THE GIFT OF 
 MAY TREAT MORRISON 
 
 IN MEMORY OF 
 
 ALEXANDER F MORRISON
 
 -..■'■■ *■■-'. T-, ♦.. 

 
 */'
 
 THE RAILWAYS AND THE EEPUBLIC 
 
 BY 
 
 JAMES F. HUDSON 
 
 NEW YORK 
 
 IIARPEK & DROTHERS, FRANKLIN SQUARE 
 
 1 88G
 
 Copyright, 1886, by Uarper & Brotuers, 
 
 AU righu rejerccd.
 
 2 
 
 O 
 t 
 
 
 COKTENTS. 
 
 CUAPTEU PAGE 
 
 I. The Problem of Railway Domination .... 1 
 3? II. Ten Years of Discrimination 25 
 
 N 
 
 ^ III. The History of a Commercial Crime . . . . G7 
 
 IT. The Laav and the Railways 107 
 
 V. Public Obligations and Corporate Practices . 155 
 
 O YI. The Pooling Policy 195 
 
 OS YII. The Fictitious Element in Railway Policy. . 251 
 <3 
 
 _ YIII. Competition versus Combination 287 
 
 ^ IX. The Discussion of Remedies 31G 
 
 ^ X. The Public Highway 368 
 
 XI. Corporations in Politics 449 
 
 432954
 
 THE RAILWAYS AND THE REPUBLIC. 
 
 CHAPTER I. 
 
 THE PROBLEil OF KAILWAY DOillNATIOIS". 
 
 A NEW social power sometimes rises to immense 
 proportions before its nature and effects are under- 
 stood. The full bearinsr of its heretofore unknown 
 forces upon future generations can then be learned 
 only by experience. The media) val rulers who first 
 organized their realms into feudal holdings saw only 
 that the barons would afibrd military protection against 
 savage enemies, and preserve order among scarcely 
 more civilized subjects. But they hardly dreamed of 
 the rise of powerful feudal princes whose power would 
 be greater than the throne from wliich they obtained 
 it, and who could set up and pull down kings at their 
 win. The men wlio first wrote pamphlets in favor of 
 education and justice for the lower orders of France 
 could not foresee the terrible outburst of popular 
 streno;th which was fated to involve in one common 
 destruction Ijoth the instrumentalities which had main- 
 tained oppression for centuries and tlie men wlio had 
 made the first uncertain steps towards asserting the 
 rights of man. Watt couhl see in the steam which 
 lifted the lid from the tea-kettle a force which miglit 
 yi^ld man some aid in his labors; but lie could not 
 
 1
 
 2 The Eailways and the BepuUic. 
 
 foresee the immense application of that force to every 
 phase of life. He could not dream of the millions 
 of factories, the thousands of steamships, or the myr- 
 iads of i-aihvay trains that lay dormant in his discov- 
 ery. Still less could he foresee the darkened skies 
 of Birmingham and Pittsburgh, or the destructive 
 power which would doom hundreds of thousands to 
 ngonizing tortures or horrible deaths as the result of 
 cupidity or carelessness in the employment of the power 
 which he found under the lid of that insii^nificant tea- 
 kettle. Experience can alone reveal the extent of the 
 benefits which new ideas or agencies bring to the world. 
 How much more is it true, that the evils to result from 
 the perversion or abuse of such great forces can only 
 be learned by their actual occurrence. This can be 
 seen from the earliest growth of social organization 
 throughout all history ; but the lesson was never writ- 
 ten in plainer characters than in the development of 
 the vast railway systems which, in the last half century, 
 have revolutionized the commercial and social charac- 
 ter of the civilized world. 
 
 AVhen Stephenson was struggling against prejudice 
 and conservatism, to secure the assent of Parliament 
 to the first-born of the gigantic brood of railways 
 which now dominates the world, he thought that pas- 
 sentrers could be carried from Manchester to London 
 at a speed of twenty miles an hour, and had a deep 
 faith that freight could be transported rather more 
 cheaply in this way than by carts and wagons. The 
 reality has surpassed his expectations more than his 
 expectations surpassed the conditions of transportation 
 which he was trying to improve. The Tory squires 
 were panic-stricken at the scaring of the game, the de-
 
 The Problem of Railway Domination. 3 
 
 structioa of tlie coacbing-inns, and the decadence of the 
 breed of horses, which might result from the new 
 method of travel; and thought it an overwhelming 
 argument against the scheme, to picture the disaster 
 that might ensue if a bull should attempt to butt the 
 locomotive off the track. AVhat would they have said 
 if they could have foreseen that the measure which 
 they were fighting would produce a political and com- 
 mercial power that would prove greater in wealth and 
 more absolute in influence than the o:reatest War\vick 
 or Montfort ever known in the old feudal times ; that 
 would carry legislatures in its pocket and defy the ad- 
 ministration of justice; that would partition the terri- 
 tory of a mighty nation among its members, at one 
 place build up a wealthy monopoh^, and at another 
 condemn a thriving industry to utter decay and death? 
 What would they have done if they could have seen 
 the arbitrary and irresponsible power of the great rail- 
 way magnates, the luxury and vast wealth which they 
 accumulate, the speculative fevers and crises of mad- 
 dening and universal ruin, the bribery and dishonesty 
 which have formed so important a proportion of the 
 immense railway development of the past twenty-five 
 years? It is well that conservative minds could not 
 conceive such a change, for they would have shrunk 
 with horror from the woes into which mankind was 
 plunging and the loss of all the qualities which society 
 had held dear. 
 
 The immeasurable benefits that have been secured 
 to mankind, and especially the unparalleled develop- 
 ment of the material resources of this country, secured 
 by the rise of the railway system, has been made the 
 subject for reams of panegyric. Unlike most pane-
 
 4 The Railways and the liepuhlic. 
 
 j^yric, all that has been said of the marvellous work of 
 the railway system and the magical expansion which 
 it has wrought in the population and wealth of the na- 
 tion is true. It has brought into commercial inter- 
 course the producer of cheap food in Texas and Dakota, 
 and the artisan of the Atlantic states and Europe. It 
 has not only made two blades of grass grow where one 
 £fyQw before, but has increased the industrial produc- 
 tion of the land a hundred-fold. All and more than 
 has been written of the magical creation of states, cities, 
 and agricultural communities, the rise of industrial en- 
 terprises, and the production of what is almost untold 
 wealth, by the expansion of our railway system, is but 
 a faint picture of the reality whose proportions exceed 
 the grasp of human conceptions. But there is a reverse 
 to the picture which the eulogists do not show. While 
 the enthusiast sees only the increase of wealth and the 
 growth of population which the railroads have wrought, 
 there is a view which is not so pleasant to the obser- 
 vation of thinking men. The other side is presented 
 by the abuses and demoralizing tendencies which have 
 accompanied the building-up of the immense railway 
 corporations of the country. 
 
 Having created our Frankenstein and realized its 
 monstrous power, it is time to inquire whether there 
 are any drawbacks to this immense gain, harmful to 
 the republican equality and personal independence 
 which are the foundation of our national character ? If 
 it is found that the wealth and influence of the im- 
 mense corporations created for the improvement of 
 transportation focilities threaten the debauchery and 
 cori'uption of the legislative power; if it appears that,
 
 TIiQ Problem of Bailwmj Domination. 5 
 
 instead of simply affording better and ampler facilities 
 to all people alike, discriminating rates and secret re- 
 bates have exalted certain localities or certain shippers 
 to prosperity, while condemning their competitors to 
 loss or ruin ; or if it is seen that, by the issue of inflated 
 stocks, the manipulation of contracts, or the use of sub- 
 sidiary corporations to divert profits from the stock- 
 holders to their own pockets, the railway managers 
 have unjustly enriched themselves — if any or all of 
 these things are shown to be true, then the question 
 resolves itself into two branches : The first is whether 
 any gain of material prosperity can compensate a nation 
 for placing its commerce in the hands of an arbitrary 
 and irresponsible power, or make good the loss of per- 
 sonal independence and confidence in public equity 
 among those whose business existence is held in the 
 hollow of the railway ofiicial's hand? The other is 
 the question whether these evils are necessary accom- 
 paniments of the proper growth of the railway busi- 
 ness ; and if the practices of discriminations, stock- 
 watering, and pooling combinations are separable from 
 the legitimate construction and operation of the rail- 
 roads, what public measures will secure their perma- 
 nent abolition and the proper prosperity and security 
 of railway investments ? 
 
 Of the existence of actual abuses in the railway 
 system of the country there is little room for dispute. 
 The presence of roads constructed upon largely inflated 
 issues of bonds, and of at least one immense corpora- 
 tion which has been built up by the favor of railways 
 to the destruction of its competitors, is too well known 
 to admit of question. But it has been the practice of 
 a very large and respectable class of writers to assert
 
 6 The Railways and the Republic. 
 
 that the watering of stocks, the making of special rates, 
 and the allowance of rebates, are necessary incidents 
 of the transportation business of the nation, and to 
 argne that the wonderful increase of prosperity wrought 
 by the era of railway extension should offset and con- 
 done all the cases of injustice which have arisen in the 
 details of the system. To a certain extent this may be 
 true. The practical influences for the maintenance of 
 special rates, and the temptations to make fortunes by 
 the operation of building railways for a nominal value 
 of twice what they cost, and realizing the profit at 
 the expense of the bondholders, may be too powerful 
 for average human nature to resist. The same argu- 
 ment carried further mijiht susfo-est a merciful con- 
 sideration for men who, incited by the hope of fort- 
 une, have secured advantages over competing firms 
 by special favors from the railways, and have finally 
 destroyed competition and established a bold and de- 
 fiant monopoly. We might even make allowance for 
 the men who, having received a gift of an empire 
 in lauds and money for the construction of a trans- 
 continental railway, proceed to bribe legislators and 
 buy up public officials to obtain further grants for 
 their corporations, or to prevent adverse action as to 
 the ratification of past donations. The pressure of mill- 
 ions to be made or lost is a mighty force, and the man 
 who sees success in that acquisition of immense wealth 
 which is the ambition of so many of the American 
 people, should, perhaps, find some allowance for the 
 power of the incentives by which he is led to for- 
 get the principles of strict equity or ignore the in- 
 terests of the public. But allowance for the circum- 
 stances of the transEcressor cannot condone the trans-
 
 The Problem of Baihoay Domination. 7 
 
 gression. If the pressure of circumstances forces a 
 railway company to build up a community or enrich 
 a business enterprise at the expense or ruin of a com- 
 peting community or firm, there is only the more rea- 
 son for seeking a greater force which shall insure equal 
 justice to all. If the influences which lead to inflation, 
 stock manipulation, and discriminations are too jDOwer- 
 ful for individual resistance, there is so much the more 
 need of a stronger power to restrain those influences. 
 If they are inherent in the present constitution of the 
 railway system, then we must seek methods of thorough 
 reformation which shall retain the efficiency of the sys- 
 tem while abolishing the injustice and public demoral- 
 ization. That such reformation will be an arduous and 
 weighty task is beyond question; but the claim that 
 it cannot be done without destroying the railway busi- 
 ness is much like the position assumed by those po- 
 litical thinkers of Russia and Germany who hold that 
 the government of a nation cannot be efficient unless 
 absolute and arbitrary power is vested in the monarch 
 at its head. 
 
 Nor do the great national benefits secured by rapid 
 railway construction afford any valid reason for spar- 
 ing abuses which may have grown out of it. No 
 element of national growth can be so perfect that it 
 is useless to inquire whether its workings could not 
 have been made more beneficial. In the case of the 
 railways especially, a critical examination is justifiable, 
 because their projectors and operators have invariably 
 embarked in these enterpi'ises not so much for the 
 public welfare as for their own private enrichment. If 
 the country has had hundreds of millions added to its 
 wealth by I'ailway construction, the builders have also
 
 8 The Eaihcays and the Bepublic. 
 
 secured tens of millions for their individual fortunes. 
 This fact in itself furnishes no indictment of railway 
 manafxement : but it does estop the argument that, be- 
 cause of the gain to the nation, public investigation of 
 unjust and inequitable practices should not be mad^. 
 The question is not whether the railway system has 
 been a public benefit, but whether it cannot be made a 
 greater one ? While the nation has gained in wealth and 
 population through the general extension of railways, 
 it does not follow that the wealth could not have been 
 more justly distributed and the population made more 
 prosperous, if railway management had been univer- 
 sally governed by the principles of equity. If the gov- 
 ernment has secured the settlement of the western 
 ten-itories, the pacification of the Indians, and quick 
 transit to the Pacific coast, by giving the men who 
 built the transcontinental railways the money to build 
 the roads and an empire of land in addition, it is still 
 permissible to ask whether it will not suffice to pre- 
 sent the projectors of the next enterprise with the com- 
 pleted railroad, without adding the millions of acres 
 of territory to induce them to take the gift. 
 
 The great ideas which shaped the formation of the 
 government, and have made the nation what it is, are, 
 first, the deriving of all power which afiects the wel- 
 fare and prosperity of the community from tlie popular 
 will ; next, the equality of all classes before the instru- 
 mentalities of government: the securing to every citi- 
 zen an equal opportunity to prosecute all branches of 
 legitimate enteiprise, and to achieve success or failure 
 solely in proportion to his own ability or industry ; and 
 finally, the maintenance of that democratic state of 
 society in which the crreatest £rood is secured bv the
 
 The Problem of Railway Domination. 9 
 
 most general distribution of education and property 
 among the people, as opposed to the production of a, 
 class of bigbly educated and wealthy aristocrats at the 
 cost of ignorance and poverty to others. Upon these 
 principles the nation has not only grown strong and 
 great in material wealth, but it has wrought a far 
 greater work than the creation of riches, in the estab- 
 lishment of a nation of intelligent, self respecting, and 
 self-governing freemen. To permit the rise of influences 
 which may destroy that work is little better than na- 
 tional suicide. Such influences prevail when the equal- 
 ity of all persons is denied by the discriminations of 
 the corporations which the government has created. 
 Under thsm, the increase of national wealth is not dis- 
 tributed among all classes, according to their industry 
 or prudence, but is concentrated among those who en- 
 joy the favor of the railway power; and general inde- 
 pendence and self respect are made impossible, while 
 the prosperity or extinction of business enterprises are 
 dependent upon the favor or enmity of the men who 
 control the transportation routes of tlie land. It is not 
 to be believed that any gain of wealth can compensate 
 for the loss of personal independence or the deprecia- 
 tion of the national character which the existence of 
 such influences threatens. No upright mind can think 
 that all the wealth, luxury, and power of imperial 
 Rome was a fair exchange for the freedom, bravery, 
 and patriotism of the poorer but far greater Roman 
 republic. 
 
 A system which contains the germ of such dangers 
 must not be paltered with. The best and liighest in- 
 terests of the people will not let us look with indiffer- 
 ence upon the growth of irresponsible corporations,
 
 10 The Railways and the Rejpvblic. 
 
 which hold a greater power over the fortunes and 
 prosperity of individuals and communities than we have 
 ever intrusted to our government. Even if we admit 
 that the instances are few in which such a power 
 has been used for the enrichment of one person at 
 the expense of the many, its mere existence threatens 
 the public welfare. No men or set of men can be 
 permitted to play the part of Providence over the 
 commerce and industries of the country. If national 
 w'ealth and growth are only to be obtained at the 
 cost of erecting within our borders the rule of a group 
 of corporation magnates, who shall be raihvay kings 
 in fiict as well as in name, let us rather choose na- 
 tional poverty and national freedom. 
 
 The nation is not, however, restricted to such a 
 choice. The alternative is not presented to the Amer- 
 ican people whether they shall accept the material 
 benefits of the railways, with the attendant evils of 
 arbitrary power, or go without the railways altogether. 
 The question is simply whether we shall accept the 
 railways as they are, or seek to retain them w^ithout 
 their abuses. The ultimate power in this land still rests 
 wdth the people. The government can still exert its 
 regulating control over its corporate creations, and bring 
 them into full harmony with the principles of commer- 
 cial equality and public justice. Its power to do so 
 has been affirmed by the courts, declared by legislat- 
 ures, and even tacitly recognized by the railways them- 
 selves. For wdiile the discussion of this subject has 
 accomplished little in the way of actually abolishing 
 these evils, it has produced a marked advance in the 
 attitude of railway managers and their public advo- 
 cates as to the principles upon which they must regu-
 
 The Problem of Railway Domination. 11 
 
 late their policy. Eight years ago the right of rail- 
 ways to make siicli rates as they please was affirmed 
 by nearly every railway man who deigned to take any 
 notice of the complaints of the public. Now, the stereo- 
 typed argument Avhich seeks to justify discriminations 
 starts out with the acknowledgment "that every com- 
 pany is bound to perform, with absolute impartialit}', 
 absolutely identical services." In the profuse defences 
 of the railway policy made in the congressional de- 
 bates of 1884-5, I have not yet seen one speech m hich 
 did not concede the princi})le that discriminations be- 
 tween shippers were reprehensible, the only question 
 being whether any effective steps should be employed 
 for their abolition. This chansre in the attitude of the 
 railway advocates has been wrought by the unaided 
 force of public opinion. I take it that public opinion 
 is just as well qualified to decide the question whether 
 these evils require legislative remedy, and to dictate 
 what those remedies shall be. 
 
 But, we were told, a year or two ago, in several 
 ably written magazine articles, the proper I'emedy for 
 all the abuses which grow out of the methods of rail- 
 way transportation must be the healing influence of 
 the great pi'inciple of competition. There is much 
 force in this argument, as pointing out the way to cure 
 the evils; but when presented as an objection to any 
 legislation wliatever, it possesses two fatal defects. It 
 first assumes that legislative regulation of the railways 
 will intei'fere with free competition, which is a wliolly 
 unwarranted assumption ; and, next, it completely ig- 
 nores the vital fact that the greatest abuse which calls 
 for legislative interference is the persistent policy of 
 the railways to suspend and obstruct the operation of
 
 12 The Railways and the BepuUic. 
 
 competition by all means wliicli their united power 
 can command. The contrast between the immeasura- 
 ble benefits which competition will bring, and the evils 
 which are produced by its imperfect and unobstructed 
 workings in the existing railway system is in itself a 
 conclusive reason for invokino; leirislation to defend 
 this great principle against the assaults of railway 
 combination, and to restore the supremacy of the nat- 
 ural laws of trade now trampled under foot by every 
 railway pool from New York to San Francisco. To 
 leap to the opposite conclusion and to assert, because 
 competition is a great and beneficial power, that leg- 
 islation must permit the work of abolishing it to go 
 on without check or hinderance, is as astounding an 
 instance of false deduction as was ever made in the 
 defense of error. 
 
 The argument of all the railway advocates against 
 the general proposition for regulation in the interest 
 of the people is based upon two assumptions. The 
 first is that there are no serious infringements of pub- 
 lic rights by the railway system as it is now con- 
 ducted; and the other is that the proposition to regu- 
 late the relations of the railways to the public neces- 
 sarily involves an attack upon the security of capital 
 invested in railways, and the destruction of their prop- 
 erty rights under their charters. The first assump- 
 tion has taken form in the assertion that the agita- 
 tion is due to "unreasoning ignorance," as one writer 
 pnt it ; or, to state it in its more courteous form, that 
 the subject of railway rates is so intricate that the gen- 
 eral public is not qualified to decide it. The assertion 
 of railway advocates, that the public do not under- 
 stand the elements which determine the cost of trans-
 
 The Problem of Railway Domination. 13 
 
 portatioD, shows either an utter misapprehension or a 
 deliberate perversion of the ehiims made by the advo- 
 cates of railway reform. If there were any serious prop- 
 osition to fix rigid railway tariffs by law, to and from 
 all stations in the country, or to enact a wholesale low- 
 ering of charges, the matter \vould assume a very dif- 
 ferent aspect. But no such legislation has ever taken 
 any definite form. What has been ui'ged in Congress 
 and the legislatures, and what is demanded by the wel- 
 fiire of the nation, is that railway charges shall be 
 placed upon a l)asis of ecpiality to all shippers, and that 
 the rates which the policy of the railways themselves 
 shows to be reasonable shall be applied to all depart- 
 ments of their traffic. To enact the impartiality and 
 equality of railway rates does not necessitate the estab- 
 lishment of iron-bound tariffs, from which the railways 
 cannot depart, and none of the legislation framed for 
 that purpose has contained any such mischievous sched- 
 ule. To demand that the same method of determin- 
 ing the cost of transportation shall apply to all classes 
 alike, and that the railway managers must not have one 
 standard for such freights as they wish to favor, and a 
 higher one for those which they desire to burden, is 
 not to demand cheaper rates. The agitation is not 
 for lower railway charges or for legislative tariffs, but 
 for the enforcement of the principle tliat all persons 
 have equal rights, and that all the services of the 
 railways shall be performed with impartiality, and 
 at charges based on the same standard of cost. To 
 answer this demand by pleading the occult nature 
 of the charges of railways, and the general ignorance 
 on that point, is, upon its most favorable construc- 
 tion, a i^roof that the ignoi'ance of the vital issues in
 
 14 The Railways and the Republic. 
 
 this subject rests with those ^Yho advance that argu- 
 ment. 
 
 It is not placing too much reliance on the popular 
 judgment to declare it capable of deciding whether 
 such discriminations as those hereafter cited in the 
 case of the anthracite pool and the Standard Oil Com- 
 pany are consistent with public welfare. I believe 
 that public opinion is competent to decide the ques- 
 tion whether the governmental favors that have been 
 lavished on the railways do not also place them 
 under public obligations to conduct their business 
 consistently with justice and equalit}'. It does not 
 require any great technical knowledge on the part of 
 the common people to see that the payment of $10,- 
 000,000 rebates by the railways to a single oil refin- 
 ing corporation in sixteen months is a vital attack uj)on 
 the independence, and even the existence, of its com- 
 petitors; and on this point the public judgment seems 
 to deserve more reliance and respect than the judg- 
 ment of the oflScers of the great trunk lines. In short, 
 it is not essential to possess a technical knowledge of 
 all the details that contribute to the making of a spe- 
 cial rate, to know \vhether discriminations are consist- 
 ent with justice, right, and the public welfare. 
 
 As to the second point, if any schemes of confisca- 
 tion are proposed, it will be a public duty for every 
 writer to expose them. But such exposure should 
 not be weakened by claiming for the railways prop- 
 erty rights which are not granted by the law, and 
 which have been denied by the courts. Nor should 
 their advocates represent every plan for their regula- 
 tion as an attack upon the security of their property. 
 Those who seek to check the abuses of a system
 
 The Problem of Railway Domination. 15 
 
 ia their inception, by measures wbicli will maintain 
 the system in its best form, are doing the most to 
 preserve it in security ; while those who try to leave 
 the evils unchecked are takino- the surest course to 
 arouse a popular storm which may some day sweep 
 away the rights of property in the railways at the 
 same time with their abuses. It was the fashion 
 araono; the dominant class in France, durin<r the eio-h- 
 teenth century, to regard the agitators in behalf of 
 popular rights as assailants of order; but the real 
 cause of the terrible storm, which destroyed both the 
 oppressions of government and the government itself, 
 was in the determination of the aristocracy to maintain 
 their power for oppression. The lesson should not be 
 lost sight of in the discussion of the existing problem. 
 If the remedies are inadequate, it is well to show their 
 inadequacy. If they are mischievous, they should be 
 exposed and denounced. But the effort to go so deeply 
 into the causes of the evils as to make it clear how 
 they may be dug up by the roots is not to be cried 
 down as an attack upon railway property. The secu- 
 rity of the railway system lies in administering it Avith 
 careful respect to justice and the public welfare. Its 
 greatest danger lies in making its oppressive hand felt 
 by the peoj^le, until the popular spirit is goaded into 
 revolt. The history of the past ten years contains one 
 evidence that the working classes can be inspired to 
 an unreasoning but fuiious attack upon the property 
 of a great corporation. The experience of 1877 should 
 warn us that safety lies in establishing principles in 
 railway management which shall protect the rights of 
 the humblest shipper against the encroacliments of the 
 most powerful, and uphold the obligations of the rail-
 
 16 The Railways and the Rejpxiblic. 
 
 ways to the people as zealously as it j^rotects the prop- 
 erty of the corporation against the blind fury of a hun- 
 gry and desperate mob. 
 
 No fiiir view of this subject will refuse to recognize 
 the vital fact that, to maintain the commercial benefits 
 of the railways, their ability to yield fair profits to in- 
 vestors must be preserved. No gain will be secured 
 by making the function of transportation a gratuitous 
 one. The efforts at reform are not opposed to the in- 
 terests of legitimate railway capital, as has often been 
 asserted by the accredited representatives of railway 
 capitalists. The history of the past ten years, with 
 its rapidly alternating eras of railway expansion and 
 railway shrinkage, bringing at one time inflation and 
 speculation, and at another depression and general 
 wreck, does not present the prevailing methods of 
 railway business as affording perfect protection to 
 the interests of the ordinary investor. When we re- 
 flect on the panics that have been produced by the 
 reckless and dishonest manipulations of railway prop- 
 erty, it does not appear that the security of capi- 
 tal is at all threatened by the inquiry whether such 
 abuses cannot be prevented. If the ability of railway 
 managers to divert the profits of the railroad to their 
 own pockets by fast freight lines, construction compa- 
 nies, and other devices of that nature, were utterly abol- 
 ished, the change ought to be a benefit to the capital 
 invested in the road rather than an injury to it. The 
 fact is that the outcry against all railway regulation, as 
 attacking the legitimate profit of railway investments, 
 has failed to draw the very important distinction be- 
 tween the illegitimate profits of the managers and the 
 legitimate returns on the actual capital invested. The
 
 The Problem of Railway Domination. 17 
 
 needed remedies miglit impair the power of railway 
 presidents and directors to lay up fortunes of millions 
 out of yearly salaries of thousands ; but that a state of 
 things which would make the rates of the roads steady 
 and equitable, and their business correspondingly en- 
 larged and unfluctuating, would injure the sharehold- 
 ers' investment, is about as credible as that the sup- 
 pression of lotteries would inflict a loss upon the de- 
 positors in the savings banks. 
 
 A determined optimism appears in the manner with 
 which railway advocates assert now that whatever 
 principles ought to prevail in the railway management 
 do prevail, and now that whatever do prevail ought 
 to. But when the measures to protect the public are 
 under consideration this optimism disappears. "The 
 questions thus presented," say the dissenting judges of 
 the Supreme Court, in the granger cases, " are of the 
 greatest importance, and their approval must material- 
 ly aff'ect the value of property invested in railroads, to 
 the amount of many hundreds of millions, and will 
 have a great influence in encouraging or repelling fut- 
 ure investments in such property." This prediction 
 has been quoted in connection with the oft-repeated 
 charge that the attempt to regulate railway abuses by 
 the granger acts of the western states was the cause 
 of the panic of 1873. To rely on this argument is 
 simply to beg the question. A study ot commercial 
 history will And the cause of that revulsion, not in leg- 
 islation adverse to the railways, but in the ability of 
 railway adventurers to construct railways ahead of 
 development, and on that insecure foundation to create 
 magnificent fabrics of inflated stock valuations. With 
 the granger legislation as subsequently modified, in
 
 18 The Railways and the EepuUic. 
 
 force for twelve years since that financial storm, tlie 
 rage for railway building has again set in, and the 
 same result of inflating the bubble to the point of 
 bursting has been repeated. In the business history 
 of the last fifteen years, the one lesson that stands out 
 most clearly is that the danger to capital in railway 
 investments is not the interference of legislation, but 
 the manipulation of railway adventurers; and it is by 
 limiting railway management to the performance of 
 public duties and to the earning of honest dividends 
 for their shareholders that the greatest security will 
 be afi'orded to legitimate investors. It is worth while 
 to notice here that the prediction of the judges of the 
 Supreme Court who dissented from the granger deci- 
 sions was not fulfilled in the sense of i:)reventing the 
 extension of railways. On the conti'ar}^, the states 
 afi'ected by that decision have since then been prom- 
 inent examples of the rapid expansion of the railway 
 system.* 
 
 Suppose that it were true, as these jurists and writ- 
 ers claim, that by the assertion of the public right 
 to regulate the railways the value of their property 
 is decreased, are there no other property rights in- 
 volved? Do railway investments form the only prop- 
 erty in the land which requires the protection of the 
 law ? Are w^e to understand these judges and their 
 endoi'sers to mean that, because railway property will 
 
 * lu Illinois the milenge of iie^v railways during the four prosperous 
 years of the era of expansion, from 1879 to 1883, was 1488; during the 
 four years of the corresponding era, from 1871 to 1875, it was 1205. In 
 Wisconsin the growth in the four expansive years after the granger deci- 
 sions was 1143, against 841 in the four years of railway growth before 
 that decision.
 
 Tlie Problem of Railway Domination. 19 
 
 depreciate if certain principles of justice prevail, there- 
 fore justice is to be set aside for the benefit of railway 
 property? If the magnitude of interests involved is 
 to be of weight in deciding such questions, let us put 
 against " the hundreds of millions " of railway property 
 on the one side the thousands of millions of private 
 property on the other. Railway regulation, accord- 
 ins: to a writer in the Princeton Pevieiv, is "confisca- 
 tion of railway property," but this puts ^vholly out of 
 the question the idea of that confiscation of private 
 property which is rendered possible by leaving un- 
 checked the power of the railways over commerce 
 and manufactures through the manipulation of freight 
 rates. Of the two parties in interest the shippers rep- 
 resent far greater property interests than the carriers, 
 although the latter, by their organization, are more 
 powerful. I have yet to hear of a single case where 
 restrictive railway legislation has seriously damaged 
 the honest valuation of any railway. I have yet to 
 learn of any seriously proposed scheme of regulation 
 that has proposed to cut down railway profits below 
 a fair dividend on the capital actually invested. But 
 the entire nation knows of one notorious case in which 
 the discriminating policy of the leading railways of 
 the country has resulted in the wholesale confiscation 
 of private property for the benefit of a favored corpoi-a- 
 tion ; while less famous cases will be alluded to in the 
 subsequent images. In view of the fact that the only 
 confiscations which have taken place have been those 
 in which the railway managers have been the oftend- 
 ers rather than the victims, might not this liorror of 
 confiscation and disturbance of property rights be just- 
 ly felt in behalf of the private property of the land.
 
 20 The JRailways and the Itejpublic. 
 
 whicli is to-day largely at the mercy of railway 
 rates ? 
 
 In order to give mncli weight to the arguments 
 by W'hicb they oppose governmental regulation, the 
 railways should make their practices accord with the 
 principles which they profess. When the declaration 
 that the elements of cost of transportation are beyond 
 the public comprehension is coupled with the wide- 
 spread practice of disregarding the cost of service on 
 important classes of their traffic, the natural conclusion 
 is that the railways have one class of principles for 
 public use and another for the conduct of their private 
 affairs. If it appears upon examination that the argu- 
 ment for leaving railway abuses to the corrective influ- 
 ence of competition, without any legislation Avhatever, 
 has been urged concurrently with the general effort 
 of railway management, all over the land, to organize 
 and maintain combinations for the express purpose of 
 preventing competition, what other inference can there 
 be than that such logic is used to perplex and obscure 
 the general judgment? But these striking contrasts be- 
 tween railway pleas and railway practices are tlirown 
 into the shade by the last formulation of railway opin- 
 ion on the views of the governmental duty to the cor- 
 porations. It has been argued for years that the sub- 
 ject is so delicate and vast that it must not be touched 
 by legislation in the public interest. To protect the 
 rights of the ordinary shipper against the fiivorite of 
 the railway would so hamper the operations of trade, 
 it has been repeated times without number, as to take 
 away the independence of the railways and destroy 
 the freedom of competition. Yet, after years of argu- 
 ment that government has no constitutional power to
 
 The Problem of Railway Domination. 21 
 
 interfere with the railways, and of demonstration that 
 all such interference must be ill-advised and injurious, 
 the railway logic comes to the surprising climax of 
 appealing to legislation for the aid of the law in up- 
 holding their efforts to j^revent competition. After 
 maintaining that the state must not protect the public 
 against the inequitable practices of railways, the rail- 
 way argument resolves itself into an appeal to the 
 state to protect them against themselves. Such a the- 
 ory of legislation implies that the public rights are 
 of no importance beside the wishes of the railway 
 managers. The practices of the railways are alleged to 
 be too just and equitable to require any defence; but 
 they must be restrained to save them from their own 
 recklessness and disregard of business principles. The 
 law must not, by any effective measures, uphold the 
 right of all persons to equal privileges and impartial 
 charges ; it cannot forbid the creation of vast monop- 
 olies; it cannot check the formation of combinations 
 to control the movements of the great staples, or pro- 
 tect the freedom of competition in all the branches of 
 transportation. On the contrary, its aim must be to 
 uphold the combinations by which competition is ol> 
 structed. To such an astounding proposition the an- 
 swer of the public should be plain. The first business 
 of the state is to guard the people against the abuses 
 of its corporate creatures. If the principle of enliglit- 
 ened selfishness is not sufiicient to keep the railways 
 from destroying themselves, it surely cannot protect 
 the private interests that are subject to their power. 
 To deny the right of restraining that selfisliness, when 
 it is confessed that the railwavs are so little enlio-ht- 
 ened in its exercise as to need the help of the law to
 
 22 The Railways and the Bepublic. 
 
 keep them from ruining themselves, is the fantasy of 
 corporate blindness. 
 
 The inquiry, what remedy will cure these evils? ne- 
 cessitates a careful review of the entire subject. It is 
 necessary, first, so to study their nature and causes as to 
 learn whether they are inherent in the transportation 
 business, or whether they have grown out of methods 
 that are susceptible of reform without utterly revolu- 
 tionizing the system. The next step will be to inquire 
 into the power of legislation to cure them. It is an 
 important question whether the legislatures which 
 have created such immense commercial and social pow- 
 ers as the railways have placed beyond their reach 
 the right to restrain and correct the abuses of the 
 power so called into existence. It is a grave matter 
 whether we are to be confronted with the alternative 
 of either submitting to the arbitrary rule of corporate 
 bodies, like that of the Central Pacific in California 
 and Nevada, or of overturning that tyranny by sub- 
 verting with it the system of law on which it is 
 founded. But when we find, as we shall, that the fun- 
 damental principles of law on which the existence of 
 these corporations rests, secure to government the right 
 to regulate its creatures, then the question comes next, 
 what remedy will at once cure the evils, preserve the 
 usefulness of the railways, and protect the legitimate 
 and honest investments of capital in the railway cor- 
 porations ? If the plan of regulation contains the ele- 
 ment of confiscation or destruction of the railway prop- 
 erty, it is not for the public benefit. If it is simply 
 restrictive of the dangerous powers of the railway cor- 
 porations over commerce, but leaves those powers still 
 existing, with only a frail legislative barrier between
 
 The Problem of Hallway Domination. 23 
 
 them and their subjects, it is inadequate. What the 
 matter demands is the application of remedies which 
 will wholly abolish the causes of discriminations, and, 
 at the same time, retain for these great instrumentali- 
 ties of trade their character as useful highways of com- 
 merce and their availability as sound and remunerative 
 investments. 
 
 This work will attempt to show that the power 
 now left in the hands of the railway managers, to 
 change their rates so as to discriminate in favor of one 
 set of shippers and against another, or to manipulate 
 the business of their corporations so as to affect the 
 stock market, is a dangerous and intolerable threat to 
 commerce, to investors, and to the whole social fabric ; 
 that the exercise of this power is not only contrary to 
 the spirit of our laws, but that it is wholly opposed 
 to the fundamental principle of the laws by which 
 these corporations were created ; that in the power of 
 the government to establish and maintain public high- 
 ways lies a thorough remedy for the existing evils; 
 and that when the obligations of the railway are en- 
 forced by making it a public highway in fact, in- 
 stead of as a legal fiction, then we may look to see 
 the great principle of competition work so freely that 
 wild fluctuations of freight rates, the injustice of spe- 
 cial rates, the restrictive influence of- pools, or the cre- 
 ation of monopolies and the crushing out of inde- 
 pendent industries by discriminations, will become as 
 impossible on the railways as it is upon our lakes, 
 rivers, and canals. The principles which should gov- 
 ern the conduct of all great enterprises, the mainte- 
 nance of public rights, the freedom of commerce, the 
 subordination of corporations to the spirit and letter
 
 2i The Railways and the Hepublic. 
 
 of the law, are eternal. The preservation of the free- 
 dom of competition, the integrity of the commercial and 
 popular character, and the prosperity of the masses, 
 the restraint of arbitrary po^ver and of corrupt or mer- 
 cenary influences, will always be among the highest 
 aims of human society. All these issues are involved 
 in the problem of railway regulation, as it presents it- 
 self to-day, and its earnest consideration should not be 
 neglected while any power for evil is left in the unre- 
 strained and gigantic corporations.
 
 CHAPTER 11. 
 
 TEN YEARS OF DISCREMtNATION. 
 
 The power of railway managers to foster or to 
 injure particular traders, brauches of business, or sec- 
 tions of country, by discriminations in their rates of 
 freight, is a momentous element of " the raihvay prob- 
 lem." The extent of this power, in any case, depends 
 on the proportion which the cost of transportation 
 bears to the total value of the article transported. 
 Where the charores for frei^-ht, in the a£::2:reirate, amount 
 to less than the average profit of the dealer, discrimi- 
 nation in rates by public carriers can only affect the 
 distribution of such profits. But where the discrimi- 
 nation in freight charges exceeds the profits, it carries 
 with it the extinction of profits for one, with probable 
 ruin if kept up long enough, and, on the other hand, 
 certain fortune for the other. The same may be said 
 of two rival cities or sections competing in the produc- 
 tion of any great staple. Other things being equal, the 
 power of the railroads can, if it is persistently exerted, 
 condemn the industry of one city to decay and stimu- 
 late the other to activity. Many interests are, by the 
 character of their business, protected from any direct 
 action of the power to discriminate on freight charges. 
 The jeweller, tlie bookseller, the dealer in costly fabrics, 
 the banker, or the retail dealer generally, and a vast 
 list of similar interests, pay freights which are so small
 
 26 The Railways and the Rejpvhlic. 
 
 in proportion to their net receipts, that no discrimina- 
 tion in rates can materially affect them. But there 
 are few "which can escape the indirect effect of an un- 
 scrupulous exertion of the power to discriminate in 
 the transportation of the great staples which make the 
 fundamental factors of any trade. IS^early all of these 
 leading interests are at the mercy of the power to 
 make unequal rates, which at present is left, with com- 
 paratively slight check, in the hands of the railway of- 
 ficials. In manufacturing iron, coal, and steel, the ele- 
 ment of freight charges in the cost of product is several 
 times the average profit. In the shipping of the great 
 grain staples a certain profit of two or three cents a 
 bushel will assure fortune to any enterprising man, but 
 rates of freight from Chicago to New York, in 1884, 
 varied more than ten cents per bushel in sixty days. 
 Where the higher cost of merchandise represents a 
 greater expenditure of labor, as in the manufiicture 
 of machines, tools, or glassware, and the wholesale 
 trade in groceries and dry-goods, the power of the 
 railways is less absolute, as the proportion of freight 
 charges to the profits is less important. But even 
 these interests may be vitally affected by persistent 
 discrimination. It cuts down the profits of one com- 
 petitor and enhances those of another; and thus acts 
 as a perpetual disturbing force in trade, against which 
 sagacity, energy, and integrity contend in vain. 
 
 While the deliberate and unscrupulous use of the 
 power of railway ofiicials for selfish purposes is an 
 evil of which the system is capable, it is not, of course, 
 believed to be a general practice. It cannot be alleged 
 with any degree of fairness that the majority of the 
 railways voluntarily enter a policy of discrimination,
 
 Ten Years of Discrimination. 27 
 
 or that all of the discriminations 'wliicli have existed 
 were prompted by the intention of the railway man- 
 ager to favor his own business connections or any one 
 else at the expense of the general shipper. But dis- 
 criminations which arise under the ordinary ^vorkings 
 of the railway system, and without intentional favor- 
 itism, may effect ruinous injustice as certainly as if they 
 had been planned for the purpose. When a railway 
 has a thousand cars ready to be loaded at Chicago or 
 St. Louis, and a rival offers to take the grain to the 
 seaboard for half the usual rate, the pressure upon the 
 first road to make an equal reduction is j^robably too 
 powerful for resistance. The cut will make a lower rate 
 to New York and Philadelphia than to Pittsburgh at 
 half the distance, and will foi'ce the Pittsburgh working- 
 man to pay more for his bread than his competitor ou 
 the seaboard ; but it is forced on the railway manager 
 by controlling circumstances. So also in dull times, 
 when a railway manager is in doubt about earning 
 enough to pay the interest-charges and dividends upon 
 the bonds and stock of his company, if a great shipper 
 comes to him and says, " I will guarantee your road 
 enough freight to make the profits secure, if you, on 
 the other hand, will agree to make a prohibitive rate 
 against all my rivals so^that they shall be shut out of 
 tlie market," the temptation to the railway manager 
 to exert this power, if he has it, is greater tlian any 
 human will, trained to the supreme business purpose 
 of money-making, is likely to withstand. Yet from 
 exactly such involuntary beginnings the most burden- 
 some and iniquitous discriminations have grown. 
 Some of these, begun under overwhelming pressure, 
 have grown to a steady and tyrannical exertion of the
 
 28 The Railways and the EepvMic. 
 
 discriminating power, and some Lave been kept up 
 merely because they are still a necessity from the pres- 
 ent constitution of the railway business. In either 
 case the effect is the same, an arbitrary power presses 
 with injustice and inequality upon the commercial 
 system of the country. 
 
 Even where no such discriminations now exist, the 
 fact that they have at times existed, and that the 
 power to renew them remains unrestrained, demands 
 either a restraint upon them or the elimination of their 
 causes. It is therefore important, while reviewing the 
 extent and character of the discriminations that have 
 existed, to determine how far they are due simply to 
 the arbitrary will of the men who fixed the rates, and 
 how far they are produced by external and perhaps 
 irresistible influences. Before commencing this work of 
 examining the extent and character of discriminations, 
 it is necessary to say that such an examination cannot 
 be exhaustive. Vast numbers of the minor and petty 
 inequalities in railway rates have never been brought 
 to light. Even of those that have been made public, 
 a complete list w^ould exceed the limits of this work. 
 The evidence with regard to the discriminations in a 
 single state, furnished by the legislative investigation 
 in New York, occupies nearly 5000 pages. All that 
 can be done in this work is to review the leading and 
 most important instances of discrimination under their 
 general classification of — (1) discrimination between 
 different classes of freight ; (2) discrimination between 
 di0*erent localities; (3) discrimination between indi- 
 vidual and competing shippers in the same branches 
 of trade. 
 
 The discrimination in the classification of freights is
 
 Ten Years of Discrimination. 29 
 
 probably the most universal, and at tbe same time 
 the least injurious, of all the discriminations practised 
 by the railways. There is hardly a railway in the 
 United States that does not charge more for the same 
 service and risk on one class of goods than another. 
 Most of them spring, more or less directly, from the 
 rule which obtains in the vast majority of freight tar- 
 iffs, of " charging what the freight will bear," or, in 
 other words, of decreeing that if the profits of one line 
 of trade are greater in proportion to the amount of its 
 freight charges than those of another, the more profita- 
 ble class shall be assessed a heavier rate and be com- 
 pelled to pay more for the same service to the rail- 
 ways. The frankest avowal of the lack of rule which 
 governs this subject w^as made by Mr. Albert Fink, 
 before the Railway Commission of New York. " Clas- 
 sification," said this high authority, "is always arbi- 
 trary," and, for this reason, he and the railway powers 
 which he represents declined to amend the tariff by 
 which they charged one wholesale trade twice as 
 much for the same service as they charged another. 
 The example is one of the most recent, and having es- 
 pecial prominence by reason of the interests involved, 
 is appropriate as an illustration of this class of dis- 
 crimination. The respective classifications of domestic 
 dry-goods and groceries imposed, in 1883, a rate of 75 
 cents per hundred pounds on domestic dry-goods from 
 New York to Chicago, while the rate on coffee or 
 sugar by the car-lo<id was 35 cents per hundred 
 pounds. The representatives of the dry-goods inter- 
 est uro-ed that it cost no more to haul a car-load of 
 cotton fabrics from New York to Chicacjo than it did 
 a car-load of coffee; that dry -goods were cleaner,
 
 30 The Railways and the JRepublic. 
 
 more easily handled, and less liable to damage than 
 sugar or coffee ; and, finally, that the profit on domestic 
 dry- goods was notably smaller than on almost any 
 other class of wholesale trade, and furnished no justi- 
 fication for the policy of making it bear twice as large 
 a proportion of the railway charges as other lines of 
 trade. A hint as to the source of this difference 
 was conveyed by the statement that it arose from a 
 classification established during the war, when domes- 
 tic sheetings were worth $400 or $500 a bale, and 
 was continued when their value was reduced to $50 
 a bale. To these arguments the reply of the railway 
 officials was that the railways were already carrying 
 goods as cheaply as they could, with due regard to re- 
 turns on their capital. This might have been a fair 
 argument in favor of retaining the average of their 
 rates; but it utterly avoided the merits of the ques- 
 tion involved in maintaining a discrimination in classi- 
 fication which imposes a burden of freight charges on 
 one class of merchandise more than twice as great as 
 on another. Although the New York State Board of 
 Railway Commissioners decided that the discrimina- 
 tion was indefensible, and recommended a change, the 
 railways refused to comply with the recommendation, 
 claiming that the matter was beyond the power of the 
 railway commissioners because it pei'tained to inter- 
 state commerce. And the power of the railways over 
 the legislature of that state is so great that the ag- 
 grieved merchants had no encouragement to ask the 
 legislature to enforce upon its own corporate creatures 
 the recommendations of the tribunal it had established 
 to remedy such evils. 
 
