so imperative a factor under the Constitution, why has our Supreme Court failed to discover it ? Is it likely that the same courts, which have almost obliterated the element of distance in this and many other cases, will suddenly reverse their judgment and compel a strict compliance with distance as a sole factor in the problem? It is a poor rule which does not work both ways.

Railway lawyers, with deadly determination, have for years sought to eliminate distance as a necessary condition for reasonableness of rates. Facts seemed to justify them in so doing. Absurdity appears only when, having won all their cases, they turn about and allege that distance is the only constitutional basis on which rates could be made by the government. The claim is preposterous in itself, entirely apart from the recent exceedingly able pronouncement of the AttorneyGeneral upon the question.

Few people in the United States appreciate the strength of the movement toward government ownership of railways in foreign countries. It is well known, of course, that so far as Germany, Austria-Hungary, Russia, and Belgium are concerned, the matter has long since been settled. In the remaining countries of Europe many indications point toward an extension of the same policy. Switzerland in 1898 inaugurated the purchase of its entire transportation systems. In Italy, the old twenty-year contracts, leasing the railroads to private companies, have just expired. The mixed policy has been so unsatisfactory, that probabilities favor direct assumption of all its own properties by the government in future. The French railways do not revert to the State until about 1950; but preparation for state management is already urged in high quarters. It is proposed to extend the present small governmental system in Brittany in such manner as to afford a basis for future action as to economy or efficiency when the large network now operated under long leases is returned to the State.

The foregoing instances, it will be observed, are in countries not strongly imbued with Anglo-Saxon political traditions. But the tendency is unmistakable in these as well. There are about thirty thousand miles of railway line in India, — six thousand more, in fact, than in the British Isles. Three fifths of this is directly owned, and much of it efficiently and most profitably operated, by the State. Canada, while not operating directly, is embarking upon new and vast schemes of transcontinental construction which practically suggest public ownership. South Africa is operating its roads; and its policies, in the words of the editor of the (British) Railway News, “have given good results.’’ Egypt also has a State Department of Railways. The Australian colonies have been experimenting for a half-century, not very successfully, to be sure, but since the Federation with improving prospects. And even in its darkest days, no programme for a return to private enterprise would be tolerated politically. Economic experimentation, as a remedy for social evils, may in practice often suggest the adage about the frying-pan and the fire; but the triumphant progress of democracy indicates a clear preference of " the people” for a fire kindled and controlled by themselves, rather than the frying-pan over a fire fanned by private enterprise. Municipal ownership in England and Scotland has marvelously thriven during the last ten years. A recent consular report, for example, enumerates ninety-nine British municipalities owning street railways. And, as in Australia, the question of cost and profits is entirely subordinated to the issues of public service and convenience.

In the United States public ownership at this writing occupies a less prominent place in political programmes. Yet our Tom Johnsons, our Dunnes, and our Pingrees have undoubtedly a large and constantly increasing following. The present temper of Wisconsin and Michigan on the railroad question is unmistakable. These are two of the most intelligent and politically enlightened commonwealths in the country. The Standard Oil agitation in Kansas and Missouri still further exemplifies this social unrest. In 1890 seven states of the Union made provision by law for rate-making railroad commissions with absolute control over all state business. By 1902 the number had nearly doubled, there being then thirteen states which had created railroad commissions with these enlarged powers. This activity was in the main confined to the Southern states. But it is spreading rapidly. Missouri, Nebraska, and notably Wisconsin and Michigan, are falling into line. Indiana has just enacted a new and radical type of railway law. Illinois, judging by the remarkable triumph for municipal ownership of street railways in Chicago, is in danger of inoculation. A mere revival of the now thirty-years-old Granger movement is not suggested by these unmistakable tendencies. The people are not wantonly hostile, as then. No wrecking enterprise is contemplated. It might be less momentous if it were so, for such conflagrations burn themselves out. This movement threatens otherwise. It results from a serious conviction among the plain people that abuses exist, to be best corrected by taking the reins into their own hands. Such is a logical conclusion, however much to be deplored. Will it not be better that the attention of this huge electorate should be diverted from such issues by the prompt application of really remedial legislation, before the question is too widely advertised in a presidential contest ? Whatever the future may some day contain, it seems clear that under present conditions public ownership and operation of the railways of the United States would be a highly dangerous experiment, — dangerous not alone to business and property, but to the safety and welfare of the republic. In appreciation of this fact, the President of the United States is neither demagogue nor socialist. He realizes the irresistible force of public opinion when once fully roused; he is well aware that public ownership of railways is no mere dream of idle theorists, but an accomplished fact in many foreign countries; and he foresees the political dangers latent in such a programme for our own country. May the Senate of the United States — subject as it is to corporate influence of the most subtle and powerful sort — be brought to a clear foreknowledge of the truth before it is too late!