 A vital discrimination in rates was made several
 
 Ten Years of Discrimination. 31 
 
 years ago, between materials for the manufacture of 
 iron in Pittsburgh and grain from the Western cities. 
 The comparison noted below is based on the figures 
 for that period, and the details may have changed some- 
 what since then. But the discrimination in the open 
 rates still exists, and the illustration of its cliaracter in 
 1876 to 1878 is pertinent to our purpose. The freights 
 mainly carried for a manufacturing cit}^ like Pittsburgh 
 are the cheapest that a railway can transport. Pig 
 iron, ore, and coal are loaded and unloaded by the 
 shippers and receivers, are transported in flat-cars, and 
 require no protection from the weather while in transit 
 or at the end of the route. Yet the rate per ton per 
 mile upon these freights, \vhich furnish the foundation 
 of the business of Pittsburgh, has ranged from two to 
 five times as much as the rate on grain and bread- 
 stuffs from Chicago to New Yorh.* This discrimina- 
 tion was supported by the usual plea of the greater 
 desirability of the grain traffic, in its affording the 
 longer haul and the larger volume. But the principal 
 factor which makes the longer haul preferable was 
 removed from this case by the fact that the terminal 
 expenses, whose proportion to the charges is generally 
 less in that case, were borne by the shippers on both 
 
 * The average charge on the pig iron shipped to Pittsburgh in 1877 
 made tlie rate per ton-mile 2| cents; and on ore \^ cents. Tlie open 
 rates liave notclianged since then; and if there has been any correction 
 of this discrimination, it has been done by the resort to another discrimi- 
 nating process in the shape of special rates or rebates. In contrast with 
 this the rate on grain from Chicago to New York, Avhen sustained by the 
 pool at 30 cents per hundred, represents a rate per ton-mile of f of a cent ; 
 and when reduced, as it was in tlie present year, to 10 or 15 cents, 
 shows a rate per ton-mile of ^ or } of a cent. In 1877 the average pool- 
 line rate was /ij^j of a cent per ton-mile.
 
 32 The Railways and the Republic. 
 
 classes of freight. As to the volume of business repre- 
 sented in the grain traffic, there is no such difference as 
 justifies the difference in charges. Supposing the cost 
 of canning a given class of freight to be ^ a cent per 
 ton-mile, a contract of 100,000 ton-miles at f of a cent 
 will yield $250 net, while one of 1,000,000 ton-miles 
 at -jQ of a cent will give a net profit of $1000. But 
 this will not justify making the smaller haul pay three 
 or four times as much as the larger. Such a charge 
 indicates, either that the rate charged on the short haul 
 yields a profit two to three times the cost of hauling, 
 or else that the long haul is done at a loss for which 
 the shippers on the short haul are assessed.* In the 
 case in question the practice simply afforded a discrimi- 
 nation between two different localities. The stress of 
 the hard times in 1877, as in 1884, w^as laid on the iron 
 industry of Pittsburgh, while the grain shippers of the 
 West escaped some of the burdens. 
 
 The difference which should be made on account of 
 the relatively low cost of transporting the freights is 
 illustrated by the charge on grain. The average cost 
 of transporting all classes of freight on the Pennsyl- 
 vania Railroad, in 1877, Avas -{^-Q of a cent per ton-mile, 
 while the average charge was -j^ of a cent. Grain, 
 which is hardly so much below the average in the first 
 cost of transportation as iron ore and pig iron are below 
 grain, is always deemed profitable by the pool lines at 
 
 * In this case there was no such difference in the amount of business 
 represented. The pig-iron and ore business of the railways to Pittsburgh 
 amounted, in 1877, to 37,000,000 ton-miles. This is equal to the trans- 
 portation of 3,500,000 bushels of grain from Chicago to the seaboard. 
 After reaching millions of transportation units the reduction in average 
 cost for additional millions is very slight.
 
 Ten Years of Discrimination. 33 
 
 iVo <^f ^ cent, or 30 cents per hundred to New York. 
 If the Pittsburgh classes had been placed on the same 
 basis as grain in 1877, leaving their greater cheapness 
 to compensate for the shorter haul, the saving to Pitts- 
 burgh would in that year have relieved her mills from 
 much of the loss and shrinkage which they suffered from 
 1874: to 1878. The effect of this discrimination, as be- 
 tween two different communities, may be noticed more 
 at length when we come to consider discriminations 
 between localities. Its present application is sufficient 
 when we perceive how little respect is paid, in fixing 
 freight charges, to the cost of service and a due propor- 
 tion of the charges for interest and dividends. If the 
 railways calculated their rates upon the cost of service, 
 it hardly seems possible that they would distribute 
 their charges so unequally. But the fact is that the}^ 
 have been able to maintain their charges on the iron 
 freights, while influences beyond their control, in the 
 shape of water competition and cutting between the 
 railways themselves, have established low rates on 
 grain; so that the iron industries of Pittsburgh are 
 forced by high rates to compensate the railways for 
 giving low rates to the grain shippers of Chicago. 
 
 One of the most strikino; instances of discrimination 
 between classes of freight is that brought up last year 
 by the discussion and adjudication of the respective 
 rates on live-stock and dressed beef The decision was 
 designed, it was said, to prevent unjust discriminations; 
 Ijut a material and grave discrimination was embodied 
 in the decision itself by the Trunk Line pool. The 
 rule adopted was, so to determine the i-ailroad charges 
 that the cost of transporting beef shall be the same 
 whether it comes to the Eastern market as live-stock, 
 
 3
 
 34 The Railways and the Republic. 
 
 to be slaughtered there, or as dressed beef which has 
 been slaughtered in the West. In other words, the 
 railway legislature of the country enacts that the man 
 who ships only the meat obtained by slaughtering cat- 
 tle in Colorado shall have no advantao;e for the smaller 
 weight shipped over the man wdio ships the same meat 
 in the live form, with the useless weight of the hides, 
 hoofs, and offal. In order to secure this result, the 
 commissioners recommended that the rate on dressed 
 beef shall be made 75 per cent, more than the rate on 
 cattle, or 70 cents per hundred pounds when the rate 
 on live cattle is 40 cents. This remarkable rule was 
 extolled as "the only just principle," because "the 
 competition between the t^vo classes of traffic is con- 
 fined simply to the parties who deal in them, the rail- 
 ways remaining neutral, and charging all parties alike 
 for the same service rendered." The absurd assertion 
 that the railways remain neutral, when they take 
 away from one class of traffic the advantage of its 
 device for lessening the cost of transportation, and 
 that they charge all parties alike for the same service 
 rendered, when they charge one class 75 per cent, 
 more than the other for transporting one hundred 
 pounds of freight, could only be made in practical 
 support of a public wrong. The very essence of the 
 question lies in the fact that the shippers of dressed 
 beef have adopted methods which do away with the 
 cost of transporting the useless parts of the animal to 
 the markets of the East. How great an economy this 
 effects is shown hv the fisfures of the Trunk Line com- 
 raissioner himself. If it requires a charge larger by 
 68-| per cent, (allowing for the difference in incidental 
 expenses) to equalize the cost of transportation, the
 
 Ten Years of Discrimination. 35 
 
 saving by the shipment of dressed beef is 34| per cent, 
 over the shipment of live-stock. This saving means 
 cheaper meat to the consumers of the East, and as 
 increased consumption always follows upon reduced 
 cost, it also means increased production of this class of 
 food in the West. Against the general adoption of this 
 improvement the Trunk Line commissioner takes his 
 stand on the principle that the neutrality of the rail- 
 roads requires them to destroy the profit of new de- 
 vices for the benefit of the public and consumers. Xo 
 more crushing illustration need be given of the utter 
 emptiness of the claim that "the intelligent railway 
 managers" determine their charges by the cost of mov^- 
 ins: freig:ht. 
 
 The remarkable suggestion in defence of this in- 
 equality, that railways should assume the functions of 
 a national Board of Health, and discriminate against 
 dressed beef on the ground that it may be unhealthy, 
 needs no comment. Another, which commands more 
 respect considered by itself, is that the cost to the 
 railway of transporting dressed beef is greater than of 
 transporting live cattle. But the exact weight of this 
 plea was shown by Mr. Fink's own figures, which jus- 
 tify an additional charge on dressed beef of only 6-1- 
 cents per hundred pounds." The inadequacy of these 
 
 * The additional cost of refrigerator cars — when they are owned by 
 the railways — and tlie necessity of renewing the ice in transit, undoubt- 
 edly adds to the standing items of cost in hauling dressed beef, as the 
 necessity of unloading, feeding, and watering live-stock does in the live- 
 stock tralRc. We have Mr. Fink's authority for the statement that these 
 incidental expenses are larger in the dressed-beef traffic than in the live- 
 stock traffic; but we also have his authority for figures whicli show that 
 this difference is utterly inadequate to justify the difference in freight 
 rates which he upholds. For he states the incidental expenses, outside 
 of tiie regular items of cost of hauling, to be ITJ cents per hundred
 
 36 The Railways and the Mepublic. 
 
 pretexts forces us to believe that the real reason why 
 the railways uphold this discrimination is the generally 
 received one that the railway corporations themselves, 
 or the influential railway managers, have large pro- 
 prietary interests in live-stock yards throughout the 
 country ; and that rather than allow these vested inter- 
 ests to be depreciated by the general introduction of 
 dressed beef, they are united in dejDriving shippers 
 and consumers the benefit of the economy of trans- 
 portation made possible by the dressed-beef trade.* 
 
 Instances of rates levied under careless or unfair 
 classification could be multiplied indefinitely by the 
 study of almost any railway tariff in tlie land. But 
 the three instances named amply serve the purpose of 
 illustration. One of them, which originally grew out 
 of a classification occasioned by war values, has recent- 
 ly been upheld by the authority of the Trunk-Line 
 pool ; another is enacted and established by the same 
 authority ; while the third is embodied in the rates of 
 two of the most prominent raihvay corporations in the 
 country. The rates on cotton goods simply force that 
 trade to bear a greater share of the railway charges and 
 pay more towards the dividends and interest of the 
 railways than the grocery trade. No such violation of 
 
 pounds on live-stock, and 24 cents on dressed beef. The difference being 
 fij cents, it is plain tliat if the rate of 40 cents yields a fair profit to the 
 railways on live cattle, the proper rate for dressed beef, calculated on 
 cost of service, is 46^ cents. 
 
 * These rates have been widely varied since the decision commented 
 upon above, as the pool was able to sustain the discrimination, or as the 
 railways broke away into open competition. The relative influence of 
 competition and combination upon inequalities in rates appears from 
 the fact that, when the railways were competing, the rates on dressed 
 beef came the nearest to equality with those on live-stock ; while, when 
 tbe pool was able to enforce its rates, the discrimination was restored.
 
 Ten Years of Discrimination. 37 
 
 private riglits as is involved in the driving of one firm 
 or class of firms out of business, for the benefit of their 
 competitors, appears in this instance. The burden, as 
 far as the facts appear, is laid equally on the entire in- 
 terest. That there is an inequality, and one which, in 
 the present state of the cotton-goods trade, is hard for 
 it to endure, is unquestionable; and being free from 
 the more outra2:eous characteristics of other discrimina- 
 tions, it affords a very favorable instance for consider- 
 ing dispassionately the question as to the equality of 
 railway rates. To a certain extent the case of the iron 
 rates at Pittsburgh presents much the same aspect, with 
 the additional feature that it levied a great share of 
 the burdens of a very trying business period upon one 
 city for the benefit of others, and that it prevented the 
 manufacturers of that city from seeking the best means 
 of relief. During the years from 1875 to 1878 the cost 
 of iron in Pittsburgh was so nearly that of iron at the 
 English mills that a little economy in the cost of manu- 
 facture would have enabled her to sell her surplus iron 
 in competition with English manufactures in foreign 
 markets. The diff"erence between the averasje freio-hts 
 on the materials and what they would have been if 
 calculated on an equality with the grain rates was 
 $3.30 on a ton of finished iron. Had Pittsburgh re- 
 ceived that advantage, there is no doubt that she could 
 have sent abroad a large surplus of Iier principal staple 
 of manufacture ; and, instead of the idleness, want, and 
 desperation which culminated in the riots of 1877, her 
 working classes w^ould have enjoyed steady employ- 
 ment through all that trying season. The practical 
 edict of the railway rates was, however, that the iron 
 manufacturei's of Pittsburgh not only should not have 
 
 132954
 
 38 The Railways and the Rejpvhlic. 
 
 the benefit of a foreign outlet for their chief staple, but 
 that they should pay rates which strengthened the rail- 
 ways so that they could furnish a foreign outlet to the 
 grain trade at exceptionally low rates. The thii'd in- 
 stance partakes largely of the character of a discrimi- 
 nation between competing firms or classes of business; 
 and its virtual declaration that the discoverers of im- 
 proved economic methods for the prosecution of com- 
 mercial enterprises shall not secure for themselves and 
 the public the benefit of their new devices, amounts to 
 a grave attack upon public rights, and a usurpation 
 by the corporations of jDower such as no monarch ever 
 wielded under a constitutional government. 
 
 Discrimination between diflPerent localities or cities 
 involves the daily exercise by railway officials who 
 adjust freight tariffs of a power greater than that 
 possessed by any civilized government — except, per- 
 haps, that of Russia. It is not alleged that the rail- 
 ways regularly and deliberately adjust freight rates in 
 order that one city or section of country may prosper, 
 or another undeigo adversity or decay. It may be 
 questioned whether any discrimination of this char- 
 acter ever arose from such a deliberate intention. Its 
 cause, where a cause can be traced, is found in the 
 external and irresistible influences of competition at 
 the points which secure the benefits, and their absence 
 at the points Avhich bear the burden. It is also often 
 true that the very influences which force the railway 
 manaGfer to make the discrimination are the stronsrest 
 inducements for him to stand by it when it is exposed. 
 A railway which is cutting rates for the purpose of 
 securing traffic at competitive points naturally looks 
 to the sustaining of rates at the non ■ competitive
 
 Ten Years of Discrimination. 39 
 
 points to furnish the sinews of wai'. So that the mer- 
 chants or manufacturers whose profits are cut down 
 or who are wholly shut out of market by the discrimi- 
 nations against their community, not only have to en- 
 dure it, but have, like Isaac, to furnish the fuel for their 
 own sacrifice. The justice of such things wears widely 
 different aspects, when looked at, now exclusively from 
 the standpoint of the railway interest, and again as in- 
 volving the welfare and equal treatment of the business 
 public. It should also be said that this class of dis- 
 criminations includes more cases of groundless com- 
 plaints against the railway policy than perhaps any 
 other. It is natural for the people of any given local- 
 ity to turn their attention principally to the advantages 
 wdiich their section or city possesses, if allowed a 
 proper development by the railway policy. But the 
 tendency of different sections and cities to plead each 
 its own case has resulted in numerous arraignments of 
 the railway policy, utterly at variance with each other. 
 The patrons of the railways are human, and, conse- 
 quently, a large jiroportion of them are fallible and 
 greedy; which results in excessive claims and incon- 
 sistent condemnations of the railway tarififs. But the 
 inconsistencies and self-contradictions of the critics 
 do not disprove the instances of discrimination which 
 have involved the prosperity of whole states or even 
 sections of the country, or which have burdened 
 entire cities and secured to their i-ivals rapid growth 
 and enhanced wealth. Pursuing this class of discrimi- 
 nations into their minor details, examples will be found 
 of such extravagant and eccentric inecj^ualities as pro- 
 duce a doubt whether the whole business of fixing tar- 
 iffs is not an immense practical joke. In order fully to
 
 4:0 The Railways and the Repvblic. 
 
 appreciate the sublime height of humor rer.ched, such 
 cases must be studied in conjunction with the grave 
 assertion that these are subjects which no one but the 
 trained experts can understand. 
 
 The first subject naturally discussed under this head 
 is the discrimination between the grain producers of 
 the West and the ag-ricultural districts of the East. 
 For many years it has been the practice of the railways 
 to charge as much for carrying agricultural products 
 from Ohio, Western Pennsylvania, or Western New 
 York to the seaboard as from Chicago to the same 
 destination. At times the charge for the shorter haul 
 has been much greater, the latest example having oc- 
 curred during the cutting of rates in the spring of the 
 present year. This has been practically acknowledged 
 by eminent railway authorities, who justify it on the 
 ground that if the western farmers are not allowed 
 especially low rates tlieir products cannot be sold in 
 the markets of Europe. This is a practical claim that 
 the railways should carry western products at a loss, 
 and that other classes of shippers should support them 
 in doing so by paying rates which will yield such 
 profits as to make up the loss on the grain traffic. 
 The idea is absurd, and is never sincerely entertained 
 in the practical deliberations of the railways. The fac- 
 tor ^vhich brings the average rate on grain from the 
 West to about half a cent per ton-mile is the competi- 
 tion of the ^vater routes, and the fact that it will at 
 once pay the railways a profit and induce the majority 
 of the grain shipments to take rail rather than water 
 transportation. But if the rate of half a cent per ton- 
 mile from the Chicago or St. Louis elevators is remu- 
 nerative, what is the obvious conclusion as to the rate
 
 Ten Years of Discrimination. 41 
 
 of one cent per ton-mile from the Ohio or Western 
 New York elevator? Simply that while the force of 
 competition causes the railways to accept moderate or 
 even narrow profits on the Western grain traffic, the 
 absence of that force allows them to collect what by 
 comparison are shown to be exorbitant profits on the 
 grain shipped by the farmers of the Eastern or Middle 
 States. 
 
 The efi*ect of the advantages given by the railway 
 policy of the last ten years to producers of the West 
 over their competitors in the East has been greater 
 than is generally understood. It would not be singu- 
 lar, when the Eastern and Middle States have been 
 most thickly covered by the railways, and the farming 
 districts are as fertile as ever, that their cereal crops 
 should diminish. That mio-ht be the natural result of 
 superior facilities for sending dairy products and fruits 
 to market, and of superior wealth in the production of 
 highdjred stock. But under such a development the 
 value of Eastern farms would increase simultaneously 
 with that of the AVestern farms. When we find that 
 an actual decrease in the valuation of the farming 
 property of the East has taken place, the inference is 
 unavoidable that there has been something abnormal 
 in the development of the country. Yet this is what 
 is shown by the census returns of the last two decades. 
 The depreciation is thought to have commenced pre- 
 vious to 1870, but its operation is clearly shown in 
 the comparison of the figures of 1870 and 1880. In a 
 decade in which the total value of all farming lands 
 in the United States increased nearly a thousand 
 millions of dollars, or about ten per cent., there was a 
 general decrease in the valuation of the farming lands
 
 42 The Hallways and the Rejpiihlic. 
 
 of the states nearest to the seaboard Diarkets, and this 
 depreciation in the oldest and richest states is shown, 
 by the census reports, to aggregate, in the Noi'thern 
 Atlantic States, more than $350,000,000/- 
 
 It hardly needs to be said that vvhere development 
 is uniform, every year should add value to the land 
 located nearest to market. Here, however, we are 
 confronted with the fact that the lands most accessi- 
 ble to the great seaboard cities, and nearest to the 
 foreign markets for our surplus products, have under- 
 gone an actual and general depreciation in value. 
 This phenomenon is explained, wdien we find the rail- 
 ways charging sixty -five or seventy-five cents on a tub 
 of butter to New York from a point one hundred and 
 sixty -five miles away, while the rate from Elgin, 
 Illinois, one thousand miles away, was thirty cents. 
 Consider the eflfect of similar discriminations through- 
 out the whole list of agricultural products, and the de- 
 cay of Middle-States farming is adequately explained. 
 The railways have, through the inequalities of their 
 
 * The depreciation of farming lands wliicli took place in the North- 
 ern Atlantic States, Avhile their acreage of improved lands increased, is 
 shown by the following table, taken from tlie census reports : 
 
 Increased Acreage Depreciatiou in 
 
 of Improved Lands. Value. 
 
 New York . . . 2,000,000 $226,000,000 
 
 Pennsylvania . . 1,900,000 68,000,000 
 
 New Jersey . . 110,000 67,000,000 
 
 Maryland . . . 428,000 5,000,000 
 
 Delaware . . . 48,000 10,000,000 
 
 Vermont . . . 113,000 30,000,000 
 
 Maine .... 567,000 2,000,000 
 
 Connecticut and New Hampshire lost slightly in acreage, with a cor- 
 responding loss in valuation of $3,000,000 and $5,000,000 respectively. 
 Massachusetts presented the unique example of a gain of $30,000,000 in 
 valuation.
 
 Ten Years of Discrimination. 43 
 
 rates, placed the fiwmers of those states practically far- 
 ther from market than their competitors in the West. 
 
 Yet the causes which give rise to this discrimina- 
 tiou are plainly external to the management of the 
 railways. Every railway manager has the alternative 
 presented to him of either carrying Western grain at 
 the half cent per ton-mile, which is about the average 
 rate, or of not carrying it at all. If he does not 
 concede that low rate he knows that the traffic will 
 go to the water routes or to some other railway, and 
 he takes it for the sake of the narrow profit that 
 there is in it. In the present condition of railway 
 ethics it would be expecting superhuman justice to 
 hope that the president or general freight agent would 
 reduce local rates in proportion. They count on the 
 local traffic as a certainty, and while an impartial ob- 
 server might see that the most permanent prosperity 
 of the enterprise lies in stimulating local traffic by as 
 low rates as are 2:iven to throuo;h traffic, it is natural 
 that railway officials, who need high local rates to 
 meet dividends and interest charges, should make 
 them as high as possible, without regard to the simul- 
 taneous and inconsistent allowance of low I'ates to 
 through shippers. It is natural, and seems inevitable, 
 in the present constitution of railway management, that 
 the discrimination in favor of throu2;h c-rain should 
 exist ; but the fiict that such a discrimination has 
 arbitrarily transferred $350,000,000 of values from the 
 East to the West is so grave that earnest inquiry is 
 demanded whether it is really inevitable. 
 
 Prominent among other discriminations Ijetween lo- 
 calities is that against the iron business of Pittsburgh 
 already alluded to, which formed so great a factor in the
 
 44 The Railways and the Republic, 
 
 depression of that industry from 1874 to 1878. This 
 discrimination arose entirely from the fact that, during 
 the period referred to, the iron trade of that city was, 
 as far as westward shipments were concerned, under 
 the control of a single railway combination; while the 
 existence of competition in the freighting business of 
 such competing points as Cleveland, the Mahoning 
 and Shenango valleys, Troy, N. Y., and the Eastern 
 Pennsylvania iron mills over-balanced the natural ad- 
 vantages which Pittsburgh ought to have enjoyed. 
 The lowest rates on the materials used in the manu- 
 facture of iron, during that period, were given to the 
 works in the Mahoning and Shenango valleys.* These 
 discriminations were in force after the Pennsylvania 
 Railroad had made an effort to reform greater ones, 
 and to place Pittsburgh on an equality with the other 
 points deprived only of its natural manufacturing 
 
 *This comparison is used because the conditions of mEinufactnre were 
 very ncarlj' similar, while those at Cleveland, Troy, and Eastern Pennsyl- 
 vania v^cre so dissimilar that a comparison of freight rates is difficult. 
 On the hauling of ore to the blast furnaces the charges to Pittsburgh 
 ranged from $2.95, in the early part of the period named, to $2.10 at its 
 close, while the charge to Youngstown was $1.25 at the opening of the 
 period and $1 at its close. The rates on pig iron shipped from the 
 blast furnaces of these valleys, to Cleveland and to Pittsburgh respec- 
 tively, an equal distance, showed a constant advantage to Cleveland of 
 from 56 cents per ton in 1874 to 12 cents in 1878. These may seem to 
 be unimportant differences, but when their aggregate is taken in a ton 
 of finished iron it is of vital importance. The total freight charges 
 on a ton of pig iron made in Pittsburgh in 1878 wore $1.90 per ton 
 greater than if it were made in the Mahoning Valley, on an equal 
 mileage and handling. On a ton of manufiictured iron in the mills, the 
 discrimination against Pittsburgh was $2.33. Carrying oat the compari- 
 son, the total freight charges on a ton of bar iron manufactured at Pitts- 
 burgh and delivered at Chicago were $11.10, while from the Mahoning 
 Valley these charges amounted to $7.57 on all-rail routes. By the lake 
 and rail route the discrimination was 50 cents per ton greater.
 
 Ten Years of Discrzjnination. 45 
 
 advantages. All other things being equal a discrim- 
 ination of $3 per ton would, during that period of 
 depression, have swallowed up the profits of manu- 
 fiicture. But Pittsburgh had the advantage of cheap 
 fuel, and the principle upon whicli i-ailway freights are 
 assessed is shown by the fact that the Pennsylvania 
 Railroad, in reari'auging its charges, obtained an ex- 
 pert's estimate of the advantage possessed by the 
 Pittsburgh manufacturers in the cheapness of coal, 
 and preserved just enough discrimination to practically 
 appropriate that advantage by the excess of rates 
 charged to the manufacturers of that city over its 
 competitors in the Western markets.* 
 
 Here is a rather curious example of the anomalous 
 effects produced by such inequalities. At that period, 
 Pittsburgli, by competitive rates to the East, was 
 enabled to sell a large share of its product in the 
 country adjacent to the Eastern rolling-mills : while 
 the rates from the New York and Eastern Penn- 
 sylvania mills to Chicago, being $1 or $2 per ton 
 cheajDer than from Pittsburgh, enabled them to con- 
 trol the Western market. In other words, by means 
 of its advantages for manufticture and its competing 
 Eastern route, Pittsburgh was enabled to sell its iron 
 almost at the doors of the Eastern mills, while the 
 Eastern mills, by means of their competing Western 
 
 * The eflfect of these burdens on Pittsburgh's leading industry was 
 shown by the rapid growtli of tliat industry after the business men had 
 been driven to the construction of a competing line. Tlic aggregate 
 product of iron and steel in Pittsburgh for the year 1878 was 417,147 
 tons; for 1883 it was 877,881 tons. Tlie first, after four years of discrim- 
 ination, was 17.G per cent, of tlie entire product of the country; tlie sec- 
 ond, after five years of moderate railway competition, was 20.8 per cent, of 
 the iron production of the United States.
 
 46 The Hallways and the Rej>uhlic. 
 
 routes, were able to sell iron in markets mucli nearer 
 to Pittsburgh than to the mills supplying them. By 
 means of this peculiar adjustment of rates, there was 
 an utterly useless haul of Eastern iron through Pitts- 
 burgh to the West, and of Pittsburgh iron sent East to 
 take its place. Whether the loss by that unnecessary 
 transportation was imposed upon the manufacturers or 
 the railways or the consumers, or divided among all 
 three of them, there is no certain means of determining. 
 It is only clear that an abnormal adjustment of freight 
 rates caused an utter waste of human effort by the 
 unnecessary transportation of some hundred thousand 
 tons of iron several hundred miles. 
 
 Another discrimination affectiog vast interests, and 
 illustrating in a strong light the principles upon which 
 rates are too often fixed, is that which attracted so 
 much attention last year in the anthracite coal rates to 
 Philadelphia. This is one of the fruits of what is, 
 with one exception, the most successfully managed 
 railway combination in the country, and the fticts 
 furnish a rather severe commentary on the claim of 
 several eminent gentlemen that the system of pooling 
 furnishes a remedy for the evils of discrimination. 
 For many years the shipment of coal to the principal 
 cities of the East has been controlled by a combina- 
 tion of the great coal-carrying railways. This com- 
 bination is complicated by the fact that its members 
 are miners and sellers of coal, as well as carriers fi'om 
 the mines to the markets. It is not necessary at this 
 point to speak of the dangers to legitimate trade 
 arising from the presence of a carrier that engages in 
 the mining business, with the power of shutting its 
 competitors out of the market when necessary to carry
 
 Ten Years of Discrimination. 47 
 
 out its o^vu purposes. All that is required here is to 
 notice that the hybrid character of the corporation, 
 hauling anthracite coal to Philadelphia, enabled it, 
 through combinations with other railways, to exact 
 from that city''^' considerably more for the anthracite 
 coal produced in its immediate vicinity than was paid 
 by cities one or two hundred miles fai'ther away. 
 Voluminous explanations of this discrimination were 
 made. The heart of the subject was, however, touched 
 by Mr. James E. Gowan when, in answer to a question 
 before a committee of the Philadelphia Councils, he 
 declared, with regard to the fact that his company 
 sold coal in Baltimore at 35 cents a ton less than in 
 Philadelphia: "I have no doubt that the Philadel- 
 phia and Reading Coal and Iron Company, like any 
 merchant or any other corporation, must meet the 
 exigencies of the market." In other words, the com- 
 panies could not altogether control the market in 
 other cities, although combinations had enabled them 
 greatly to advance the prices over those of the ante- 
 pool period; but in Philadelphia their control was so 
 absolute that it fixed a greater price and exacted a 
 
 * According to the published rates of the dual corporation known in- 
 terchangealjly as the Philadelpiiia and Reading Railway Company and 
 the Philadelphia and Reading Coal and Iron Company, tlie price of stove 
 coal in March, 1884, delivered on board vessels at Port Richmond, for 
 shipment beyond tlie capes of the Delaware, was $3.90. For delivery 
 within the harbor tlic price of the same coal was $4.45, while the price 
 of the same coal delivered by cars to the city yards was $4.80. It was 
 further shown in tlie inquiry raised on this subject tliat on coal for 
 shipment outside the capes a drawback was granted by tlie railway and 
 coal-producers conjointly, the result being that Philadelpiiia, at a dis- 
 tance of 90 miles from the coal-fields, paid a retail ])rice of $G.50 per ton, 
 while New York, 120 miles away, paid $5.50; Baltimore, 188 miles dis- 
 tant, paid $G; and Boston, with 354 miles of transportation, got its coal 
 at $5.70.
 
 4:8 The Railways and the Republic. 
 
 greater transportation charge on the coal used at its 
 own terminal city, than on the coal sent to a more 
 distant point. The discrimination in the open rates 
 of the company, between the city retailers and the 
 shippers to Boston or New York, was alleged by the 
 railway officials to be covered by the cost of switching 
 and delivering the cars to the retail yards. As this 
 discrimination amounts to $6 or $8 a car, there can be 
 no doubt of its lavish liberality; but it still leaves 
 50 cents per ton of the discrimination unexplained ; 
 while the different charge for exactly the same ser- 
 vice on coal destined to points within the Delaware, 
 over that on coal going outside the capes, was 55 
 cents. Rebates were alleged to increase that discrim- 
 ination by $1 per ton, while the fact that Kew York 
 and Boston, with a greater transportation than Phila- 
 delphia, got coal at retail 70 cents or $1 per ton 
 cheaper, proved that the discrimination did exist to a 
 great amount. On the very plausible hypothesis that 
 the rates w^hich w^ere profitable for the railroads to 
 carry coal destined for Boston or New Yoi'k would 
 also be profitable if the coal were consumed in Phila- 
 delphia, the aggregate discrimination in the item of 
 anthracite coal alone was estimated by a local author- 
 ity at $2,878,000 annually. A similar combination of 
 railways was shown by testimony before an investiga- 
 tion of the Philadelphia Gas Trust, to establish a no 
 less decided discrimination on the gas coal furnished 
 to the city gas-works."^* 
 
 * It is shown in the testimony there, as summarized by Mr. John Nor- 
 ris of the Philadelphia Record^ that the average price of Pennsylvania and 
 Westmoreland gas coal was less by 50 cents per ton in New York than 
 in Philadelphia; while about as signal an instance of arbitrary discrim-
 
 Ten Years of Discrimination. 49 
 
 It is not surprising that the people of Philadelphia 
 considered it grievous and anomalous that a combina- 
 tion of railways, the leading members of which owed 
 their very existence to Philadelphia capital, should 
 impose an annual burden on them, in the single item 
 of coal, of $3,750,000 in excess of what other cities 
 were charged on the same class of freight. Such a 
 discrimination against any city is a grave matter; but 
 it is especially paradoxical to the Philadelphians that 
 it should be laid on Philadelphia by the railways 
 which Philadelphia has built. Yet it may be doubted 
 if the burdening of any community, by the mere opera- 
 tion of unequal freight rates as between that point 
 and another, contains half so great a threat to public 
 rights as the avowal openly made by the railways 
 in this instance, of the right to impose different rates 
 with reference to the ultimate destination of the freig-ht 
 entirely beyond their lines. When the Philadelphia 
 and Reading declared that it would deliver coal on 
 board schooners at $3.90 if the schooners carried it to 
 Boston or New York, but would charge them 50 cents 
 more if they carried it to Wilmington or Chestei", 
 it assumed a power of arbitrary dictation little short 
 of tyranny. It is not the business of any raihvay cor- 
 
 ination as any on record came to light in the case of a contractor, who 
 had contracted to deliver 50,000 tons of coal to the Philadcli)liia Gas- 
 works. By a combination of the Pennsylvania and Baltimore and Oliio 
 Railroads, he was rendered unable to fuUil his contract, the rate of freight 
 being raised $1 and $1.25 per ton as soon as it was discovered tliat the 
 coal whicli he sliipped was intended for Pliiladelphia and not for New 
 York and Boston. In tlie statement of the case made by Jlr. John 
 Norris to tlie councils' committee the average discrimination against 
 Pliiladelphia on bituminous coal was stated to be $1 per ton, which 
 swelled the aggregate annual cost of the discrimination against tho city 
 to $3,750,000. 
 
 4
 
 50 The Hallways and the Repvhlic. 
 
 poration to control the distribution of any staple after 
 the service of transportation has been performed ; and 
 when a corporation goes beyond its own line by the 
 declaration that it will give better rates if the freight 
 is carried to one locality than if it is carried to another, 
 it is but a short step to the arbitrary prohibition by 
 the railways of any delivery of coal to such localities 
 as they may wish to exclude from the general market. 
 How easily that step is taken w^ill be shown farther 
 on, in the consideration of some other features of the 
 coal-carrying business. 
 
 In the examples of discrimination hitherto adduced, 
 the difference in rates has been moderate, the magni- 
 tude of the interests concerned is of great importance. 
 Not less important but far more striking are the 
 wild eccentricities of railway rates which are found 
 in almost every part of the nation, in the differences 
 on various classes of freiirht, in the charjres for Ions: 
 and short hauls. The almost numberless examples 
 in which the rates to points halfway fi'om the AVest 
 to the seaboard were greater than for carrying the 
 same freight all the way, were illustrated at Pitts- 
 burgh in the period already referred to;* but they 
 are made commonplace, not only by the frequency 
 of their recurrence, but by the abundance of more 
 
 *In March, 1878, the rates on grain and flour, from Chicago to Pitts- 
 burgh, ■o'cre 25 cents, while to New York, involving 350 miles more trans- 
 portation, they were 15 cents. In May of tlie same year grain was hauled 
 through Pittsburgh to Pliiladelphia and Baltimore at 13 cents, while if 
 the railways had stopped the freight at that city, and saved themselves 
 the carriage of 350 miles over the mountains, they would have charged 
 18 cents. These are but specimens which might be multii)lied indefi- 
 nitely, as shown by the New York investigation. — Report of Hepburn 
 Committee^ pp. 55, 53.
 
 Ten Years of Discrimination. 51 
 
 glaring examples of the same sort.* The instances in 
 wbicli a rate for a given distance has been fixed and 
 maintained at such an excess of the charge for trans- 
 porting the same freight the same distance and as 
 much farther, in addition, as to make the proportion 
 from three to four times as great, are multitudinous. 
 The examples furnished from the southern, western, 
 and transcontinental lines which have been quoted 
 by high authority and discussed in Congress show 
 their almost universal character.f Those cited from 
 Illinois, Mississippi, and Georgia are striking illustra- 
 
 * A striking illustration of a similar discrimination against tlie glass 
 industry was related to me by a glass manufacturer of fruit jars, doing 
 business in Pittsburgh. lu the summer of 1876 he made large contracts 
 for the delivery of fruit jars, by car-load lots, in Chicago, Toledo, and 
 Detroit. In order to figure the cost of delivery exactly, lie obtained a 
 special rate of $50 per car-load to Chicago, or, as a car-load of this ware 
 weighs less than 20,000 pounds, 28 cents per hundred. Towards the 
 close of the season he found it necessary to fill some of his orders by 
 buying the ware in Philadelphia, and in shijjping from that point found 
 that the open rate was 14 cents, or exactly one half the charge, for nearly 
 double the distance. On a complaint against this remarkable inequal- 
 ity, the rate from Pittsburgh was made exactly the same as from Pliila- 
 delphia, leaving a discrimination as regards distance of about three-sev- 
 enths of the whole charge. 
 
 fThe case which was heard before the Illinois Railway Commission 
 last year showed a rate of IG cents on fourth-class freight from Chicago 
 to Kankakee, a distance of 56 miles, while on the same freight to Mat- 
 toon, a distance of 172 miles, the rate was 10 cents. This inequality was 
 produced by railway competition at the latter point. 
 
 The Winona and Memphis example, which occupied so important a 
 place in tlie congressional debates, showed a charge of $1 per Ijale on 
 cotton from Memphis to New Orleans, a distance of 450 miles ; while 
 from Winona to New Orleans, a distance of 275 miles, the charge was 
 $3.25 per bale. River competition to Memphis was the cause of this dis- 
 crepancy. Another example of the same sort was adduced in Congress, 
 in a rate of $1 from New York to Atlanta, wliile, on the same class, un- 
 der the influence of ocean competition, the rate was made 75 cents to 
 New Orleans, about double the distance.
 
 52 The Railways and the Rejpublic. 
 
 tions of the utter disregard of distance wliicli prevails 
 in the making of railway rates as between competi- 
 tive and nou - competitive points ; but they cannot 
 present any such astounding triumph over the facts 
 of geography and the cost of service as is to be found 
 in the tariffs of the Pacific railways, as quoted by the 
 ISTew York Chamber of Commerce and referred to in 
 the House of Representatives.'"' It would be hard for 
 any one not acquainted with transcontinental geogra- 
 phy to comprehend, from the rates of the Pacific roads, 
 that each reduction in the distance for which the freight 
 is hauled brings with it a more than pro2')ortionate in- 
 crease of charges. 
 
 No less surprising a result of the eccentricities of 
 railway rates is to be found in the cases which were 
 experienc4id at Pittsburgh, and are shown by the Kew 
 York investigation to have been repeated in that 
 State,f where the inequalities of rates have actually 
 
 *Tlie transcontinental rates, given in the report on discriminations 
 to the New York Chamber of Commerce, are as follows : 
 
 New York to Salt Lake $4.95 
 
 " " Ogden 4.65 
 
 " " Dillon, Montana 3.45 
 
 " " San Francisco 2.25 
 
 Other specimens of the fantasies of the Pacific railway tariffs were re- 
 ferred to in Congress last winter, as follows : New York to San Fran- 
 cisco, $300 per car; to Reno or Virginia City, $500. The same outra- 
 geous rule was also found to be in force on the Northern Pacific, where 
 the rate on hardware from Chicago to Lincoln Station, 100 miles east 
 of Portland, was $400 ; to Portland, $200. The principle, or, rather, ab- 
 sence of i^rinciple, on which these discrepancies were based, was that the 
 interior merchants must pay the througli rate to the Pacific coast, and 
 the local rate back to the local point, although the goods were dropped 
 at the local point on their way west. 
 
 tW. W. Mack, of Rochester, shipped goods to New York, and liad 
 them reshipped to Cincinnati through Rochester, and made saving of 14
 
 Ten Years of Discrimination, 53 
 
 caused freights to be hauled from the original point 
 of shipment away from their destination to a competi- 
 tive point, and thence shipped back again through tlie 
 place where they originated. The waste of this wholly 
 useless haul represents, perhaps, the climax of the per- 
 sistent stupidity controlling freight rates. The trained 
 and scientific railway management sometimes lauded as 
 infallible might at least have perceived the economy 
 to the corporations of omitting the totally unnecessary 
 haul of seven hundred miles, and, while charging the 
 shippers just the same, allowing them the saving of 
 time by shipping the goods directly from Pittsburgh 
 or Rochester to the point of destination. Indeed, a 
 little liberality might have omitted the wasted haul, 
 and only charged half rates for it. Either of these 
 amendments might have been made favorably to the 
 shippers; but through 1876 and 1877 the railway offi- 
 cials continued so convinced of the utter correctness 
 of their freight charges that the spectacle of a car-load 
 of Pittsburgh manufactures, destined for Texas or 
 California, but commencing its journey by starting in 
 the other direction, on a trip to New Yoi'k and back 
 
 cents per 100 lbs. ; on tlie same process for a shipment to St. Louis lie 
 saved 18 cents per cwt., there being a wholly unnecessary carriage of the 
 goods in each case of seven hundred miles. — New Toric Investigating 
 Committee'' s Report, p. 55. 
 
 A considerable amount of manufactured iron and steel, glassware, and 
 white-lead was to be shipi^ed some years ago from Pittsburgli to points 
 in Texas, California, and otiier distant localities, and in one case to so 
 near a point as Chattanooga. The rates from New York and Philadelphia 
 to these markets for the articles referred to were so much lower than 
 from Pittsburgh that it eftected an actual saving to the Pittsburgh manu- 
 facturers to sliip their goods by tlie car-load to New York, and thence to 
 have them hauled back again over tlie same track tlirough Pittsburgh to 
 the points for which they were destined.
 
 54 The Railways and the Bejpublic. 
 
 again througli Pittsburgh, was a by no means infre- 
 quent phenomenon of railway business. 
 
 No exhaustive list of discriminations .can be given. 
 The typical cases cited suffice to show that gross injus- 
 tice has been practised on a large scale, and that the 
 power to favor one community at the expense of an- 
 other has been exerted by the great corporations. 
 
 When all these examples are traced back to their 
 source, an examination of the causes which produce 
 them will show that in every case they arise from 
 the imperfect working of competition. Other influ- 
 ences may vary their form or change their aspect; 
 but all of them originally come from the fact that, in 
 one way or another, competition operates in favor of 
 the locality which gets the best rates, while its absence, 
 or the obstruction of its natural influence, prevents 
 the same advantage from being secured at another. 
 In most, if not all, of the important discriminatior.s 
 against localities, the pressure of competition at one 
 point in favor of low rates there, and its absence else- 
 where, placing it within the power of the railway 
 management to maintain rates there, constitutes an 
 influence external to the management of any single 
 corporation, and greater than any individual power 
 of resistance. The conclusions from these instances 
 then are: (1) that this class of discriminations has 
 existed and does exist to an onerous and dangerous 
 extent, affecting some of the fundamental interests 
 of the land and establishing practical injustice ; and 
 (2) that it grows not so much out of the arbitrary 
 and absolute edicts of the railway managers, as from 
 the present constitution of the railway business, which 
 creates competition at certain points and leaves others
 
 Ten Years of Discrimination. 55 
 
 without that benefit, and whicli also develops combina- 
 tions for the abolition of competition where it has been 
 pushed to an extreme degree. When these points are 
 established an insis-ht into the fundamental factors of 
 the railway problem is made comparatively easy. 
 
 Discriminations in classification are prescriptive and 
 unreasonable; discriminations between localities are 
 burdensome and dangerous ; discriminations between 
 individuals are corrupt and criminal. The first class 
 are handed down by custom, and, while sometimes 
 embodying an inequality that is burdensome, scarcely 
 amount to an aggression upon the existence of any 
 industry or trade. The second arise from the neces- 
 sity of the railways, as generally conducted, and, 
 therefore, rarely involve a deliberate attack upon any 
 community or section. But no such redeeming cir- 
 cumstances attend the fixins; of discriminatimx rates as 
 between individual shippers. It is the most vicious 
 and unjustifiable form of the evil. A railway ofiicial 
 who gives one merchant better rates than his competi- 
 tor must do so with the distinct purpose of securing 
 to the reci])ient of the ftivor advantages which the 
 competitor cannot enjoy. The injurious nature of this 
 power is heightened, and the difliculty of detecting its 
 exertion is increased, by its secret operation. The ad- 
 vantages to favored shippers being generally granted 
 Ijy secret rates or drawbacks, the inequality is rarely 
 detected until the injury is done. The same cause 
 naturally restricts the citation of such cases. Indeed, 
 even an approximate estimate of their extent is im- 
 practicable. To determine it would require an exam- 
 ination of the books of every railway in tlie land, and 
 a full statement of the results would fill a librar}-. It
 
 56 The Railways and the Bepublic. 
 
 must suffice for present purposes to cite instances which 
 show that discriminations have been made between in- 
 dividual shippers by the officials of leading railway 
 corporations, and that in well-authenticated cases they 
 have been burdensome and ruinous in their character. 
 To prove that such wanton injustice has been inflicted 
 upon individuals by men who still hold the power to 
 repeat the wrong, is to demonstrate the existence of 
 the evil and to show the necessity of a radical remedy. 
 That is all that is aimed at by the present examina- 
 tion of the subject. 
 
 The only thorough investigation of this subject by 
 any authority having the power to compel the attend- 
 ance of witnesses, and to order the j)roduction of books, 
 was that made in New York by the Hepburn Legis- 
 lative Committee five years ago. Attempts at legis- 
 lative investigation have been made in other states, 
 resulting in a few disclosures; but none of them has 
 comprehensively examined the entire question. The 
 Hepburn committee, however, pushed its inquiry to 
 the fullest extent, and the testimony taken before it 
 on the subject of special rates granted to individual 
 shippers clearly exposes the practice of the two lead- 
 ing railways traversing that state. The proof in these 
 cases was the unimpeachable testimony of the books 
 of the New York Central and Erie railways them- 
 selves; and the evidence that the practice was custom- 
 ary was furnished by the admissions of the officials 
 of these railways before the committee. It would be 
 beyond the scope of this Avork to summarize the cases 
 of individual discrimination presented in the volumi- 
 nous report of that investigation. We can give but a 
 few instances, taken at random. Transcripts from the
 
 Ten Years qf Discrimination. 57 
 
 records of the Erie Railway showed that five firms 
 at Biiighamton, and the same number at Elmira, 
 obtained special rates varying from five eighths to 
 one third of the tariff rate. Special rates, affording a 
 decided advantage over the regular tariff, were shown 
 in a single report to have been made in thirty-four 
 cases by the Erie Railway, while a similar rejjort as 
 to the New York Central gave thirty-three examples 
 of special rates, containing such noticeable instances 
 as the rate of 9 cents granted to three dry-goods firms 
 of Utica, and 10 cents to another, against tarift" rates 
 of 33, 26, and 22 cents, on first, second, and third class 
 freights; Avhile the same rate Avas given to five grocery 
 firms in Syracuse, which was no slight reduction from 
 the regular rate of 37, 29, 25, and 18 cents on the 
 four classes of freight. Four Rochester grocery firms 
 got sj^ecial rates of 13 cents while the tariff rates were 
 40, 30, 25, and 20 cents. The discrimination on dry- 
 goods might not furnish a vital factor in the prosper- 
 ity of the competing firms ; but the wholesale grocery 
 firm which is allowed to get all supplies at from one 
 third to one half the rates that less fjivored firms are 
 obliged to pay, obtains an advantage which in the 
 long run means prosperity to it and ruin to its rivals. 
 A summary of the regular and special rates on the 
 New York Central shows special rates to l)e made to 
 individuals at twenty-two points along its line be- 
 tween Albany and Buftalo. The special rates at some 
 points were a little more than one third of the regular 
 tariff, while at Syracuse the extreme of discrimination 
 occurred, a special rate being made of one fifth of the 
 tariff on first-class goods. 
 
 Some of these special rates showed a singular disre-
 
 58 The Railways and the liepublic. 
 
 gard of the element of distance, one of 20 cents being 
 made to Little Falls, 217 miles from New York, while 
 that made to Syracuse, 291 miles away, was 10 cents, 
 and that to Black K-ock, 455 miles, was exactly the 
 same as to Little Falls. These special rates were 
 generally made for jobbers or large dealers.* The 
 principle, or lack of principle, on which they were 
 granted was explained by the testimony of the Assist- 
 ant General Freight Agent of the New York Central, 
 whose duty it is to make such rates and to keep a 
 record of the contracts. He testified that special rates 
 were made " whenever I think them necessary." The 
 object of this action, according to the testimony, was 
 "to help the shippers, as many of them could not live 
 otherwise." This is qualified by the statement that 
 " they cannot compete with western manufacturers." 
 From the same source we learn that special rates are 
 granted to certain parties " on the understanding that 
 they will not ship by canal." The practical operation 
 of this policy is shown by the admission of this witness 
 that one large manufacturer of cotton cloth is charged 
 20 cents and a small one 25 cents, the schedule rate 
 being 35 and 40 cents. The last detail of the manner 
 in which a leading railway makes its rates tells us, 
 of an important shipper, that he had not the same 
 privilege as a competitor " because he did not ask for 
 
 * One great wrong of this system is that there is uo unit of volume 
 at which one man can ship as clieaply as another. Suppose two mer- 
 chants at A; one is able to buy one car-load of goods to dispose of it to 
 his customers ; the other is able to buy ten car-loads, and he is given a 
 difference in rate equal to a profit in handling the goods, or nearly so. 
 Result, the smaller dealer is frozen out. This supposititious case has its 
 actual counterpart all along the line. — New York Committee's Report^ 
 p.G4.
 
 Ten Years of Discrimination. 59 
 
 it." The extent to ■which this manner of making 
 railway rates has been carried is shown by the fact 
 that the books of the New York Central Eailway, 
 exhibited to the committee, contained over six thou- 
 sand special rates granted during the first six months 
 of 1880. 
 
 It is no more than just to say that the purpose of 
 these multitudinous and inconsistent special rates w^as 
 stated to be the encouragement of local shippers, w^ho 
 might otherwise be oppressed by the cheaper rates on 
 through traffic. But the fatality which presides over 
 the railway policy appeared to make it impossible to 
 cast out one devil without calling in several worse 
 ones. When the New York Central attempted to 
 remedy the wrong of giving through shippers lower 
 rates than the shippers along its line, it fell into sev- 
 eral other wrongs, in its discriminations between the 
 favored shippers and the general public; in its dis- 
 criminations between the various classes of shippers, 
 some of whom got 10 cent rates, some 20, and some 
 25 ; in its dictation to shippers that they should not 
 have the reduced rates, if they shipped any goods by 
 canal; and in the avowal that these favors are granted 
 as a matter of personal solicitation rather than as a 
 matter of public equity and justice.* There could be 
 no more sisjnal illustration of the unsoundness of the 
 prevailing methods of railway business than that the 
 means which were taken to remove, or, rather, relieve, 
 
 * He who goes into a railroad office and bargains for a special rate 
 gets it; he who, relying on the equitable treatment which common car- 
 riers are bound to give, or not knowing that special rates may be had, 
 delivers them his goods and calls for his freight bill, pays a higher rate, 
 — New Y(/rh Committee' 8 Ileport, p. GG.
 
 60 The Railways and the EepuUic. 
 
 a discrimination against locality sliould produce six 
 thousand discriminations as between individuals. 
 
 Most of the testimony to other cases of preferential 
 rates between shippers is less direct than that fur- 
 nished by the New York investigation; but some 
 important ones are proved beyond question. One 
 instance, showing how a great business may be con- 
 centrated in the hands of a few favorites of the rail- 
 way, was disclosed by the arguments of the favored 
 shippers for the continuance of the discrimination. 
 For some years past one of the industrial phenomena 
 of Pennsylvania has been the gradual consolidation 
 of the coke industry of that state in the hands of a 
 few powerful firms. The control by these firms of the 
 entire coke trade of southwestern Pennsylvania could 
 only be adequately explained by railway favoritism ; 
 but actual knowledge as to such discriminations was 
 confined to the railways and their favorites. At the 
 last session of the legislature, however, anions: the 
 opponents of a bill to prevent discriminations, the 
 representatives of these firms appeared, and argued 
 that it was necessary for them to have the discrimina- 
 tions they were receiving, in order to compete with 
 coke manufacturers outside of the state. The argu- 
 ment prevailed with the legislators, who -were "willing 
 to listen to an}^ logic that the railway interest chose 
 to advance; but two facts put it in a peculiar light. 
 The first is, that the coke production outside of 
 Pennsylvania is unimportant, nine tenths of all the 
 coke in the United States being manufactured in 
 Pennsylvania; the second is, that the bill had no 
 bearing upon discriminations between Pennsylvania 
 shippers and those outside of that state, but provided
 
 Ten Tears of Discrimination. 61 
 
 only that rates must be equal as between Pennsylvania 
 shippers. In opposing it, the favored firms showed 
 that the discriminations they wanted were against 
 competitors in their own region; and that it was such 
 favoritism as the bill under discussion was intended to 
 prevent, that had enabled them to secure a monopoly 
 of the coke industry, only inferior, in magnitude and 
 glaring injustice, to the petroleum monopoly and the 
 anthracite-coal combination. 
 
 Kindred examples of individual discrimination have 
 grown out of the control of the bituminous coal trade 
 by the railways already referred to.'^ A former pro- 
 prietor of large coal interests on the Baltimore and Ohio 
 road testified before an investifratino; committee that, 
 as he was informed by the General Freight Agent of 
 that company, an agreement had been made with the 
 Pennsylvania Railroad, that no coal from the region of 
 liis mines was to be sold between Delaware Bay and 
 Cape Cod, the supplying of gas coal to the cities be- 
 tween those points being reserved to the Pennsylvania 
 Railroad and West Virginia mines. As a result of 
 this agreement the rate of freight on a large contract 
 which this operator had made, to furnisli coal to the 
 gas works in New York, was advanced to a prohibitory 
 
 * These appear, for the most i^art, under the guise of discriminations 
 against localities, by establishing rates which shut out the coal-miuing 
 firms in general from certain localities. One phenomenal case, however, 
 seems on its face to be a most wonderful ilkistration of discrimination in 
 classification. It enacts tliat, on coal from tlie Pittsburgh vein, the rate 
 to Philadelpliia shall be $2.40 per ton if it is to be used for steam-heat- 
 ing ; but if it is to be used for making gas, the rate shall be twice as much. 
 The reason for this remarkable rule that the same freight shall jjay twice 
 as much, if it is to be used for one purpose, as when it is to be used for 
 another, is the determination of the railroad to preserve a monopoly of 
 supplying gas coal in the hands of two favored mining corporations.
 
 62 The Railways and the Rejpuhlic. 
 
 point, and he was forced, at a loss of alDOiit one dollar 
 per ton, to pnrcliase coal of the Westmoreland mines, 
 which were favored in the rates. This partakes largely 
 of the character of a discrimination in locality ; but its 
 bearing as a case of individual discrimination may be 
 seen in the fact that the unfortunate mine-owner was 
 forced into bankruptcy, and that, at the sale of his 
 mining property under legal jorocess, it was purchased 
 by a prominent director of a third trunk-line railway, 
 who has, as far as can be learned, experienced no in- 
 superable difficulties since then in getting the coal 
 from that mine into market. 
 
 There has probably never been a bolder assertion 
 of the power to make individual discriminations than 
 that of the Central Pacific Railway in two of its prac- 
 tices which, besides being matter of common notoriety, 
 were testified to before a legislative committee of 
 California. One is the practice of granting special 
 rates only to those who will bind themselves to ship 
 nothing by sea. This dictation to the shi2:)per of the 
 routes for the transportation of his goods, means sim- 
 ply that if he does not transact his business according 
 to the methods prescribed by the monopoly which 
 controls land transportation, he shall be shut out from 
 equal terms in railway freights. The rigor with which 
 that rule has been enforced in California, and with 
 which the Central Pacific has pursued its policy of 
 buying up or bringing competing roads to an agree- 
 ment sustaining that perfection of tyranny, is a matter 
 of railway history, and forms perhaps the most striking 
 of the many glaring forms of injustice that have been 
 perpetrated by the public beneficiary which monopo- 
 lizes the freic^hting^ business of California. The other
 
 Ten Years of Discrimination. 63 
 
 practice is that extreme development of the principle 
 of "charging what the freight will bear," by which every 
 shipper of silver ore over the Central Pacific is required 
 to furnish an assay of his ore, and to accept a rate of 
 freight in accordance with its value. There may be a 
 strict impartiality in this practice of confiscating the 
 extra value of the product of the mines which may be 
 fortunate or unfortunate enough to yield rich minerals. 
 I have no knowledge as to whether that remarkable 
 practice is consistently carried out; but the assertion 
 of the right to make a special rate for each mine, and to 
 charge one mine twice as much as another for exactly 
 the same service, savors too strongly of arbitrary and 
 unchecked absolutism to pass unchallenged. 
 
 A notorious case of individual discrimination arose 
 under the operation of the trunk-line pool on live- 
 stock, in the rebate given to the Chicago "eveners." 
 Between 1875 and 1879, the trunk lines carrying live- 
 stock from Chicago to the East paid a single firm a 
 rebate of $15 on every car of live-stock shipped to the 
 East. The consideration for which this favor was 
 granted was that the firm undertook to " even up " the 
 percentages of the various lines forming the live-stock 
 pool ; that is, if one road obtained, under the ordinary 
 workings of the pool, less than its allotted percentages 
 of the traffic, the firm was to ship enough stock over 
 its line to restore the balance. A concern with an as- 
 sured advantage over all competitors of $15 per car, on 
 a business of some hundreds of cars a week, might well 
 undertake to perform this service. It is clearly shown 
 that this firm, for a long time, enjoyed an advantage 
 over its competitors that no energy or economy of 
 theirs could overcome. If the trade was prosperous
 
 64 The Railways and the Republic. 
 
 the favored firm made $15 per car more than its rivals; 
 if the trade was unprofitable, it lost $15 per car less 
 than they. Not only so, but it had the enormous ad- 
 vantage of collecting the same tax on every car of live- 
 stock that was shipped by its rivals. It received from 
 the railways not only an advantage in freights equal 
 to an ordinary business profit on all the live-stock that 
 it could ship, but an income from all the business that 
 its rivals could transact."'^ In short, it Avas assured by 
 the combined power of the trunk-line pool an advantage 
 which in the course of a year or t^vo would guarantee 
 it great wealth ; and, on the most charitable explana- 
 tion of the agreement, that wealth was given to it by 
 the railways out of the higher rates which they were 
 enabled to levy on its competitors by the pooling 
 combination, of which it acted as an agent. It is to 
 the credit of the trunk-line pool that it abolished 
 this outrage upon justice and travesty upon business 
 principles in 1879; but not until this profitable royal- 
 ty upon the live-stock transactions of the country had 
 raised the fiivored firm to a commanding place in that 
 trade. 
 
 Further instances of preferential rates might be in- 
 dicated ; but the proof of their existence is generally 
 of an indirect character. The clearest proof that such 
 inequalities are general is the common understanding 
 of shippers that the cost of transporting freight de- 
 pends entirely on the special rate that each shipper 
 
 * This feature of the discrimination would seem almost incredible if it 
 had not a parallel in the petroleum trade, and if it were not established 
 by the testimony before the New York Committee. (See pages 69 and 70 
 of that report.) It should be said that the rebate or commission was re- 
 duced to $10 per car, before the abolition of the practice.
 
 Ten Years of Discrimination. 65 
 
 can c-et. A friend who is ensraGied in the iron- ore 
 trade, when asked the rate on ore from Lake Erie to 
 the iron works of Pittsburo-h and the Mahoniuoi: Val- 
 ley, some months ago, replied : " Oh, the open rate is 
 $1.50 a ton, but everybody gets a special rate, and it 
 all depends on that." In this case, as there are three 
 railways competing for the business, it may be taken 
 for granted that if a shipper cannot get a good special 
 rate from one company he can from another; and it is 
 probable that the competition reduces the varions spe- 
 cial rates to a practical equality, except, it may be, in 
 the case of those whose relations with railway officials 
 enable them to get their freight carried at less than 
 cost. But the method is vicious, in its assertion of the 
 right to give different rates to one shipper and to the 
 public at large on similar business; and in cases where 
 there is no competition to limit and regulate such dis- 
 crimination, the shipping public is utterly at the mercy 
 of the railwa3"s. 
 
 The cases of individual discrimination cited in the 
 practices of the New York roads, of the coal-carrying 
 railways of Pennsylvania, of the Central Pacific Kail- 
 way in its special contracts, and of the live-stock 
 business, do not prove that the railways commonly 
 and deliberately favor one shij^tper at the expense of 
 others. But at least two of these instances involve 
 this nefarious abuse; while the fact already referred 
 to, that such favors are always secretly granted, ren- 
 ders it practically impossible to produce instances in 
 such profusion as to demonstrate the general prevalence 
 of the evil. Enough has been said to show, however, 
 that the leading railways make a practice of granting 
 special rates; and that this practice is the exercise of 
 
 5
 
 66 The Railways and the Republic. 
 
 a power by wbicli they can secure to any shipper a 
 monopoly in any line of business in which the freight 
 charcres form a vital element of cost. When that evi- 
 clence is reinforced by the history of a notorious in- 
 stance of this discrimination in its worst form, which 
 has defied public opinion and overridden public justice, 
 the case may be considered as closed. The history of 
 the manner in which, by the power of railway dis- 
 crimination, an immense monopoly was built upon the 
 ruins of a thriving industry ; of the persistent and un- 
 scrupulous methods by which the favored corporation 
 was raised to unexampled power and wealth ; and of 
 the ^vide-spread demoralization and disaster wrought 
 by this policy, requires a chapter by itself. When 
 that is given, the demonstration, not only that the rail- 
 ways have the power arbitrarily to deal out prosperit)" 
 to their ftivored shippers, and adversity to those whom 
 they regard unfavorably, but that they have exerted 
 that power unscrupulously and persistentty, against 
 public protest and without regard to public justice, 
 will be complete.
 
 CHAPTER HI. 
 
 THE HISTORY OF A COMMERCIAL CRIME. 
 
 Victor Hugo tells the story of the beti'ayal of 
 popular riglits and of the erection of an absolute, cor- 
 rupt, and sycophantic empire, on the ruins of represen- 
 tative government, and calls it "The History of a 
 Crime." In describino; an assault on commercial lib- 
 erty as successful as that of Louis Napoleon upon 
 political liberty, prosecuted by methods as unscrupu- 
 Lus as his, and the establishment, on the ruins of in- 
 dependent industries, of a commercial absolutism as 
 merciless and corrupt as was the political absolutism 
 of the Second Empire, it seems jieculiarly appropriate, 
 adapting Victor Hugo's phrase, to entitle the account, 
 " The History of a Commercial Crime." The Standard 
 Oil Company, indeed, embodies the commercial crimes 
 of the past decade. Its vast wealth has been accumu- 
 lated in less than fifteen years, by speculative manipu- 
 lations, by bribing legislators, and by distorting law 
 to deny to one man the privileges given to another. 
 Its history illustrates, step by step, the extent to which 
 tlie greed for wealth can corrupt commercial moralit}', 
 pervert law, and betray the interests intrusted to its 
 pi-otection. The methods by which this company ac- 
 quired its power, and those by which it exercises that 
 power, from its greatest operation to the selling of a 
 single barrel of oil, sllo^v the baneful results of per-
 
 68 The Railways and the Eepuhlic. 
 
 mitting the exclusive control of a great commercial in- 
 terest to be vested in a monopoly which can oppress 
 the consumer or the jiroducer alike. Throughout the 
 course of intimidatiou, corruption, defiance of commer- 
 cial and statute law, and contempt of public justice 
 that marks the rise of the Standard monopoly, one fact 
 is pre-eminent: This monopoly was called into existence 
 and sustained in its most odious tyranny by the per- 
 sistent and deliberate discriminations of the railways 
 in its favor. Not only the $100,000,000 which that 
 corporation has gathered out of the oil trade in the 
 last fifteen years, but its dictatorial power, its unscru- 
 pulous crushing of opposition, its corruption of public 
 servants, its control of the speculative features of the 
 business, and the favoritism and sycophancy which are 
 essential accompaniments of its absolutism, are the di- 
 rect results of the advantages which the leading rail- 
 ways of the country gave it, l)y carrying its freights on 
 terms which rendered competition practically impossi- 
 ble. So that while greed, dishonesty, speculative com- 
 binations, and disregard of private and public rights 
 are all represented in that aggregation of wealth and 
 injustice, it is signally the embodiment of the gigantic 
 wrongs which the railways can inflict and have in- 
 flicted through the power of discrimination. 
 
 In its inception as a corporation for the refining of 
 petroleum, the Standard Oil Company, formed at 
 Cleveland, Ohio, some fifteen years ago under a char- 
 ter from the State of Ohio, was not essentially diflereut 
 from its two-score of competitors in the same business. 
 Its capital was $300,000, enough to give it a leading 
 but not a commanding position in the ti'ade, there 
 being many other refiners of equal or even superior
 
 The History of a Commercial Crime. 69 
 
 wealth. But it was controlled by men who perceived 
 how one refining company might be made master of 
 the trade by combining tlie railways, and by binding 
 them to its interests with indissoluble ties. No doubt 
 refiners as well as other business men had long before 
 discerned the advantages to be gained by securing the 
 favor of a railway line, and obtaining special rates for 
 transporting crude petroleum from the oil regions to 
 the refineries, and the refined product to the seaboard 
 or interior markets. But it is generally believed that 
 the mind of John D. Rockafeller first comprehended 
 the value of a scheme to unite the favors of all the 
 railways upon his company. His conception first took 
 form in the famous "South Improvement Company," 
 an organization for the avowed purpose of controlling 
 the freiijht business of the oil res-ions. It induced the 
 three principal trunk-lines then engaged in carrying 
 oil to give it, under a secret contract, rebates ranging 
 from 40 cents to $3.07 per barrel, and was guaranteed 
 "against loss or injury by competition." In return 
 for this favor it was to insure the railways a fair divis- 
 ion of the freight traffic of the oil trade. The contract 
 provided also that it should receive a rebate on all oil 
 carried for other parties, which, as no one else could 
 ship oil, in competition with such a favored shipper, 
 appears to be supererogatory. The contract was signed 
 by the South Improvement Company, on the one hand, 
 and by the Pennsylvania, the Erie, and the New York 
 Central trunk lines on the other hand. The prema- 
 ture publication of the scheme proved its ruin. The 
 oil producers of that day were an independent class of 
 men, and were not disposed to seek the thrift that 
 would follow judicious fawning. A storm such as has
 
 70 The Railways and the Rejpvhlic. 
 
 never been known before or since, in connection with 
 commercial questions, arose tlironghout the oil regions. 
 Public meetings, from one end of the district to the 
 other, thundered out defiance. Rather than submit to 
 the yoke of the South Improvement Company, they 
 would burn every tank and raze every derrick in the 
 oil regions. Whether or not the threat would have 
 been carried out, it showed the railways such a spirit 
 as would create other means of transportation if the 
 South Improvement project were persisted in. The 
 attempt to create a monopoly fell, therefore, before the 
 popular clamor. 
 
 But the idea remained. The ingenious and persis- 
 tent mind which had conceived the South Improve- 
 ment scheme perceived that the work must be carried 
 out gradually, and a control obtained, step by step, 
 over the railways and the petroleum trade alike that 
 would defy public opinion. It would be interesting, 
 as a psychological study, to know wdiether the concep- 
 tion from w^hich the Standard project sprang included 
 at first the crushing out of all rivalry, and the control 
 of the markets, which it finally attained ; * or whether 
 
 * A story sometimes heard, iu the under-cun"ents of trade gossip, tells 
 how the originator of this scheme presented himself at a meeting of bank 
 directors in Cleveland, and demanded an advance of hundreds of thou- 
 sands of dollars. Being asked what security lie offered for so large a loan, 
 he replied that his security was simply a monoi^oly of the petroleum 
 trade, and presented such evidences of his ability to obtain that monopoly 
 that the bank directors were convinced, and furnished him the sinews of 
 v.ar for his career of conquest. The story is not authenticated, and is, 
 perhaps, a rather skilfully drawn bit of ex-post-facto fiction. Bnt it is 
 interesting as illustrating the recognition of the fact in business circles 
 that the means adopted to give the Standard Oil Company success at 
 the outset of its career were well calculated to insure it the final attain- 
 ment of its subsequent monopoly.
 
 The nistory of a Commercial Crime. 71 
 
 it only sought the advantages immediately in view, 
 and thence was led on from one point to another, for 
 the maintenance and extension of its power. It is 
 probable that the genius that inspired it saw at first 
 only the prizes directly before it; but as Napoleon at 
 the Bridge of Lodi foresaw his conquest of Europe, it 
 is possible that this Napoleon of the petroleum trade 
 felt in the opening of his career an ambition propor- 
 tionately as inordinate as that of his prototype. No 
 matter whether or not the end was seen from the be- 
 ginning; the methods used were such as both achieved 
 immediate gain and laid the foundations of the im- 
 mense monopoly afterwards established, without excit- 
 ing the public alarm. 
 
 No less interestino: would be a full knowledge of 
 the methods by which the railways were first bound 
 to the Standard scheme. But no evidence attainable 
 by the public exists on that point, and the matter 
 must be left to conjecture. The ability to employ 
 lake transportation on a large share of its shipments 
 from Cleveland has been alleged as the first considera- 
 tion by which the Standard obtained its vital advan- 
 tages in rates. This is a sufficient explanation of 
 lower rates at Cleveland than elsewhere, but does not 
 afford any ground for the preference given to the 
 Standard over its rivals at that point. The fact that, 
 ever since then, the support given by the New York 
 Central and Erie lines to the Standard's monopoly of 
 the refining trade has been unwavering, while the 
 Pennsylvania Bailroad has at times in intervening 
 years made vigorous efforts to throw off the yoke, may 
 be taken as an evidence that the ties which connected 
 the two former roads to the scheme were closer and
 
 72 The Railways and the Eejpiiblic. 
 
 more firmly knit than those of the latter. It is possi- 
 ble that the Standard manas-ers at the start relied on 
 the universal rule of the railways to give the lowest 
 rates at competitive points, to insure that the Pennsyl- 
 vania Kailroad Avould maintain their advantacje at 
 Cleveland over their Pittsburgh rivals. The main fact 
 that is public property is, that by the summer of 
 1874 the railways were fully committed to the inter- 
 est of the Standard. The majority of the refineries in 
 Clev^eland were either consolidated under the charter 
 of the leading corporation or leased to it for a term of 
 years. Near the opening of its career, too, the Stand- 
 ard obtained a controlling interest in the United Pipe- 
 Lines Company, already the main transportation com- 
 pany for conveying oil in pipes from the wells to the 
 railways, and which subsequently obtained absolute 
 control of that business. The result of these combi- 
 nations became manifest in 1874, affecting the relative 
 positions of the rival refining interests in the market 
 for exporting refined petroleum from the seaboard. 
 
 On October 1, 1874, the railways established the rate 
 of $1.90 per barrel to New York * for all refineries, 
 whether located in Pittsburgh, Cleveland, or the oil 
 regions. This rate affords a marked illustration of 
 the ingenuity with which railway rates can be made to 
 oppress legitimate and independent industry. Apart 
 from the question whether the same charge was really 
 made to the Standard and other refineries, it utterly 
 discarded the element of distance in the cost of service. 
 The Pittsburgh refineries, which required a liaul of 60 
 to 75 miles for the crude oil from the wells, and of 350 
 
 * New York Investigating Committee's Report, p. 42 ; testimony, p. 
 3417.
 
 The Histor]) of a Commercial Crime. 73 
 
 miles for tbeir refiued product from the refineries to 
 tlie nearest point of export, were deprived of their 
 leo-itiraate advantao-e over the Standard refineries at 
 Cleveland, which required a haul of about 250 miles 
 farther. This was asserted to be for the avoidance of 
 discrimination; but it was nothing but a defiance of 
 the principle that like chai'ges should be made for like 
 service. It was equivalent to declaring that industries 
 located where they can be carried on most economi- 
 cally shall be deprived of the legitimate benefit of the 
 foresight which placed them there, and reduced to au 
 equality with those improvidently built where they 
 require extra and unnecessary transportation. It de- 
 nied to the public the cheapness in its staples which 
 comes of producing them where they can be most eco- 
 nomically produced. In principle the railways might 
 as w*ell have claimed that it would be just to carry 
 the crude oil from the Pennsylvania wells to a refinery 
 in the Rocky Mountains, and thence back to the sea- 
 board, at the same rate as to the Pennsylvania refiner- 
 ies. If the same rate had been charfred to the Stand- 
 ard and to its Pittsburgh rivals it would have been 
 a discrimination against the latter. But the fact soon 
 became apparent that the Standard i-efineries obtained 
 further advantages which enabled them to undersell 
 their competitors in the export markets. The establish- 
 ment of the new rate Avas a virtual prohibition upon 
 exports from the Pittsburgh refineries, and they were 
 confined to the supply of the interior trade, which ab- 
 sorbed a me]'e fraction of their previous product, until 
 they could devise some means of relief The plan for 
 relief was found in the project to lay a pipe line from 
 the oil regions to Pittsburgh. To understand this
 
 74: The Railways and the Republic. 
 
 project it must be stated that the rates were so levied 
 that all crude oil l>rou2;ht to the Pittsburo-h refineries 
 by the Allegheny Valley Railroad must, when refined, 
 be taken East over the Pennsylvania Kailroad. That 
 is to say, a single rate was charged as a whole from 
 the oil regions to the seaboard; and the Pittsburgh 
 refiner was required to pay the entire rate, even if he 
 shipped his refined oil by another route. The object 
 of this device was to prevent the Baltimore and Ohio's 
 line to Pittsburgh from competing for the oil traffic. 
 If an independent pipe line could be put into opera- 
 tion, the Pittsburgh refineries could receive their crude 
 oil by that line, and the Baltimore and Ohio could 
 compete for the transportation of the refined prod- 
 uct. This would not only put the Pittsburgh re- 
 finers on an equal footing, but would give them an un- 
 doubted advantao-e. It was believed that the savins: 
 on the transportation of crude oil to the refineries 
 would be two thirds of the prevailing rate; while the 
 additional saving, by the shorter haul from Pittsburgh 
 to the seaboard, would make that city the refining cen- 
 tre of the country instead of Cleveland. The project 
 took sha2:)e in the Columbia Conduit Company, which 
 began in that year to lay its pipes from the oil wells 
 to the Pittsburgh refineries. 
 
 That the estimate of the high importance of this 
 measure in sustaining competition was not confined to 
 its supporters is demonstrated by the steps which the 
 Standard and the railways took to defeat it. The laws 
 of Pennsylvania at that time aflforded them a means of 
 opposition which they used to the utmost. These laws 
 gave to pipe lines in the petroleum-producing counties 
 the power to appropriate the right of way for their
 
 The History of a Commercial Crime. 75 
 
 pipes, just as the railways do under the eminent domain 
 of the state. But this power was confined to the oil- 
 producing regions, so that the right of way to Pitts- 
 burgh could only be obtained by purchase, without the 
 aid of the state's eminent domain. Xo difficulty was 
 experienced in obtaining the consent of property own- 
 ers to bury pipes under their fields. The new line was 
 laid without opposition until it reached the north bank 
 of the Allegheny River, where, within sight of the Pitts- 
 burgh refineries, the Pennsylvania Railroad, which had 
 a branch running along that river, forbade the laying of 
 the pipes under its track. An appeal to the legislature, 
 to extend the right to appropriate property by legal 
 process, already granted to pipe lines in the producing 
 counties, was the next step. This was met by the com- 
 bined force of the Pennsylvania Railroad and a lobby 
 which was notoriously at the service of the heaviest 
 purse. To afford a fair excuse for the defeat of a meas- 
 ure which was required by the material interests of the 
 state, it became necessary for the Standard to divide 
 the Pittsburgh interests. A leading firm of that city, 
 whose senior member had publicly avowed his support 
 of the free pipe bill, was admitted to the Standard cor- 
 poration, and he reversed his position and declared 
 as^ainst the bill. This extension of the Standard in- 
 terests to Pittsburgh was followed up by the purchase 
 and lease of other establishments, until enough Pitts- 
 burgh refiners were induced to oppose the bill for 
 equality in pipe-line transportation to afford a ])retext 
 for killing the bill. 
 
 But by this time the Columbia Conduit Company 
 had devised a method of partly overcoming the ob- 
 stacle. While the railroad could prevent the pipe line
 
 76 The Railways and the BejpuUic. 
 
 from going under or over its tracks, it could not hinder 
 the passage of wagous over its tracks upon the public 
 road. So the pipe line was brought up to the track, 
 ■within a few feet of the public-road crossing. On the 
 other side of the track, only a few feet away, was the 
 end of a pipe which connected with the Pittsburgh refin- 
 eries. Oil tanks mounted on ^vheels were filled from 
 the pipes on the north side of the railway, driven across 
 the track by the public crossing, and discharged into 
 the pipes on the south side, to be conveyed to tlie re- 
 fineries a few miles away. For many months the wag- 
 ons hauled their loads of oil over the AYest Pennsyl- 
 vania tracks, to avoid the obstacle presented by the legal 
 rights of that corporation. Finally — probably because 
 the pipe method was really safer and less liable to ac- 
 cidents which might be expensive to the railway — the 
 latter consented to allow the pipes to be laid under 
 the tracks and the complete pipe-line connection to be 
 made with Pittsburgh. Perhaps also the railway man- 
 agers believed that, under new combinations soon to be 
 formed, the value of the pipe line as an independent 
 route would be nearly destroyed. 
 
 The interests of the Standard Oil Company now re- 
 quired it to attach the Baltimore and Ohio Railroad to 
 the combination, instead of leaving it to maintain an 
 independent route for the Pittsburgh refiners. The dis- 
 criminations of the other trunk lines were maintained, so 
 that no independent Pittsburgh refining firm could ship 
 oil to the seaboard by the Pennsylvania Eailroad at 
 its regular rates, and sell it there in competition with 
 the Standard, which continued to move petroleum in 
 large volumes over that road at whatever the secret 
 rates may have been. But though the Baltimore and
 
 The History of a Commercial Crime. 77 
 
 Ohio road, while used as a competing line by the inde- 
 pendent refiners, had its economy materially impaired 
 by expensive transfers between the refineries and the 
 shipping-point, yet it enabled these refiners to enter the 
 seaboard market on nearly equal terms with the Stand- 
 ard, and to keep up the fight for existence with a fair 
 degree of success. The policy by which the Pittsburgli 
 refineries wei'e forced into decay is illustrated by the 
 fact that previous to 1874, and at periods in 1875 and 
 1877, whenever they enjoyed any approximation to 
 open competition among the railways for their freights, 
 their business was active and expanding. 
 
 To prevent the independent refiners of Pittsburgh 
 from maintaininfj their trade ascainst the combined 
 power of the Standard and the three other trunk lines, 
 the alliance of the Baltimore and Ohio Railroad became 
 necessary. The termination of a railway freight war 
 which had been waged for some time between the 
 trunk lines, in a general treaty, afforded an opportunity 
 to attach the Baltimore and Ohio Railroad to the com- 
 bination. Heretofore this road had been, in the oil 
 trade, a competitor, and a supporter of independent 
 competition. Thereafter it assumed the character of a 
 weathercock, at one time throwing its power on the 
 side of the Standard, and at another breaking away, 
 because its share of the spoils was not large enough. 
 In this case it was reported that a concession to it of a 
 percentage in the live-stock trafiic from Chicago, and 
 of a differential rate on grain to Baltimore, less by four 
 cents tlian to New York, formed the consideration for 
 which it ao-reed to desert the Pittsburrdi refiners and 
 join the other trunk lines. The ties of the other three 
 companies to the Standard were by this time so strong
 
 78 The Railways and the Eepublic. 
 
 that they were ready to make large concessions on 
 other questions to secure the dominion of their darling 
 monopoly. The compact was made, and the rate on 
 petroleum from the pipe lines to the seaboard, over 
 whatever distance the shipments were carried, was 
 fixed at $1.15. Apart from the persistent injustice 
 already referred to, of ignoring the element of distance 
 in the charges, this rate ^vas not excessive for the trans- 
 portation of petroleum. Although deprived of their 
 advantage in location, the independent refiners could 
 have kept up their competition if the rate had been 
 charged equally to all refiners. It was alleged at the 
 time that this rate was charged on the Standard ship- 
 ments; but nobody believed this, and nobody was 
 expected to. For, within a few weeks of the promul- 
 gation of this rate, the Standard was selling oil in the 
 Eastern markets at less than the first cost at the refin- 
 eries, with the open freight rate added. The discrim- 
 ination was known to be large in amount, but its exact 
 character was not known. It has since then been ex- 
 plained by the discovery of tlie New York Investigat- 
 ing Committee * that, on August 1, 1875, the New York 
 Central and Erie railroads contracted to give the 
 Standard a rate as low as the lowest net rate to other 
 parties, and, besides, to pay the Standard and its affili- 
 ated companies a rebate of ten per cent, on all ship- 
 ments of oil. The '' afiiliated companies " were those 
 which the Standard had admitted to its combination as 
 a reward for their aid in defeating legislation in behalf 
 of free competition ; and the correspondence of the 
 Standard and the Pennsylvania Railroad in 1877 
 showed that the ten per cent, rebate on all shipments 
 
 * New York Investigation, Exhibits, pp. 175, 183.
 
 The History of a Commercial Crime. '79 
 
 of oil included not only a special lowering of the 
 Standard's rate, but a tax on all the oil which their 
 rivals might ship. By such means as this the indepen- 
 dent refiners were again shut out of the market. Even 
 in supplying the domestic trade, it was found that the 
 Standard could get small shipments to interior jobbers 
 more cheaply than the independent refiners. The trade 
 of the latter was nearly destroj'ed ; some refineries were 
 closed and one or two became bankrupt. 
 
 But the refiners found a method of prolonging the 
 contest one year more. They still bad the Columbia 
 Conduit to supply them with crude oil, and they adopt- 
 edj|the plan of shipping their product down the Ohio 
 River to Huntington, West Virginia, whence it was 
 taken by the Chesapeake and Ohio Railroad to Rich- 
 mond for exportation. By this roundabout line many 
 thousands of barrels were shipped during 1875 and 
 1876. The exorbitant character of the trunk-line charws 
 is evident from the fact that a rate of 80 cents a barrel 
 for nearly 500 miles of additional transportation, with 
 an extra transfer at considerable expense, was remuner- 
 ative to the Chesapeake and Ohio Railroad. But even 
 at that rate the Pittsburgh refineries were at a disad- 
 vantage. The circuitous route w\as more expensive at 
 the best than the direct and rapid one closed to all but 
 the Standard. ^rhe river half of it was dangerous and 
 useless for six months in the year, from low water in 
 the summer or ice in the winter ;| and when the long 
 and slow journey had been performed, the product 
 reached, not a great exporting city, but a ])(^rt just 
 coming into use, where no market for exportation was 
 established, and where tiie means of shipment abroad 
 were indirect and uncertain. It was evident that the
 
 80 The Railways and the Hepublic. 
 
 struggle w.'is a losing one for the independent refiners, 
 while the Standard continued to extend its power and 
 wealth. It had laid a pipe line of its own from the oil 
 reo-ions to Pittsburo-h, meetino; w^ith none of the ob- 
 stacles from the railways that had been thrown in the 
 way of the Columbia Conduit Company. It had ex- 
 tended its refining establishments by buying out or 
 admitting to partnership a number of refining firms 
 in New York, Philadelphia, Baltimore, and West Vir- 
 ginia, so that at every important refining point the 
 Standard had a foothold, and secured to its branches 
 advantages w^hich no outside refineries could have. Its 
 sharpest fight, however, was with the body of ten or 
 twelve firms in Pittsburgh, who kept their indepen- 
 dence for about four years, until the event, famous at 
 that day as "the Potts fight," at first revived their 
 hopes, but after a few months of bright prospects sealed 
 their doom, and the stru2:2:le for commercial freedom 
 ended in an ignominious surrender to the Standard. 
 
 In the early part of IS 77 the Pennsylvania Railroad 
 began to show some discontent under the restrictions 
 which it had imposed upon itself in behalf of the 
 Standard. But the Standard had grown from the po- 
 sition of a bantling, dependent for its prosperity upon 
 railroad favors, to that of a tyrant which dictated 
 terms to the trunk lines, and administered punishment 
 to disobedient railways, by throwing all its traflSc on 
 the lines which remained faithful to its interests. 
 Having, as it deemed, the Pittsburgh refining interest 
 under its feet, it asserted its pow^r over the railways, 
 and its monopoly of the refining interests in the East- 
 ern cities, by ordering the Pennsylvania Railroad to 
 refuse the carrying business of the Potts combination.
 
 The History of a Commercial Crime. 81 
 
 This was an association of Eastern refineries, second in 
 magnitude only to the Standard, and rumored to be 
 second also in the discriminations which it obtained 
 from the railways. Besides its refineries in the East, 
 this combination, through the Empire Transportation 
 Company, a subsidiary corporation of the Pennsyl- 
 vania Railroad, controlled a pipe line and considera- 
 ble producing territory in the oil district. With these 
 facilities, and with a low rate on the transportation of 
 crude petroleum from their pipe-lines to their works, 
 the Potts refineries enjoyed a prosperous and expand- 
 ing business until the Standard determined that the 
 time had come to strike a blow at this rival. The 
 arrogant demand that the Pennsylvania Railroad 
 should turn away the freight of the Potts refineries 
 from its depots, and close out its interest in the favored 
 corporation which it was maintaining, was met by a 
 refusal from the Pennsylvania Railroad managers, who 
 happened to be in fighting mood, and a freight war, 
 the bitterest that had yet been known, was precipi- 
 tated upon that corporation. The railway declared 
 that it would make rates for all independent refiner- 
 ies equal to those given to the Standard. The Stand- 
 ard responded by turning all its shipments on other 
 lines, leaving the Pennsylvania Railroad to depend on 
 the crippled Pittsburgh refiners who had nearly lost 
 their trade, and on the Potts combination, for its oil 
 traflic. If the fight had continued on that line the 
 independent interests might have grown so as to com- 
 pensate the railway for its loss of the Standard's busi- 
 ness; for as soon as they had a chance to compete in 
 the foreign markets they experienced a rapid revival. 
 But other influences were speedily introduced into the 
 
 6
 
 82 The Railways and the Republic. 
 
 contest. The Pennsylvania Railroad was taught to 
 feel the power of the corporation for whose increase 
 and wealth it was more responsible than any other 
 one agency. 
 
 The New York Central and Erie roads showed their 
 fidelity to the cause of the Standard* by supporting its 
 demand and attaching the Pennsylvania Railroad in a 
 bitter war of rates, which reduced its revenues at all 
 points. The opposing capitalists controlled the money 
 market so as seriously to hamper the finances of the 
 insubordinate raih'oad, already crippled by other ad- 
 verse influences. The great Pennsylvania Raih'oad 
 found that its creature, the Fi'ankenstein Avhich owed 
 existence and groAvth to it, was now its master and con- 
 queror. The humiliating fact was acknowledged by a 
 surrender, and the rebellious corporation passed again 
 under the yoke of the Standard, in the closing months 
 of 1877. The railway protected the interests of its 
 proteges to the best of its abilit3\ The Standard pur- 
 chased the refineries of the latter in the East, and their 
 oil-carrying cars, pipe lines, and producing territor}^, 
 concluded an apportionment scheme by which it guar- 
 anteed to the Pennsylvania Railroad a fixed share of 
 the petroleum freight traffic, and entered on its final 
 and absolute monopoly of the oil-refining trade. For 
 
 * "The Central and Erie railroads joined hands with the Standard and 
 proceeded to enforce its demand by a war of rates, winch terminated suc- 
 cessfully in October of that year. Tlie oil traffic, instead of being more 
 profitable to the Central and Erie, has certainly been less remunerative 
 since that war than before. We are unable to find the slightest respect 
 wherein it resulted to the advantage of these roads. The Standard got 
 the ' plum,' and as a result it owns exclusively tlie terminal facilities for 
 liandling oil in Philadelpliia and Baltimore. It owns and controls the 
 terminal facilities for handling oil of the four trunk-roads." — New Yorli 
 Investigating Committee's Report^ p. 44.
 
 The History of a Commercial Crime. 83 
 
 its victory over the Peiins3'lvania was not the only 
 step by which it strengthened its dominion at this 
 time. The Baltimore and Ohio had ao:aiu mven the 
 Pittsburgh refiners, who received their supplies from 
 the Columbia Conduit Compan}-, a chance to ship their 
 product over its road. This would have preserved 
 the life of the independent refining interest, and could 
 not be suffered by the monopoly. The trunk-line in- 
 fluence induced that road to notify the Columbia Con- 
 duit Company that no more oil transported by its line 
 would be received on the Baltimore and Ohio. At the 
 same time, a j^roposition was made to that company 
 for a purchase of its pipe line. As the choice was 
 between sale and extinction, the proposition was ac- 
 cej)ted, the pipe line passed into the hands of the Stand- 
 ard and was torn up, leaving, as the only pipe line 
 running to Pittsburgh, the one connected with the 
 Standard refineries. 
 
 This made the monopoly absolute master of the re- 
 fining trade. It controlled every avenue of transpor- 
 tation, managed all the largest refineries in the land, 
 and Avas able to shut off every competitor from either 
 receiving supplies or shipping its product. If any re- 
 fineries in any part of the land were permitted to run 
 they owed their immunity to their insignificance. The 
 Pittsbui'gh refiners, ^vlio had struggled for four years 
 against the domination of the Standard, were left with- 
 out any avenue of escape, and the rigor of their fate 
 can be perceived from the fact that at the beginning 
 of 1878 nearly every firm of the original refining in- 
 terests of Pittsburgh had either made the best terms 
 practicable ^vith the Standard or accepted the alter- 
 native of the bankrupt courts. From its original com-
 
 84 The Railways and the Bepuhlic. 
 
 monplace proportions, tlie Standard bad, at this time, 
 swelled to a corporation whose wealth was estimated to 
 exceed $30,000,000. The sources from which most of 
 this wealth was drawn may be undei-stood from the dis- 
 closures afterwards made of the discriminations in its 
 favor. Up to that time these favors could only be in- 
 ferred from tlie fact that the Standard could ship oil 
 over the trunk lines when none of its competitors 
 could do so at prevailing rates. The first legal avowal 
 of its rates was in the case of H. L. Taylor et al. vs. 
 The Standard Oil Company, in which it was alleged 
 by the plaintiif that a rebate of $1 per barrel had 
 been paid by the railways to the Standard. The re- 
 ply of the Standard admitted a payment of a rebate, 
 but denied that it was of the amount named. Subse- 
 quently Mr. A. J. Cassatt, of the Pennsylvania Rail- 
 road, testified before the New York Legislative Inves- 
 tiiratino; Committee that in eiohteen months the rail- 
 ways had paid to the Standard the sum of $10,000,000 
 in rebates. The period covered by the testimony was 
 a year or two later than the time now under consid- 
 eration. But the inference is plain that the rebates 
 paid the Standard during the period of its growth 
 from an ordinary corporation to a complete monopoly 
 were equal to its entire increase of wealth for that 
 time. In other words, its entire profits were comprised 
 within the discriminations made in its favor by the 
 railways. 
 
 The compact by which the railways surrendered 
 themselves and the public interests to the rule of the 
 Standard was well understood to be vital and bind- 
 ing; but of its exact and shameful details the public 
 was kept in ignorance until two years later, when the
 
 The History of a Commercial Crime. 85 
 
 correspondence, comprising the contract, was brought 
 out by legislative investigation. In this contract the 
 Standard assumed the power of parcelling out the traf- 
 fic, not only between the different trunk lines, but be- 
 tween the different cities. Of the shipments to the 
 seaboard sixty-three per cent, should go to New York, 
 of which the New York Central, Pennsylvania Rail- 
 road, and Erie were each to carry one third ; of the 
 remaining thirty-seven per cent, the Penns3dvania Rail- 
 road was to be given twenty-six shares, and the Balti- 
 more and Ohio eleven. For guaranteeing this division 
 of the traffic the Standard received a "commission" 
 (as it was called in this document) of not less than 
 ten per cent, of the rate. This commission was stipu- 
 lated to be subject to indefinite increase, but under 
 no circumstances to reduction. It was also reinforced 
 by the important provision that no other shipper of 
 oil should have any commission or rebate whatever, 
 unless his shipments were as large as those of the 
 Standard.* As the railways had already raised the 
 Standard to the position of controlling over ninety-five 
 per cent, of the trade, and had crushed out nearly all 
 its rivals, it will be seen that the probability of find- 
 ing such a shipper to enjoy equal terms with the mo- 
 nopoly was very remote. Nor, with the Standard in 
 control of the trade, was it likely to have any difficulty 
 in carrying out its guarantee of the percentages Avhieh 
 it had parcelled out among the railways. The com- 
 pact was a league and covenant between the railways 
 and the Standard, that no independent competition in 
 the petroleum trade should be permitted by the rail- 
 
 * Correspondence of Wni. Kockafellcr and Tlios. A. Scott, Oct. 17, 
 1877.
 
 86 The Railways and the BejmUic. 
 
 ways. It bound tbe corporations to the principle that 
 competition was to be abolished, and handed over the 
 producers and consumers alike to the tender mercies 
 of the monopoly which was established by the power 
 of the railways. It might be supposed that such a 
 complete surrender to its power would satisfy the am- 
 bition of the Standard. But it appears that there -was 
 one more point which it desired to gain. On Febru- 
 ary 15, 1878, the American Transfer Company, con- 
 trolling the crude shipments of the Standard combi- 
 nation, asked from the Pennsylvania Railroad the 
 extraordinary commission of 20 cents a barrel on all 
 crude oil transported by the raili'oad for shippers not 
 members of the combination. Some of the producers 
 had been shipping crude petroleum, enduring the ten 
 per cent, discrimination, and to stop such an indepen- 
 dent course, the commission of 20 cents per barrel was 
 asked of the Pennsylvania Kailroad for every barrel 
 of oil it transported, whether shipped by the Stand- 
 ard combination or by independent producers. It 
 would seem almost incredible that any shipper could 
 ask for a payment on his rival's business, but the letter 
 making the demand is extant, and so is the still more 
 astounding letter of the third Vice-President of the 
 Pennsylvania Railroad to the Comptroller of that com- 
 pany, stating that he has seen the documents; and that 
 the New York Central and Erie roads were allowing 
 such "rebates" of from 20 to 35 cents; and ordering the 
 comptroller to make out vouchers for the rebate of 20 
 cents to the American Transfer Company on the entire 
 crude petroleum business of the Pennsylvania Railroad.* 
 
 * Correspondence of Daniel O'Day and A. J. Cassatt, Feb. 15 and May 
 15, 1878.
 
 The History of a Commercial Crime. 87 
 
 A review of the position of the Standard Oil Com- 
 pany at this time showed that it had little more to 
 desire in the extension of its empire over the oil refin- 
 ing interest of the United States. It controlled, in 
 Cleveland, Pittsbnrgh, Baltimore, Philadelphia, New 
 York, and. Boston, works comprising ninety-five per 
 cent, of the refining capacity of the United States, all 
 the pipe lines within the oil regions, and about one 
 sixth of the producing territory. It wielded an abso- 
 lute and unchecked control over every department of 
 the petroleum trade. It could dictate every step taken 
 by the railways, impose terms on any outside dealer 
 in crude or refined petroleum, and, if there was any 
 disobedience, could administer efifective discipline to 
 the recusant, whether a raihvay corporation or a mer- 
 chant. The few outside refiners who mana2;ed to 
 keep their works in intermittent operation were forced 
 to receive their crude oil by rail, while the Standard 
 refineries were supplied directly by pipe lines, with 
 an economy of 67^ cents per barrel. By its position 
 as the only purchaser of crude petroleum, and its 
 control of pipe-line certificates, it could raise or de- 
 press the markets at its will; it could crush out any 
 attempt to revive competition ; it had bound to its 
 service the four great trunk lines ; and in the defence 
 of its interests up to and after this time, its pi'actically 
 unlimited corruption fund secured to its allegiance the 
 legislatures of the three greatest states of the Union. 
 From this time, the career of the Standard consisted 
 in maintaining the absolute character of its rule, ex- 
 torting the full profits to be secured ])y its monopoly, 
 and punishing all who rebelled against it. 
 
 It was not long after the final establishment of the
 
 88 The Railways and the Mepuhlic. 
 
 monopoly before feeble attempts \vere made to over- 
 throw it. The Baltimore and Ohio Kailroad had hardly 
 allowed the pipes of the Columbia Conduit Company 
 to be taken out of the ground, before it discovered 
 that the mess of pottage for 'svhich it had sold its 
 birthright of free competition was small and worth- 
 less. It would have resumed competition, but its con- 
 nection by the Columbia Conduit Company with the 
 oil region was gone. An attempt was made to bring 
 a new pipeline to Pittsburgh, which produced another 
 movement for a free pipe law. The oil regions united 
 with a few refiners in asking for that measure; but in 
 vain. Even the attempts to hold a public meeting in 
 iaxoY of the new bill were smothered by the Standard. 
 To prevent the expression of independent public opin- 
 ion, a meeting called for that purpose, in Pittsburgh, 
 was packed by the workmen of the Standard refiner- 
 ies, who howled down every speaker advocating com- 
 mercial freedom in the oil trade. Paid articles in the 
 press asserted that the measure would take the refin- 
 ing trade from Pittsburgh and cany the whole busi- 
 ness to other states. As this was just what the Stand- 
 ard was doing — the oil business at Pittsburgh having, 
 at that time, diminished fifty per cent. — only those 
 who wished to earn the Standard's wages were afl:ected 
 by such a plea. But that class, especially among the 
 law-makers of Pennsylvania, was numerous enough to 
 secure the defeat of tlie free pipe bill. That measure 
 was again voted down, and the attempts to secure an 
 independent line of transpoi'tation were abandoned. 
 
 The seaboard pipe line Avas another project which 
 assumed more threatening proportions. This scheme 
 aimed at carrying petroleum in pipes direct from the
 
 The History of a Commercial Crime. 89 
 
 wells to the seacoast. It could not reach the seaboard 
 with the pipe-line law of Pennsylvania as it then was; 
 but in June, 1879, the opposition company succeeded 
 in getting its pipes through to a railway which was 
 not in the Standard combination. By this means it 
 established a partial competition with one branch of 
 the Standard. Tlie railways rallied their united pow- 
 ers this time to protect their monopoly and master 
 "against injury by competition." A meeting of the 
 railway and Standard officials on June 5 reduced 
 the open ivate on crude petroleum, first to 80 and 
 then to 30 cents, while the Standard at once ob- 
 tained the special rate, for its own private use, of 20 
 cents per barrel. Upon this very low cost of trans- 
 portation it made a profit on about two millions of 
 barrels of oil, which it had previously contracted to 
 deliver. The continuance of such a rate, while the 
 seaboard line kept up its fight, allows but one of two 
 conclusions. Either the rate of $1.15 to $1.90 per bar- 
 rel, which the railways had chai'ged to the general 
 trade, was extortionate, or the rate of 20 cents, which 
 they gave to the Standard, -was throwing away their 
 stockholders' money for the benefit of the monopoly. 
 Which horn of the dilemma may be chosen makes no 
 difference. The important fact is that during that 
 year the railways kept up the fight to destroy compe- 
 tition, until the stockholders of the seaboard pipe-line 
 were forced into quietly selling their interests to the 
 Standard, and the monopoly was again triumphant. 
 
 In the meantime the Standard Oil Company ex- 
 tended its pipe lines to its refineries in Cleveland and 
 in eastern cities; and it is noticeable that while the 
 railways always placed insuperable obstacles in the
 
 90 The Railways ajid the Eepuljlic. 
 
 ^vay of iudependent lines, the monopoly could lay its 
 pipes wherever it desired. It controlled the jobbing 
 trade, and rendered it almost impossible for any out- 
 side refiner to sell his product even to domestic dealers. 
 Its tyranny was felt by the dealers in oil throughout 
 the country. It maintained an oi'ganization which 
 watched the entire trade, and if any wholesale dealer 
 or jobber undertook to sell the product of independent 
 refiners, or to sell for less than its prescribed prices, he 
 \vas cut off from further supplies, and every means that 
 unscrupulous wealth could employ was used to injure 
 his commercial standing. Even at such a distant point" 
 as Columbus, Mississippi, w^hen the grocers claimed the 
 right to sell independent petroleum that had reached 
 them by the river route, the monopoly established a 
 grocery store and sold goods below cost in order to 
 drive the merchants into submission. In this case, 
 happily, the monopoly was defeated, as the merchants 
 unitedly refused to buy the oil of the Standard Com- 
 pany until it retracted its claim of dictation, and, per- 
 haps because of the smallness of their trade and their 
 location, they were successful. A coal mei'cliant in 
 Ohio, who had some spare storage room, bought an 
 invoice of lubricating oil from an independent refiner}', 
 and as soon as the regulators of the Standard learned 
 of his transgression they purchased coal, and ordered 
 their accents to sell it at less than cost, initil he was 
 forced to succumb. In every city in which the retail 
 petroleum dealers have disobeyed the Standard's be- 
 hest — and even in some others — the monopoly has put 
 tank wagons in operation, which traverse the streets, 
 and sell petroleum at retail to private consumers. In 
 Baltimore the rebellious merchants were punished by
 
 The History of a Commercial Crime. 91 
 
 the sale of petroleum at retail, from these wagons, at a 
 price lower than that which the Standard charged to 
 jobbers; but the difference was made up by raising 
 the price to the people after the local merchants had 
 been driven out of the trade. In short, for the seven 
 years since the establishment of its absolute empire, 
 the Standard Company, as a journalist puts it, has 
 " bullied the trade of the country, wholesale and retail 
 alike." With its power to control the retail trade, at 
 one time checking shipments and glutting the market 
 with crude oil, at another taking exactly the opposite 
 course, accompanied by its almost unlimited resources 
 for manipulating the speculative exchanges, and by the 
 constant rebates through "which it monopolizes the ex- 
 jDort trade, the accumulation of wealth by the Standard 
 has been unchecked. Its resources, which in 1873 were 
 $1,000,000, and in 1878 had grown to $30,000,000, are 
 now rated at the enormous sum of $100,000,000; and 
 as the capital stock of the Standard Trust Company 
 and the American Transfer Company at par amount 
 to nearly that sum, the estimate is probably not ex- 
 cessive. 
 
 It has been claimed that this vast a2:2:re2:ation of 
 wealth has been created l)y superior business ability. 
 One writer says : " In one sense the Standard is en- 
 titled to all it has. Its energy, foresight, sharpness, 
 and calculating precision of probabilities and possibil- 
 ities, have brought it, Avitli exceptional luck, its vast 
 accumulation of wealth and power and 2:)roperty." This 
 is an erroneous view.* It is true that the Standard 
 
 * " That tlicse gentlemen possess eminent business talent is obvious ; but 
 that they possess a monopoly of the business ability of the country com- 
 mensurate with their monopoly of the oil trade is eminently absurd." — 
 2\ew Torh Invest i{/ating Committee's Rejiort, p. 44.
 
 92 The Railways and the Republic. 
 
 has been managed with ability. The greatest foresight 
 and audacity were required to conceive the monopoly, 
 and to obtain from the railways the favors which 
 established it. If a highway robber should gain vast 
 plunder by bribing the railways and the courts to let 
 him rob trains with impunity, his remarkable boldness 
 of conception and soundness of judgment in selecting 
 his tools would be acknowledged. But he would owe 
 his wealth not to his ability, but to nefarious corrup- 
 tion and violation of duty on the part of those whose 
 business it is to protect the public. In like manner 
 the ability and energy of the managers of the Standard 
 Oil Company would never have given them more than 
 local importance, if they had not been favored by the 
 railways with rebates and privileges that enabled them 
 to crush competition. Nor could that monopoly have 
 been maintained without the corruption of legislators 
 and the bribery of public officers. 
 
 The country has been startled during the last year 
 by the exposure of some of the methods used by this 
 great corporation to crush out its latest rivals. In 
 a suit of a Buffalo company against one of the Stand- 
 ard corporations* it was proved that the defendants had 
 enticed away the manager of the plaintiff's works, by 
 threats and bribery ; that they had secured the delivery 
 of adulterated oil to the plaintiffs, and had brought 
 vexatious suits against them. Testimony was offered 
 that the agents who enticed away the manager of the 
 independent concern had tried to get him to leave the 
 works in such a condition that they might be blown 
 
 * Buffalo Lubricating Oil Company vs. Vacuum Oil Company of Roch- 
 ester. In this case the plaintiflfs secured a verdict of $30,000 damages 
 for conspiracy.
 
 The History of a Commercial Crime. 93 
 
 up and destroyed, but this was excluded by the court. 
 In another case, recently exposed in Cleveland, an of- 
 ficer of the Standard Oil Company tried to bribe the 
 bookkeeper of an independent firm to betray the par- 
 ticulars of its business and the names of its customers. 
 These disclosures drew from the press expressions of 
 surprise and condemnation. It is hard to see why 
 they should excite surprise. Such acts are the neces- 
 sary and natural accompaniments of the policy w^hich 
 created the monopoly, and if they are dishonest and 
 oppressive, it is because that whole policy is one of 
 dishonesty and oppression. If unscrupulous men have 
 succeeded in inducing great railway corporations to 
 give them unjust advantages to the ruin of their rivals, 
 and have thus built up wealth to the extent of a hun- 
 dred millions, are they likely to shrink from corrupt- 
 ing the manager of an independent establishment to 
 desei't his employers? When they have induced legis- 
 lators to defeat laws securing to all competitors equal- 
 ity in transportation, will they hesitate to bribe, if pos- 
 sible, an obscure bookkeeper to disclose the secrets of 
 his employers? The crushing out of a single rival is 
 bad enough ; but it has not the public significance that 
 accompanies the reduction of an entire industry to 
 such ruins as can be seen for miles along the banks of 
 the Allegheny Kiver in the suburbs of Pittsburgh. 
 These conspiracies are but illustrations of the corrup- 
 tion and unscrupulousness which marked the rise of 
 the Standard Oil Company between 1874 and 1879. 
 
 With what forces the monopoly of the Standard is 
 still upheld, was disclosed by two pulilic events in 
 Ohio during the past year. A number of independent 
 refineries at Cleveland have lately attempted to com-
 
 94: The Railways and the Bepublic. 
 
 pete with the Standard. It was essential to have 
 a pipe line from the Pennsylvania oil fields to their 
 works. They petitioned the Ohio legislature for a 
 law authorizing it, setting forth that they were obliged 
 to pay 30 cents a barrel to the Pennsylvania Com- 
 pany for transporting crude oil from the oil regions to 
 their w^orks; that the Lake Shore and New York, 
 Pennsylvania, and Ohio roads refused to carry crude 
 oil at all, since the Standard Company had laid down 
 its double line of pipes ; that the latter company, with 
 two pipes, refused to transport petroleum for them at 
 any price, while carrying for its own refineries some 
 5,000,000 barrels a year; that with a common-carrier 
 line, such as they were endeavoring to establish, the 
 independent refiners could bring their crude supplies at 
 a cost of 10 cents per barrel, as against 30 cents charged 
 by the only line which would transport their oil ; and if 
 they could obtain such a line they could refine 600,000 
 barrels of oil the first year and twice as much the 
 next. On such a state of facts what could the rej^re- 
 sentatives of the people do, but at once place the compet- 
 ing refineries on an equality with the Standard ? But, in 
 the same legislature which sent a representative of that 
 great corporation to the United States Senate, the meas- 
 ure was quietly defeated, after such work by tlie lobby 
 that members of the body and some of the Ohio press 
 characterized it as "an indelible disgrace to the state." 
 The discrimination against the independent refiners 
 on another branch of their business was shown beyond 
 dispute in the suit of Scofield, Schurmer, <fe Teagle 
 against the Lake Shore road, which was tried in 
 the Cleveland courts last year. These independent 
 refiners asked for equal rates with the Standard over
 
 The History of a Commercial Crime. 95 
 
 that railway to Western cities. Failing to obtain these 
 rates, tbey brouglit suit against the Lake Shore Com- 
 pany for damages. The testimony of the officers of 
 the railway in this suit establishes the fact of discrim- 
 ination. The president and general manager testified 
 that his road, ever since his connection with it, had 
 given better rates to the Standard than to other refin- 
 eries. The general freight agent's testimony showed 
 the character of that discrimination, in the fact that the 
 Standard had at one time enjoyed a rate to Chicago of 
 35 cents per barrel and 28 cents in tank cars, while the 
 tariff rate was 80 cents per barrel. This was an extreme 
 case, the averacre discrimination beins; a little more than 
 20 cents per barrel, on shipments to Chicago, and to other 
 cities in proj^ortion. The advantage of the Standard 
 in its pipe-line transportation is equivalent to about 
 30 cents per barrel on refined oil, so that the total dis- 
 crimination in its favor amounts to 50 cents per barrel. 
 Upon its average shipments of 600,000 barrels per 
 year over the Lake Shore, therefore, the Standard has 
 a margin of profit of $300,000 annually, enabling it, 
 on this branch of its business, to defy competition. 
 
 It should be said that within a year there have been 
 indications that efforts to establish independent refin- 
 ing interests are not utterly hopeless. Two years ago, 
 after the right to run pipe lines over the state, freely 
 exercised by the Standard, had been for nine years 
 denied to other oil interests, an exceptionally inde- 
 pendent legislature of Pennsylvania passed a free pipe 
 bill. Tliis enables crude petroleum to be carried to 
 independent refineries, if enough of it is wanted to sup- 
 f)ort such a line. One or two independent refineries 
 have been started at Pittsburgh. A new pipe line has
 
 96 The Railways and the Republic . 
 
 been laid from the Pittsburgh refineries to the nearest 
 districts of the oil fields, notwithstanding the opposi- 
 tion of the railways and the Standard. The eftect of 
 competition upon the producing interests is shown by 
 the fact that wherever this new line has reached the 
 wells, the Standard has instructed its agents to pay an 
 advance of 10 to 12\ cents per barrel above the market 
 quotations, for crude oil delivered to its pipe lines. 
 This attempt to break down competition is likely to 
 defeat itself, as it shows the producers what they have 
 lost through the absence of competition, and induces 
 them to sustain the project which, at its very start, se- 
 cures an advance on their product equal to $4,000,000 
 on their entire stock. The independent refineries of 
 Cleveland, twelve or more in number, have the lakes 
 open to them for eight months of the year. With a 
 discrimination of 20 cents a barrel against them on 
 their crude supplies, they have proved that they can 
 at least maintain their existence; and they hope, if 
 they obtain the power to build a pipe-line to their 
 works, to secure an important and rapid expansion of 
 their business. But the work which has been done by 
 the railways during the past ten years, in building up 
 the monopoly, wall make competition a difficult task. 
 An independent pipe-line must compete with the Stand- 
 ard pipe-lines and their capital of $25,000,000, having 
 branches at every well in the producing regions, and 
 controlling tanks and delivery stations at every point 
 in the trade. The independent refiners must measure 
 their strength against the Standard Company with its 
 capital of $70,000,000, present in eveiy market of the 
 Avorld, controlling every avenue and branch of the 
 trade, descending even to the sale by the half gallon to
 
 The Ilistory of a Commercial Crime. 97 
 
 consumers irom its tank wagons, at less than cost, 
 wherever its rivals are able to put their products iu 
 the market. As surely as justice and commercial as 
 well as political freedom must finally prevail, the 
 struggle for freedom in this trade will some day be 
 triumphant ; but the exertions of the railways to estab- 
 lish and maintain the monopoly make the odds fearful, 
 for the time, against freedom and independence. 
 
 Pleas are never wanting to justify monopoly, and 
 those advanced on behalf of the Standard require 
 some consideration. They have an especial interest in 
 connection with the subject of railway discriminations 
 and railway pools, as they exhibit in an extreme form 
 the principles on which these practices are defended. 
 It is claimed on behalf of the Standard Company, first, 
 that by apportioning freights among the railways en- 
 gaged in carrying petroleum, it enabled them to main- 
 tain profitable rates, and that by guaranteeing and en- 
 forcing that apportionment, it was of actual service to 
 the railways ; second, that the combination of refining 
 interests out of which the Standard monopoly grew, 
 simply secured, by union, profits which the}- could not 
 have secured in competition. It was argued that as 
 the great bulk of the petroleum product of this coun- 
 try was destined for exportation, the devices which in- 
 creased the cost of the staple at the seaboai'd did no 
 harm to the producers. On behalf of the railways it 
 is urged that the influence of the Standard in sustain- 
 ing rates justified the discriminations in its favoi-; and 
 the case is presented as an instance of the princi])le 
 that I'aihvay managers will give the best I'ates to the 
 largest shippers. Prominent railway men have de- 
 clared that as the Standard could cjive them larsjer
 
 98 The Hallways and the Eepvhlic. 
 
 shipments than any other refiner, they coulJ give bet- 
 ter rates to it than to its competitors. These argu- 
 ments connect themselves with the whole subject of 
 pooling and discrimination, the thorough discussion of 
 which must be reserved for subsequent chapters ; but 
 some of the principles applicable to this case call for 
 notice here. 
 
 Waiving for the present the inconsistency of the po- 
 sition of the Standard, as at once the great upholder 
 of railway rates and the recipient of lower rates thau 
 any other refiner ever obtained, the claim that its in- 
 fluence on prices has not injured the producers of oil 
 must be emphatically denied. Since the Standard 
 Company acquired its power the producing interests 
 of the oil region have been in a condition of chronic 
 depression. The cost of crude petroleum has been 
 kept at a low average, while the charges for refining 
 and transportation, imposed by the power of the Stand- 
 ard, have forbidden a corresponding reduction of the 
 price abroad, and thus prevented the increased de- 
 mand which, in a normal condition of trade, would 
 compensate for low prices. The phenomenal position 
 of the controlling power in that industry has been 
 such that it was enabled practically to say to the pro- 
 ducers: "You must expend the labor necessary to 
 bring the oil to the surface. Except as regards the 
 portion of the territory which we own, we will make 
 no outlay and take none of the risks in production ; 
 but when the oil is produced, by our control of the 
 avenues of transportation, we will take exclusive charge 
 of it, fix the price for which ^ve will buy it, and ap- 
 propriate the lion's share of the receipts from the oil 
 when it is refined and taken to market. If you do
 
 T!ie History of a Commercial Crime. 99 
 
 not like our terms you can let the oil run to waste or 
 leave it undisturbed in its subterranean reservoirs.*' 
 The recent action of the Standard, in offering an ad- 
 vance of 10 to 12-| cents per barrel on the market 
 price of oil wherever the competing line has reached 
 the wells, shows that the loss to the producers, 
 through the lack of competition iu transportation, 
 for the last eight years, must be reckoned by mill- 
 ions. Consider the present situation of the petroleum 
 market with a surplus stock of crude oil equal to more 
 than a year's consumption, which, for about two years, 
 has depressed the price below the average cost of pro- 
 duction ; while, on the other hand, the price in Eu- 
 rope has attracted the competition of the Kussian oil 
 fields to a de2:ree that threatens to drive American 
 jietroleum out of Europe and confine its market to this 
 hemisphere ; is not the burden of the Standard felt 
 by the producers? In the depressed condition of the 
 crude petroleum business, which has prevailed under 
 the Standard regime, it is clear that the extra charges 
 for refining and transportation have been assessed in 
 great part upon the producers, to say nothing of their 
 present load of 30,000,000 barrels in surplus stock, 
 which might have been marketed if the trade had 
 been free from this monopoly. The essential fact is that 
 the influence of the Standard has made oil cheaper to 
 the producers and dearer to the consumers ; and both 
 differences have gone mainly into its own pockets. 
 
 The illusory character of the railway policy of main- 
 taining high rates by reducing them to a favored ship- 
 per was never more clearly exposed than in this case. 
 The theory was that by giving the Standard an advan- 
 tage on a part of the petroleum, the rates on the bulk
 
 100 The Railways and the Rejpiiblic. 
 
 of tbat business could be sustained; bufc the actual 
 effect was, that the discrimination in favor of the Stand- 
 ard excluded all other shipments, and put the reduc- 
 tion into effect on the entire freight business of 
 the petroleum trade. This result of the railway offi- 
 cials' method of sustaining rates suggests the question 
 whether the conduct of the railway business of the 
 country does not illustrate the Irish bull on a gigantic 
 practical scale. It is worth while to remember, too, 
 that the claim of the independent petroleum interests 
 was not for low rates, but for equal ones. Although 
 the old rates were shown by subsequent events to be 
 excessive, the independent refiners could have paid 
 them and maintained their existence if no one else 
 had obtained lower ones ; nor could the Standard ever 
 have created its monopoly, except by the differential 
 rates which enabled it to shut every one else out of the 
 market. The arraignment of the railway combination, 
 with the Standard as its binding power, is not an at- 
 tack upon remunerative railway rates ; it is an attack 
 upon low rates exceptionally made in favor of a single 
 shipper. 
 
 An error no less serious is exposed by this case in 
 the favorite argument of the railway managers that it 
 is for the interest of their corporations to give better 
 freight rates to large shippers than to smaller firms. 
 The practical mockery of this theory which builds up 
 the business of favored shippers to immense propor- 
 tions by preferential rates, and then tells those who 
 ask for equal rates that their business is less impor- 
 tant than that of their fiivored rivals, "svas never more 
 unblushingly exhibited than in the case of the Stand- 
 ard. The question is not, as it is generally put.
 
 The History of a Commercial Crime. 101 
 
 whether it is better to get a, shipment of a hundred 
 cars from one firm than one of ten cars from another. 
 It is whether it is better to get a shipment of a hundred 
 cars from a single firm than shipments of a hundred 
 cars from ten smaller ones. If the Standard had not 
 been raised to its present tyrannical power there would 
 have been in its place an independent interest of fifty 
 or a hundred firms shipping, in the aggregate, as great 
 or a greater amount of freight. Aside from the public 
 aspect of the question, there is no doubt that it would 
 have been better for the railways to carry the nat- 
 ural shipments of such a legitimate business than to 
 depend upon the dictates and favors of a monopoly. 
 It has often been shown, and notably in the report of 
 the Hepburn Committee to the Ne^v York Legislature, 
 that in endowing the Standard with railway favors out 
 of which it has made a hundred millions of dollars in 
 ten years, the policy of the railway managers was prac- 
 tically no less a betrayal of the interests of their share- 
 holders than it was an assault on public right and jus- 
 tice. 
 
 I must acknowledge that the argument which places 
 the combination in the li2:ht of one for the benefit of 
 the refining interests has more foundation, in the as- 
 sured fact that it has been exceedingly beneficial to 
 the members of the refining interests which formed that 
 corporation. It is true, too, that several firms, after 
 they had been brought nearly or quite to insolvency 
 by the pressure of the monopoly, were able to make 
 terms that restored their fallen fortunes. To these, as 
 well as to the partners in the corporation, the Stand- 
 ard brought greater or less prosperity. But to the 
 other members of the refining interests of 1874, who
 
 102 'The 'Jiailways and the RejpuUic. 
 
 were driven into a sale of their works at a sacrifice, or 
 found their business career terminated by the still less 
 satisfactory sale of their property in bankruptcy, the 
 benefits of the Standard's control of the refining in- 
 terest are not so apparent. Suppose that a monopoly 
 had been created by the organization of the entire oil 
 trade in a single combination, with equitably distrib- 
 uted shares to each member. That mio-ht have re- 
 suited in greater profits to them all for a time. Such 
 a combination, if it were possible in an independently 
 organized industry — which, happily, it is not — would 
 work no injustice to its members. It would require 
 attention from the public point of view, and, if armed 
 with the power to crush all fresh competition, would 
 contain a threat to the public interests. But the prev- 
 alent fashion of pools and combination is not directly 
 concerned in this case. The Standard was not even 
 an equitably organized trade-pool. It was a combina- 
 tion of a part of an interest which said to some of the 
 members of the business : " Come under our rules ; 
 conduct your business exactly as we direct you ; run 
 your refineries when we tell you to run ; buy and 
 sell only by our orders. If you obey our commands 
 in all respects, and consent to our absorbing the bulk 
 of the immense profits which our combination secures, 
 we will guarantee you a moderate prosperity. Refuse 
 and you shall be ruined." To the rest of the trade 
 it said, by its actions, that they should be ruined in 
 any event, and by the help of the railways it made 
 good its threats. An increase of wealth to the amount 
 of $70,000,000 or $80,000,000 in ten years is, proba- 
 bly, more than the old interests would have secured if 
 they had retained their separate existence. But when
 
 The History of a Commercial Crime. 103 
 
 this wealth is divided up by giving $25,000,000 to oue 
 firm, $250,000 to another, and awarding utter extinc- 
 tion to a third, it may be doubted whether the trade, 
 as a whole, is sufficiently repaid for the surrender of 
 independence and uprightness. Business which is con- 
 ducted on the basis of tryins: to mve consumers the 
 most for their money is a public benefit. That which 
 is managed so as to increase the cost of the products 
 to the consumers and to extort the greatest profit 
 from them is a public curse. It would have been bet- 
 ter for the refiners of this country to retain their posi- 
 tion of doing a public service for all the money they 
 got, than to expose their trade to the charge of extort- 
 ing immense profits by fraud and force. But when 
 the profit that was obtained by the favoritism of the 
 railwaj'S is distributed in the form of immense wealth 
 to one portion of the trade, moderate pay to another 
 portion for conforming to the demands of the combi- 
 nation, and poverty to those who retained their inde- 
 pendence, the claim that the Standard combination 
 was for the benefit of the refining interests appears to 
 be audacious if it is not sarcastic. 
 
 Tlje complete answer to all such arguments in favor 
 of railway pools, discriminations, and trade combina- 
 tions, is given by the fiicts in the history of the Stand- 
 ard Oil Company. By whatever plea of expediency 
 it may be supported, a policy is false which establishes 
 a monopoly on the ruins of independent and legiti- 
 mate competition. However splendid pecuniary prizes 
 may be, they are a public wrong when they are made 
 rewards for subservience or amassed by conspiracy and 
 dishonesty. Tliese are the results of the comljinations 
 which gave the Standard its remarkable increase of
 
 104 The Bailways and the Bejmblic. 
 
 wealth. Gloss over the methods used by whatever 
 specious arguments the railway advocates please, they 
 built up a great monopoly and crushed out an indepen- 
 dent trade. They were conceived in favoritism and 
 dishon'esty, brought forth with the aid of corruption 
 and conspiracy, and in full growth and maturity are 
 a curse to the independence and integrity of the na- 
 tion. If the Western bandits whose career has been 
 so sensational had been able to amass as great Avealth 
 as the Standard, by highway robbery, their riches 
 would not have demoralized the public more than the 
 success of this corporation. They would, at least, have 
 secured their gains at the risk of their lives. But the 
 wealth of the Standard represents no such courageous 
 dishonesty. It represents the reward which can be 
 obtained by securing the favor of the railways to 
 crush out open and honest competition ; by bribing 
 legislators to prevent equitable laws ; and by employ- 
 ing all the powers of corruption and intimidation 
 which immense hoards of money possess, to maintain 
 arbitrary power and illegal monopoly. Apart from 
 the encouragement it gives to similar attacks upon the 
 independence of other industries, the success of greedy 
 and unscrupulous wealth cannot fail to be demoralizing 
 in all its influence. AYhen gigantic dishonesty meets 
 with such gigantic success, what wonder is it that 
 more ordinary forms of the same evil prevail? In all 
 its direct and indirect results, as the wrecker and de- 
 stroyer of legitimately obtained prosperity, as a mo- 
 nopoly of an essential industry, and as a corrupter of 
 public and business morals, the Standard Oil Company 
 is an unmitigated evil and a public curse. 
 
 The infliction of that curse upon the nation must
 
 TliC History of a Commercial Crime. 105 
 
 be charged to the policy which unites the railways in 
 efforts to suppress competition among themselves, and 
 to give favored shippers a monopoly of the traffic by 
 discriminating rates. For reducing a thriving and in- 
 dependent industry to ruins under the feet of the 
 Standard Oil Company ; for giving that monopoly the 
 power, not only to dominate the petroleum trade, but 
 to intimidate and conquer the very railways which 
 had built it up; and for lifting it to a position in 
 which it has been reputed to control at least one state 
 lefrislature, two seats in the United States Senate, and 
 a cabinet officer in the national administration — for all 
 this the four trunk lines are responsible. If the New 
 York Central and Erie railroads had maintained jus- 
 tice in their rates, the present tyrant of the petroleum 
 trade could never have exceeded its original position 
 as a merely local corporation. If the Pennsylvania 
 Kailroad had given the refiners along its line the same 
 opportunity for cheap transportation that it gave the 
 Standard, the independent industry of Pittsburgh 
 would to-day hold the Standard in check by its com- 
 petition. If the Baltimore and Ohio Railroad had 
 kept up its character as a competing route, the same 
 industry could have continued its struggle against mo- 
 nopoly on equal terms. It took the united action of 
 all four trunk lines to force the petroleum industries 
 of New York, Boston, Pliiladelphia, and Pittsburgh 
 into complete subjection to the rule of the Standard 
 combination. These four corporations, the exemplars 
 and leaders of the railway system of the country, fur- 
 nished to that conspiracy against independent com- 
 merce and free competition the active strength and su2> 
 l')ort which made its success possible. Without their
 
 106 The Railways and the Repvhlic. 
 
 steady and persistent violation of the great rule of 
 equal privileges to all shippers, the project for the 
 subjugation of the petroleum trade would have died 
 still-born. In assigning to them the responsibility 
 for- such an attack upon commercial liberties, is it too 
 severe to declare that the four leading railways of the 
 country are guilty of the great commercial crime of 
 the last decade ?
 
 CHAPTER IV. 
 
 THE LAW AIS'D THE EAILWATS. 
 
 A PUBLIC wrong may be made to bear the semblance 
 of a private right. Thus railway discriminations are 
 defended by claiming for the railways the same right 
 that any citizen has, to perform service for one customer 
 cheaper than for another. A merchant is at liberty to 
 sell to A at a lower price than to B ; he will sell to 
 the buyer of $20,000 worth at a lower price than to 
 the buyer of $1000 worth. "Why, then," asks the 
 railway advocate, " have not the railway managers the 
 same right to give one shipper better rates than an- 
 other? We have seen that such discriminations are 
 often forced upon them. These are business corpora- 
 tions conducted for the purpose of making money, and 
 as a merchant secures a large transaction by a lower 
 rate, what justice or reason is there in refusing the rail- 
 ways a like privilege?" This argument has been quali- 
 fied in recent discussions by the admission that no 
 "unjust discriminations" should be allowed. But the 
 principle of the plea demands a short examination. . 
 
 If any merchant, manufacturer, or broker had the 
 power to make discriminations which would affect the 
 prosperity of whole communities, or buikl up fortune 
 for one person out of the adversity of his rivals, ought 
 not the law to take away that power? If a Stewart 
 or Astor had obtained such a control of trade that he
 
 108 The Railways and the Hejpublic. 
 
 could compel western New York to pay more for its 
 cottons, its clothing, or its groceries than Illinois or 
 Iowa, or could sell to a select few of the thousands of 
 retail merchants at prices that would give them a prac- 
 tical monopoly, would the public necessity for abolish- 
 ing such a dangerous power be hindered by any plea 
 of individual rights? The privileges of feudal lords 
 scarcely involved greater control over the welfare of 
 the people than such mastery of their commercial life ; 
 but the civilized world abolished them hundreds of 
 years ago. Under our institutions there can be no 
 private property in the liberties, lives, or welfore of the 
 people. I cannot believe that after we have proved, 
 by a century of experience, the wisdom of abolishing 
 all royal or feudal control over the prosperity and free- 
 dom of the masses, we shall permit a more arbitrary 
 and irresponsible sway to be established over our 
 commercial liberties either by corporate or individual 
 plutocrats. 
 
 But the fact that no individual merchant ever has 
 obtained such a power, marks the difference between 
 the position of the greatest private trader and that of 
 a railroad corporation. Let Stewart and Claflin favor 
 one dealer as they will ; others can get relief by deal- 
 ing with other merchants — and if the}^ cannot buy else- 
 where as cheaply as their favored rival does of the great 
 merchant, the loss comes out of the latter's pocket. As 
 long as the dominant power holds no franchise under 
 wdiich it can throw the cost of its favors on those 
 against whom it discriminates, no public rights are 
 attacked. No merchant can hold such a power unless, 
 as we have seen, the monopoly is placed in his hands 
 by the favor of the railways. This contrast between
 
 The Law and the Railways. 109 
 
 tine ability of the greatest and most successful traders 
 and that of the weakest and most bankrupt railway in 
 the exercise of discrimination, illustrates the differences 
 in the sources of their powers and in their public obliga- 
 tions. The merchant owes his wealth and importance 
 in the market to his own ability and industry, and, 
 however great that wealth and power may be, the 
 competition of others is a perpetual safeguard against 
 fovoritism which will build up one class or locality at 
 the expense of others. The railway owes its existence 
 and creation to the state. Its power over transporta- 
 tion rates does not come from ability or industr}^, but 
 begins as soon as the tracks are laid, and continues 
 throughout its career, no matter how extravagantly or 
 recklessly it may be managed. It is the legislation 
 which gives it existence and enables it to build and 
 control the road from which the power to make dis- 
 criminations is drawn. It is a vital point that the rail- 
 ways occupy an entirely exceptional and unique posi- 
 tion, (1) in that they alone can make discriminations so 
 as to affect public interests, and (2) in that they derive 
 this power entirely from the legislation which has given 
 them existence. The character of that legislation has 
 been such as to justify the imposition of restraints upon 
 the railways wherever they threaten the public interest. 
 It rests upon powers which can be wielded only for 
 public purposes; and the employment of which, in 
 the creation of the railways, clearly implies that they 
 were created for tlie benefit of the people, that the 
 public welfare is their supreme end. The right of the 
 railway to exist rests upon its character as a puljlic 
 highway. This character is the sole justification of the 
 exti'aordinary acts of power by which the state gave
 
 110 The Hallways and the Rejpvhlic. 
 
 tlie railways existence, and of the legislative favors by 
 whicli the railway system has been developed. In tbis 
 character too lies the foundation of the public obliga- 
 tions of the railways. Having accepted the advantages 
 and powers which public policy grants to aid the con- 
 struction of public highways, they are bound to perform 
 the duties which attach to that character and to respect 
 the public rights affected by it. 
 
 The agency of government in giving corporate exist- 
 ence to the railwa3's, and in aiding the construction of 
 a large number of them by subsidies and public loans, 
 is enough to support the claim that the public interest 
 should be paramount in controlling their operations. 
 But a farther exertion of governmental power has been 
 made in behalf of every raihvay in the country ; one 
 which is requisite to their construction, and which fully 
 stam2:)S that construction as a public purpose and not 
 a private business or speculation. The state has exer- 
 cised its sovereignty in appropriating and condemning 
 land for the right of way, without the consent of the 
 owners. 
 
 The right of eminent domain, or the power of the 
 government to take private property fur public pur- 
 poses without the consent of the owner, upon such com- 
 pensation as may be fixed by legal process, is one of 
 the supreme powers of government. It is founded 
 upon the principle which holds states together, that 
 private rights must always be held subordinate to the 
 public need. But this principle implies that the power 
 in question cannot be exerted save for a public pur- 
 pose. The right of every man to hold his property at 
 whatever price he chooses, or to refuse to sell it at any 
 price, is indefeasible against any right except that of
 
 The Law and the Railways. Ill 
 
 the government for public purposes. If the state 
 should force one man to sell his property at a valua- 
 tion for another's private use, this would be an act, 
 not of sovereignty, but of tyranny. But it is an 
 equitable and beneficial practice of every civilized gov- 
 ernment to appropriate the land of private owners, 
 upon just compensation, for such public uses as the 
 construction of state buildings, or of public highways. 
 Since the days of theEoman empire, the establishment 
 of public highways has been recognized as a function of 
 the government in every civilized state; and it is for 
 this end that the power of the state has been conferred 
 upon the railway companies to seize the land needed 
 for their right of AA'ay. Before railways were thought 
 of, the same power had been granted to companies for 
 the construction of highways in the form of canals, 
 turnpikes, or plank roads, and for the improvement of 
 natural water-courses. The grant in tlie same manner, 
 of the power of seizure, under the state's eminent do- 
 main, shows that the railway was, from the first, recog- 
 nized by the law as a public highway, in exactly the 
 same legal relation to the state as the canals and turn- 
 pikes. This exercise of sovereign po^ver was absolutely 
 necessary for the creation of the i-ailway system. Ex- 
 perience shows that no railroad twenty-five miles in 
 length can be built without the resort to the power of 
 the state, for there are always some proprietors who 
 demand an exorbitant price or altogether refuse to let 
 the railway pass over their property. jSTo railroad of 
 greater importance than a mere switch ever has been 
 or ever can be built without invoking the sovereignty 
 of the government in its behalf * 
 
 * Within the personal knowledge of the writer a number of private
 
 112 The Railways and the BepuUic. 
 
 Not only was it the plain purpose of legislation to 
 establish public highways by these acts, but that Avas 
 the only purpose for which the power could be exerted. 
 This is a constitutional country in which the rights of 
 the citizen are carefully guarded against encroachment, 
 even by the legislature, and any attempt to appropriate 
 property for other than public uses would be uncon- 
 stitutional. This is a point of vital importance. Some 
 writers seem to imagine that the railways are not sub- 
 ject to the restrictions and obligations of public high- 
 ways, but own and control their tracks as absolutely 
 as a manufacturing corporation owns its mill. This 
 view ignores the rights of private ownership. If the 
 state should assume to empower A to take B's land by 
 legal process, paying the price assessed by a jury, and 
 to use it for his private residence or private business, 
 every one would see in this a most arbitrary and out- 
 rageous abuse of power, and every court would un- 
 hesitatingly pronounce the act unconstitutional and 
 void. Yet this is exactly the claim of the railways, 
 when they assert their independent ownership of tracks 
 and rights of way that have been obtained by this ex- 
 ertion of the sovereign power. If it be true that their 
 roads are not public highways, then they have no legal 
 right where they are, and could be dispossessed of 
 their tracks by an appeal to the courts. The power of 
 the state to take the land of private citizens can onl}?- 
 be exerted for public uses; and the sole public use of 
 the railways is as highways for merchandise and pas- 
 capitalists wished to build a railway to their coal mines, through ten 
 miles of country -where they were well known and very influential. In 
 order to avoid the trouble of incorporating themselves, they tried to buy 
 the right of way by private negotiations, but were forced to resort to in- 
 corporation and the right of eminent domain.
 
 The Law and the Railways. 113 
 
 sengers. The railway, no doubt, when conducted with 
 due regard to the public requirements, is such a high- 
 way as truly as the turnpike. If it were not, the legis- 
 lative acts under which the railway system was built 
 up would be null and void, and the entire railway 
 S3'stem would be a mere product of violence and fraud, 
 without legal justification. 
 
 This principle was recognized, formally at least, by 
 Messrs Vanderbilt and Jewett, in their letter to the 
 New York legislative investigating committee. They 
 declared that " it is the primary duty of the state to 
 furnish ' highways,' whether they be the road, the canal, 
 the turnpike, or the railroad, the state alone havin^r 
 the risjht of ' eminent domain.'" But, notwithstandino- 
 this admission, many Avriters in the interest of the rail- 
 ways have denied that they are public highways. This 
 denial is indeed necessary to their consistency, if they 
 deny the i-ight of the state to regulate these highways 
 in the public interest. Mr. Geoi'ge Ticknor Curtis, the 
 most eminent of these writers, brought forward the 
 theory of private ownership, in 1880, denying the as- 
 sertion of Judge Black that railways are public high- 
 ways and consequently held subject to public uses. 
 His claim that the railways must be exempt from legis- 
 lative regulation has been echoed by the advocates and 
 organs of the railway theory. A very respectable ex- 
 ample of this class was Mr. W. F. Crafts, Avho, by giv- 
 ing a fair statement of the claim that the exercise of the 
 right of eminent domain in behalf of the railways invests 
 them with the character of public highways, earned the 
 right to a tolerant hearing. But, while stating the case 
 fairly, he could not give up his preconceived ideas of 
 private ownership. Admitting that the view we main-
 
 114 The Railioays and the Republic. 
 
 tain may be plausible in theory "and evolved from some 
 old principles of law," he declared that it is not " true in 
 fact." In one sense it may be untrue in fact. The rail- 
 ways, as generally conducted, may correctly be asserted 
 to have lost the impartial character and freedom of com- 
 petition which are the essential features of public high- 
 ways. This is, indeed, the principal count of the indict- 
 ment against them: that they have changed their char- 
 acter, betrayed the public purpose for which they were 
 established, and adopted practices and methods wholly 
 inconsistent with the nature of public highways. But 
 Mr. Crafts means that it is " untrue in fact " that the rail- 
 ways rest upon the legal foundation of the public high- 
 way. He has attempted to prove this by asserting the 
 legislative power of " the necessities of modern prog- 
 ress," ■^* which, in his opinion, have, within the last 
 fifty years, made it constitutional and right for the 
 state to take away the property of A and give it to B 
 for tlie latter's private use and behoof — provided al- 
 ways that B is a railway corporation. But this argu- 
 ment is two-edged and cuts both ways. If the neces- 
 sities of modern progress justify the invasion of the 
 rights of private property for the benefit of one inter- 
 est, they will justify a similar invasion of those rights 
 for the benefit of a greater interest. It is as necessary 
 to keep the avenues of commerce open to competition 
 
 * '• The necessities of modern progress rendered a modification of old 
 theories, and even of old principles, inevitable ; and since the introduction 
 of railroads, tlie idea that private property taken for the purpose of travel 
 in a peculiar manner and under new conditions is a public highway, is 
 no longer tenable and in practice is not recognized. The old theory of 
 the rights of the public in such a road was necessarily modified in prac- 
 tice, though it still lingered in the minds of some jurists." — W. F. Cbafts, 
 Scribnefs Monthly, Oct., 1881.
 
 The Law and the Bailvjays. 115 
 
 and to put down monopolies as it is to furnish cheap 
 rights of way to raih'oad corporations. Grant that such 
 a necessity may take away the property of citizens and 
 make it the property of corporations, it may well go 
 a step further and take away the property of the cor- 
 porations to be the property of the state. Certainly if 
 modern progress can amend constitutional principles 
 and invade the right of property, it can do so to no 
 better end than to guard the freedom of commerce and 
 promote the welfare of the public. 
 
 This theory of the private proprietorship of the rail- 
 ways is founded by Mr. Crafts, one of its typical advo- 
 cates, on the practice of the present times. "The old 
 theory of the right of the public in such a road," he says, 
 " was necessarily modified in practice." It makes a vital 
 difference, as to the pertinence and accuracy of this 
 statement, w^hose practice it is that is supposed to re- 
 peal fundamental and time-honored principles of law. 
 It is true that the practice of the raihvays does no 
 longer recognize the principle of the public highway. 
 But does the practice of those whose private interests 
 lead them to override fundamental principles of law 
 amount to a repeal of that principle? It is an old 
 principle that public office is a public trust, to be ad- 
 ministered for the welfare of the entire nation. If this 
 principle has not been recognized in practice, and office- 
 holders have violated it, using their offices to make 
 money or to strengthen their parties, does the principle 
 become false? Perhaps the effort to make the public 
 interest the supreme end of the public service might 
 be met by the assertion that the public interest must 
 be made subordinate in tlie manafrement of the jrovern- 
 ment, because the practice of the politicians in office
 
 116 The Railways and the Eepullic. 
 
 has long modified the old theory, and made the offices 
 the property of political rings. Few professional poli- 
 ticians have the assurance to adopt such a view, but 
 it is exactly parallel to the claim of the railways to 
 private property in their lines. In each case the argu- 
 ment is, that because rights and public obligations have 
 been persistently ignored, therefore the principles of law 
 on which those ris^hts and oblisfations rest are abol- 
 ished. 
 
 If it is meant to assert that the practice "which has 
 abolished these principles is the practice of the courts 
 and legal authorities, the assertion is incorrect. The 
 public obligations of the railways may rest upon " old 
 theories" and be "evolved from old principles of law," 
 but theories and principles may be none the worse that 
 they are old and long established. The old theory, 
 that the railway is in its legal character a public high- 
 way, has been affirmed in its clearest and most positive 
 form by the highest and most authoritative judicial 
 tribunals of the land. Old principles of law which 
 have been declared essential and fundamental by the 
 Supreme Court of the United States, and by the courts 
 of last resort in New York, Pennsylvania, Massachu- 
 setts, Vermont, and North Carolina in the early days, 
 and of many other states, including a reassertion in 
 the United States Supreme Court in the later stages 
 of railway development, claim some respect in the 
 minds of the public, however lightly railway advocates 
 may subordinate them to imagined necessities of mod- 
 ern progress. The doctrines which were laid down at 
 the beginning of the railway system by such authori- 
 ties as Walworth, Baldwin, Shaw, and Black, have in 
 its later and greater growth been reaffirmed and ap-
 
 The Law and the Railways. 117 
 
 plied by Waite, Strong, Miller, Clifford, Agnew, Mc- 
 Creary, Baxter, and Kedfield. The combined author- 
 ity of the higher courts and the recognized text-books 
 has from first to last recognized, as a fundamental 
 principle in the constitution of the railways, that they 
 were created by sovereign powers, which could onl}^ 
 be exercised for public uses, and which made the pub- 
 lic rights the supreme obligation in their administra- 
 tion. 
 
 It is a pregnant fact, too, that the strongest and most 
 complete assertion of the view that the railways are 
 public highways, has been given by the courts for the 
 benefit of the railways themselves. The earlier cases 
 all arose from the attempts of land-owners to resist 
 the seizure of their land by the railroads. This issue 
 was drawn very clearly in the case of Beekman vn. The 
 Saratoga and Schenectady Railroad, decided by Chan- 
 celler Walworth in 1831.* It is amusing to find that 
 in this case the same argument was used against the 
 railroad which is no\v offered in its favor. The plain- 
 tiff insisted that the railway could not be a public 
 highway, because farmers and travellers could not use 
 their own vehicles upon it. To this the counsel for 
 the railway replied, that it would be a public high- 
 way for the vehicles suited to it, and the eminent 
 jurist who decided the case adopted that view in a 
 decision which laid down in clear and exhaustive 
 terms the following fundamental principles : " (1) 
 Railroads are public improvements for which the leg- 
 islature cau authorize the appropriation of land on 
 just compensation to the owner; (2) the privilege of 
 making such a road and taking tolls tliereon when 
 
 * 3 Paige, 45.
 
 118 The Railways and the Hepuhlic. 
 
 granted to an individual or a corporation is a franchise 
 subject to the public interest and under legislative 
 regulation ; (3) the sovereign power could not take 
 the property of one citizen and transfer it to another, 
 even upon full compensation, except for public pur- 
 poses, and an act of the legislature doing so would 
 be repugnant to the Constitution of the United 
 States." 
 
 The same principle is set forth still more decisively 
 by the Supreme Court of the United States in the case 
 of Bonaparte vs. The Camden and Amboy Railroad.* 
 The ex-king of Spain resisted the right of the railway 
 to appropriate his land for its tracks, on the ground 
 that it was not for a public purpose, but for the use 
 of a monopoly. The final decision of the case by the 
 highest tribunal of the nation clearly laid down the 
 principles on which the public control of the railwa3^s 
 is now asserted. The opinion of Justice Baldwin fol- 
 lowed out the precedent already instanced by holding 
 that " a road or canal is for public use, w^hen the pub- 
 lic have the right of passage on paying a stipulated, 
 reasonable, and uniform toll." But he made a proviso 
 W'hich should be full of warning to the railway cor- 
 porations of the present day, by asserting that, "if 
 the toll amounts to a prohibition it is a monopoly and 
 the road is not public." The absolute necessity that 
 the road should be a public highw^ay, not only in name 
 but in fact, was also affirmed, and the court declared 
 that if the law was open to the objection that the 
 road w^ould be used solely for the private benefit of 
 the corporation, the objection would be fatal, " as it is 
 opposed to every constitutional principle which pro- 
 * 1 Baldwin, 205.
 
 The Law and the Railways. 119 
 
 tects the right of property, to take from the hiwful 
 owner and aj^propriate it to the private use of another, 
 or a private corporation for its own use." Such a 
 transfer was ruled by the court only to be valid when 
 it was an appropriation to a public use ; and if the 
 railways succeed in establishing the theory of pri- 
 vate ownership, every rod of their tracks must, un- 
 der this decision, revert to the original owners, or be 
 held in defiance and usur^^ation of the rights of pri- 
 vate property as laid down by the highest court of 
 the land. 
 
 Many decisions of the highest state courts in the 
 early days of the railway system were emphatic in 
 rejecting the idea that railways could be anything else 
 than such highways. This was done in the interest of 
 the railways themselves. The railway lawyers saw 
 that, unless their public character was made indisput- 
 able, their very life would be imperilled by tlieir in- 
 ability to take the land necessary for their tracks. Tlie 
 decisions in which tliis principle has been repeated by 
 the courts of Massachusetts, Connecticut, New York, 
 Vermont, Pennsylvania, Maryland, North and South 
 Carolina, Ohio, Iowa, and Minnesota would of them- 
 selves more than fill this volume ; some of the most 
 important of the earlier decisions were made by the 
 Supreme Court of Pennsylvania. It is significant that 
 while the Supreme Court of Pennsylvania is now con- 
 sidered the stronghold of the great railway corporation 
 of that state, tlie principles laid down in its decisions 
 of 1853 and 185G liave never been set aside. Tlie first 
 great railway question decided Ijy this court was that 
 of the constitutionality of municipal subscriptions to 
 aid in the construction of railways, and Judge Black
 
 120 The Railways and the liepublic. 
 
 held that such subscriptions under acts of the legis- 
 lature "were constitutional, solely on the ground that 
 they aided the construction of a public highway.* Three 
 years later the same court gave another decision involv- 
 ing the forfeiture of a railway charter, in which the ut- 
 ter subordination to the public use and public control 
 of all property taken by the right of eminent domain 
 was declared in the strongest terms.f The lands for 
 the road, as the court said, " were taken for public 
 use; otherwise they could not have been taken at all." 
 The principle that railways were public highways was 
 declared to be the sole justification for appropriating 
 land, for making municipal subscriptions, for fixing 
 tolls, or granting to corporations or individuals the 
 right to build and operate such roads. "A public 
 highway," said the court, " is not private property any 
 more than a public office," and when the corpoi'ation 
 forfeits its charter " by misuser or abuse of its corporate 
 privileges," or by " any act in derogation of public 
 right," the public lligh^vay reverts to the control of 
 the state, and the franchises of the corporation in the 
 road are extin2:uished. 
 
 But weare told by the railway advocates that these are 
 old theories, and that the necessities of modern progress 
 and the practice of the latter-day railway system has 
 overruled these decisions of twenty-five and fifty years 
 ago. It becomes a question of intei'est therefore to in- 
 quire at what time the constitution-making power of 
 modern progress overruled the decisions of the supreme 
 legal tribunals. That rather indefinite judicial influ- 
 ence had evidently not reversed the decision of the 
 
 * Sharpless vs. Mayor of Philadelphia, 21 Pennsylvania, 147. 
 t Erie and North East R. R. vs. Casey, 2 Casey, 287.
 
 The Law and the Railvmys. 121 
 
 older courts in 1869, Avhen Chief -justice Eedfield, in 
 his standard work on the law of railways, reaffirmed 
 and sustained by a host of authorities the three prin- 
 ciples: (1) That railways are public highways; (2) 
 that unless they are public highways it would be be- 
 yond legislative power to exercise the right of eminent 
 domain in their behalf; and (3) that the railway cor- 
 porations obtain from the exercise of that right only 
 an easement in the land condemned for their use* 
 Nor had the change taken place in 1872, when the 
 Supreme Court of the United States repeated the doc- 
 trine that the railway is a public highway with especial 
 force and particularity of detail.f The declaration of 
 the principle in this case is the more significant in that 
 it was made by Justice Strong, with the concurrence 
 of Justice Field, both of whom took the side of the 
 corporations and dissented from the application of 
 practically the same principle in the more famous, but 
 not more decisive. Granger cases. In the first case, the 
 principle was asserted in behalf of the railways ; as it 
 established the constitutionality of a public loan in 
 their aid. But it was no less conclusive in its assertion 
 of their public character and public obligations. Jus- 
 tice Strong not only declared the railroad a public 
 highway, but asserted that the right of eminent do- 
 
 *Redfiekl on Railways, ch. xi. 229, says: "That railways are but im- 
 proved public highways and are of such public use as to justify tiie right 
 of eminent domain by the sovereign in their construction is now almost 
 universally conceded. Williams ts. New York Central, 18 Baib. 222, 24G ; 
 State «s. Rives, 5 Ired. 297; Northern Railway r». Concord and Clare- 
 mont Railway, 7 Foster, 183; Bloodgood ts. M. and II. Railway, 18 
 Wend. 9, and 14 Wend. 51 ; 1 Bald. C. C. Reports, 205, sec also page 
 73 ; 3 Seld. 314." 
 
 t Olcott rs. Supervisors, 16 Wallace, 078.
 
 122 The Railways and the Republic. 
 
 main could not be used in favor of a railway corpora- 
 tion for any other purpose. As if to forestall the plea 
 that the railway could be regarded as a public high- 
 Avay only for the purpose of condemning the land, 
 and as a private corporation in other respects, the 
 language is decisive that the claim that they are 
 "public only with respect to the power of eminent 
 domain " is a mistake. " In their very nature they 
 are public highways." This decision, uttered by the 
 justices who are now regarded as the most emi- 
 nent railway judges, decisively refutes the idea that 
 the public character of the railway is an obsolete 
 theory. 
 
 This doctrine, first established in behalf of the rail- 
 roads, has been reaffirmed in the later decisions, both 
 to establish their leo-itimate rio^hts and to curb their 
 unwarranted pretensions. It has been their justifica- 
 tion in thousands of cases in which the land of private 
 owners has been taken to secure rights of way for 
 railways. It has been asserted as authorizing county 
 and municipal subscriptions to aid their construction.* 
 It is true that for many years the fundamental prin- 
 ciple was so far forgotten and discarded in the prac- 
 tice of the railways that Judge Black's enunciation of 
 it was called by the press a novel and extreme doc- 
 trine. That it was, instead, the doctrine on which 
 the railway system was ushered into existence and on 
 which its entire growth was based, has already been 
 shown. It seemed novel and extreme to those ■who 
 inferred from the neglect and defiance of the law by 
 the railway corporations that it did not exist. Those 
 who have examined the clear rulino;s of the high courts 
 
 * Rogers ts. Burlington, 3 Wallace, 654.
 
 The Law and the Railways. 123 
 
 by whicli the legal status of the railways was defiDecl, 
 or noted the multitiule of cases in whicli these prin- 
 ciples were repeated,'^ know that they are neither 
 novel nor obsolete, but that they form the legal founda- 
 tion on which the railway system of to-day has been 
 built up. 
 
 It is well to note here that the rights of private 
 property are the very foundation of the claim of the 
 public for the restraint and regulation of the railways. 
 It is customary for railway advocates to attack this 
 claim as ''an assault on property rights." A thorough 
 comprehension of the principles laid down by the 
 courts will show that the assault on property rights is 
 made by the opponents of railway regulation. Thou- 
 sands of miles of land have been taken, without the 
 owners' consent, to furnish tracks for the railway. If 
 this was for the private benefit of the companies, it 
 was simj)ly taking away the land from one owner and 
 giving it to another, an outrage and invasion of pri- 
 vate rights which no legislative power would be com- 
 petent to make ; which, as the Supreme Court of Penn- 
 
 * If the somewhat voluminous citations already made to establish the 
 validity of this important le<?al doctrine should be deemed insufficient, 
 the reader can find them reaffirmed in the following references given in 
 Redfield on Railways, and sundry other opinions: Williams vs. New 
 York Central, 18 Barb. 222, 246 ; Northern Railway m. Concord and Clare- 
 mont Railway, 7 Foster, 183 ; Bloodgood ts. M. and H. Railway, 18 Wend. 
 9, and 14 Wend, 51 ; sec also 3 Seld. 314 ; Bradley «». New York and 
 N. H. Railway, 21 Conn. 294; Symonds ts. City of Cincinnati, 14 
 Ohio, 147; Embury ts. Conner, 3 Corns. 511 ; Talcott vh. Township of Pine 
 Grove, 1 Flippin, 144; People rs. New York Central Railway, Daily Reg- 
 ister, February 10th, 1883; Railway Company vs. Maryland, 21 Wall, 
 470; Lumford vs. Stearns, 4 Cush. 61 ; Prosser t"s. Wapallo Company, 18 
 Iowa, 327 ; Slater vs. Boston, C. and M., 25 Vermont, 433. Further cita- 
 tions are made, as Redfield says, " almost to infinity," but the reader will 
 be of opinion that these are sufficient.
 
 124: The Railways and the Bepuhlic. 
 
 sylvania said, " would be a rescript and not a law." 
 The denial of the public character of the railway de- 
 prives the railway system of any title to the protec- 
 tion of the law, and leaves its creation and preserva- 
 tion a mere trespass. It is only as public highways 
 that the existence of the railways can be reconciled 
 with the rights of property. The actual regulation 
 and control of these highways in the interests of the 
 public is the sole method by which these rights can 
 be vindicated. It does not help them to recognize the 
 principle in theory while rejecting it in practice. It 
 is a mere paradox to say that the railways are public 
 highways for the purpose of appropriating the land of 
 private citizens and receiving public aid, and not to 
 regard them as under the obligations of public high- 
 ways, to grant equal and reasonable jjrivileges of trans- 
 portation and travel. 
 
 That this is still the controlling principle of railroad 
 law is shown by the later decisions. In the first place 
 it is by this principle that the building of some sixty 
 thousand miles of railway has been accomplished. No 
 ten consecutive miles in any settled section of the coun- 
 try could have been built without invoking this prin- 
 ciple in order to condemn private property for public 
 use. Again, recent decisions affirm and enforce the 
 right of the legislature to authorize the use of public 
 funds by counties and municipalities in aid of railways 
 as a public purpose. There are cases, too, in which 
 the right of the railways to defy this principle has 
 been challenged. A few of these have been brought 
 to trial, notwithstanding the tactics of the railway 
 counsel; and the courts have declared arbitrary dis- 
 criminations illegal, and have awarded damages for
 
 The Law and the Railways, 125 
 
 such offences. Finally, there are successive decisions 
 by the Supreme Court of the United States, as well as 
 the state and circuit courts, in which the full right of 
 the state to control and regulate the railways and fix 
 the rate of tolls has been clearly established. In these 
 decisions, it is true, the function of the railways as com- 
 mon carriers is made more prominent than their func- 
 tion as builders and operators of public highways. 
 This fact has contributed to turn away the attention 
 and thought of the public from one side of the twofold 
 character which the railways sustain in their relations 
 to the community. The important distinction between 
 these relations will be discussed in another chapter. 
 It does not, for our purpose, affect the weight of these 
 decisions, in which the public duties and obligations of 
 the railways are founded upon the principle laid down 
 by the judges of the preceding generation, that they 
 are public highways; and then are further sustained 
 by showing that, as common carriers, they are so af- 
 fected with a public right as to be subject to govern- 
 mental regulation and control. 
 
 The right of the state to regulate the railways has 
 been affirmed by numerous decisions of the highest 
 state and federal courts. These decisions are so re- 
 cent and so well known that it is not necessary to dis- 
 cuss them so fully as the earlier and more fundamental 
 ones. Indeed, they only apply the principles previ- 
 ously settled, in affirming the right of the state to pre- 
 vent abuses and to regulate the operation of the rail- 
 ways. But they are important in defining the powers 
 of the state in detail as applied to the developments 
 of the modern railway system. It has already been 
 said that the conception of the railway as a public
 
 126 The Railways and the EepxibUc. 
 
 highway was the foundation of the decision of the 
 famous Granger cases by the Supreme Court of the 
 United States, The doctrine is not indeed specifi- 
 cally affirmed there. But the omission is more than 
 supplied by the distinct declaration of the principle 
 made by the same court four years earlier. Although 
 there were some singular changes in the position of 
 the members of the Supreme Court* between the de- 
 cision of this case and that in the Granger cases, the 
 ' latter applies the principle and carries it further, found- 
 ing the regulative authority of the government upon the 
 public use or interest in a business, without reference 
 to the exercise of the right of eminent domain in its 
 establishment. In the first of these cases, Munn vs. 
 Illinois, the Supreme Court held that an act of the leg- 
 islature regulating the charges of grain elevators and 
 warehouses was constitutional, solely on the ground that 
 the state may regulate any class of business which has 
 become affected ^vith a public use.f The other cases 
 dealt directly with the power of the state over the rail- 
 ways, and in all these cases the decision unreservedly 
 affirmed the power. The doctrine ^vas not new. Chau- 
 
 * It is noticeable that wliile the decision in Olcott vs. The Supervisors, 
 which sustained a public loan in aid of a railway, was upheld by Justices 
 Strong and Field, on the ground that it is a public highway, the same 
 judges dissented from the decisi<m in the Granger cases, that the legis- 
 lature could regulate the charges of the corporations. On the other 
 hand, Chief-justice Waite and Justice Miller, who had dissented from the 
 first decision, delivered and sustained the rulings in the five cases of 187G. 
 This contradictory position may afford an explanation of the absence of 
 any reference to the doctrine of the public highway in either the affirm- 
 ing or the dissenting opinions in the Granger cases. 
 
 t Munn ts. Illinois, 4 Otto, 113 ; C. B. and Q. R. R. vs. Iowa, 4 Otto, 155 ; 
 Peik rs. C. and K W. R. ; Winona and St. Peters vs. Blake. These cases 
 are all reported together.
 
 The Law and the Railways. 127 
 
 cellor Walworth had asserted it as early as 1831. In 
 the Camden and Amboy case, the right of regulation 
 on the part of the state had been recognized, though 
 not perhaps directly affirmed, by the United States 
 Supreme Court. In the Granger cases, however, these 
 rights were fully declared, and some important details 
 were discussed. In some of them the subject of state 
 and inter-state commerce was considered, and the right 
 of a state to re2;ulate such inter-state commerce as af- 
 fects its citizens, in the absence of action by Congress, 
 was clearly affirmed. One case involved the meaning 
 of a grant of power " to fix reasonable rates," and it 
 was held in that and in the next case that it lies 
 wholly with the legislature to determine what rates 
 are reasonable. Another decision gave an indirect as- 
 sent to the assertion, made by the supreme court of a 
 state, that a legislature cannot alienate its rio-ht of resr- 
 ulating a corporation intrusted with the operation of 
 a public highway. 
 
 The regulation of the railways by the state has been 
 most frequently opposed by the claim that the char- 
 tered rights of the corporations are violated by it. 
 Commencing with the declaration of Chancellor Wal- 
 worth that: "The legislature may, from time to time, 
 regulate the use of the franchise and limit the amount 
 of the toll which it shall be lawful to take, unless they 
 have deprived themselves of that power by a legisla- 
 tive contract with the owners of the road," tlie ques- 
 tion arises: first, what constitutes such a contract; and 
 second, have any sucli contracts been made 1)y the leg- 
 islatures with the i-ailway companies? In regard to 
 this reason and law ag:ree that the ri^rht of tlie state 
 to regulate its public higliways cannot be easily for-
 
 128 The Bailways and the Bepullic. 
 
 feited by the legislature. The rights of the public in 
 the manageraeut of the creatures of the state are not 
 to be defeated by implied contracts or indirect grants 
 of power. It is a universal rule for construing all such 
 grants by the state that its powers of supervision and 
 control are not to be waived except by the most direct 
 and plainest terms. Even ^vhen made in such terms 
 the action is subject to the constitutional limitations 
 which affect the power granted. If the legislature 
 cannot exert the public power to create a monopoly, 
 as declared by the Supreme Court of the United States 
 in 1842, it cannot delegate a power which would have 
 that effect to any of its corporate creatures or sub- 
 jects. 
 
 The principle that the grants in all charters must be 
 construed strictly against the corporations, and that 
 when there is any doubt it must be resolved in favor 
 of the state, or, in other words, that it must be pre- 
 sumed that the law will preserve the public right as 
 against its creatures, makes it clear that no implication 
 or deduction from the charters can establish a contract, 
 such as Chancellor Walworth speaks of, by which the 
 legislature surrenders its power and duty to regulate 
 the use of the public highways for the public welfare. 
 This is affirmed in its strongest terms by such authori- 
 ties as Cooley, Greenleaf, and Redfield, as true of all 
 corporations, and in particular of railways. Greenleaf 
 further raises the very pertinent question whether one 
 legislature can barter away the powers of succeeding 
 legislatures, and ans\vers it decidedly in the negative.* 
 
 * Greenleaf on Cruse, note, pp. 67 and 68. See, also, Taney's state- 
 ment of rules of construction in Charles River Bridge Co. vs. Warren 
 Bridge, 11 Peters, 544.
 
 The Laio and tJie liaihoays. 129 
 
 These rules of tlie most autboritative text-books are 
 based upon the strongest utterances of the highest 
 courts in the hand. In the early period of corporate 
 growth, Taney and Black put them in forcible lan- 
 guage, and they have, of later years, been repeated and 
 applied with equal weight of authority and strength 
 of utterance by the Supreme Court of the United 
 States,"^ as well as the circuit and state courts. These 
 authorities make it clear that the power of the state 
 over the corporations can only be abjured by the most 
 direct and specific language, and especially that noth- 
 ing could bind the state not to protect the rights of 
 the people on the public highway, short of an explicit 
 agreement on the part of the legislature, to quote the 
 language of the United States Supreme Court, " not to 
 do the acts" which the railway would desire to pre- 
 vent. Has any such agreement ever been made by 
 the legislature of any state, not to regulate the rail- 
 ways so as to preserve their public character ? Do the 
 railway charters contain any express agreement on the 
 part of the state that it will not secure by law equal 
 rights to the public on the highways, or that it will not 
 compel the I'ailways to supply adequate and impartial 
 accommodations to all alike? Have any charters ever 
 been m'antecl in Avhich tlie le2;islature declares tliat 
 neither itself nor its successors shall ever exercise its 
 power to limit or fix the amount of toll? When such 
 
 * " The rule of construction in tins class of cases is that it shall be con- 
 strued most strongly against the corporation. Every rcasonaljle doubt 
 is to be resolved adversely. Nothing is to be taken as conceded but 
 what is given in unmistakaljle terms, or by an implication cquallj' clear. 
 Silence is negation and doubt is fatal to the claim. This doctrine is vital 
 to the public welfare. It is axiomatic in the jurisprudence of this court." 
 — Justice Swayne, 97 U. S. G59. 
 
 9
 
 13*3 The EaUicay.s and the RejpvJJLic. 
 
 an extraordinary instrument is produced, it will be 
 time to inquire whether^ according to the question 
 raised bv Greenleaf. anv such action can be taken. 
 ^Any act of the legislature disabling itself from the 
 fature exercise of powers intrusted to it for the public 
 good is void, being in effect a covenant to desert its 
 paramount duty to the people." Or, if that authoiity 
 is not final, such a provision in a charter would raise 
 the still graver question suggested by the Supreme 
 Court of the United States in the Camden and Amboy 
 case, whether it does not rob the road of the character 
 of a public highway, and thus destroy the validity of 
 the errant. 
 
 It is sufficient for all present puiposes that no agree- 
 ment has ever been made by any legislature, in which it 
 distinctly and in direct teims abjured its right of reg- 
 ulating the railways which it chartered. The estab- 
 lishment of this fact by the decisions of the courts 
 c^oes into detail far bevond the creneral affirmation of 
 the Supreme Court in the Granger cases, and completely 
 overturns the claim, with regard to the most important 
 feature of the charters, which the railway lawyers have 
 set up as constituting an inviolable contract. This 
 argument has been that the grants in the charters of 
 the railways of the right to take tolls, which in some 
 cases were left indefinite, constituted an agreement 
 that the railway corporations should always have that 
 right. On this construction of the charters, by an 
 implication which is declared inadmissible in the rules 
 already quoted from Taney, Swayne, Cooley, Green- 
 leafy and Kedfield, the claim has been set up that acts 
 limitins: the rates of toll on the railwavs were uncon- 
 stitutional, as impairing the obligation of the contract
 
 Ttie Law and the Railways. 131 
 
 between the state and the corporation created by its 
 charter. This claim has been expressly denied by the 
 state courts and the circuit courts of the United States, 
 in cases which covered the entire range of the instru- 
 ments by which the lisrht to take tolls has been sriven 
 in state charters. In a case before the Minnesota Su- 
 preme Court, affiiTued by the Supreme Court of the 
 United States, a construction by implication was al- 
 lowed, to the extent of holding that where a charter 
 did not expressly give the railway company the right 
 to take toll, that right was to be understood as an 
 essential feature of the enterprise; but the court still 
 recognized the po^ver of the state by subsequent en- 
 actment to fix and limit the toll which could be taken 
 by the corporation. 
 
 This is only decisive as to instances in which the 
 charters do not expressly give the right to fix tolls, 
 and might leave the vast majority of charters in whicli 
 that right is expressly granted open to construction as 
 contracts, if those charters were not also fully covered 
 by judicial declarations that they do not amount to a 
 conti*act which prevents the passage of further laws 
 on the subject. In the prominent express cases decided 
 by Justice Miller, of the United States Supreme Court, 
 and Judge McCrary of the Circuit *Court," the right 
 given in the charter "to transport all articles usually 
 carried on railways and to charge and receive such 
 tolls and fi'eights therefor as should be for the interes-t 
 of the corporation," and the further grant of authority 
 to the directors "to establish such tolls and to alter 
 the same from time to time," was urged on behalf of 
 the defendants. Here was apparently an unlimited 
 
 * Southern Express cases. 10 Fed. Reponer, 210.
 
 132 The Hallways and the Rejpuhlic. 
 
 grant of power witli regard to transportation and the 
 fixing of tolls. Yet these eminent judges held that it 
 presented no obstacle to the rights of the plaintiffs. 
 Another case in which the construction of these in- 
 definite grants of power to fix freight rates was prom- 
 inently involved Avas that of Wells, Fargo, <fe Com- 
 pany vs. The Oregon Railway and Navigation Com- 
 pany. The railway corporation interested in this case 
 was empowered by its charter to collect such " tolls or 
 freights as the corporation itself may prescribe," which 
 Judge Deady held to mean no more than a grant to 
 take reasonable tolls." The strict construction of these 
 charters by the courts, in the application which the 
 railways sought to make, is decisive as to the power 
 of the state to fix and regulate the rates and opera- 
 tions of the railways. If the right " to charge and re- 
 ceive such tolls as shall be to the interest of the cor- 
 poration," in one case, and in the other, " to collect 
 such tolls as the corporation itself may prescribe," 
 does not, as these courts justly decided, imj^ly the 
 right of the coi'poratiou to disregard equity and im- 
 partiality in fixing their charges, it is far more impos- 
 sible for it to imply that the legislature has in any 
 such indirect manner deprived itself of its right and 
 duty to regulate the tolls as the public welfare shall 
 require. 
 
 One class of charters, which 2:)erhaps comprises the 
 majority, does not seem to be covered by these deci- 
 sions. The instruments which fix a maximum of rates 
 that the railway is authorized to charge, appear to 
 contain a specific grant, which, if anything could do 
 
 * W^ells, Fargo, & Couipauy ts. Oregon Railway and Navigation Com- 
 pany, 15 Fed. Reporter, 5G1.
 
 The Law and the Railways. 133 
 
 so, would constitute a contract or agreement between 
 the state and coi'poration. Such charters have, of late 
 years, constituted the strouiZihold of the railway law- 
 yers a2:ainst the rin;ht of the state to reirulate their cor- 
 porations. Most certainly if the direct grant of the 
 power to railway corporations to collect certain rates 
 stipulated in the charter does not imply that they shall 
 always possess that right, superior to state enactment, 
 no other provision can possibly do so. Such an im- 
 plication is, however, contrary to a fundamental rule 
 of construction, and the most thorough application of 
 that rule yet extant was made by the Supreme Court 
 of Georgia in a comparatively recent case.* The char- 
 ter under review in this suit clearly fixed the maximum 
 rates of freight which the railway corporation was 
 authorized to charofe. The rio-ht of the lesfislature to 
 alter and further to limit those rates was the point at 
 issue alleging the complaint of the railway ; that the 
 commission appointed by a subsequent act of the legis- 
 lature had established rates much below the limit fixed 
 in the charter of the corporation. Upon this issue, 
 the court, in a very convincing opinion, showed that 
 no such grant carried with it the understandiuG: that 
 the state would not in future exercise its constitutional 
 privilege of regulating the charges of the railway. 
 "The words of the charter parting with that right," 
 said the court, " must amount to a positive contract," 
 and " nothing^ short of an absolute, direct airreement 
 that the state will not use its right, can under this rule 
 of law prevent it from doing so."f 
 
 * Georgia Railroad and Banking Company vs. Commissioners, 70 Ga. 
 694. 
 t The same act was sustained by tlie United States Circuit Court in
 
 134 The Railways and the Bejpublic. 
 
 The foregoing pages give a clear idea of the author- 
 ity on which the right of the public, to enforce the 
 regulation of the railways and the prevention of abuses, 
 is based. The weight of judicial opinion in favor of 
 that claim is overwhelming. Mr. G. T. Curtis stands 
 alone in denying that railways are public highways, in 
 the face of every high authority that has ruled upon 
 that question from Walworth, Shaw, and Baldwin 
 down to Crawford, Rij^ley, and Baxter, Even Justices 
 Field and Strong, whose dissent from the extreme ap- 
 plication of the doctrine of public right in the case of 
 Munn i:s. Illinois has placed them in the attitude of 
 judicial champions of corporate privileges, are wholly 
 committed to the doctrine of the public highway, by 
 their affirmation of that principle for the benefit of the 
 railways four years before the decision of the Granger 
 cases. In Mr. Curtis's assertion that " if there is no re- 
 served power of revision or alteration of their charters 
 held by the state, then they are a species of common 
 carriers exempt from legislative regulation of their 
 charters," he also stands alone against the rules of con- 
 struction laid down by Taney, Swayne, and Cooley, 
 and applied to exactly this subject by Waite, Miller, 
 McCreary, Baxter, Deady, Kipley, and Crawford. It 
 is wholly at variance with every idea of constitutional 
 government for the benefit of the people governed, that 
 it can take away the property of a private citizen, and 
 give it to a corporation, to be used by the latter for its 
 own private ends, without any respect for public welfare, 
 or that the government can surrender its power to en- 
 force the subordination of its own creations to the 
 
 the case of Tilley vs. The Sayannah, Florida, and Western Railroad, 5 Fed. 
 Reporter, 641.
 
 The Law and the Railways. 135 
 
 public purposes which alone can justify the means 
 employed to give them existence. Such a thing might 
 be possible to an absolute tyranny. It is impossible 
 in the constitutional government of a free people. It is 
 impossible in a legal sense, as irreconcilable with the 
 principles on which popular institutions must be 
 founded ; it is impossible in a practical sense, since, 
 if it obtains permanent force and full sway in estab- 
 lishing gigantic corporate influences of as great or 
 greater power than the government itself, the freedom 
 and independence of the people will be irretrievably 
 lost. 
 
 What is the primary object and duty of every public 
 highway ? Is it not to furnish facilities for travel and 
 transportation to all classes alike ? It is bound to fur- 
 nish such accommodations as its nature affords to the 
 whole people. All favors to individuals or grants of 
 privileges to special classes are inconsistent with its 
 public character. The millionaire can have no rights 
 in the enjoyment of its services which the poorest 
 tradesman or most humble workingman cannot obtain 
 on equal terms. It makes no difference in the binding 
 force of this obligation that the highway is placed in 
 charge of a corporation, with power to reimburse itself 
 for its expenditure in improvements and repairs, by 
 levying tolls upon the traffic which is benefited by 
 those im2")rovements. The turnpike or canal company 
 that constructs such a highway levies its tolls and ob- 
 tains its profits sul)ject to the public obligations which 
 are an inherent part of its grant. Absolute impartial- 
 ity is the first requisite of its public character. The 
 tolls must bear equally upon all classes of its traffic 
 with regard to the service performed. Its fjicilities
 
 "136 The Railways and the Hepiiblic. 
 
 must be afforded without favor to all who seek to use 
 it for the shipment of merchandise or for their own 
 travel. The same acts of sovereignty having been era- 
 ployed in establishing the railways as in the case of 
 the turnpikes and canals, the same public obligations 
 and the same public rights attach to their operation. 
 The force and adequacy of these principles of con- 
 stitutional law are shown by the complete and thor- 
 ou^-h application which the earlier definitions of the 
 relations between the railways and the public have to 
 practices which have attracted public attention only 
 at a comparatively recent date. The idea that the 
 company may so conduct its business as to afford 
 cheap transportation to some persons and to exclude 
 others from its benefit was expressly denied from the 
 start. It is not permitted to charge higher rates to 
 one person than to another. It must be "the usual 
 rate of fare," said Chancellor Walworth ; and as if to 
 forestall the claim that the higher rate is the usual 
 one, and the lower rate granted to favored pei'sons the 
 special one, the Supreme Court of the United States fol- 
 lowed this up by declaring, in the Camden and Amboy 
 case, that it must be " a stipulated, reasonable, and uni- 
 form toll." The foi'cible admonition is given in this de- 
 cision that if the railway does not maintain these qual- 
 ities in its toll, it is not a public highway, and the leg- 
 islative acts by v»'hich it obtained its road are uncon- 
 stitutional and void. The rates must not be excessive, 
 but reasonable; they cannot be changed to apply to each 
 particular case, but they must be stipulated ; and they 
 cannot be made different to different shippers or trav- 
 ellers, but they must be uniform. The idea of exclud- 
 ing any traffic by levying upon it rates that make it
 
 The Lav) and the Railways. 137 
 
 impossible to be shipped, is forbidden iu the clearest 
 terras. " But if the toll araoimts to a prohibition " says 
 the report, " it is a monopoly and the road is not pub- 
 lic," and in such cases " it is opposed to every constitu- 
 tional principle whicli protects the right of property." 
 Finally, the legal existence of the railway is not se- 
 cured by the mere legal enunciation of its public 
 character or the affirmation of its charter that it is a 
 public highway, while its actual operation ignores that 
 public charactei'. It must be operated as a public 
 liighway in order to preserve the validity of its char- 
 ter. "The declaration in the charter that the Camden 
 and Amboy is a public highway does not make it so, 
 if the effect of the charter is to give the exclusive use 
 to the corporation," says Judge Baldwin; and in further 
 definition he says, "the true criterion is whether the 
 objects, uses, and purposes of the incorporation are for 
 public convenience or private emolument, and whether 
 the public can participate in them by right or only by 
 l)ermission." What may result from the failure or re- 
 fusal to observe these fundamental principles is signif- 
 icantly set forth by the Supreme Court of Pennsyl- 
 vania, in saying that charters can be forfeited for abuse 
 and misuser of privileges whicli consist of any positive 
 act in violation of the charter or in deroo;ation of the 
 public rights (set forth in the preceding extracts) wil- 
 fully done or caused to be done by those appointed to 
 manage the corporation ; " in which case," the court 
 weightily said, "the franchises are, as a necessary con- 
 sequence, returned to the state, and the road remains 
 what it always was — public propei-ty." It is evident 
 that these courts ^vould have had little toleration for 
 the idea of a highway that gives one shipper certain
 
 138 The Bailways and the BepuUic. 
 
 rates and makes otliers for Lis competitors, so high 
 as virtually to exclude them from market; or for the 
 idea that the corporation controlling that highway may 
 order the public to cease producing a certain class of 
 merchandise, and to suspend operations for a stated pe- 
 riod, on pain of being excluded from the use of the 
 highway, or to sell certain products at a stated price 
 under the same penalty. It is hardly possible to con- 
 ceive what these judges would have said, if they had 
 been confronted by the claim that all the corporations 
 in the country might unite to maintain an artificial 
 standard of rates; that one such corporation might 
 practically say to the public that no goods should be 
 forwarded over its public highway till another public 
 highway had secured its share of business, for the ben- 
 efit of the public highway interest at large ; or that if 
 the merchandise in question had yielded toll to the 
 corporations controlling sundry public highways in 
 divers parts of the land, it should be cariied over 
 this highway for less tolls than if it had not done so. 
 But we may be sure that the vigor of the judicial 
 vocabulary would have been severely taxed to express 
 utter condemnation of such ideas, and the unquali- 
 fied judgment that such acts are w^holly repugnant 
 to constitutional principles, and a gross infraction of 
 the contract by which the public highway w^as founded. 
 Upon the binding force and the utter indefeasibility of 
 the public right to obtain impartial, equitable, and un- 
 restricted privileges of transportation upon the rail- 
 ways the earlier decisions are as clear and unmistak- 
 able as in their declaration that the railways are pub- 
 lic highways. 
 
 The decision of the later courts a^rainst the dis-
 
 The Law and the Railways. 139 
 
 criminations wbicli have formed the subject of the pre- 
 ceding chapters have been no less vigorous and deci- 
 sive. No law with regard to the railways is more defi- 
 nitely established than that their accommodations must 
 be extended to all persons on the impartial principle 
 of exactly equal rates for equal services. A review of 
 the decisions made by the different courts before which 
 this question has come for adjudication, both in this 
 country and England, not only shows that they have 
 declared the necessity of equality in rates in the most 
 decided language, but the cases in which they have 
 asserted that rule cover the most vital forms of dis- 
 crimination that have been made of late years, and es- 
 tablish beyond question the utter illegality of all such 
 practices. One point with regard to these decisions 
 deserves notice ; and that is that none of them have 
 ever been carried up to the Supreme Court of the 
 United States. Abundant opportunity has been given 
 to railway lawyers for testing this principle in the 
 court of last resort, by its affirmation to the fullest 
 extent in the United States circuit and district courts. 
 Some eight or ten cases have been decided by those 
 courts, in which various discriminations of the railways 
 were entirely forbidden. In one jDrominent group of 
 cases the attempt of the railways to exclude certain 
 express companies from the transaction of business on 
 their roads, either for the benefit of a favored company 
 or for the purpose of concentrating the express busi- 
 ness in the hands of the railway itself, was declared 
 illegal; and the railways were enjoined to furnish to 
 all express carriers who desire to use their road cars 
 for the transaction of the business, up to their full ca- 
 pacity, upon exactly equal terras. In other cases the
 
 140 The Railways and the Republic. 
 
 discrimination against one stock-yard in a certain city 
 for the benefit of another was made the subject of an 
 injunction ; while in yet another, the practice of giving 
 rebates to the largest shipper was adjudged illegal, 
 and damages were awarded to the smaller shipper to 
 the full extent of the discrimination. The railways 
 have not given up the practice of discrimination. Some 
 of the identical forms of that abuse condemned by the 
 circuit courts are still maintained on the leading lines. 
 Whatever attempts are made by injured shippers to 
 obtain a legal remedy for the abuse are fought in the 
 lower courts with such pertinacity, and made so ex- 
 pensive, as to discoui-age all but the boldest or the 
 most wealthy litigants. But the fact that the railways 
 do not dispute the legal principle on which all the de- 
 cisions against discriminations are founded, by carry- 
 ing them into the court of last resort, amounts to a 
 tacit acknowledgment of its legal correctness. In ad- 
 dition to the judicial condemnations of discriminations 
 which can be quoted, we have, tlierefore, the practi- 
 cal confession of tlie railway authorities themselves, 
 that the legal requirement of equal terms to all ship- 
 pers cannot be successfidly denied before the highest 
 courts. 
 
 In the decisions which are to be cited on this point, 
 two of the earliest among the American rulings ^vere 
 given by the Supreme Court of Pennsylvania. One 
 of them is especially interesting, as involving a prac- 
 tice which is now the rule in the management of 
 nearly every important railway in the land, and as be- 
 ino" rendered by a judge whose subsequent dissent in 
 the United States Supreme Court from the famous 
 Granger decisions gives his authority peculiar weight,
 
 The Law and the Eailways. 141 
 
 when thrown against a common railway practice. The 
 question was whether a railway can adjust its rates 
 for carriage over its own line, so as to induce the ship- 
 ment of freight, beyond its terminus, over the line 
 ^vhich it wishes to favor ? How illegal this is, appears 
 from the declaration of Judge Strong, more than twen- 
 ty years ago,* not only that the railways cannot make 
 such a discrimination for a third party, but that they 
 cannot even do it for tlieir own benefit as owners and 
 lessees of the connecting roads. The practical and 
 universal declaration of such roads as the Pennsylva- 
 nia Railroad, that if the shipper will send his freight 
 beyond Pittsburgh, by its connecting line, the Fort 
 Wayne road, he shall have a better rate than if he is 
 left free there to forward it by river, or by some othei' 
 railway, or the exactly similar practice of the ]N"ew 
 York Central, in forcing the shipment of its through 
 freight over its connecting lines, is, under the principle 
 laid down in this decision, utterly illegal. That deci- 
 sion is wholly ignored in the railway methods of the 
 day. But it stands uncontro verted, as the declaration 
 of one of the highest living jurists, who is bjMio means 
 a severe critic of corporate doings, that "It is not con- 
 sistent with the public interest or ^vith common right 
 that they (the railways) should be permitted so to 
 use it (their power of making rates for merchandise 
 shipped on their lines) as to secure to themselves su- 
 perior and exclusive advantages on other lines of trans- 
 portation beyond the ends of their own i-oad." This 
 appears like extreme doctrine, especially when con- 
 trasted with the almost universal practice of the rail- 
 way corporations. Yet it only follows the law as laid 
 * Twells m. Pennsylvania R. R., 3 American Law Register, 728.
 
 14:2 The Railways and the EepuUic. 
 
 down in a leading English case quoted as authorita- 
 tive in American courts. In the case of Braxendale,* 
 the English court made a still more extreme applica- 
 tion than the American courts have done. This case 
 not only established the rule that the railway cannot 
 adjust rates to secure business for its connecting or 
 subsidiary lines, but it also laid down, in its extreme 
 prohibition of discrimination against even a competi- 
 tor of the railway in the carriage of freight, the prin- 
 ciple of absolute equality of accommodation between 
 shippers, which forms the foundation of the famous ex- 
 press decisions in the courts of this country. 
 
 It is noticeable, too, that in a case very similar to 
 the exjoress cases decided in the United States courts 
 in the present decade, exactly the same principle of law 
 was decided by the Supreme Court of Pennsylvania, 
 thirty years ago, to be inherent in the principles on 
 v/hich the railways are founded. It is no new theory 
 that has been enunciated by Justices Miller, McCrary, 
 Baxter, and Deady, in holding that the railways are 
 oblio-ed to give equal rates and facilities to all express 
 companies, and that they cannot exclude any such ap- 
 plicants for transportation, even for the purpose of 
 carrying on the traffic on their own account. That 
 decision was made in 1855,f and the necessity for re- 
 peating it only proves the irrepressible conflict which 
 is constantly going on between the prevalent methods 
 of the railway corporations and the principles of law 
 on which they have obtained their existence. The 
 enunciation of the same principles of law twenty-five 
 years later was as thorough and forcible as in the 
 
 * In re Braxendale, 94 English Common Law Reports, 308. 
 t Sanford rs. Catawissa and Williamsport Railroad, 24 Pa. 378.
 
 The Law and the Railways. 143 
 
 early vigor and independence of the Pennsylvania 
 court. The force and effectiveness of these later de- 
 cisions are perhaps increased by the fact that some 
 half dozen cases arisins; in four different states were all 
 decided in accordance with this principle, and were all 
 affirmed by a member of the Supreme Bench, upon the 
 final hearins: in the circuit court/"^ In all these cases 
 the various expedients by which the railways could 
 seek to exclude an express company from the use of 
 their roads, either for the benefit of a f^ivored company 
 or for the purpose of monopolizing the express traffic 
 in their own hands, were brought into question. All 
 of them, whether by refusing facilities to the disf^wored 
 companies, or by adjusting rates so as to place them at 
 a vital disadvantage, or by a contract which gave the 
 favored express carriers such an amount of space in 
 their cars as to exclude the others, were held to be 
 illegal and inadmissible. It was virtually adjudged 
 that, neither by direct or indirect means, "could the 
 railways "insist upon the exclusive right to do such 
 business themselves, nor grant such to one express 
 company to the exclusion of others, hut are hound to 
 carry for every one offering to do the same sort of husi- 
 ness vpon the same termsP These plain and uncom- 
 promising declarations of the courts place a vast num- 
 ber of the prevalent railway discriminations under the 
 ban of the law. 
 
 Another leading class of discriminations was shown 
 to be illegal, and another plea, by which many instances 
 of that abuse have been defended, was overtlirown by 
 a decision which declared rebates given to a huge ship- 
 per, based solely on the amount of freight shipped by 
 *Soutbcra Express cases, 10 Federal Reporter, 210.
 
 14-i The Bailways and the RepuUic. 
 
 him, to be " violative of tlie equality of rights guar- 
 anteed to every citizen," * Upon the plea that the 
 large shipper is entitled to the lower rate, the favors 
 granted to the Standard Oil Company, as well as 
 numerous cases of less notorious discriminations, have 
 been justified by the railways. No other apology has 
 been offered or, indeed, exists ; and how utterly the 
 adequacy of that defence is rejected by the law is 
 shown in Judge Baxter's forcible denunciation of it. 
 His vio-orous statement of the results which follow that 
 practice stands out as a condemnation of what has 
 been done by exactly such illegal use of the railway 
 power. The managers of the railways " would be 
 quick to appreciate the power with which such a hold- 
 in£c w^ould invest them," could favor their friends to the 
 detriment of their personal or political opponents, " or 
 might demand a division of the profits" in interests to 
 be affected by such disci'iminations, or finally might 
 "extinguish competition, monopolize business, or dictate 
 the price of coal or every other commodity to consu- 
 mers." Judge Baxter says, " these results might fol- 
 low" the use of such a power; but those who have 
 studied the history of the Standard Oil Company, or 
 of the anthracite coal combination, or investigated the 
 numerous less prominent cases of discrimination in fa- 
 vor of the largest shipper, raised to that enviable posi- 
 tion by the ftivor of the railways, know that they have 
 followed it. His radical condemnation of the practice 
 shows how flagrant a defiance of the principles of law 
 and justice is comprised in that practice, " Capital 
 needs no such extraneous aid," says the judge. It has 
 many inherent advantages, but it " has no just claim, 
 
 Hays vs. Pennsylvania Company, 13 Federal Reporter, 309.
 
 The Law and the Railways. 145 
 
 by reason of its accumulated strength, to demand the 
 use of the public highways on more favorable terms 
 than are accorded to the humblest of the land," and 
 to give it such favors " is a discrimination in favor of 
 capital and is contrary to sound public policy, viola- 
 tive of that equality of right guaranteed to every citi- 
 zen in the land, and a wrong to the disfavored party 
 for Avhich the courts are compelled to give redress." 
 
 Not only is this attempt to justify special rebates to 
 favored shippers ruled out by the courts, but all con- 
 tracts agreeing to carry for one shipper at a cheaper 
 rate than for others fall under the same ban. Just 
 such a contract as that by which the power of the 
 Standard Oil Company was made permanent was de- 
 cided by the Supreme Court of New Jerse}','^ some 
 years before that last violation of the public rights was 
 perpetrated, to be " void as ci-eating an illegal prefer- 
 ence, and inconsistent with the duty of the railway cor- 
 porations to observe to all men perfect impartiality." 
 
 One of the universal practices, by which the rail- 
 ways control some of the branches of business depend- 
 ent on their services, is to dictate what warehouses or 
 facilities for receivinnr certain classes of frei oh t shall be 
 permitted to exist upon their lines. This practice is 
 most general in its application to the business of 
 grain elevators and stock-yards. Yet any discrimina- 
 tion between such competing establishments has been 
 decided by the Supreme Court of Illinois and tlie Cir- 
 cuit Court of the United States to be utterly illegal. 
 The t^vo Illinois cases f took into consideration tlie at- 
 
 * Messenger m, P. R. R., 36 New Jersey Law Reports, 407. 
 t Vincent vs. C. and A. R. R., 49 111. 33, and C. and N. W. R. R. xs. Illi- 
 nois, 50 111. 3G5. 
 
 10
 
 146 The Railways and the Republic. 
 
 tempt of the railways to discriminate between certain 
 grain elevators at Chicago, and affirmed the legal doc- 
 trine that for a railway to attempt to divert shipments 
 from one to another, either by a difference in charges, 
 or by refusing to deliver the grain consigned to one 
 such elevator upon any pretext, either of a contract to 
 do otherwise, or of its own interest and practice, was 
 " peculiarly defiant of its obligations (of the railway) 
 as a common carrier," Such a practice, as Judge 
 Lawrence put it, " might result in the creation of a 
 system of organized monopolies in the most important 
 articles of commerce, claiming existence under a per- 
 petual charter from the state, and by the sacredness of 
 such charter claiming: also to set the lecfislative will 
 itself at defiance." These decisions preceded by some 
 years the thorough-going rulings of the United States 
 courts upon discriminations, and in reality furnished a 
 j)recedent for them in the high authority of Chief-jus- 
 tice Lawrence, that the fundamental principles of law, 
 to which the railways owe their existence, demand ab- 
 solute impartiality to all shippers, and that it is the 
 duty of the legislature and the courts alike to enforce 
 that rule. The same right was no less plainly affirmed 
 by the Circuit Court of the United States," in a case 
 where a railway had agreed, in connection with an- 
 other railway, to deliver all the live-stock shipped 
 over its road to the yards of the favored company, 
 thus excluding the complainant from any competition 
 in the business. The decision of Judge Baxter, like 
 all his utterances on such subjects, was forcible and un- 
 compromising. The railways " possess no such power 
 
 * Coe & Milsom vs. Louisville and Nasliville Railroad, 12 Federal Re- 
 porter, 775.
 
 The Law and the Railways. 147 
 
 to kill and make alive," and those injured by such ac- 
 tion need not a\Yait the slow progress of a suit for 
 damages, Lut can obtain a prompt relief by an injunc- 
 tion from the courts. 
 
 Finally, a very common class of discrimination is 
 shov^m to be illegal, in the recent decision of the United 
 States Circuit Court, that a railway cannot either ex- 
 clude the freight of a connecting line, or give adv^an- 
 tacjes to one connectins* line over another in the rates 
 at which freight is exchanged. Hardly any more com- 
 mon practice in the present conduct of the railways 
 could be specified than that of making rates so as to 
 cause all the through freight of a railway to go over 
 the line, at its terminus, which it desires to fovor, and 
 practically to exclude other lines from any exchange 
 or prorating of freights. But Judges McCrary and 
 Hallett, in the Denver and New Orleans case,^ de- 
 cided that every railway is bound to receive freight 
 from all lines connecting- with it, and to deliver freig-ht 
 to all as ordered by the shippers, on equal terms. This 
 case not only establishes the right of railwa3^s to equal 
 privileges in their dealings with others, but clearly im- 
 plies that the division of freights referred to in the 
 chapter on pooling is illegal. 
 
 These cases cover nearly all forms of discrimination 
 between shipjiers. In the first place eveiy one of them 
 affirms the legal obligation of impartiality. In detail, 
 they prohibit discriminations even for the benefit of 
 other lines in which railroads have a legitimate interest ; 
 or to secure, for themselves exclusively, the express busi- 
 ness over their own lines. The railroads may not ex- 
 
 * Denver and New Orleans R, R. vs. Atchison, Topcka, and Suuta F(5 
 R. R., 15 Federal Reporter, C50.
 
 148 The Railways and the Republic. 
 
 elude a competitor from using their road and cars on 
 equal rates with other shippers. Discriminations in fa- 
 vor of the shipper who furnishes the largest traffic are 
 held to be illegal, and contracts to give one shipper a 
 lower rate than others are null and void. All eleva- 
 tors, stock-yards, and other establishments for the re- 
 ceipt and handling of special classes of freight must 
 be treated alike, and all other railways must have 
 equal privileges and rates. When the courts, in such 
 cases as these, insist on perfect equality for all cus- 
 tomers of the railways, it is plain that no form of dis- 
 crimination injurious to any shipper is tolerated in law. 
 There is one class of discriminations upon which these 
 decisions have no direct bearing; those in favor of one 
 locality or city against another. But if it is illegal 
 for the railway to differentiate rates so as to force 
 business over its own leased line, or into its own ele- 
 vator or stock-yards, how plainly is the same rule of 
 equality violated by forcing traffic to one city or local- 
 ity to the exclusion or decay of another? Not that 
 the railways are or ought to be obliged by law to give 
 as low rates to a non-competitive point as to a com- 
 petitive one. The inequalities arising from the un- 
 equal workings of competition call for remedies deeper 
 than mere reo-ulative les-islation. But all artificial in- 
 equalities of rates between different points are obvious- 
 ly as much in conflict wnth the impartiality required 
 by law, and with public right, as any of the discrimi- 
 nations condemned in these decisions. 
 
 The legal principles cited in this chapter establish 
 the right of the state to control the railways, and the 
 public obligations implied in the very conditions of 
 their existence. These rights and obligations are
 
 The Law and the Railways. 149 
 
 founded in reason and justice. It is absurd to sup- 
 pose that a representative government can create cor- 
 porations with an irresponsible power over commerce 
 greater than that intrusted to the government itself. 
 If our institutions permitted such an anomaly it 
 would call for constitutional changes to make it impos- 
 sible. The preservation of popular rights, the prime 
 object of our government, is incompatible with the 
 growth of irresponsible j^owers, whether in the shape 
 of feudal aristocracies or corporate plutocracies. It 
 has been abundantly shown that the fundamental prin- 
 ciples of law, as laid dovrn by the courts, tolerate no 
 such powers. These principles have been clearly de- 
 clared and directly applied by authoritative judicial 
 decisions. All that is necessary is to comprehend and 
 apply them. The principles thus established may be 
 stated as follows : 
 
 1. The railway is an improved and modern public 
 highway for the transportation and travel to which it 
 is adapted, just as canals and turnpikes are public 
 highways for tliat to which they are adapted. It owes 
 its existence to the exertion by the government of its 
 power to establish highways, a power which even the 
 government cannot employ for any but a public pur- 
 pose. 
 
 2. The corporations to which the construction and 
 conduct of these public highways are intrusted by 
 the state can use their franchises for gain, in all ways 
 consistent with their public character. To allow the 
 private and pecuniary objects of these enterprises to 
 supersede their public purpose would make private 
 rights superior to public rights, would defeat the end 
 for which they were created, destroy their public char-
 
 150 The Hallways and the Rejpvhlio. 
 
 acter, and render the acts by wLicli tbey were created 
 unconstitutional and void. 
 
 3. In the nature of a public highway the govern- 
 ment whicli creates it retains the right and the duty of 
 supervising and regulating it, so as to guard and main- 
 tain its public use. Every grant of a franchise in the 
 highway is subject to this reserved power of the state, 
 and it is doubtful whether the legislature can, even by 
 a direct and explicit surrender of its control, divest it- 
 self or its successors of their power to protect the pub- 
 lic in its enjoyment. 
 
 4. The fundamental characteristic of the public high- 
 way is the right of all persons to use it upon equal 
 terms. Both as public highways and as common car- 
 riers the I'ailways are bound to absolute impartiality, 
 in equal charges to all persons for equal services, and 
 in equal accommodations to every one seeking the use 
 of their tracks. Any discriminations in the tolls or 
 freight charges which give one individual or class an 
 advantage over others, or any combinations to prevent 
 the free use of their facilities, are illegal and destruc- 
 tive of their character as public highways. 
 
 These legal rights and obligations of the railways 
 are defined by the common law. Its rulings are of 
 peculiar value in this inquiry, because they not only 
 declare the duties and the rights of the corporations, 
 but also explain the principles upon which both their 
 public rights and private duties are founded. But it 
 is worthy of notice that the constitutional provisions 
 of the leading states in the Union are fully as ex- 
 plicit as the common law in declaring the public 
 character of the railways and in asserting their subor- 
 dination to the legislative power in all matters affecting
 
 The Law and the Railwaijs. 151 
 
 the public interests. The " obsolete tbeoiy " that the 
 railways are public highways finds direct enunciation 
 in the most recently enacted state constitutions. In 
 Arkansas, Alabama, Colorado, Illinois, Louisiana, Mis- 
 souri, Nebraska, Pennsylvania, and Texas, the constitu- 
 tions adopted within the last decade all declare that 
 the railways are public highways. The constitutions 
 of California, Georgia, Iowa, Michigan, Minnesota, and 
 Wisconsin affirm the riirht of the lecjislature to res^u- 
 late the operations of the railway's, while many other 
 states have practically asserted that right by its actual 
 exercise, and it has never been successfully denied. Of 
 the fifteen constitutions referred to, twelve explicitly 
 forbid discriminations between shippers or passengers, 
 while in other states a similar prohibition is implied 
 by the constitution or bylaws made under its author- 
 ity. Pools or combinations between different railroads 
 to the prejudice of other railroads are forbidden by the 
 constitutions of Arkansas, Illinois, Colorado, Georgia, 
 Michigan, Missouri, Nebraska, Pennsylvania, and Ohio. 
 Rebates and drawbacks are prohibited by constitutional 
 enactments in Arkansas, California, Geoi-gia, Missouri, 
 and Pennsylvania, while the much-defended practice 
 of charorino; more for a short haul than for a lono;er one 
 over the same line is forbidden by the constitutions of 
 Pennsylvania, Missouri, Arkansas, and California, and 
 by the highly lauded statute law of Massachusetts. 
 There is not a claim of the railway reformers, nor an 
 enunciation of the courts, subordinating tlie franchises 
 of railway corporations to the public interest, but finds 
 explicit recognition in the most recent constitutions. 
 The "old principles of law" which, according to rail- 
 way advocates, have been repealed by the necessities of
 
 152 The Railways and the Republic. 
 
 modern progress, are incorporated in the clearest terms 
 in the constitutional instruments that have been drawn 
 up within ten or fifteen years. 
 
 These constitutions would prevent most of the rail- 
 way abuses, if their provisions were enforced. But the 
 dangerous power of the railway interest is apparent in 
 the fact that in twelve states of the Union it is able 
 to nullify and override the constitution. To violate 
 statute law is bad enough ; but this defiance of consti- 
 tutional provisions exhibits the railway power as en- 
 dangering the rule of the people and threatening to 
 make corporate dictation supreme. In the twelve states 
 whose constitutions forbid discriminations it is safe to 
 say that the prohibition is secretly violated every day 
 in the year. In the nine states in which pooling is 
 forbidden, the constitutions have been openly defied 
 for the last six years. In the five states in which re- 
 bates and drawbacks are prohibited, and the same 
 number in wdiich the short and long haul discrimina- 
 tion is forbidden, these constitutional and statutory 
 provisions are simply ignored by railway magnates 
 who are stronger than the constitutions and the law. 
 Who can fail to see the danger to popular institutions 
 and the decay of representative government when, un- 
 der the influence of the railways, the legislators elected 
 by the people refuse to pass laws directly required by 
 the constitution, and necessary for the enforcement of 
 the fundamental law? Yet last winter a law^ which 
 would have merely put into effect the language of the 
 constitution was defeated in Pennsylvania by subser- 
 vient representatives of the people, under orders from 
 a great railway corporation. 
 
 It is upon the principles laid down by the courts
 
 TJie Law and the Railways. 153 
 
 and set forth in the state constitutions, that the rail- 
 ways of the country have been created. These prin- 
 ciples alone justify the charters and sustain the exercise 
 in their behalf of the sovereign power of eminent do- 
 main. Their public obligations and their subordina- 
 tion to governmental control are conditions of their 
 legal existence. In view of tlie acts which brought 
 the railways into being, there is no more doubt 
 of the right of the state to impose all needful regu- 
 lations upon them, to secure impartiality and free- 
 dom in their use, than there is of the right of the man 
 who has sold land to collect the stipulated price from 
 the buyer. To sum up, the railway is created by law 
 to fulfil a public purpose — that of affording improved 
 transportation on equal terras to all persons whom it 
 can serve. Whatever is necessary for the lionest and 
 impartial discharge of that one function it has a right 
 to do. It can make such charges as will yield it a 
 profit on the investment of its capital; but it must 
 distribute the burden of its charges evenly among all 
 its patrons in proportion to the service rendered. It 
 is desi2:ned to overcome the obstacle of distance : but 
 it should overcome that obstacle for the benefit of all, 
 and it is not within its objects to bring one locality 
 nearer to market than another and to make the latter 
 support it in doing so. It is a public servant, not a 
 public tyrant which can enrich and magnify its favor- 
 ites at the general expense. It may own and control a 
 franchise in its tracks and rights of way, but it has no 
 right to control legislatures or to compel courts and 
 public officers to do its bieldiug. It is not a commer- 
 cial providence to exalt one vessel to honor and con- 
 demn another to dishonor. It is not a political guild
 
 154 The Railways and the Eepuhlic. 
 
 to sway by its capital, its commercial power, aud the 
 work of its employees the business of the people. It 
 is not a modern baron Avitb supreme power over the 
 property and prosperity of its subjects. It is not en- 
 dowed by the state with the power to rule the business 
 of the nation, dictating in what manner or over what 
 routes the people shall carry on their commerce, or the 
 amount of business that they shall transact. A creat- 
 ure of the state, it must not become a conspirator 
 against commerce, either by building up monopolies 
 for its favorites, or by organizing them for its own 
 profit.
 
 CHAPTER V. 
 
 PUBLIC OBLIGATIOIiS AND COEPOEATE PRACTICES. 
 
 " The Railway Questio:^," as a subject of popular 
 agitation, grows out of the disregard and defiance by 
 the railways of their public obligations, defined in the 
 preceding chapter, in the practices described in earlier 
 chapters. Many of these practices appear to be ex- 
 cusable and, indeed, necessary, if the railways are to be 
 govei-ned by no consideration but profit to themselves. 
 In defending them, their advocates assume that these 
 corporations are mei'ely business enterprises, organized 
 to make money for the ownei's. But even on this 
 ground the defence is but partial and imperfect. Leav- 
 ing out of sight, for the moment, the public character 
 of the roads, it may be proved that many of their cur- 
 rent practices are unwise in the lowest business sense, 
 being at war with their own pecuniarj^ interests. Every 
 business intended to supply a general social want is 
 most effectually built up by affording the best and 
 most extensive service possible, at the lowest charge 
 consistent with a fair profit. But this is eminently true 
 of a corporation whose charter is perpetual, and whose 
 operations are forever linked with the prosperity and 
 activity of the community it serves. If its managers 
 are incapable of any higher sense of duty than faith- 
 fulness to the trust they hold for their stockholders, it 
 is still true that they are bound to seek the public
 
 156 The Railways and the Jtejpuhlic. 
 
 favor, to make it the uncle viating and conspicuous rule 
 of their management, that every customer alike shall 
 get from them the best bargain they can afford to give, 
 and to aim to build up in trade and prosperity the 
 communities along their own line, rather than those 
 far beyond it. Every great mercantile business in the 
 country has been built up by seeking earnestly to offer 
 the best service equally to all, by fixed prices, small 
 i:)rofits, and careful study of the public wants. Shall 
 the permanent prosperity of a railway be furthered by 
 the opposite plan ? By violent and arbitrary discrimi- 
 nations? By imposing the heaviest possible burden 
 on the general public, while acting with lavish extrav- 
 agance in meeting open competition or in distributing 
 secret favors ? 
 
 While recoo-nizino; the fact that the hi2;hest interests 
 of the railways, viewed simply as corporations conducted 
 for profit, are opposed to many practices common in 
 their management, it must not be forgotten that there 
 are much higher and more imperative restrictions upon 
 inequality in their dealings with commerce. Railways 
 are constituted to make money ; but they are con- 
 stituted to make money consistently with the public 
 welfare. As against public I'ights, corporate interests 
 must always be subordinate. The conflict between 
 the money-making function of the railway and its pub- 
 lic obligations is often more apparent than real ; but 
 in many cases the question arises, AVhich shall prevail? 
 The general tendency of railway practice, as we have 
 seen in the preceding pages, has assumed that "when 
 the securing of net earnings for the railways conflicts 
 with public justice, justice must go to the wall. But 
 no such assumption can be permitted in a public in-
 
 PuUIg Obligations and CorpovaU Practices. 157 
 
 quiiy into the principles which should govern the 
 operation of the railway. Broadly defining the privi- 
 leges of the railways, it may be said that they should 
 have all the powers necessary for the profitable prosecu- 
 tion of their business, consistently with the public wel- 
 fare. Any practices may be allov\^ed ^vhich are neces- 
 sary for profitable transportation, if they do not work 
 any material damage to one class of shippers or confer 
 unfair advantages upon another. But where public 
 justice and private profit conflict, the latter must be 
 compelled to give way. The extreme powers of govern- 
 ment employed in the establishment of tlie railway 
 system were not put forth in order to make the earn- 
 ing of dividends more important than the obligations 
 of justice and equity upon the public high^vays. To 
 argue that the profits of capital can justify the imposi- 
 tion of unequal burdens iipon commerce, is simply re- 
 viving, in another form, the aristocratic idea that the 
 aggrandisement of a class can be made the purpose of 
 government to the detriment of the general welfjire. 
 
 Both the best interests of the railways as business 
 enterprises and their obligations as creatures and agents 
 of government are involved in a question made promi- 
 nent in the congressional debates last winter, whether 
 it is proper for railways to charge more for a short haul 
 than for a long one. On its face it is plain that no rail- 
 way can profitably carry freight a thousand miles at 
 the same or a less rate than is reasonable for the same 
 freight for half the distance; yet it was earnestly con- 
 tended on the floor of Congress that to prohibit the 
 practice would inflict hardship upon the railways, with- 
 out any benefit to shippers. Now it may happen, in a 
 particular and exceptional case, that it is better for a
 
 158 The Railways and the Bepullic. 
 
 railway to take less for a long haul than the rate which 
 would be profitable on a shorter one. If a railway has 
 empty cars at a competitive point from which freight 
 can be taken, provided the railway makes as cheap 
 rates as the competing route, it may be more profitable 
 to accept the freight at a reduced rate than to let the 
 cars stand idle or to haul them back empty. But even 
 in such an exceptional instance the reduced rates ought 
 at least to earn operating expenses and contribute 
 somethiuo; to the fixed chara:es of the road. These 
 limitations are utterly disregarded in the practice of 
 the roads, and were generally ignored by the congres- 
 sional defenders of the discrimination. 
 
 Two notable instances of this class have been promi- 
 nent in the discussion, the Mattoou and Kankakee case 
 before the Illinois Railroad Commission, and the Wi- 
 nona and Memphis cotton rate in the House of Rep- 
 resentatives. They are extreme types of innumerable 
 inequalities between local and through tariffs. They 
 were defended by the same plea. The rate of $3.25 
 from Winona was said to yield no more than a fair 
 return on the expenses and capital. But at Memphis 
 the question is whether the railway shall take the 
 freight at $1 for nearly twice as long a haul, or lose 
 it altogether, and it was reiterated on the floor of Con- 
 gress, as it has been elsewhere, that, to use the language 
 of Mr. Stewart, "if the railway makes a small profit 
 by taking this cotton fi'om Memphis, it is for the bene- 
 fit, not only of the railway, but of the local shipper, be- 
 cause it enaVjles the railway, under those circumstances, 
 to give better terms to the local shipper." If the rail- 
 way makes a small profit ! That is where the gist of 
 the question lies. If the railway does not make a small
 
 Pullic OUigations and Corporate Practices. 159 
 
 profit at such a rate it is plainly imposing the cost of 
 the freight upon the local shippers or the stockholders. 
 But if it does make a small profit on hauling cotton at 
 $1 a bale for 450 miles, what profit does it make by 
 hauling it at $3.25 a bale for 275 miles, a charge per 
 mile more than five times as great? The same ques- 
 tion was presented with numerous other illustrations. 
 The competition of the railways from New Orleans to 
 New York with the coastwise carriers, it was said, 
 puts the through rate from one point to the other at 
 76 cents, while from Atlanta to New York the rate is 
 %1. " Has the Atlanta man any reason to complain if 
 the railway imposes only a reasonable charge for the 
 service rendered him?" asked the same gentleman who 
 undertook tlie defense of the Winona and Memphis 
 absurdity. 
 
 These arguments always raise as the first question, 
 What constitutes a fair, reasonable rate ? It has even 
 been earnestly urged that the charges of the raihvays 
 are always fair and reasonable, and that this is proved 
 by their constant reduction of rates for the last twenty 
 years.'"" Further, the president of the Illinois Central 
 
 * It is amusing to see the confidence ^vith •n-hicli this general reduction 
 of the cost of transportation is sometimes cited as proving the magnani- 
 mous generosity of particular corporations. Thus the fact tliat the aver- 
 age rate of freight per ton-mile on tlie main line of the Pennsylvania 
 Railroad has fallen from 2.665 cents, in 1865, to 0.817 cent, in 1883, has 
 been widely trumpeted, accompanied by a table showing how vast an 
 income the railroad company has surrendered to its patrons; that is to 
 say, how much greater its income would be, if it collected on the busi- 
 ness of 1882 tlie rates of 1865. The diflerence for the one year 1883 is 
 $53,213,949.11; and the "reduction" for eighteen years amounts to 
 $818,947,486,261. This is an astonisliing instance of giving away what 
 the giver never owned or possessed. The fact is kept out of sight that 
 the business of 1882 is the result of the progressive reduction of rates for 
 many years ; and could never have existed but for the reductions. The
 
 160 The Railways and the Bepublic, 
 
 road, in his defence of tbe Mattoon and Kankakee case, 
 made a plausible plea for the reasonableness of his 
 Kankakee rate of 16 cents for 56 miles, because it was 
 the rate fixed by the Illinois railroad commissioners. 
 But this avoids the point at issue ; which is simply 
 whether that rate can be reasonable when the same 
 freight is carried over the same line to Mattoon, a dis- 
 tance of 172 miles, for 10 cents. Relatively to rates 
 which had previously prevailed it was doubtless quite 
 reasonable. The cost of woollen goods has also de- 
 creased very much since 1865. A suit of clothes can 
 probably be bought for $50 which would have cost 
 $100 at war prices. In view of this fact, the lower 
 price seems fair and reasonable ; but if the reader 
 should buy such a suit at $50, and should learn that 
 the tailor had sold exactly such a suit to his next cus- 
 tomer at $10, he would be sure that he had been 
 cheated. If, moreover, under the operation of our laws 
 the tailor had obtained the exclusive control of the 
 business of supplying clothing in central New York, 
 and should establish the price of $50 for such a suit of 
 clothing in Syracuse as he sold for $10 in Rochester, 
 no aro'ument concernino; the fidr and reasonable rates 
 given to Syracuse and the necessity of meeting competi- 
 
 ccmpany increased its business from 420,000,000 ton-miles in 1865 to 
 2,879,000,000 ton-miles in 1883; and its revenue from freights increased 
 from §11,193,000 in 1SG5 to $23,621,430 in 1882. But it is certain 
 that this business would have been merely nominal, and this vast 
 revenue would have been utterly lost, had the company maintained 
 the rates of 1865, and refused to meet the public demand for lower 
 freights, made reasonable by improvements in machinery and method. 
 The railways as well as the country at large have greatly profited by the 
 steady decrease in the cost of transportation for many years; but the fact 
 has no value as a proof of reasonableness or equity in the adjustment of 
 rates by the managers.
 
 Piibl'iG Obligations and Corporate Practices. 161 
 
 tion at Kochester would convince the Syraciisans that 
 the clothing business did not call for radical reform. 
 And the Syraciisans would be entirely right. How 
 can such arguments influence an intellect able to put 
 two and two together? For while the rate of 16 cents 
 for hauling one hundred pounds of freight 5G miles 
 may be reasonable enough in itself, it stands side by 
 side with the rate of 10 cents for hauling the same 
 goods 172 miles. If one rate is fair, what must the 
 other be? 
 
 The defence of the discrimination between long and 
 short hauls, or, to define it by its real cause, between 
 competitive and non-competitive traffic, is founded on 
 the claim that the cost of interest and dividends on 
 capital need not be borne by all freights alike. "The 
 road charges very little profit on the New Orleans cot- 
 ton from Memphis," said Mr. Fink before the Senate 
 Committee in 1883, "they charge nothing perhaps for 
 the use of the investment in the road ; but on the bale 
 of cotton they carry from Winona to New Orleans they 
 must charge for the investment made in the road, be- 
 cause the road was built for the Winona and not for 
 the Memphis people." What authority had Mr. Fink 
 for this statement? If it is so, the road seems to have 
 gone wofully astray from its original intention. So far 
 as the cotton question is concerned, the road, if built 
 for the benefit of Winona, should have stopped at that 
 place and given its exclusive attention to the trans- 
 portation interests of that town. But instead of that 
 it constructs 175 miles of additional track to I^Iemjihis, 
 by which cotton is hauled at rates which give it an 
 advantage of |2.25 per ton in the New Orleans market 
 over the cotton of the Winona shippers. This rate 
 
 11
 
 162 The llailways and the Republic. 
 
 confessedly pays little or no return to tlie capital in- 
 vested in the 175 miles of road from AVinona to Mem- 
 phis, and the deficiency must be made up by imposing 
 charges on the Winona people, proportionately five and 
 a half times as large. It is evident, then, that whatever 
 may be said of the road from Winona to New Orleans, 
 the other portion was decidedly not built for the bene- 
 fit of Winona, but for the benefit of Memphis at the 
 expense of Winona. 
 
 In defence of the discriminations in favor of com- 
 petitive freight in Congress last winter, it was strenu- 
 ously denied that local freight is compelled to bear the 
 burden of low charges on through freight. The author- 
 ity of Mr, Alexander, a prominent Southern railway 
 official, was quoted by several Congressmen, to the ef- 
 fect that no railway had ever raised its local charges to 
 meet the loss caused by lowering its through rates. 
 Supposing this to be a correct statement of fact, it is 
 misleading, as an attempt to show that no burden is 
 placed upon the local shippers. It ignores the burden 
 that is placed upon them by the superior opportunities 
 given to their competitors in exactly the same line of 
 business; and the equally significant fact that it prac- 
 tically raises their rates by confining the general reduc- 
 tion of freight charges to competitive traffic. When 
 railway rates have been reduced fifty jier cent, on 
 through traffic within the last ten yeai's, and local rates 
 have virtually remained unchanged, the burden of the 
 local shippers has been practically doubled, no matter 
 what sophistry may be used to conceal the fact. 
 
 Under the present system of management it must be 
 admitted that the railway officers are often under 
 practical compulsion to accept freight, at competitive
 
 Public Obligations and Corporate Practices. 163 
 
 points, at charges lower than those paid by local traffic. 
 The cars, perhaps, are on hand ; employment is offered 
 for them at low rates, and if it is not accepted they may 
 be left indefinitely without employment. If it appears 
 that the rate which can be obtained will more than 
 pay actual operating expenses, it is hardly possible for 
 the manager to avoid accepting it. The smallest con- 
 tribution of the business to the fixed charges of the 
 line seems to him better than no earnings. But even 
 this consideration cannot apply to such abnormal and 
 absurd discrepancies in rates as some of those we have 
 described. For example, the working expenses of rail- 
 ways in the United States are, upon the average, G5.21 
 per cent, of the gross earnings. It is substantially 
 within the margin of 34.79 per cent, of the gross earn- 
 ings, then, representing the entire net earnings of the 
 road, that a variation of rates, between points approx- 
 imately equal in distance, might be made without in- 
 curring actual and direct loss by each single transaction. 
 It is true that some of the expenses included in this 
 computation may not be connected with the transporta- 
 tion of freight, and the percentage of net earnings on 
 freight may be somewhat larger than on the aggregate 
 business. On the other hand, there is no real advantage 
 in takinoj the freicfht at all, if the whole marmn of 
 profit is taken off. If a very small advantage may be 
 accepted, when no consideration but the profit of the 
 railway is regai'ded, it may be conceded, for example, 
 that it is better to take freight to New York from 
 Chicago at a rate one third less than the charge from a 
 point fifty miles east of Chicago. A rate of 20 cents 
 per hundred for 850 miles may yield something to the 
 road, when a rate of 30 cents for 800 miles would not
 
 164 The Railways and the Republic. 
 
 yield more than a fair profit upon the capital. But 
 between this instance and the wide discrimination we 
 have discussed there is no analogy. Mr. Horr ui'ges 
 that, if the railways cannot earn 6 per cent., they should 
 be allowed to earn 2 per cent.'"' But if the average net 
 earnings of the railways amount to 6 per cent, upon 
 their capital stock and debt, it follows that, to earn 2 
 per cent., they must have a revenue equal to the pres- 
 ent average expenses of operation, and one third of the 
 present net profits besides ; that is, of 76.80 per cent, 
 of their present earnings. In other words, the reason- 
 ins: of Mr. Horr, if altofrether valid, would authorize 
 a raihvay to accept through fi'eight at rates not less 
 than 76.80 per cent, of its charges on local freight 
 for the same distance, in order to earn 2 per cent, on 
 one and 6 per cent, on the other, or to charge a 
 rate from a competitive point equal to that Avhich it 
 would charge to a non-competitive point involving only 
 three quarters of the service. This has no application 
 to eccentricities of maua2:ement in which one rate is 
 from three to five times as great as another, proportion- 
 ately to the distance. If the Memphis rate on cotton 
 yields 2 per cent, interest, the Winona rate must yield 
 24 per cent. The difi:erence between a rate which pays 
 2 per cent, on the investment and one which pays 6 or 
 even 10 per cent, will never account for such discrep- 
 ancies as making twice the charge for half the dis- 
 tance. 
 
 * " Suppose, in addition to doing their local business, they can carry a 
 portion of this through traffic, and can get it on a basis of paying only 
 2 per cent, on their investment instead of 6, ought they not to be jjer- 
 mitted to do this extra work ? Most clearly they should be."— J/r. Borfi 
 Speech, Congressional Record, ASth Congress, second session, p. 167.
 
 Piiblio Olligat'ions and Corporate Practices. 165 
 
 But ill cases to which the argument of Mr. Horr 
 really applies, as in some other classes of discrim- 
 ination, it is clear that the fault lies, not with the 
 men who make the rates, but with the system under 
 W'hich they are obliged to act. But the evil must none 
 the less be removed. The requirement that rates shall 
 be uniform to all shippers grows out of the public 
 character of the railways, and cannot be laid aside or 
 ignored without injury to the public interest. Con- 
 sider the analogy between i-ates imposed b\^ railways 
 and taxes imposed by municipal corporations, both 
 creatures of the state. Large property-owners and cor- 
 porations doing an immense business within the city of 
 New York are said to evade municipal taxation by 
 locating their residences and offices outside of the city 
 limits. Suppose that the municipal authorities of New 
 York should invite such corporations and millionaires 
 to return, upon the agreement that they shall pay one 
 fifth or one sixth of the rate assessed on the tax-payers 
 at large. Would not sucli a proposition raise a storm 
 among the general tax-payers, to which the complaints 
 against the railways would be a mere zephyr? The 
 public mind would insist that in taxation rates must 
 be equal ; that it would be better to lose much revenue 
 than to establish a class favored by a lower rate of 
 taxation than that assessed on the general public; and 
 that the city must not reward the removal of property 
 to escape taxation. I do not claim that the circum- 
 stances and obli^rations in the two cases are identical. 
 But the railway corporation and the municipal coi-pora- 
 tion are alike creatures of the state and derive their 
 powers from legislation; the freight rates ai'e greater 
 in proportion to the profits of business than the tax
 
 16G Tli& Railways and the Republic. 
 
 rates ; and, in both, the public necessity for practical 
 equality is imperative. 
 
 This subject cannot be dismissed without an avowal 
 of the belief that the practice of giving shippers who 
 have the ability to select a competing route marked 
 advantages in rates over those whose freight is wholly 
 within the control of the railway is, in its permanent 
 effect, injurious to the railway itself. We have recog- 
 nized and conceded the powerful inducements which 
 often compel railway managers to adoj)t this policy. 
 But while the temporary influences may be irresistible, 
 the permanent effect, like that of discounting future 
 receipts at high rates, is costly and often ruinous. The 
 present methods and constitution of the railway busi- 
 ness may compel it; but, if so, they are vicious and 
 require reformation. The true interests of a railway 
 are best promoted by building up the business of the 
 country along its tracks, and ai'e injured by offering a 
 premium on the growth of business in sections beyond 
 its lines. In the end, the towns and farming country 
 lying along any railway must furnish its main strength 
 and support. In fact, the roads not only depend upon 
 local business for their support, but often draw from 
 it the means of competing for through freight at less 
 than cost. They thus offer a bribe to cajDital and en- 
 terprise to go somewhere else than on their lines, and 
 strike at the very root of their own future and perma- 
 nent prosperity. In justification of the wide inequali- 
 ties of rates between local and comi^etltive business, 
 a vague effort is made to establish, as a general rule, 
 that the business which is unaffected by competition 
 may properly be made to pay fixed charges and divi- 
 dends, leaving all competitive business to be taken at
 
 Public Obligations and Corporate Practices. 167 
 
 any rate wliicli will pay the cost of trausportation, with 
 a possible but doubtful margin for profit. Neither in 
 the interest of public justice, nor in that of the rail- 
 way itself, can it be accepted as a rule that the ship- 
 pers whose business is in its exclusive control shall 
 bear all the cost of the investment, while competitive 
 points enjoy the use of the road without sharing that 
 burden. Such a rule would, in effect, throw the entire 
 burden of the enterprise upon one locality for the 
 benefit of another, an indefensible act of government. 
 This rule is imaginary, and produced to suit the exigen- 
 cies of the railway apologists, rather than adhered to in 
 practice. It is clear enough from statistics that the 
 average rates on through freight froiu the West to the 
 seaboard do pay fixed charges and a fixir return on 
 the capital invested. The largest railway owner in the 
 United States declared, less than two years ago, that 
 a rate of fifteen cents per hundred pounds from Chi- 
 cago to New York afforded profitable business to his 
 system of roads. Whether this was exact or not, an 
 average charge of twenty cents from Chicago to Xew 
 York is so profitable that it is almost impossible to keep 
 the rival railways from cutting under it to secure busi- 
 ness. This fact exposes the practice of making a charge 
 proportionately from two to five times as large on lo- 
 cal business in a strong and unenviable light. The 
 vast majority of such inecpialities in rates are unmis- 
 takably the excesses of arbitrary power in a territory 
 where its rnle is absolute; and the burdens imposed 
 by such a power, where it has full control, and those 
 borne where it is restrained by competition, stand in 
 the strongest possible contrast, when we compare the 
 rates accepted by the railways on competitive freights
 
 168 The Railways and the Bepullic. 
 
 and those which they impose on shippers who ai'e 
 wholly at their mercy. The inequalities heretofore 
 discussed show that a thorough reform is needed in 
 railway management ; and the fact that these practices 
 are defended bj^ representatives of the leading rail- 
 w^ay organizations proves that this reform must come 
 from a power outside of those Avhich at present con- 
 trol the I'ailways, and superior to them. 
 
 It has been sufficiently shown that when discrimina- 
 tions in rates are made between particular sections, lo- 
 calities, or interests, in the regular course of business, 
 and even when they seem to be forced upon the rail- 
 ways by comj)etition, they work gross injustice and 
 amount to a public wrong. But in this discussion it 
 has been assumed that the management of the rail- 
 way is simply a business management, seeking the suc- 
 cess of the corporation as a business enterprise. Even 
 these evils, thus originated, are trifling compared with 
 those which arise when the interests of the managers 
 are more or less distinct from those of their compau}-. 
 And this is often the case; how often the public will 
 never know. If the railways are to have the power to 
 make discriminations which seriously aifect the profits 
 of trade, there is not and cannot be any certainty that 
 the power will not be used to build up a firm, an in- 
 dustr}^, even a city or district, in which the managers 
 or their friends have pecuniary interests, at the expense, 
 or even ruin, of their competitors. By open discrimi- 
 nations, or by secret rates, drawbacks, and rebates, a 
 few railway managers may subject to their will every 
 business in which transportation is a laige element of 
 cost, as absolutely as any Oi'iental despot ever controlled 
 the property of his subjects. No civilized community
 
 Public Ohligaiions and Corj)oraie Practices. 169 
 
 Las ever k^o^vn a body of rulers with such power to 
 distribute at pleasure, among its mercantile classes, 
 prosperity or adversity, wealth or ruin. That this is 
 no abstract or remote danger to society is plain to any 
 man who will look at the condition of trade and of 
 mercantile morals in the United States to-day. In the 
 most important branches of business, engrossing much 
 of the daily activity and productive energies of the na- 
 tion ; in the manufacture of iron and steel, the convey- 
 ance and marketing of stone, brick, grain, lumbei-, coal, 
 petroleum, live-stock, and all kinds of meats, the cost 
 of transportation is so large an element in tlie final 
 price to the consuaier that a material difference in 
 that cost commonly represents far more than the entire 
 average profits of the shipper. The result is that men 
 who can secure discriminations in their favor from the 
 railways can defy competition, can override advantages 
 of locality, of superior skill, of foresight and enterprise, 
 and can accumulate unearned wealth, to be divided, if 
 they will, with the agents of the corporations which 
 are thus made conspirators with them to plunder the 
 community. True, there are checks upon such conspi- 
 racies. The competition of water routes, and that be- 
 tween the railways themselves, together with such for- 
 bearance on the part of managers as conscience or law 
 and public opinion may dictate, have in many cases set 
 limits to the evil. But it is, nevertheless, the case to- 
 day, recognized more or less completely in all these 
 branches of industry, that the surest way to commer- 
 cial success is to obtain, by fair means or foul, a close 
 alliance of friendship, favor, or interest with some influ- 
 ential railway official. Such a state of affairs is radi- 
 cally irreconcilable with a healthy and natural condi-
 
 170 Tlie Railways and the Repiiblic. 
 
 tion of the commercial interests affected. lu the first 
 place it is destructive of the democracy of commerce, 
 which extends the ri^-ht of manufacturinoj or distribu- 
 tino; merchandise to all who wish to en2;a2;e in it. Let 
 railway favors secure to particular firms in prosperous 
 times the greater share of the profits of any business, 
 and in unprosperous years all that can be gained, and 
 the result must eventually be to consolidate that busi- 
 ness in the hands of a favored few. Those who cannot 
 obtain such favors must choose ^^■hether they will with- 
 draw at once from the ruinous struggle, or continue it 
 until gradual decay forces them out. Not only can 
 the great enterprises in which profits are determined 
 directly by railway rates be brought into dependence 
 and subserviency by this policy of discrimination, but 
 through these the retail merchants and jobbers in the 
 same line of trade. If any one thinks this is a fancy pict- 
 ure of the tyranny which can be exercised over trade 
 by individual discriminations, let him study how, in the 
 anthracite coal trade, in which every mining firm's ex- 
 istence is dependent on the toleration of the transpor- 
 tation companies, they extend their partiality and dis- 
 crimination to all the retail coal yards dependent on 
 them for supplies. The result of corrupting the foun- 
 tain head is inevitably to taint the stream which flows 
 from it. Place the fundamental enterprises of com- 
 merce under the rule of favoritism, and the same evil 
 qualities will extend throughout all the branches of 
 trade drawing their supplies from these sources. 
 
 While the concentration of the wealth and resources 
 of only one or two branches of trade in the hands of 
 the railway plutocracy has been complete, the effect of 
 such discriminations, even upon conlmercial interests
 
 Public OUigations and Corporate Practices. 171 
 
 in which their agency is limited, is opposed to healthy 
 business independence and to pure business morals. 
 The man who brings capital, ability, and energy to the 
 prosecution of any important shipping or manufactur- 
 ing trade, finds that these are not the qualities Avhich 
 most surely command success. Knowledge of the mar- 
 kets, frugality, and unremitting work avail nothing 
 against a rival who, by favor of the railway, secures an 
 advantage of five or ten per cent, on the price of his 
 commodities in the cost of transportation. This evil, 
 too, works insidiously, and rarely comes to light until 
 great injustice is effected. Is it strange that those who 
 find their legitimate business disappearing through un- 
 seen influences, which bafile all their exertions, should 
 turn to reckless speculation as a last hope of restoring 
 their fortunes? Or is it inexplicable that, when the 
 prosperity which merchants have built up by 3^ears of 
 toil, integrity, and skill is sapped and ruined by the 
 secret favoritism of an irresponsible power, they should 
 revenge themselves on the social system which permits 
 such depredations by fraudulent transactions, dishonest 
 bankruptcies, or mammoth defalcations ? No better ex- 
 planation of the decay of commercial morals is needed 
 than the rise of a power which deals out commercial 
 success by favoritism or selfishness, and nullifies the 
 efforts of honest, independent, and conservative trade 
 to obtain a competence. 
 
 Finally, the worst effect of this obnoxious practice is 
 that it destroys the individual independence and self- 
 respect of its victims. Give to any man or set of men 
 power to award at pleasure prosperity or adversity, 
 and a premium is placed upon sycophancy and cor- 
 ruption. A man whose resources depend on i-ates of
 
 172 Tlte Hallways and the Bepublic. 
 
 transportation ^vill naturally be slow to provoke the 
 enmity or opposition of railway managers who, by a 
 rate unfavorable to him, or a secret rebate to his rivals, 
 can condemn his business to slow but certain decay. 
 Men who see that wealth and prosperity can be gained 
 by conciliating the favor and serving the purposes of 
 those who hold the fiat of fortune in their hands are ur- 
 gently tempted to subserviency and time-serving. It 
 Avill appear elsewhere that the greatest protection to 
 the railways in such unjust practices is the fear of pi'o- 
 voking their enmity by appealing to the law against 
 them. Nothing could more strongly tend to destroy 
 individual independence and personal self-respect in 
 the commercial community than the power, held by 
 every railway managei", by manipulating rates, to give 
 rich rewards to his friends and to serve out pecuniary 
 punishment to all who oppose his plans or incur his 
 enmit}^ 
 
 No one now denies the injustice or danger of the 
 exercise of this power, yet railway advocates plead 
 against a legal prohibition of such discriminations, ar- 
 guing that the power to make them is necessary in 
 competing for the business of the lai-ge shippers. The 
 highest estimate of their importance in legitimate rail- 
 way management would not justify the continuance of 
 powers which may be used for the purpose of favorit- 
 ism between shippers. Concede the utmost advantage 
 that any railway can hope to obtain b}^ favoring large 
 shippers rather than small ones, and it has no weight 
 against the fundamental public right to ec^uality in the 
 action of railway rates upon commei'ce. Concede in 
 the hii»:hest dec^ree the convenience of rebates or draw- 
 backs in the transaction of railway business, yet this
 
 Public Ohllgations and Corporate Practices. 173 
 
 consideration is insignificant beside the imperative pub- 
 lic necessity of preventing the discrimination and ftv- 
 voritism which rebates and dra\ybacks at once facili- 
 tate and conceal. In fact, the importance of these 
 methods in legitimate railway operations is greatly 
 overstated. They have been made prominent in the 
 defensive pleas of the railways, in order to divert at- 
 tention from the breaches of public justice and equity 
 with which they are practically associated. 
 
 Much is made of the claim that the railwa3's must, 
 for their own interest, give large shippers lower rates 
 than small ones. Within very narrow limits this is 
 true. The shipper who forwards a single package of 
 freight has no equitable claim to proportionate rates 
 with the one who does his freighting by the car or 
 train-load. The cost of the service is greater. But the 
 application of the rule is limited by the nature of rail- 
 way transportation. For wholesale shippers, the cost 
 and value of the service are directly proportionate to 
 the number of car-loads of freight transported for each. 
 Further, in any industry the largest output, and, con- 
 sequently, the largest freight shipments, Avill be secured 
 by giving all competitors equal freedom to reach the 
 market. It costs the railways no more to haul ten 
 car-loads of freight for ten shippers than to haul them 
 for one; while the true interests of the railways, as 
 well as of the public, require free competition, under 
 which all shippers have equal facilities. 
 
 Under certain imaginable circumstances, indeed, 
 there may be an appreciable difference in the cost of 
 service between transporting a large number of cars for 
 one shipper and the same number for several shippers. 
 But this is rarely any ground for discrimination, since,
 
 174: The Railways and the Rejpuhlic. 
 
 when competing shippers require such service, the con- 
 ditions are practically the same. One furnace or roll- 
 ing-mill may have twenty car-loads of coal hauled a 
 short distance daily, w'here two others want but ten 
 each, but in such a case the difference of cost is not 
 material. On the long hauls, where important discrim- 
 inations have mainly been enforced, the difference in 
 the cost of service to large and small shippers is inap- 
 preciable. There is the same slight difference in the 
 cost of making up trains; but it is an infinitesimal 
 part of the total charges. It would cost the railway 
 a little more to collect thirty car-loads of refined petro- 
 leum from a half dozen refineries at Cleveland than to 
 take the whole number from the Standard yards; but 
 on the total charges for transporting that freight to 
 New York or Philadelphia, the extra cost cannot make 
 an appreciable difference. In all such cases, too, it is 
 easily perceived that a greater quantity of freight will 
 be moved if the shipper of a few cars is placed on an 
 equality with the shipper of many. The result of the 
 discrimination in favor of the Standard Oil Company 
 proves that the concentration of the business in the 
 hands of one great establishment restricts its aggre- 
 gate volume. The irony of the plea in its defence is 
 exposed wdien we remember that, while the railways 
 justified the discriminations on the ground that they 
 must favor the largest shipper, the real reason why 
 the competing refineries could not make equally large 
 shipments w^as that the railways ^vould not give them 
 equal rates. • It were as reasonable to blindfold a man 
 and then refuse to take oft* the bandage because he 
 shows no evidence of possessing eyesight. As a prac- 
 tically universal rule the difference in the cost of ser-
 
 PuhliG OUigaiions and Corporate Practices. 175 
 
 vice between handling a number of cars for various 
 shippers and handling the same number for one ship- 
 per is too slight to be considered as an element in 
 the question of rates. In wholesale shipments the car- 
 load is the unit. Shipments smaller than the car-load 
 call for extra services, and a, higher rate should be 
 charged upon them. On all large shipments, from one 
 car-load to any numbei", the rate should be uniform 
 per car-load. 
 
 The errant of a rebate or drawback on the freiirht 
 payments of any shipper can have no object but to 
 conceal the amount of the discrimination in his favor. 
 Under this practice the freight of the favorite shipper 
 is charged on the manifests and books of the railway 
 at the reo-ular tariff rates. The a2:ents and clerks vrho 
 receive and forward the freight, and those who deliver 
 and collect the freight charges, have no record showing 
 a lower rate to him than to others. The same charires 
 are indeed collected of him at first, but after he has 
 paid a certain amount he recovers the stipulated rebate 
 or drawback, on the presentation of his freight receipts. 
 By this method the official knowledge and record of 
 the advantage given is kept, not only from the public, 
 but from most of the clerks and agents of the com- 
 pany. Practically its only effect is to conceal the 
 ti-ansaction, and it is foir to conclude that this is its 
 real purpose. In the recent Congressional debates on 
 this topic the ingenuity of two or three supporters of 
 railway practices was exercised in imagining circum- 
 stances which might make this practice necessary. Mr. 
 Rice, of Massachusetts, made the discoveiy that one 
 shipper might find another underselling him by the 
 aid of " secret lower rates," a case, certainly, not veiy
 
 176 The Railways and the RepxihUc. 
 
 uncommon ; and, as a remedy, lie wished the right 
 preserved to the railways to grant a rebate to the first 
 shipper, to make things even. If it were made cer- 
 tain that the rate of rebate would be the same to all 
 shippers, there might be no public objection to it; but 
 the very nature of the practice excludes such equality. 
 If the rebate is the same the additional j^ayments and 
 repayments are useless, and it would be easier to re- 
 duce the regular tai'iff rate. The remed}^ for the secret 
 rebates, so often practised, is not to set up others to 
 equalize them, but to abolish the practice, and enact 
 that there shall be no " secret lower rates." Another 
 suggestion in the same debate was, that the rebate 
 might be necessaiy to allow a shipper the rate fixed 
 by the I'ailways for exportation, when he had been 
 chai'ged a higher rate on the freight which was ex- 
 ported ; while another was, it might be used to correct 
 the disadvantage which a shipper might be subjected 
 to by lower rates granted to rivals who shipped by 
 other roads, as if a railway could be expected to re- 
 fund to every shipper alike, after the freight has been 
 carried and the transaction is complete, the excess of 
 its charges over those of a rival. But if such an efibrt 
 of the imagination had any foundation in fiict, its use- 
 fulness or fairness would have no bearing on the prac- 
 tice of granting secret drawbacks. The correction of 
 an ascertained or admitted overcharge has nothing to 
 do with this practice. For such refunding of money 
 honestly due the shipper, the vouchei'S of the company 
 may properly be issued. But to put in the hands of 
 a railway manager the power to grant secret draw- 
 backs on the regular freight charges of a shipper 
 whom he may favor, is as dangerous to commercial
 
 PuIUg Obligations and Corporate Practices. 177 
 
 freedom as the old Freuch system of issuing lettres de 
 cachet Wcas to personal liberty. 
 
 Against every such practice the public interest de- 
 mands the complete equality of shippers. The favor- 
 ite argument of railway men, that the public, not un- 
 derstanding the details of railway business, cannot 
 judge of the necessity or usefulness of these practices, 
 simply shows that those who urge it do not under- 
 stand the question. When they imagine that any 
 pleas of utility or convenience can justify inequalities, 
 they fail to understand the primary and imperative 
 necessity of the equality wliich must be guaranteed to 
 all persons in railway services. In some respects there 
 may be reason for waiving the public convenience, in 
 order to encourage and develop railway interests. But 
 the demand for equality is fundamental and indefeasi- 
 ble. No convenience in the transaction of railway 
 business, no pecuniary enhancement of the fortunes of 
 managers, can condone the public crime of establishing 
 preferences and ftivoritism in rates. Any method of 
 transacting business which can be used to cover such 
 preferences, or any argument which can be adduced 
 to support tiiem, embodies an assault on public justice. 
 
 Another variety of discrimination which, to some ex- 
 tent, partakes of the nature of individual preferences, 
 Las been defended on the same ground as tlie defence 
 of tlie discrimination against localitii^s. It is tlie policy 
 of charging " what tlie fi'eight will bear." Extreme 
 instances of this practice were earnestly defended on 
 the floor of Congress last winter. No doubt the ques- 
 tion what the freiglit will bear is often an important 
 consideration in I'ailway problems ; but this is no 
 justification of the practice of the Central Pacific Rail- 
 
 12
 
 178 The Railways and the Bepublic. 
 
 way, wliicli was defeucled by its Congressional apolo- 
 gists. " If I have a mine yielding ore worth six dol- 
 lars a ton," asked Mr. Budd, " and my competitor near 
 by has one which yields ore worth forty dollars a ton, 
 am I to be shut out of shipping my ore to market be- 
 cause I cannot afford to pay as high a rate as my 
 rival V This was said in defence of the Central Pa- 
 cific Railway, which requires shippers of ore from the 
 Nevada mines to submit assays of their product to the 
 railway managers, and varies its freight charges with 
 the richness of the ore. The reply to this somewhat 
 pathetic inquiry is obvious. If ore is not of enough 
 value to pay a fair freight for carrying it to the reduc- 
 tion works, it is not the duty of the railway to make 
 up for this by carrying it at a loss. If the railway at- 
 tempts to make charitable compensation to unfortunate 
 mining operators, it must either put the loss on its 
 stockholders or on the miners of good ore. Neither 
 practice is equitable. The railways are not built to 
 rectify the inequalities of fortune, either at the cost of 
 their stockholders or at that of fortunate mine-own- 
 ers. If the ore is not worth paying a fair freight, we 
 see no other course for the owner of the mine than the 
 somewhat trying one suggested by Mr. Budd, of wait- 
 ing until nature puts forty-dollar ore into his mine. 
 But this is not the real point at issue. No one has 
 ever accused the Central Pacific Railway of wasting its 
 capital by carrying ore for unlucky mine-owners at less 
 than cost. The character of that corporation makes 
 the fact that it carries low grade ore at a certain rate 
 conclusive evidence that the rate affords a profitable 
 return for the service performed. But if cheap ore can 
 be profitably carried at this rate, all ore can be profit-
 
 Public OhUgations and Corporate Practices. 179 
 
 ably carried at the same rate ; and the higher charge 
 on richer ores is excessive and unjust. The railway 
 exerts its power to grasp part of the profits of the 
 prosperous miner, and the miner submits rather than 
 have his works stopped. In this case the cost of ser- 
 vice is disre2;arded in fixing the frei^-hts. Xow the in- 
 expert public may be unable to determine the exact 
 cost of service, but is intelligent enough clearly to see, 
 in the rate fixed on cheaper ores, proof that the high 
 rates on better ores are excessive and extortionate. 
 The railway has no right to a2:)propriate any part of 
 a shipper's good fortune, or superior judgment, or 
 greater industry; and the practice is little else than 
 robbery. 
 
 It has already been observed that the question what 
 the freight will bear is, within proper limits, an ele- 
 ment in the calculations of managers. If the coal, 
 which lies valueless in some remote mountain of Penn- 
 sylvania or West Virginia, will not bear the charges 
 necessary to repay the capital used in constructing a 
 railroad to bring it to market, the road will not be 
 built. If it \vill bear such rates — that is, if after pay- 
 ing them, the price which the owner gets, when his coal 
 is brought into market, remunerates him for the cost 
 of mining, and leaves him a profit — the building of the 
 railway will benefit both him and its builders. In 
 such calculations the relation between cost of service 
 and what the freight will bear is the essential element 
 which determines whether the enterprise will pay. It 
 is evident, too, that, under different conditions and in 
 different localities, both the burden which the freight 
 must bear and that which it can bear will vary widely. 
 A coal mine which can only be reached by a line in-
 
 180 The Railways and the Republic. 
 
 volving heavy grades and expensive tunnels must sup- 
 port heavier charges than cue which is reached by a 
 level and inexpensive route; while a gold or silver 
 mine can pay a higher rate for securing the advantages 
 of railway transportation than a limestone quarry. 
 But while a railway is perfectly justified in rejecting 
 freight which will not bear charges equal to the cost 
 of service, it has no rio-ht to extort excessive rates be- 
 cause the freight is so valuable that its owner can en- 
 dure them without ruin. Moreover, rates for different 
 shippers and different localities must be uniform on 
 the same class of freight ; otherwise the way is open 
 to onerous discriminations which may deprive private 
 enterprise of the just advantages of their thrift or fore- 
 sight, and the public of the natural cheapness or supe- 
 riority of their products. Such a course must ulti- 
 mately be injurious to the railway which adopts it. 
 Perhaps an iron-bound monopoly like the Centi'al 
 Pacific can, for a time, swell its apparent profits by the 
 practice, but in the end the result must be, as we have 
 seen it to be in the long-and-short-haul abuse, to dis- 
 courasje the o-rowth of the business which has to take 
 all the burden it can bear, and on which the permanent 
 prosperity of the railway de2:)euds, and to encourage 
 that the rates on which are beyond its control. The 
 worst feature of the practice, however, is that it opens 
 the way and serves as a cloak to arbitrary personal 
 discriminations between shippers, the most utterly 
 vicious and indefensible of railway abuses. 
 
 Another practice which is almost universal among 
 railways is the attempt to control, by discriminating 
 rates, the disposition of freight bej'ond the line of the 
 company; or, what is identical in principle, although
 
 Public Ohligations and Corporate Practices. 181 
 
 different in application, making the charges on a certain 
 class of freight the means of dictating to the shipper in 
 what manner he shall dispose of other freights in his 
 business. Of this abuse, too, the Central Pacific Rail- 
 way practises the most extreme form in its notorious 
 special-contract system. By these contracts the rail- 
 way agrees to give a shipper a large reduction from 
 regular rates, on condition that he shall ship all freight 
 by the railway, using ocean transportation for no part 
 of his business. The railway doubtless secures by this 
 means a lai'2;e share of the frei^rht business which 
 would otherwise seek the more economical but less 
 rapid carriage by sea; and this use of its power over 
 that portion of the merchant's freight which has of 
 necessity to be carried by railway probably results 
 in the enhancement of its profits. But it is to be noted 
 that this makes no difference in the cost or profits of 
 the service rendered in any particular instance. The 
 railway can haul a car-load of groceries just as cheaply 
 for a merchant who has brought a ship-load of some 
 other merchandise to San Francisco by water as for 
 one who has not. The service, cost, and profit to the 
 railway are identical in both instances, but, by a dif- 
 erence in the cliarges, the Central Pacific Company 
 imposes a virtual prohibition upon all merchants to 
 whom its service is essential on any part of their lousi- 
 ness, from using the water route on such shipments as 
 it may be for their advantage to have transported in 
 that way. Practically the same 2")osition was shown to 
 be taken, in the suit against the Lake Shore and ]\Iichi- 
 gan Southern Railroad, arising out of discriminations 
 in favor of the Standard Oil Company. The officers of 
 the railway, on the witness stand, admitted that the
 
 182 The Railways and the Eejpuhlic. 
 
 discriminations had been persistently and permanently 
 imposed, and justified them on the plea that the Stand- 
 ard gave the road all its business. Other considera- 
 tions were presented, such as the largest shipper plea; 
 but the essential claim of the railway officials was that 
 an agreement on the part of the shipper to send all his 
 freight over a railroad justifies the road in giving that 
 shipper a large advantage over another requiring exact- 
 ly tbe same service. In other words, they recognize 
 the obligation to charge equal rates to all shippers 
 only so long as it is convenient to do so. They will 
 charge equal rates if nothing offei's them any induce- 
 ment to do otherwise; but if any future or hypothet- 
 ical advantage is to be gained they wnll make rates to 
 reward the shijoper who obeys their wishes on matters 
 independent of the transaction in question, or to punish 
 one who does not. The practical operation of this dis- 
 crimination is as truly an imposition upon the public 
 as its theory is an infraction of the equitable obliga- 
 tions of the railways. Its I'esult is evident in the Central 
 Pacific case. The merchant must either j)ay expensive 
 railway charges on that class of merchandise which is 
 susceptible of cheap transportation by water, or he 
 must abandon that pai't of his trade to which the ser- 
 vices of the railway are essential. Such dictation as to 
 the routes of general business is not to be tolerated in 
 the public interest. It is the right of trade to use all 
 the different routes best adapted to the economical car- 
 riage of its respective classes of merchandise. It is a 
 public right that articles for general consumption shall 
 be brought to consumers by the least costly methods. 
 Any manipulation of railway rates which increases the 
 cost of a great staple to the consumer is an invasion
 
 Public Obligations and Corporate Practices. 183 
 
 of popular rights. Any dictation to commerce as to 
 the routes by which it shall transport its goods is an 
 assault upon the liberty of trade. 
 
 The same principle — of making the pecuniary inter- 
 est of the company superior to its obligation of im- 
 partiality — affords the foundation for the custom of 
 making special rates on freight coming off or going to 
 particular connecting lines, so as to compel the freight 
 to take these routes. This is almost univ^ersally prac- 
 tised in the movement of throuo-h freiirhts to and from 
 the East and West. For instance, the Pennsylvania 
 Railroad transports from Pittsbui-gh to the seaboard a 
 lar2:e amount of o-min, which comes to it from the Pitts- 
 burgh, Fort Wayne, and Chicago road, and for which it 
 receives a certain share of the through rate made on the 
 shipment at Chicago. Suppose its share of the rate to be 
 12^ cents per hundred pounds; indicating that 12^ cents 
 per hundred pounds is a reasonable rate for hauling 
 grain in large quantities over its line, when the freight is 
 delivered at its terminus already loaded in cars, and 
 ready for shipment. Under its obligation to give, to 
 all shippers alike, the same rate for the same service, any 
 one else who can offer grain at Pittsburgh, already loaded 
 in cars, is entitled to the same rates. Suppose that the 
 grain was brought to Pittsburgh by river, "would the 
 shipper get it carried thence to Philadelphia or New 
 York for the same charge that is made for exactly the 
 same service on freio;ht comino: from the connecting 
 lines of the Pennsylvania Kailroad ? It is very well 
 known tliat he would not. The Pennsylviinia Railroad 
 has established, by its rates, an effective veto on the 
 shipment of freiglit from the river points to tlie East 
 by any other than the all-rail route; and shippers hav-
 
 184r The Railways and the Republic. 
 
 ing freight which could be carried advantageously by 
 river, and thence by rail over the Pennsylvania Rail- 
 road, if charged the same rate others obtain on exactly 
 the same service, cannot utilize that cheap and natural 
 highway of commerce. The same rule, varied accord- 
 ing to circumstances, is in force on every railway doing 
 a through business. By universal custom the railways 
 assert the riiiht to dictate how the frei2:ht shall be 
 brought to tlieir lines, and even what shall be done 
 with it after transportation. Thus the Pittsburgh, 
 Fort Wa3'ne, and Chicago Railway brings two car-loads 
 of flour to its terminus in Pittsburgh. If one car-load 
 is to be shipped to Philadelphia, over the Pennsylvania 
 Railroad, it pays a certain fixed rate; if the other car- 
 load stops in Pittsburgh, it is charged another rate, 
 materially greater. What right has the Fort Wayne 
 I'oad to enact that the consumers of Pittsburc;h shall 
 pay a higher rate on their flour as a penalty for not 
 aflfordinii; business to another road ? What ric^ht has 
 any road to assume the prerogative of dictating where 
 or how the freight which it carries for the public shall 
 be disposed of? 
 
 In these cases, advantages are given in rates to the 
 freights of connecting lines, because the Pennsylvania 
 Railroad has a controllino: interest in the stock of the 
 other corporations. It is for its pecuniary advantage 
 that freight coming to its line, or going from it, shall 
 furnish business to its Western roads. But that pecun- 
 iary advantage does not accrue to it in its character as 
 a transportation agency between Pittsburgh and Phila- 
 delphia, but in its character as an investor in the stock 
 of other roads. It is not as a railroad company, but 
 as a stock-owning corporation, that it favors these roads.
 
 PiiMic Obligations and Corporate Practices. 185 
 
 The confusion of these functions is of doubtful charac- 
 ter and may easily lead to dangerous practices. We 
 have seen in the illustration how it may lead, and in 
 fjict has led, to the almost total disuse of the facilities 
 for transportation offered by the Ohio and tlie Missis- 
 sippi rivers between the East and West. But what is 
 there to prevent the same practice being carried to still 
 greater lengths ? If a railway company may invest in 
 the stock of another railway and declare that freight 
 coming from the line of the latter shall be carried at rates 
 which practically prohibit through freight from other 
 sources, why may it not extend the same discrimination 
 to other classes of business? Why may it not take a 
 partnersliip in immense coal fields, for instance, and 
 establish rates which send the operators of other coal 
 mines into insolvency? There is no legal justification 
 for the dictation to shippers by one railroad that their 
 freight must pay tribute to another road. Such prac- 
 tices are destructive of the independence of trade, and 
 their sole purpose is either to uphold a monopoly in 
 transportation, or, as was illustrated in the oil business, 
 to build up a monopoly in the business affected. No 
 plea of profit on investments, which one company may 
 have made in the shares of another, can excuse such a 
 distinct attack on the right of every man to obtain the 
 materials of his business where he chooses, and to sell 
 his products where he can find the best market. 
 
 It is customary to defend this practice by the plea 
 that, to move freight f)r the long distances, it is neces- 
 sary for the different lines of railway to share a rate, 
 which, divided between the lines over which it passes, 
 affords a comparatively small rate to each. The answer 
 to such an argument is very evident. There is not the
 
 186 The Railways and the Repvhlic. 
 
 slightest objection, from the public standpoint, to mak- 
 ing cheap pro-i'ata charges, so long as they are equal to 
 all. But in fact the practice does not favor the cheap 
 transportation of freight for long distances. It is not 
 conducive to the cheap movement of the crops that the 
 advantage of the pro-rata charge should be restricted 
 to certain especially favored lines. The favoring of 
 one or two lines is what is objected to, and that 
 preference restricts, instead of aiding, the shipment of 
 through freight. It is demonstrable that the grain 
 raised alons; the banks of the Missouri could be trans- 
 ported to the seaboard, by the Missouri, Mississippi, 
 and Ohio rivers to the upper ports of the latter river, 
 and thence by rail to Baltimore and Philadelphia, at a 
 marked economy over the all-rail route, if the roads 
 whose main lines run from that river to the Eastern 
 cities would make, on such shipments, the same rates 
 they give on the same service when the grain reaches 
 them by connecting lines. They would be paid exact- 
 ly the same rate for exactly the same service, and the 
 increased volume of traffic would largely increase their 
 revenues on their main lines. But this practice, which 
 is defended as affording cheap transportation to the 
 West, operates as a bar to the use of the water route 
 for a portion of the distance. It is a fundamental 
 obligation of the railways not to discriminate against 
 freight which comes to it from one route, because its 
 officers or its investments are benefited by the earnings 
 of some third road. The New York Central has no 
 right to give freight from the Lake Shore a better rate 
 than frei2;ht from the lake, on account of the Vander- 
 bilt investments in the Lake Shore; nor has the Lake 
 Shore the risrht to crive better rates to the New York
 
 Public Obligations and Corporate Practices. 187 
 
 Central freight than to that offered it by the Erie, be- 
 cause the Vaiiderbilt investments are large in the New 
 York Central. The only safe rule is that laid down 
 twenty years ago by Judge Strong, and recently re- 
 peated by the Circuit Court of the United States, in a 
 case in which exactly this question arose between two 
 roads in Colorado. It is that every railroad is bound 
 to give the same rate to similar freight offered under 
 similar conditions, irrespective of the question whether 
 or not the freio-lit comes to it from a route to which it 
 is friendly. The business of the railway is to transport 
 the freight offered to it, giving equal rates to all for 
 the same service, and it is most emphatically none of 
 the railway's business what is done with the freight 
 before comino: to its line or after leavinir it. 
 
 In the discussion of the various inequalities of the 
 railway tariffs, in the preceding pages, it has been rec- 
 ognized that it is impossible to fix any exact rule for 
 determining the equitable charges for each of the infi- 
 nite variety of services which the railroads are called 
 upon to perform. Such a task would be hopeless, 
 whether attempted by critics of the i-ailwa}'s or by leg- 
 islation. No iron-bound rule can be established to 
 govern the inexhaustible multiplicity of the various 
 conditions which they must meet. But the general 
 principles of equity and justice which should govern 
 all their operations are clearly defined by the law, and 
 are evident from the natural requirements of public 
 rights. These principles furnish rules which are uni- 
 versal and 2iieet all cases. The general principles 
 which should be respected in the operations of the 
 railways are stated in the first two rules given below, 
 from which the succeeding ones may be regarded as 
 deductions:
 
 188 The Railways and the Repuhlic. 
 
 1. The public character of the railways requires 
 practical equality in the services of each to all who 
 employ them. No discrimination in rates or prefer- 
 ence in the despatch of freights is consistent with that 
 character. 
 
 2. The business character of the i-ailways forbids 
 any demand that they shall perform services for any 
 part of the public which do not yield them a fair com- 
 pensation on the capital invested, 
 
 3. The equality demanded by the public obligations 
 of the railway consists in making the rates charged to 
 all shippers bear a practically equal proportion to the 
 cost of service performed. To perform a greater ser- 
 vice for one shipper or locality, at the same charge 
 made to another for a less service, is as great an in- 
 equity as to perform the same service for a less charge. 
 
 4. The railway cannot be requii'ed I)y the public in- 
 terest to make its charges cover full profit on capital 
 invested. In many cases the road is unaljle to obtain 
 business at such charges, and must accept lower rates. 
 But it is a public wrong for the railway to discard this 
 element in its charges to one shipper or se't of shippers, 
 and impose it upon another, so as to inflict a disad- 
 vantage or burden upon the latter. 
 
 5. Any attempt to secure increased pi'osperity to 
 any section or locality, by transporting its freights at 
 less charges than yield such a fiiir compensation to the 
 railways, is a violation of both the preceding rules, and 
 is beyond the proper province of the railways. 
 
 6. The claim that has been made for a reduction of 
 railway I'ates in certain sections, on account of a de- 
 pression of values in the products of those sections, is 
 not just, unless it can be shown that the existing rates
 
 Public OUigations and Corjoat^ate Practices. 189 
 
 are in excess of the fair profit to ^Yhich the railways 
 are entitled. It is not the business of the railways to 
 repair the misfortunes or hardships of any section or 
 interest at the cost of other interests. 
 
 7. Distance being an essential element in the cost of 
 service, neither the railways nor the public have a 
 right to disregard it. The people of one locality have 
 no right to ask that they shall be placed on an equal- 
 ity with those of another locality requiring less trans- 
 portation, and the railways must not bring a point one 
 thousand miles away from market nearer in charges 
 than one two hundred and fifty miles away. As dis- 
 tance is not the only element in the cost of service, the 
 charges cannot be required to be in exact pi'oportiou 
 to the number of miles the frei2:ht is to be hauled ; 
 but it should have due weig-ht in determining; the dif- 
 ferent rates of any railway, 
 
 8. The I'ates of other railways for a given service 
 do not constitute an authoiitative criterion for the 
 rates which a certain road may impose. The capital 
 required to construct the road, the power necessary to 
 haul freight over its grades, and the volume of busi- 
 ness determining its rates, may be much greater or less 
 in one case than in another. But the rates whicli a 
 road charges for service to shippers at one point may 
 fairly be taken as an indication of the proper charges 
 on the same class of freight to shippers at another 
 point on the same line. 
 
 9. The railroad is chartered solely to aft'oixl im- 
 proved facilities for transportation on its own line, and 
 it should confine itself strictly to that work. To re- 
 quire anything of it outside of the pi'oper performance 
 of that work is foreign to the purpose of its creation,
 
 190 The Railways and the BepuUic. 
 
 while its voluntary assumption of powers beyond that 
 function may amount to a gross usurpation. This rule 
 will be found to prohibit several practices to which the 
 railways are prone. Thus : 
 
 The railway must not use its power to raise or 
 depress the prices of any commodity over which its 
 transportation may give it influence. It is not within 
 its province to judge between the producer, the con- 
 sumer, or the middle-man, as to whether prices should 
 be lower or hicrher. 
 
 It must not use its power to regulate the operations 
 of any industry to which it furnishes transportation, 
 or to restrict production, either directly or by support- 
 ing combinations for that purpose. Its participation in 
 any plan to create an artificial scarcity of any staple 
 amounts to a conspiracy against the public. 
 
 It has no right to exert its corporate influence, or to 
 expend its funds, for the purpose of aflfecting the action 
 of other railways, either in fixing rates or in other 
 matters which may affect its own business. 
 
 It must not assume the work of police or sanitary 
 regulation, by giving preferences to one class of busi- 
 ness over another, on the plea that it is preferable in 
 the interest of the public health or the public mor- 
 als. It has no right to say that it is for the public 
 health that it shall charge twice as much for the trans- 
 portation of one staple as for another requiring ser- 
 vices of equal cost. Such an assumption is wholly be- 
 yond its province, and usually serves only as a cloak 
 for wanton discriminations. 
 
 It must not exert its corporate influence in political 
 questions or in legislation. The railway has a rio-ht 
 to present its side of the case when legislation is pro-
 
 Public Ohlujatlons and Corporate Practices. 191 
 
 posed which may affect its legitimate interests ; but to 
 support its presentation by distributing favors among 
 those who can affect legislation is corrupting and in- 
 admissible. 
 
 10. A clear deduction from the rule that the rail- 
 way must perform equal services at equal rates, and 
 must not seek to extend its power beyond its duty on 
 its own line, is that it has no right to inquire whence 
 freight was obtained, or what is its destination. Its 
 sole business is to transport the freight from the point 
 at which the shipper offers it to the point to which he 
 wishes it transported. To say that if it comes from a 
 certain locality or over a certain route, or is going to 
 a certain locality or route, liigher rates will be charged, 
 is an unjustifiable interference with trade, which is nev- 
 ertheless commonly practised in railway management. 
 
 11. The railway has no right to inquire what the 
 shipper will do with other freiglit than that which he 
 offers for transportation. To declare that if he uses it 
 in a certain trade or manufacture, or that if he trans- 
 ports some of his freight by sea, or gives a portion of 
 his freight business to some rival route, he will be 
 charo-ed hi^-her rates than others is an infraction of 
 commercial liberty. 
 
 The limitation of the railways to their single pur- 
 pose of building and operating public highways for 
 the benefit of commerce, as insisted on in these pages, 
 is a necessary deduction from their public o})ligatious. 
 As long as they confine themselves to the performance 
 of their legitimate functions, they are of inestimable 
 public service, and their existence and estaldishment 
 should be freely encouraged, their rights and property 
 strictly guarded, and their success duly recognized and
 
 192 The Railways and the Bepuhlic. 
 
 applauded. But if they have in any instances trans- 
 gressed the just and legal limits of their powers, the 
 transgression must be noted and the public danger 
 recognized. If they have built up private wealth by 
 favoritism, encouraged the growtli of monopolies, com- 
 bined to raise the prices, or artificially to restrict the 
 supplies of any staple, organized combinations to pre- 
 vent fi'ee competition in their own or any other busi- 
 ness, conspired against the development of the country 
 by seeking to prevent the building of other routes, or 
 sought to control politics by corrupting voters, legis- 
 lators, or courts — if they have committed any or all of 
 these transgressions, they have made a dangerous at- 
 tack upon the public welfare, and demonstrated by 
 their own acts the necessity of a thorough reform. The 
 public experience is sufficient to determine whether 
 there have been such invasions of popular rights. It 
 is not necessary to show tliat such dangei'ous practices 
 are universal. One such monopoly as the Standard 
 Oil Company is evidence enough that the railways 
 possess a power inconsistent with the independence 
 of trade. One political and commercial oligarchy like 
 the Central Pacific Railway should convince the nation 
 that the growth of such irresponsible and unscrnpu- 
 lous powers must be made impossible. We need not 
 wait until all enterprise is ruled by railway managers 
 and all wealth distributed among their favorites, be- 
 fore we take action for the maintenance of popular in- 
 dependence in trade as well as in society. Tlie mere 
 fact that the railways can, if they choose, usurp pow- 
 ers so inconsistent with the objects for which they 
 were established and so dangerous to the public inter- 
 est, makes it necessary to place such powers completely
 
 Public Obligations and Corporate Practices. 193 
 
 beyond tbeir reach. What legislation is necessary may 
 be a difficult and yet unsolved problem ; but that 
 there is an imperative and urgent necessity for a pub- 
 lic remedy which shall not only forbid such distortions 
 of the public character of those corporations, but shall 
 thoroughly and completely eradicate them and make 
 them impossible, no one can doubt who has considered 
 their true bearing and effect. 
 
 It is an interesting subject of speculation whether, 
 if such practices are necessary for the successfid oper- 
 ation of the railways, any enhancement of the national 
 wealth or development of the material resources of 
 the country could compensate for the domination of 
 business interests by a class of privileged plutocrats, 
 the destruction of commercial freedom, and the deteri- 
 oration of the mercantile classes into dependants and 
 time-servers of railway magnates. Such a question has 
 little practical bearing, as it is clearly possible to pre- 
 serve a useful and profitable existence to railway en- 
 terprise freed from such abuses. But suppose it were 
 not possible, would the gain of wealth in the nation be 
 any compensation for the decay of popular rights and 
 the degradation of individual character? I think not. 
 The land ''where wealth accumulates and men decay" 
 has long been proverbially destined to ultimate disaster. 
 It would be far better for the people, and would secure 
 a stronger and higher national life, to preserve the old 
 methods of life, the slow and restricted operations of 
 commerce, with the frugal but withal independent and 
 self-respecting chai'acter of the people, than to gain ten- 
 fold the marvellous growth of Avealth that lias been 
 created by the railway system, and with it place the 
 vast operations of commerce under the rule of an irre- 
 
 13
 
 194: The Railways and the Iiej)uhlic. 
 
 sponsible oligarchy of corporation magnates, and trans- 
 form the once independent, npright, national character 
 into subservience or submission, such as either accepts 
 fortune from the fcxvor of its masters or sinks into ob- 
 scurity or fsiilure on account of their opposition. Bet- 
 ter national poverty than national wealth with the peo- 
 ple divided into the class ^vhich grants prosperity, the 
 class which earns it as servants, and the class which 
 can only express its dissatisfaction by discontented mut- 
 tering and destructive disorder. If we must choose be- 
 tween railway prosperity combined with the power of 
 these corporations to distribute wealth by discrimina- 
 tions, on the one hand, and national poverty on the 
 other, let us, for the preservation of freedom, justice, 
 and national self-respect, wipe out the railway system, 
 with the wealth that it has created in the last three 
 decades, and go back to the old national life of re- 
 stricted resources but unrestricted independence.
 
 CHAPTER VI. 
 
 THE POOLING POLICY. 
 
 Having reviewed the several classes of railway dis- 
 crimiuations as they are practised, and explained their 
 injustice, illegality, and dangerous effects upon social 
 and political equality, we come to the question, In what 
 direction shall a remedy be sought. Can the opera- 
 tion of economic laws be relied upon to correct these 
 abuses, or must the new power, which has been created 
 within the last two generations, be always regarded 
 as a dangerous element in society, to be constantly and 
 jealously watched by the public and bound down by 
 restrictive legislation ? The spirit of American institu- 
 tions in dealing with all evils, and especiallj^ with those 
 arising in the operations of commerce, naturally seeks 
 the metliod which Avill involve the least interference 
 with freedom, consistent with the general safety. The 
 commerce which is governed the least, is governed the 
 best. In that respect the claim that the remedy for 
 all inequalities in the practical working of the rail- 
 wa3'S is the regulating influence of tlie laws of trade, 
 and especially the corrective influence of competition, 
 is very plausible. But it is confronted by tlie fact 
 that hitherto, in the history of the railway system, the 
 laws of trade have not prevented the maintenance of 
 inequitable rates, the infliction of unjust discriminations, 
 or the domination of great industries by monopolies
 
 196 The Railways and the Rejpvhlic. 
 
 fostered by the railways. Before accepting this ex- 
 perience as final, however, and rejecting economic law 
 as an insufficient corrective, it is necessary to inquire 
 whether those laws have had a fair trial. The value of 
 competition as a remedial agency cannot be determined 
 without considering how far the present operation of 
 the railway system limits its workings, and also how far 
 the prevalent railway policy seeks further to suspend 
 and abolish it. This leads us to examine the latest 
 and most powerful development of the railway system, 
 best known as "pooling" — although Mr. Fink desires 
 to have the pools called "associations," and Mr. G. R. 
 Blanchard suggests the dignified term "traffic unity." 
 
 Pooling was defined by W. H. Vanderbilt and 
 H. J. Jewett, in their letter to the Hepburn Com- 
 mittee of the New York legislature, as "a successful 
 plan for preventing railway wars and securing uni- 
 formity of rates." This definition is open to two criti- 
 cisms: First, that it fails to give any clear indication 
 of what pooling really is; and, second, that it is a ques- 
 tion of fact whether pooling has either prevented rail- 
 way "wars or secured uniformity of i-ates. Mr. Fink has 
 asserted that the purpose and effect of pooling is to 
 prevent discriminations, and " the establishment and 
 maintenance of uniform tariffs." Neither of these state- 
 ments gives any definition of the pool. In general, 
 the term is applied to any com1)ination, between rail- 
 ways engaged in competitive traffic, to maintain rates 
 by suspending competition. More specifically, how- 
 ever, pooling includes the only means by which such 
 combinations have been made successful ; to wit, the 
 suspension of competition by uniting the traffic in 
 one common total or " pool," from which the business,
 
 The Pooling Policy. 197 
 
 or its proceeds, is divided among the various companies 
 in fixed percentages. The polic}' of combining to sus- 
 pend competition is an old one ; but tlie conception 
 of a " pool," comprising the business of all the roads 
 and holding it beyond their individual control, dates 
 from Mr. Fink's entrance into the management of the 
 trunk lines, has been applied under his supervision, and 
 is regarded as his creation. The detailed devices by 
 which the business is combined and its proceeds di- 
 vided vary with the nature of the traffic pooled, and 
 with the agreements which are practicable in each case. 
 The most general form of the freight pool is an agree- 
 ment allotting a percentage of the traffic to each road, 
 and providing that, if any road exceeds its share of the 
 business, freight shall be diverted from it to the other 
 roads until the agreed proportion is established, thus 
 taking away the incentive for any road to attempt to 
 enlarge its business by lowering rates. Some such 
 "traffic pool" as this has, at one time or another, con- 
 trolled most of the competitive freight business of the 
 country. The other leading variety, the " money pool," 
 deals not w^ith the freight or passengers, but with the 
 earnings. The money received for transportation is 
 brought together in one total, and divided in fixed per- 
 centages among the combining roads. If, as is general- 
 ly the case, the gross earnings are pooled, this arrange- 
 ment inflicts a much greater loss upon the railway 
 which exceeds its allotment than the trafiic pool. For, 
 in the traffic pool, the excess of traffic is simply diverted 
 from the road ; but in the money pool the road which 
 carries more than its share performs the excess of ser- 
 vice without any compensation ; and the actual cost of 
 this work is clear loss.
 
 198 The Railways and the Republic. 
 
 There has of late years been a strenuous eflfort to rep- 
 resent the pool as something else than a device to 
 destroy competition, as, in fact, a corrective of railway 
 evils. The definition of the railway presidents already 
 quoted is one instance, and Mr. Fink's testimony be- 
 fore the Senate Committee, in 1883, is another. "The 
 'princijjal object of this association," said he, "is to 
 establish equitable and uniform tariffs over the roads 
 represented on the committee, as far as their competi- 
 tive traffic is concerned." The qualification contained 
 in the last clause was made more significant by the 
 addition : " It has nothing to do with local traffic." 
 But why has it nothing to do with local traffic? Are 
 not equitable and uniform tariffs as much to be desired 
 in the case of local traffic as in any other ? Should not 
 the " prevention of unjust discriminations," the arrange- 
 ment of rates " so that they will bear equally upon dif- 
 ferent localities," and " conducting the transportation 
 business in a business-like way, and in the interest of the 
 public and the companies," which ]\Ir. Fink elsewhere 
 alleges to be the object of pooling, be sought as stren- 
 uously on local as on through shipments? The fact is, 
 as Mr. Fink says, that the fostering and beneficial 
 operations of the pool have no connection whatever 
 with local traffic, and the reason is, simply, because 
 the one influence that the pool seeks to suspend is al- 
 ready absent from the local traffic. Non-competitive 
 traffic is never turned into the common fund and parti- 
 tioned among the different corporations. If there is 
 any purpose of uniform methods or mutual assistance, 
 apart from the prevention of competition, why is not 
 the local traffic of the combining roads brought under 
 remedial provisions of the pool, and its proceeds dealt
 
 The Pooling Policy. 199 
 
 out in fixed percentages? It is simply because the 
 pool is a device to avoid competition ; and ^vbel•e the 
 traiSc is not competitive that there is no demand for it. 
 Mr. Fink has, on several occasions, declared that pool- 
 ing does not prevent competition. On the face of it, 
 this assertion seems to be a confession of failure ; and 
 the natural comment is that, if pools have not prevented 
 com^Jetition, it has been from no lack of effoi't on Mr. 
 Fink's part. But what Mr. Fink really means is, doubt- 
 less, that there are certain influences of competition, 
 always indirect or partial, which, in the nature of the 
 case, pooling cannot suspend. The competition of the 
 water routes, for instance, acts directly on the grain- 
 carrying traffic from Chicago, and indirectly on the same 
 traffic carried on parallel routes farther south. The pos- 
 sibility that fresh capital may be brought in to build 
 new competing railways has also been a disturbing 
 factor in the pool. But whatever may be the influence 
 of competition in these imperfect forms, the great object 
 and aim of the pooling policy is to susjiend direct com- 
 petition between the railways. Whatever other admin- 
 istrative duties may be performed by its machinery are 
 subordinated to the grand central object of preventing 
 independent and competitive action by the railways. 
 When the pool has succeeded in abolishing direct com- 
 petition it is a success; when the natural forces of 
 trade break its artificial fetters, and the competing com- 
 panies make their rates in accordance with their own 
 facilities for transportation, the pool is a failure. Uni- 
 form and equitable tariffs and stable rates are very de- 
 sirable; but when an organization prevents uneven 
 rates only where there is danger of competition, and 
 leaves them without check everywhere else, we may be
 
 200 The Railways and the Bepuhlio. 
 
 permitted to doubt whether those praisevrorthy pur- 
 poses are its priucipal, or even among its real objects. 
 
 The fact that pooling combinations have for their 
 main and controlling object the suspension of competi- 
 tion, is apparent in their history. That history shows, 
 too, that the railway wars which furnish the excuse 
 for pooling, and mark the e2:)ochs of its development, 
 have been waged with the sole object of preventing 
 natural competition, and of forcing the competing lines 
 into combination. The bitter railway contests of 
 1874-76 were occasioned by the opening of the Bal- 
 timore and Ohio's connection with Chicago, and its 
 establishment of a differential rate to Baltimore four 
 cents lower than to New York. The other Chicago lines 
 attacked this policy, resolving to destroy the revenue of 
 the new rival, together with their own, until it should 
 be driven into an agreement in accordance with their 
 views. The effort to abolish the differential rate was 
 a fiiilure ; but the ruinous and wasteful character of the 
 wars resulted in bringing the lines together in 1877, 
 organizing the trunk-line pool. The success of that 
 organization, during the first two or three years of its 
 existence, lay in the completeness with which it abol- 
 ished competition ; and the conflicts that have broken 
 out at intervals since have displayed the evident deter- 
 mination of the combining lines to prevent natural and 
 legitimate competition, and to make all independent 
 action so ruinous that no railway could permanently 
 continue it. This has been evident in the operations, 
 not only of the trunk-line pool, but of all the other 
 pooling organizations, which have sprung up under its 
 example, from the Atlantic to the Pacific. While near- 
 ly every railway in the country has joined in the pool-
 
 The Pooling Policy. 201 
 
 ing policy, none has ever clone so until some portion of 
 its traffic was subject to competition, and then none 
 but competitive traffic has ever been made subject to 
 the authority of tlie pools. 
 
 The failure of the pools to suspend competition en- 
 tirely, and the purpose of the railways to weaken or 
 destroy its influence at all hazards, were signally shown 
 in the closing act of the great railway conflict which 
 has been raging with varying bitterness for more than 
 a year and a half. It was characterized by such extraor- 
 dinary features as the reduction of entire schedules 
 of freio-ht rates one third or one half at a sino^le blow, 
 and, when its ends were supposed to have been at- 
 tained, by an advance on rates of 50 per cent, in a day. 
 One notable step was that of the Pennsylvania Rail- 
 road, in reducing its emigrant passenger rate from the 
 Eastern cities to Chicago and St. Louis, in a single day, 
 from $13 to $1. This was for the avowed purpose, as 
 was every other salient act of this corporation during 
 the conflict, of attacking the revenues of its rivals, and 
 forcing them to restore the supremacy of the pool. 
 The true nature and purpose of all this warfare was 
 shown by the bargain which is supposed to have closed 
 it. The conflict has been frequently represented to 
 leo-islatures and Conixressional committees as an instance 
 of the ruinous effect of competition ; but the manner in 
 which the two greatest corporations proposed to estab- 
 lish peace, on the terms which suited them, shows that 
 it was waged by them with the clearly defined purpose 
 of driving out indej^endent competition. 
 
 The trouble with both the New York Central and 
 the Pennsylvania railroads, was that independent com- 
 peting lines had been built, or were in process of con-
 
 202 The Railways and the Eejyuhlic. 
 
 struction, into territory which they regarded as pecul- 
 iarly their own. The Buffalo and West Shore jiroject, 
 the possibility of which had been pointed out by the 
 late J. AV. Garrett in 1880, had paralleled the former 
 to Buffalo. The opportunities for loading down the 
 property with fictitious capitalization were too much 
 for its projectors, and, as a consequence, a few months 
 of the v/ar which followed its opening sent it into 
 bankrui^tcy. At the same time another independent 
 line, the South Pennsylvania Bailroad, was buildinc; a 
 connecting link between the competitors of the Penn- 
 sylvania Railroad, at PittsVjurgh, and the western ter- 
 minus of the Reading at Harrisburg. This was, in all 
 its bearings, a peculiarly legitimate enter2:)rise. An ex- 
 penditure of $10,000,000 would open up vast mineral 
 districts in southern Pennsylvania, give the anthracite 
 coal regions a new Western outlet, and complete a 
 shorter and more direct through route from New York 
 to Pittsburgh. The troubles of Mr. F. B. Gowen, in 
 the management of the Reading Railroad, the Eastern 
 connection of this line, brought him into relations with 
 Mr. Vanderbilt, who saw the opportunity to retaliate 
 upon the Pennsylvania Railroad for the support it was 
 believed to give to the West Shore, and to increase his 
 power in the restoration of the combination. There 
 was also a tempting occasion for the most approved 
 methods of stock inflation. This road was in process 
 of construction when, in July, it was announced that 
 a bargain had been concluded between the New York 
 Central and the Pennsylvania railroads, by which the 
 former was to gain possession of the West Shore and 
 the latter was to get control of the South Pennsylvania 
 in its unfinished state, and to use its pleasure as to
 
 The Pooling Policy. 203 
 
 completing the work or leaving it to ^o to ruin. Ru- 
 mors to this effect had been heard for some days. Mr. 
 Vanderbilt, with that striking frankness which some- 
 times throws a world of light on the railway magnates' 
 view of things, had declared that while he could not 
 say that such a bargain Avas completed, he regarded 
 the West Shore as " a common, miserable thief," which 
 "had been caught with its hand in his pocket," and 
 he declared that the war on the part of the New York 
 Central would never stop until it gained control oi 
 the West Shore. This assertion of the railway's prop- 
 erty rights in the transportation business of the cities 
 along its line, and of the determination to choke off 
 any criminal who attempts the felony of competition, 
 was not repeated in words by the less talkative mag- 
 nates of the Pennsylvania Railroad, but their acts had 
 no less plainly shown that they were determined to 
 ruin all their rivals unless the encroachments upon 
 their territory were stopped. By the latter part of 
 July, the official declaration of the bargain put it be- 
 yond doubt. The New York Central obtained, through 
 the aid of the Pennsylvania Raih-oad capitalists and a 
 syndicate of New York brokers, a lease of the West 
 Shore on a reorganized capitalization of $60,000,000. 
 The Pennsylvania Railroad is to obtain control of the 
 South Pennsylvania and the Beech Ci'eek, another 
 road in Avhich Mr. Vanderbilt was interested, by the 
 issue of securities to the amount of their supposed 
 cost, bearing interest at three per cent. Each corpora- 
 tion is thus protected in the exclusive possession of its 
 darling local traffic, and, it has since been rumored, 
 the great combination is to exercise its power to shut 
 out the Baltimore and Ohio from New York, and to
 
 204 The Railways and the BepuUic. 
 
 rule tbe transportation of the country bet\Yeen that 
 city and the Mississippi River. Apart from the be- 
 trayal by Mr. Vanderbilt of his partners in the South 
 Pennsylvania enterprise, who had undertaken in good 
 faith to build a new Ihie from Pittsburgh to the East, 
 the bar2:ain receives additional sio;nificance from the 
 fact that any acquisition by a railroad of a rival line is 
 forbidden by the constitution of Pennsylvania in the 
 most sweeping terms. The prohibition covers the pur- 
 -chase, lease, or " control in any way " of the property 
 or franchises of " any rival or competing line." This 
 provision was framed for the express purpose of pro- 
 tecting competition. It left no possible way in which 
 the Pennsylvania Raih'oad could legally gain control of 
 the South Pennsylvania. Yet it was freely announced 
 that it would take possession, and would furnish 
 the securities by which the bargain was to be consum- 
 mated. It was an open secret that the constitution 
 was to be evaded by the agency of a subordinate cor- 
 poration, a transaction which was characterized by one 
 of the highest legal authorities of the state * as " a 
 clear fraud upon the constitution." 
 
 An injunction suit, brought by the attorney-general 
 of the state to prevent the consummation of the trans- 
 action, has been met by some astonishing arguments. 
 The president of the Pennsylvania Railroad declared 
 in his testimony that he did not make the agreements 
 as president of that corporation, because it was not le- 
 gal ; but he did it as president of a minor coi'poration, 
 which was owned and controlled by the Pennsylvania 
 Railroad. Yet how clearly this v\'as a mere evasion is 
 shown by his declaration elsewhere, that he would not 
 
 "' Hon. Daniel Agnew, ex-justice of tbe Supreme Court of Pennsylvania.
 
 The Pooling Policy. 205 
 
 Lave made the purchase if left to himself, but ^Yas 
 constrained to do so by the Avishes of his associates, 
 and of the directors of the Pennsylvania Railroad, The 
 South Pennsylvania, it was argued, was not a com- 
 peting line, because it was not yet completed, and, as 
 the brilliant president of the New York Central put it, 
 was simply "a lot of holes in the ground." But the 
 investment by the Pennsylvania Railroad, through its 
 agents, of $5,500,000 in these " holes in the ground," 
 was justified and declared to be necessary, because the 
 new road, if completed, would be " a disturbing factor 
 in the trunk-line situation." Under such pleas as this 
 the Pennsylvania Railroad hoped to buy up and de- 
 stroy competition, notwithstanding the prohibition of 
 the state constitution. 
 
 But while the acquisition of the South Pennsylvania 
 and West Shore roads illusti'ates the evils of stock- 
 watering and construction-company contracts, and the 
 defiance of constitutional law by the railways, it is es- 
 pecially significant in the light which it throws upon 
 the true causes and purposes of the conflict which it 
 seems to have ended. If there were any doubt left by 
 these facts, the purpose has been clearly avowed by 
 the representatives of the trunk lines themselves. Mr. 
 Vanderbilt's declaration that his corporation would 
 never cease from war until it had obtained control of 
 the West Sliore has already been referred to. Since 
 the attorney-general of Pennsylvania has commenced 
 injunction proceedings to enforce the j^rovisions of the 
 constitution, it has been openly declared, by the organs 
 of tlie Pennsylvania Railroad, tliat the railway war was 
 prolonged by this opposition to the consolidation, and 
 that it could not be ended until the Pennsylvania road
 
 20G The Railways and the BejmlUc. 
 
 had undisputed control of the independent project. By 
 these declarations the railway authorities put the re- 
 cent Avar in its true light. When they struck at each 
 other's revenue by reducing rates one third or one half 
 at a single blow, they were not competing; they were 
 aiming at the destruction of competition. They de- 
 clared, by their acts, that they would keep up their 
 policy of mutual destruction until their rivals were 
 driven to terms ; and the real purpose of the late con- 
 test is placed beyond all doubt by the great bargain 
 in which competition was strangled. The railway 
 kings waged the late war, disturbed business by vio- 
 lent fluctuations of rates, tumbled the investment mar- 
 ket into chaos, wasted the revenues of their coi'pora- 
 tions, and finally added $74,000,000 to the totals of 
 their stock and debt, for the clear purpose of driving 
 the roads which competed for their local traflSc into 
 consolidation, and of forcing the outside corporations, 
 which they could not absorb, into combination with 
 themselves. 
 
 The success of the pooling policy in maintaining 
 rates and suspending competition has been far from 
 complete. In the first few years of its operation it 
 Avas able to advance the rate from Chicago to the East 
 to the high figure of 45 cents per hundred pounds, 
 and to keep it at 30 to 35 cents for a considerable 
 period. But the wars of 1 879, 1880, and 1881 brought 
 rates down again, and, for most of the time since, their 
 efforts to maintain them above the 25-ceut basis have 
 been futile. Within the last two years the attempt 
 to maintain rates by the power of the pools has been 
 an almost entire failure, and it is yet an open question 
 whether the effort to restore them will be successful.
 
 The Pooling Policy. 207 
 
 The degree of success or failure -vvbich has attended 
 the various pools lias depended partly upon the char- 
 acter of the devices resorted to, but still more upon 
 the external conditions surrounding the traffic pooled. 
 The mere agreements to sustain rates made by the 
 trunk-line presidents, during the years from 1875 to 
 1877, wlien there was not enough business to keep 
 all their lines employed, hardly yielded results worth 
 the trouble of making the compacts. The first institu- 
 tion of the policy of pooling and dividing the traffic, 
 under Mr. Fink, was less stringent than any subsequent 
 pool, as regards its provisions for sustaining rates and 
 its power to enforce discipline ; yet it was more suc- 
 cessful in keeping np rates for a period of years than 
 any of the improved and strengthened compacts in suc- 
 ceeding years. This can be explained on no other hy- 
 pothesis than its good-fortune in that, shortly after its 
 organization, a period followed 'when the large expor- 
 tations of agricultural products and the general revival 
 of prosperity furnished to all the trunk lines a volume 
 of business which took away the inducement for cut- 
 ting rates. The first pool bridged over the short pe- 
 riod from 1877 to the revival which began to make 
 itself apparent in 1878. In subsequent years, when 
 expansion of the breadstufts movement had ceased, 
 while, on tlie other hand, tlie factitious prosperity of 
 the trunk lines under its workino^s had broui>]it ne^v 
 competitors into the field, and compelled the further 
 division of the traffic, the j^ower of the iX)ol began to 
 wane. New devices to strengthen it were constantly 
 adopted: arbitrators were appointed to I'evise its 
 awards of percentages, advisory commissions to settle 
 its principles, power was granted to cut rates as a
 
 208 The Railways and the liejmUic. 
 
 means of punishing surreptitious reductions, and, finally, 
 the money pool was tried. When this last and most 
 stringent plan was adopted, it was heralded as a pro- 
 vision which would forever abolish the deplorable 
 vice of cutting rates. Yet its failure permanently 
 to uphold rates was made manifest in the autumn of 
 1884 and the opening of 1885, when, as was stated by 
 Mr. Fink in one of his reports, the money balances 
 ^vere regularly adjusted, but the rate-cutting went on. 
 In the absence of traffic to keep all the lines employed, 
 even this extraordinary provision for strengthening the 
 pool and mulcting offenders against it proved unsuc- 
 cessful. At the close of the period we have reviewed 
 the largest railway .owner in the country was quoted 
 as declaring that pooling, in the case of general rail- 
 way traffic, is only successful when business is good, 
 and cannot avert low rates when business is poor. 
 Mr. Fink has recognized the logic of events by declar- 
 ing that, for the full maintenance of rates, the pooling 
 combinations must have legal recognition and author- 
 ity to enforce their contracts on the roads. This is, 
 however, but one side of the picture. It must be ac- 
 knowledged that the pooling devices have succeeded 
 in bridging over sevei'al periods of threatening adver- 
 sity, and that, on the whole, they have for considerable 
 periods suspended competition and secured to the rail- 
 ways artificially high rates. This qualified success 
 has been largely dependent on the absence of the in- 
 ducements to rivalry; and when the strength of the 
 pool has been tested by a long period of light ship- 
 ments and business depression, its most stringent form 
 has proved a failure. 
 
 On the other hand, it appears that one class of com-
 
 The Pooling Policy. 209 
 
 binations lias been totally exempt from the weakness 
 of pools in general traffic. The three prominent cases 
 Lave been : the combination of the trunk lines in the 
 petroleum traffic, the anthracite-coal combination, and 
 the live-stock j^ool as it was maintained prior to 1880. 
 Each of these combinations has been remarkable alike 
 for its stability, in contrast with the pools in general 
 business, and for its disregard of public interests and 
 public rights. It will be observed that in each of 
 them the cohesive power appears to have lain in the 
 private interests which controlled the action of the of- 
 ficials of the roads. In two of these cases a shipping 
 firm, in consideration of special rates or drawbacks, un- 
 dertook to divide the traffic in fixed proportions, by 
 giving such of the roads as fell behind their share dur- 
 ing one period enough of its freight shipments dur- 
 ing the period succeeding to make up for the short- 
 age. The live-stock pool, which granted a rebate of 
 $16 per car to a prominent Chicago live-stock firm 
 for performing this service, was the shortest of these 
 combinations in duration ; but its operation for more 
 than two years was sufficient to illustrate the work- 
 ings of the method. It is to the credit of the trunk- 
 line pool that this discrimination was fiuall}' abolished, 
 on a plan presented by Mr. Fink in 1879. The rela- 
 tions of the Standard Oil Company with the trunk 
 lines have always borne the character of a combina- 
 tion. In the early days of its career it may have been 
 simply the beneficiary of an agreement between the 
 railways. It enjoyed a contract for special rates, and for 
 the division of traffic between the two New York roads, 
 from October, 1874; but its power in connection with 
 the Pennsylvania liailroad was not so fully defined un- 
 
 14
 
 210 The Railways and the Bepublic. 
 
 til 1877 or 1878. The termination of the contest be- 
 tween the Pennsylvania Raih'oacl and the Standard, in 
 1877, completed the grasp of the hitter corporation on 
 the petroleum business. At the same time the trunk- 
 line pool was formed, a fact which is suggestive as to 
 the influences that led the railway company to end its 
 conflict with the Standard. The trunk-line negotia- 
 tions were used to bring the Pennsylvania Eailroad to 
 the full support of the Standard's monopoly, and one 
 of the most important and enduring results of the 
 j^ooling agreements of 1877 was the establishment of 
 the petroleum pool, in wdiich the Standard occupied 
 the position of evener as well as beneficiary, and held 
 the j^ower to discipline any road that might break 
 away from the combination. Whatever indefiniteness 
 there may have been in the pooling arrangements pre- 
 vious to that time, there is no doubt as to the agree- 
 ments referred to in the account of that organization, 
 by w^hich the Standard agreed to maintain the percen- 
 tages assigned to each railroad, and the railroads agreed 
 to protect the Standard against competition. This cli- 
 max and triumph of the pooling policy beggars criti- 
 cism. The combination which sustains rates by ren- 
 dering it impossible for any shipper to exist, save the 
 power which makes the division among the various 
 roads, may well be regarded as "a successful plan for pre- 
 venting railway wars and securing uniformity of rates." 
 However its success may be questioned in other ar- 
 rangements, there is no doubt that tlie pooling plan, 
 of wdiich the Standard is the cohesive power, has, since 
 its final triumph, been wholly successful in abolishing 
 railway wars between the lines which made themselves 
 its servants, and securing such "a uniformity of rates" 
 as shuts out all other shippers of petroleum.
 
 The Pooling Policy. 211 
 
 The anthracite -coal combination exhibits the suc- 
 cessful working of the pooling policy under somewhat 
 different circumstances ; but it is a no less significant 
 instance of the suspension of competition. The appli- 
 cation of that policy to the anthracite coal traffic was 
 probably the first form of pooling practised. The ex- 
 act character of the early anthracite pools is not pub- 
 licly known ; but as early as 1871, an investigation- was 
 ordered by the Legislature of Pennsylvania into the 
 character and effect of an alle2;ed combination between 
 the anthracite roads. During this investigation repre- 
 sentatives of the railways testified that there was 
 no compact or agreement between the roads for limit- 
 ing production or enhancing the price of coal. It was 
 afterwards asserted that this testimony had been made 
 possible by abrogating the agreement before the inves- 
 tigation, but that,Avhile the written compact had been de- 
 stro3^ed, the understanding continued in force as before. 
 Whatever may have been the case before 1871, it is cer- 
 tain that, ever since that time, the anthracite-coal traffic 
 has been controlled by a combination of railways, as open 
 and undisguised as the trunk-line pool, but fiir surpass- 
 ing the wildest ambition of that organization in its 
 control of private business, its restriction of production, 
 and its successful measures for increasing prices to 
 consumers. In this case the evils of combination 
 have been increased by the direct interest of the com- 
 panies in the business which furnishes their chief traf- 
 fic. The legislative investigation referred to showed 
 that excessive and outraojeous discriminations a^rainst 
 shippers had been made by tlie coal roads. After 
 a thirty days' strike the private mine -owners had 
 consented to the wages demanded by the miners,
 
 212 The Bailways and the Republic. 
 
 and would Lave supplied a large trade; but the rail- 
 ways, which were also miners as well as carriers, and 
 were determined not to yield to their men, raised the 
 freight rates of the private firms to three times 
 their former standard. By this means the price of 
 coal was brought up to $12 a ton, and the private 
 operators, their workmen, and the consumers of coal 
 were made to feel the power of the great railway 
 and mining companies. It is not necessary to fol- 
 low out in detail the steps by which the railways 
 established their absolute power in all branches of 
 the coal trade. Enough that the result is that of 
 270,000 acres of anthracite coal lands in Pennsylva- 
 nia 195,000 are now owned by six railways. One ef- 
 fect of uniting, in the same corporations, the business 
 of shippers and that of carriers is the enormous in- 
 flation of their capital. Their aggregate capitaliza- 
 tion amounts to $500,000,000, while the actual cost 
 of the roads and equipment for transportation is 
 $114,000,000. 
 
 For the purpose of securing a profit on this stupen- 
 dous amount of inflated capital, the policy of combina- 
 tion has been carried to an unequalled extent. Not 
 only was competition in transportation suspended, by 
 a division of traflic between the railways, but the com- 
 petition of the mines was stopped, as far as possible, by 
 agreements which limited the output of anthracite coal 
 to an arbitrary total fixed by the combination.''' These 
 agreements are enforced by ordering the suspension of 
 mining at such time as the railway combination deter- 
 mines; sometimes for one quarter of the working time 
 in a year. We have seen that the combination con- 
 * 30,000,000 tons annually during the past two years.
 
 The Pooling Policy. 213 
 
 teDcls as vigorously to prevent an advance of miners' 
 wages as to maintain tbe price of coal; and hence the 
 artificial advance of price brings no corresponding in- 
 crease of pay to the labor employed. In fact, statistics 
 show that the average wages paid to the men engaged 
 in this severe and arduous work ranges from $350 to 
 $400 per year. The restrictive powers of the combina- 
 tion are extended over the distribution of the product. 
 No wholesale dealer can engage in the anthracite coal 
 business without the consent of one or the other of the 
 lines forming the combination, or without conforming 
 to the fixed and arbitrary wholesale prices prescribed 
 by the companies. Some of the eccentricities of the ar- 
 tificial means used to sustain prices have been exposed 
 in a previous chapter. The burden of the control, es- 
 tablished over both producers and consumers, by the 
 anthracite and bituminous coal combinations, has been 
 estimated at 8-^1,000,000 annually. AVhatever may be 
 thought of the accuracy of this calculation, there is no 
 doubt that the combination controlling the coal trade 
 of Pennsylvania has, by restrictions upon that industry 
 and artificial prices for its products, inflicted a vast and 
 wholly unjustifiable bui'den upon the producers and 
 the public. 
 
 These three most successful examples of the combi- 
 nation policy show that the most powerful and perma- 
 nent pools in railway traffic are those which are asso- 
 ciated with vital discriminations. It may be ques- 
 tioned whether the discriminations give strength and 
 permanence to the pool, or whether they can be main- 
 tained only l)y a pool wliich is strong in itself. The 
 anthracite pool is solid and enduring, as much because 
 the companies are miners and shippers of coal, and wish
 
 214 The Railways and the Repuhlic. 
 
 to obtain artificially higli prices for their product, as 
 because they are carriers and wisli to obtain Ligli rates 
 of freight. But, in the other pools involving a favored 
 interest, it is an interesting question whether the cohe- 
 sion is furnished by the presence of a large shipper, 
 able, by controlling the traflSc, to maintain a division 
 of the business between the roads, and to punish re- 
 bellion by diverting shipments, or by the superior zeal 
 of the railway managers, who care more to benefit a 
 business in which they are individually interested, 
 than one in which only the profits of the railways are 
 involved. The latter theory receives some corrobora- 
 tion from the fact that it does not seem to make much 
 difference, in cases of this sort, what the devices of the 
 pool may be for its preservation. It may be a simple 
 and perhaps tacit compact, as in the early stages of the 
 combination wdiich fostered the Standard Oil monop- 
 oly ; or a division of the traffic, as in the later stages of 
 the same pool, and in the case of the " eveners' pool" 
 in the live-stock trade ; or a division of territory, as in 
 the case of the bituminous-coal companies; or a com- 
 bination of all these features, with restriction of pro- 
 duction and arbitrary prices for the product, as in the 
 case of the anthracite - coal pool. The presence of a 
 shipping interest, with special favors or exclusive 
 control, has always produced the greatest degree of co- 
 hesion and success in the pooling combination. The 
 fact is significant that the most successful pools have 
 been those which have built up monopolies. 
 
 Another point of weight in estimating the ability of 
 pools to suspend competition is that these devices have 
 proved successful in inverse ratio to the number of dif- 
 ferent lines combined. Where there have been but
 
 The Pooling Policy. 215 
 
 two roads engaged in the traffic, as in the bituminous- 
 coal agreements, or three, as in the Connellsville-coke 
 pool, and in the first stage of the petroleum combination, 
 the primitive form of a simple agreement to sustain 
 rates has frequently proved successful. When, in the 
 last-named case, the number of roads concerned in- 
 creased to four, a more stringent combination was re- 
 quired, and was made. When there were but four lines 
 engaged in the trunk-line traffic, Mr. Fink's first pooling 
 arrangements proved sufficient to maintain rates for a 
 term of years ; but, during the last twenty months, with 
 seven separate corporations to share the trafiic, all 
 the additional safeguards and precautions which seven 
 years of experience have suggested to his inventive 
 mind have proved inadequate to hold them together. 
 The same is true of all pooling combinations. If a 
 hundred diS'erent railways were competing for the same 
 traffic, it would evidently be impossible to obtain unani- 
 mous consent to the establishment of a pooling combina- 
 tion. Perhaps a dozen or a score of competing compa- 
 nies might be brought to form such a compact ; but to 
 make them all adhere to it would be utterly impossi- 
 ble. In short, it is a general principle, which limits all at- 
 tempts at pooling traffic, that competition can be suspend- 
 ed only where the number of competitors is limited. 
 
 The leading claim in support of the pooling policy 
 is that it aims at uniformity of rates. Such uni- 
 formity is, no doubt, highly desirable for the public as 
 well as the corporations. Railway reformers demand 
 uniform rates upon an equitable standard. But, to 
 judge whether this end can be attained by the rail- 
 way combinations, it is necessary to considei*, first, what 
 the result will be if the objects of the pools can be per-
 
 216 The Railways and the Rejpvhlic. 
 
 fectly attained ; and, second, what result is actually at- 
 tained by pooling as practised. If the pooling man- 
 agers should perfect their ideal, it may be doubted 
 whether a uniform and permanent tariff, such as W'Ould 
 be established by men wdiose sole purpose is to get 
 the utmost possible revenue out of the traffic, would 
 be a public benefit. However favorable to commerce 
 the uniform adherence to fair and moderately profita- 
 ble freight rates may be, there vrould be no public ben- 
 efit in the permanence of rates at twice that standard. 
 For instance, the permanence of the grain rate from 
 Chicago to the seaboard at 45 cents, after the com- 
 petition of the railways had reduced the rate below 
 20 cents, the lower rate at least yielding some profit, 
 has little to recommend it in the intei'ests of gen- 
 eral commerce. If the pool would maintain equita- 
 ble rates its success might be desired ; but what guar- 
 antee is there that the complete establishment of its 
 power would make such rates? Its very character, the 
 functions of the men who control its policy, and its 
 avowed object of swelling the earnings of railways by 
 artificial methods, forbid such an expectation. Make 
 the success of the pool absolute, so that it can work 
 w^ithout fear of competition, and its rates will be uui- 
 form; but of such a character that their uniformity w^ill 
 be a public grievance and burden. 
 
 The apostles of the pooling theory have earnestly in- 
 sisted, of late, that the object of pooling is not to ad- 
 vance rates. Thus, a pamphlet by Mr. G. A. Blanchard 
 alleges that "traffic unity has reduced rates and in- 
 creased tonnage;" adding rather disingenuous tables of 
 the rates in force at the establishment of the pool in 
 1877, and at the date of the pamphlet. The same
 
 The Pooling Policy. 217 
 
 claim was made in general terms by the United States 
 Bureau of Statistics, in a report which advocates the 
 pooling doctrines. It says : " The volume of traffic has 
 also enormously increased and rates have constantly 
 fallen." These statements are only partly true, and 
 suggest an inference which is wholly incorrect. Rates 
 have not constantly fallen during the existence of the 
 pools. For the first few years of these combinations 
 rates were advanced and kept up. The original trunk- 
 line pool, whose success led to the adoption of the same 
 policy by all the railways of the country, advanced rates 
 as fast as its ability to do so was demonstrated, from 
 the 15-cent basis at Chicao-o — which had ruled durino; 
 the preceding period of severe competition — to a basis 
 of 30 and 35 cents, and finally of 40 and 45 cents. It 
 is certain that further advances were only prevented 
 by the knowledge that the traffic would wait for the 
 opening of the water-routes, and thus avoid the imposi- 
 tion of double rates by the railways. Since the estab- 
 lishment of these high rates in 1877 and 1878, rates 
 have taken a downward course; but this was in spite 
 of the pools, and not as a consequence of their opera- 
 tions. Every reduction in rates has been in conse- 
 quence of a revolt of one railway or another from the 
 rule of the combination ; every restoration of the pools 
 has been accompanied by an advance of rates. A re- 
 sult which it is the main pui-pose of these combina- 
 tions to prevent cannot be made an argument in their 
 favor. Ilailroad federation may not yet have l)een able 
 wholly to suspend the operation of competition ; Ijut 
 its failure is due ratlier to its lack of power than to 
 its lack of desire. A thief may be cauglit and lodged 
 in the penitentiary; but this demonstration of the
 
 218 ' The Railways and the Eejpublic. 
 
 power of either statute or economic law is no argument 
 in favor of the practice which called it forth. 
 
 In contrast with the ideal of the railway managers 
 stand the actual effects of the pool upon uniformity of 
 rates. It is natural that reactions from attempts to 
 sustain rates by arbitrary means should produce great 
 variations and sudden changes. Every year of the pe- 
 riod since pooling became general, and almost every 
 month in the last two years, furnish illustrations of 
 this fact. Thus, in 1879, the East-bound rates from 
 Chicago were reduced, in a few months, from 45 to 15 
 cents, and then raised again to 40. Thus, in nearly 
 every month of the last fifteen, there have been one or 
 more chano;es in the rates on leadinoj classes of trunk- 
 line freights, varying from the usual change of 20 
 per cent, at a time, on grain freights, to the unprece- 
 dented reduction of 92 per cent, on emigrant rates 
 made by the Pennsylvania Railroad in January, 1885. 
 All these variations of rates were the result of efforts ei- 
 ther on the part of some road to obtain better conditions 
 for itself in the combination, or, on the part of the com- 
 bination, to drive refractory roads to submission, by de- 
 stroying their revenue. The more extreme and vio- 
 lent the changes, the more clearly were they the result 
 of the pool influences. When ^ve remember that be- 
 fore the combinations beG:an these violent and unex- 
 pected changes in rates were almost unknown, it will 
 be seen that the actual operation of the pooling pol- 
 icy has been, not to establish uniform and equitable 
 rates, but to produce irregular periods of high rates va- 
 ried by seasons of extreme changes, ^vhich have wrought 
 great injury to commerce. 
 
 Another claim of no less importance, though per-
 
 The Pooling Policy. 219 
 
 haps less prominent, is that pools prevent discrimina- 
 tions. This is what neither law nor public opin- 
 ion has yet been able to do, and it would be a great 
 achievement for the combinations. Perhaps a sufficient 
 answer would be simply that they have not done so. 
 If seven or eight years of pooling have effected no ap- 
 preciable improvement, how long are we to wait before 
 the reformatory influences begin to work ? But the 
 failure may be due to human imperfections, which 
 would be abolished if the pooling combinations are 
 perfected. Let us then consider what tendency to pre- 
 vent discriminations there is in devices to suspend 
 competition. The claim, as hinted by Mr. Fink, and 
 stated more directly by other advocates of the policy, 
 is that it prevents discriminations, (1) by removing the 
 fluctuations of rates under competition, which will give 
 one man a cheaper rate in the morning than another 
 will get in the evening ; and (2) by taking away the 
 forces which give a competitive point cheaper rates 
 than a non-competitive one. It is true, as shown in 
 preceding chapters, that many discriminations arise 
 from the inequalities of competition ; but the remedy 
 of entirely destrojdng competition is too much in the 
 style of that mediaeval school of treatment, which cured 
 a severe cold by throwing the patient into a much 
 more dangerous fever. At any single point of ship- 
 ment, the inequalities of rates under general competi- 
 tion are never very serious. There is more truth in 
 the claim, that the success of the pool in sustaining 
 rates, at competitive points, would diminish the ten- 
 dency to discriminate against freight from other points. 
 But the actual workings of the pools reduce the value 
 of this result nearly to zero. The different lines are
 
 220 The Railways and the Bejpublic. 
 
 left entirely to tbeir own will as regards tlie local 
 rates. No matter how well through rates may be sus- 
 tained, any line may impose ten times the proportion- 
 ate rate on its local traffic, so far as pool regulations 
 are concerned. Any railway can indulge in as wild 
 vagaries of discriminations and inequitable tariffs as it 
 pleases on its local traffic, and the pooling authorities 
 Avill never offer a protest. All the numberless forms 
 of discrimination between places, persons, and classes 
 of freight, which grow out of the absolute control by 
 a railway of its local traffic, are left unchecked by the 
 pool ; and the value of this alleged preventive of dis- 
 crimination is shown by the fact that, after seven years 
 of pooling, not a single case is on record in which the 
 pool has checked any display of partiality, however 
 flagrant, by one of its members in its own local traffic. 
 If a number of competing raihvays should combine, 
 with the sincere intention of abolishing all favoritism 
 in rates, they might be aljle to accomplish much good. 
 But if they combine for the purpose of upholding such 
 favoritism, the evil is doubly intrenched behind the 
 authority of the pool. The fact is that no pool ever 
 was organized for the purpose of abolishing discrimina- 
 tions, while some of the most prominent and success- 
 ful pools have existed apparently for the purpose of 
 upholding such discriminations. It is possible to im- 
 agine a combination, under the control of a man like 
 Mr. Fink, who uses all his power to establish practical 
 equality in rates on the majority of the traffic which he 
 controls. It is no less possible to imagine that even 
 such a pooling authority may be forced by the interests 
 of the railways, in a particular branch of traffic, into an 
 unreasonable discrimination ; as when the economy
 
 The Pooling Policy. 221 
 
 made by doing away with the transportation of use- 
 less weight, by shipping dressed meat instead of live- 
 stock, is annulled by putting the freight rates 70 per 
 cent, higher than on the old method of transportation, 
 which some of the railways are interested in preserv- 
 ing.* Further, the facts force us to take into considera- 
 tion combinations which no imagination could easily 
 originate, in which the influence of the railways upon 
 each other aud the commercial public is consolidated, 
 for the express purpose of maintaining and perpetuat- 
 ing most unjust discriminations. When Mr. Fink is 
 able to erase from commercial history such gigantic 
 facts as the Standard Oil Company, the anthracite pool, 
 and the live-stock discriminations, his claim that pool- 
 ing prevents discrimination may have some Aveight, 
 but not until then. 
 
 In practice the pool simply strengthens the arbitrary 
 and unrestrained power of railway officials over part 
 of their traffic, and thus facilitates all vital and injuri- 
 ous forms of discrimination. While the imeven action 
 of competition may produce inequalities of rates, the 
 cause of discriminations between localities is that the 
 railways are free from competition at local points. It 
 is their exemption from competition, too, which enables 
 them to establish arbitrary and unjust differences be- 
 
 * Before the Hepburn Committee Mr. Fink correctly said, " The proper 
 basis of railroad tariffs is the cost of transportation." Witli regard to 
 the live-stock and drcsscd-beof rates, he stated tlie principle on which 
 the matter was settled to be tliat of putting "the dressed-beef and live- 
 stock shippers on the same footing, as regards the cost of transportation 
 (which in this instance means freight charges) of the product of the 
 animal to Eastern markets." In other words, the economy of the dressed- 
 beef shipments was to be destroyed, for the l^encfitof the live-stock inter- 
 ests of the New York Central and Pennsylvania Kailroad managers.
 
 222 The Railways and the Hejpuhlic. 
 
 tween shippers in tlie traffic over whicli they Lave 
 absolute coDtrol. This absolutism is extended and 
 strengthened by the pool. Evils which were uj)held 
 by a single corporation are supported by the united 
 force of half a dozen, and the favoritism that was be- 
 fore confined to the local traffic of the lines may be 
 extended and enforced at competing points. Even 
 admitting that the pool will abolish the discriminations 
 complained of, it wdll also abolish the freedom of trade 
 movements and the oj)eration of natural laws of com- 
 merce, in whose defence alone the practice of discrimina- 
 tion is resisted. The railway pool, as a remedy for dis- 
 crimination, is a leap, from the frying-pan of inequitable 
 and partial exactions by the railway powei", to the triple- 
 heated furnace of absolute and arbitrary rule, imposed 
 by the combination of all roads and the more or less 
 complete abolition of competition. 
 
 It is not meant that pools do nothing but work for 
 the suspension of direct competition ; but it is clear 
 that the suggestion of anything else as their principal 
 purpose is misleading and uncandid. A passage of 
 Mr. Fink's testimony before the Senate Committee, in 
 1883, is a striking instance of this.* The Commissioner 
 
 * In Mr. Fink's testimony before the Senate Committee on Education 
 and Labor, after stating that the principal object of his organization was 
 " the establishment and maintenance of uniform tariffs," he said : " It 
 would not do for many companies to operate each road separately from 
 the others. They have to arrange with each other to form connections, 
 to establish through lines of transportation, and tariffs for such through 
 lines. It is a very complicated question to make tlicse tariii's uniform on 
 many competing lines, and to arrange them so that they bear equally 
 upon different localities, and to avoid unjust discrimination, and it is still 
 more difficult to see that the tariffs properly established over so many 
 roads are maintained alike to all shippers receiving a like service. To 
 accomplish this is tlie object of the bureau, v,-hicU is established
 
 The Pooling Policij. 223 
 
 of the trunk-line pool lias at other times alleged the 
 facilitation of tbroiigli shipments, forming connections, 
 establishing through lines of shipment, and tariffs for 
 such lines, to be an important work performed by the 
 pool.'"* It is not to be denied that the establishment 
 of facilities by which goods can be shipped, on a single 
 bill of lading, from New York to Omaha, is highly im- 
 portant ; and it is also true that in some measure this 
 work is perfoi'med by the pooling arrangements. But 
 it is only incidental to the main object of those arrange- 
 ments, and is by no means their principal function. 
 How essential this distinction is, may be seen from the 
 character of the pools. If the improvement of facilities 
 for through shipments were the object, the pools would 
 be made up of connecting and not competing lines. 
 The fact that such combinations are always made by 
 the competing lines, already established between lead- 
 ing points, and that the lines connecting with them 
 beyond those points are left to the care of other pools, 
 shows that the facilitation of through shipments does 
 not weigh a scruple in the scale against the main ob- 
 ject of suspending competition. Again, through bills 
 of ladincr. and connections from the East to the West, 
 
 ill the interest of the public as well as in the interest of the rail- 
 ways." 
 
 * "These associated companies assume the responsibility of delivering 
 the freight to points of destination beyond the terminus of the road whicli 
 originally receives the freight. They issue through bills of lading, and 
 make all proper arrangements for the transfer of the freight from one 
 road to another, for settling the freight charges of each road, and adjust- 
 ing all legitimate claims for loss or damages accruing on any part of the 
 route, thus relieving the shipper from the great trouble, annoyance, and 
 expense dependent upon making separate arrangements witli each road 
 over -which the freight passes." — J//'. Fink's letter to New York Commis- 
 sion, January 29th, 1835.
 
 224 The Railways and the Bepublic. 
 
 were established before the pooling associations ever 
 took charge of the work, and the improvement under 
 that method is of slight if not doubtful value ; while as 
 to the establishment of through routes of transporta- 
 tion, so far from that work being done by the pools, it 
 has always been done outside of the pools, and when 
 accomplished has, by its competition, always produced 
 a new disturbing element in the working of those com- 
 binations/^ 
 
 The examination of these pleas for the pools having 
 shown mainly what they do not do, the next step is to 
 examine what they really do effect. In the first place, 
 they create an enormous and unrestrained power over 
 commerce, which is not provided for in legislation. A 
 journalist, writing of the trunk-line pool in no unfriend- 
 ly spirit, represents it as V)earing the same relation to the 
 railways that the federal government does to the states; 
 and asserts the commissioner's duties, in their scope and 
 influence on the business interests of the uation, " to be 
 only second to those of the President of the United 
 States." Such a view of the combination has been dep- 
 recated by Mr. Blanchard ; but if this account of the 
 power of the trunk-line pool over the material interests 
 of the nation is defective in anything, it is in making 
 the pool second to the United States government. The 
 sole advantage possessed by the United States govern- 
 ment-is in the power directly to enfoi'ce allegiance to 
 the compact of union ; while any disaffected member 
 of the pool may secede. This right of secession is a 
 
 * " Through bills of lading were issued long before the organization of 
 the trunk-line pool, and the service then rendered was quite as satisfac- 
 tory as under the present system." — Letter of Trackrs and Travelers Union 
 to New Torlc Commission, Fehniary, 1885.
 
 The Pooling Policy. 225 
 
 thorn in the sides of the adv^ocates of pooling; and the 
 latest development of their theory is a demand that 
 pooling compacts be made enforceable by law, so that 
 no one shall be able to withdraw from the combination 
 when once it is formed. If this were done, the anoma- 
 lous combination of corporations would clearly hold a 
 power over business vaster than either the United 
 States government or any other, under a representative 
 system, ever possessed. Neither Congress nor a state 
 legislature would dare to pass an act affecting values 
 throughout the country, or making an important change 
 in taxation, without thorough discussion before the 
 public. If it is proposed in the national legislature to 
 make a change of 10 or 20 per cent, in the tariff, the 
 subject occupies the attention of Congress or its com- 
 mittees for an entire session, or sometimes for two, and 
 a notice of several months is given before it goes into 
 effect. But the executive board of a railway pool, 
 meeting in a private office, will in a day's session make 
 changes in rates which affect commerce more than any 
 single tariff bill, and enact edicts which may suspend 
 the movements of great staples over half the country. 
 The eidogist of the pooling system who placed the 
 pool commissioner second in power to the President of 
 the United States and made the executive committee 
 less mighty than Congress was too modest in his claims 
 for the combination. No such consolidation of railway 
 power was contemplated in the legislation establishing 
 the railways. The spirit of American institutions is 
 inconsistent with such vast and arbitrary powers over 
 public interests. The agencies of the government are 
 carefully restricted and guarded against possible excess 
 in their employment. Every power that can affect the 
 
 15
 
 226 The Railways and the BepuUic. 
 
 actions or welfare of a large number of peoj^le is hedged 
 around by the most careful safeguards, and jealously 
 watched by public opinion, save one. That one is this 
 anomalous combination of the corporate creatures of 
 legislation ; a combination for which no warrant can be 
 discovered in their charters; but which has risen to a 
 control over commerce that was never conceived until 
 the pool showed it to be possible. If, as has been 
 shown, the separate and individual power of the rail- 
 way corporations, each over its own business, is of 
 dangerous extent and requires constant watching and 
 most careful restrictions, how much more alarming is 
 the combination which consolidates that power, and 
 seeks to establish a centralized control over all the 
 avenues of trade? When we find the orders of the 
 pool issued in New York and repeated in San Fran- 
 cisco;"^ when we see it maintaining a monopoly of one 
 great iudustr}^, and dictating the number of days in 
 which a great industry shall stand idle, fixing a limit 
 on the aggregate production, and prescribing the prices 
 at which the staple shall be sold, we ought to be able 
 to recognize that such combinations are not only un- 
 authorized in law, but wholly at variance Avith the 
 principles on which representative government and 
 popular independence are founded. 
 
 From this unrestrained control of business interests, 
 
 * Circular of George W. Ristine, commissioner of the Transcontinental 
 Association, repeating Mr. Fink's order tliat local rates shall be charged 
 on freight which was shipped from New York by the Delaware, Lacka- 
 wanna, and Western Railroad. This is a striking illustration of the 
 unity with which widely separated organizations act in concert, as it 
 notifies the merchants of San Francisco that the rates given them by the 
 contracts of Pacific coast railroading would not be maintained, and tliat 
 the contracts are abrogated on that class of freiglit, because the railroads 
 on the other side of the continent are in a quarrel.
 
 The Pooling Policy. 227 
 
 the most flagrant and dangerous abuses can spring. 
 The connection of the pool with some notorious dis- 
 criminations, and with the growth of at least two great 
 monopolies, has already been described. But fully to 
 appreciate its effects we must note the fact that, with- 
 out this very policy of combination, which is alleged 
 to cure discriminations, these abuses could never have 
 been accomplished. No single railway could ever have 
 perpetrated the Standard Oil infamy. Without the 
 combination of all the anthracifce-coal roads, the domi- 
 nation of that industry would be impossible. While 
 one of the trunk lines refused to support the discrimi- 
 nation against dressed beef, the rates on that class of 
 shipments were brought down to less than half of those 
 established by the pool. A single railway can main- 
 tain a marked and inequitable favoritism between in- 
 dividual shippers on its line. But to establish a dis- 
 crimination against an entire interest, or to maintain 
 domination over an important industry, the union of 
 all the railways engaged in the traffic is necessary. 
 When that union is accomplished by the pool, what is 
 to prevent it from extending and increasing just such 
 abuses as those already mentioned ? If the pooling 
 combinations are made permanent, why may they not 
 apply to the iron industry the same policy that has 
 conquered the petroleum refining industry? The main 
 difficulty is to devise a pool which will hold together 
 firmly enough, and in such cases the profit to be 
 gained by a monopoly of any great industry has al- 
 ways furnished the most effective cohesive force. Why 
 might not t\vo or three more roads be added to the 
 present trunk-line pool, prohibitory rates be placed on 
 imported iron, and the business of the iron trade given
 
 228 The Railways and the Bepublic. 
 
 to half the mills and furnaces by discriminating rates, 
 as was done by these same trunk lines in the case of 
 the Standard Oil Company, while the other half of the 
 Avorks are forced to suspension and decay ? All this 
 might be done on the plea of preventing undue com- 
 petition, sustaining uniform rates, and making an equi- 
 table distribution of business, with as much plausibility 
 as some other things have been done in recent years. 
 Or if the railway combination prefers, what will pre- 
 vent it from taking possession of such portions of the 
 iron industry as it may select, and then dictating the 
 wages of the workmen, ordering the suspension of pro- 
 duction, and fixing arbitrary prices to every private 
 buyer of nails or finished iron ? What has been done 
 in one industry can be done in others; provided only 
 that a combination can be formed binding the railways 
 to such a policy. Let the principle of pooling be com- 
 pletely carried out, and the country may be made de- 
 pendent upon one monopoly for its su2:)ply of iron, upon 
 another for its bituminous coal, and upon others for its 
 meat, its cotton and woollen goods, and its glass-ware, 
 just as it now is for its petroleum and its anthracite 
 coal. The one barrier which stands between the people 
 and such a state of aftairs is the failure of the railways 
 to make their pools sufficiently compact and permanent. 
 It should not escape public attention, as it cannot es- 
 cape the attention of the railway managers, that the 
 greatest pecuniary rewards to themselves, if not to their 
 shareholders, and the most powerful aid in solidifying 
 their combinations, will be obtained by establishing 
 such monopolies as have been created by the railway 
 power in petroleum and anthracite coal.* 
 * Another less prominent example might be added to these in the gas-
 
 The Pooling Policy. 229 
 
 It is one bad feature of pooling combinations that 
 they tend to deprive the public of the benefits of im- 
 provement in the railway service. They destroy the 
 motive to attract patronage by improved service or by 
 cheaper I'ates. It is true that this policy leaves the 
 railways free to secure for themselves all economies 
 that can be made by lessening the cost or increasing 
 the safety of their work. But they no longer have 
 any inducement to extend the benefit to the shipping 
 public. It is folly for a pooling railway to offer in- 
 creased accommodations to the public, in hope of se- 
 curing increased patronage ; for the road will get from 
 the pool exactly its allotted share of patronage, w^heth- 
 er it affords the best or the poorest service to the public. 
 If it gives the best accommodation, and thereby secures 
 more than its share of patronage, it must hand over its 
 excess or an equivalent in money to the other mem- 
 bers of the pool ; if it gives the w^orst accommodation, 
 and thereby loses business, the loss is made up by the 
 pool from the more enterprising and j^rosperous roads. 
 The effect of the whole system is to allow economies 
 for the benefit of the railways, whether by improve- 
 ments or merely through niggardliness ; but to destroy 
 all motive for striving to render special service to tlie 
 public. The discovery of devices for cheapening the 
 services of the railways to shippers or travellers is not 
 a benefit to the pool. Tiie fundamental idea of these 
 combinations is to divide the trafhc among the rail- 
 ways by an arbitrary rule, destroying the inducement 
 to attract business by giving the public the benefit of 
 
 coal industry, wliicli is operated solely by the favoritism of the Pennsyl- 
 vania Railroad and tlie Baltimore and Obio Railroad. The coke trade is 
 also undergoing the same process.
 
 230 The Railways and the BepuUic. 
 
 improvements and economies. When the pool pro- 
 tects its members against loss by the reduction of traf- 
 fic that naturally follows mean accommodations, the 
 public interest is greatly prejudiced. The result of 
 such protection must inevitably be, as declared by the 
 New York Court of Appeals of a similar pool, " that 
 the freighters and passengers would be ill-served, just 
 in proportion that carriers would be well-paid." ''^ 
 
 The artificial maintenance of rates by pooling com- 
 binations has several positive drawbacks, considered 
 solely in the interests of the corporations which form 
 the pools. Most prominent among these is the fact al- 
 ready mentioned, that its success directly and power- 
 fully stimulates the construction of competing and par- 
 allel lines. The trunk-line pool demonstrates this fact. 
 While there were but four lines performing the great 
 services of transportation from East to West, the idea 
 of constructing parallel lines to divide the business 
 seemed wild and impracticable. But the pool created 
 an artificial profit on their business for some years from 
 1877, and three new competing lines were constructed 
 under independent management ; while two more were 
 established under the control of the already existing 
 
 * The New York Court of Appeals, iu declaring the pooling combi- 
 nation of canal-boat owners to be illegal, pointed out this inevitable 
 tendency as follows : " The association being thus secure against intei'- 
 nal defections and external encroachments, and the members having thus 
 thrown their concerns into stock to derive an income in proportion to 
 the number of shares they hold and not according to their merit and ac- 
 tivity in business, and safe against the reduction that would otherwise 
 follow mean accommodations and want of skill and attention, the public 
 interests must necessarily suffer grievous loss. Indeed, the consequence 
 of such a state of things would be that freighters and passengers would 
 be ill-served just in proportion that carriers would be well-paid."' — Stan- 
 ton vs. Allen, 5 Dcnio, 434..
 
 The Pooling Policy. 231 
 
 lines which desired a larger share of the traffic. The 
 addition of new trunk lines has thus been largely in 
 excess of the growth in the volume of through freight. 
 Perhaps new trunk lines would have been built if 
 there had been no pool, and there might have been 
 some inflation in their stocks and bonds ; but the prof- 
 its made by the artificial rates of the pool stimulated 
 such operations, and led to the extravagance with 
 which they were carried out. It has been recognized 
 by leading railway men, in the language recently at- 
 tributed to one of them, that "pooling increases the 
 temptation to build unnecessary roads." It must also 
 be acknowledged that pooling places circuitous and 
 disadvantageous routes on an equality with those which 
 are direct and best prepared to perform the work of 
 transportation. The theory of the pool is that the 
 strong and direct lines must divide their business with 
 the weak and roundabout ones, not out of generosit}', 
 but lest the latter should cut rates and cause the former 
 loss. This has been carried to the remarkable result, 
 in the passenger pools, of declaring that roundabout 
 lines shall have the privilege of carrying through pas- 
 sen2;ers at less than the res-ular rates, in order to o-ain 
 business by compensating for the loss of time. In oth- 
 er words, the principle of " differentials," in passenger 
 traffic, means that the roads shall be put on an equal- 
 ity, by letting some of them perform more work for a 
 less charge. This may be correct if the maintenance 
 of artificial rates is an absolute necessity; but if it is 
 not, the roads which are able to do the largest busi- 
 ness most directly and expeditiously can, it is evident, 
 make a profit at rates which will bring only loss to 
 those which are stru2:i?linn: under a load of debt, or
 
 232 The Railways and the BejyvMic. 
 
 must haul tbeir freisrbt over a lomz: and indirect route. 
 In this resj^ect the pool exhibits the weakness of all 
 combinations, wbetber trade unions or pools of capital ; 
 it throws the burdens on its energetic, solvent, and ca- 
 pable members, and diminishes the penalties for ineffi- 
 ciency and insolvenc}'. 
 
 Another unfovorable influence of pools upon the 
 railways is their tendency to increase the frequency and 
 violence of railway wars, to which the companies resort 
 in order to secure advantages in the combination. 
 These contests are appealed to as justifying pools, but, 
 in fact, their extreme character is simply a result of the 
 pooling policy. The notion that the pool is essential 
 to the prosj^erity of the railways, being generally ac- 
 cepted as railway gos2:)el, the universal effort in case of 
 disagreement or rebellion is to inflict such loss and dam- 
 acre as will drive the offending: members back into the 
 pool. If a railway can vitally damage the business of its 
 rivals, it is reckless of the loss to itself, hoping for com- 
 pensation when the pool rates are restored. Thus the 
 rivalry goes on fi'om bad to worse, each contestant 
 hoping to drive its opponents back into the pool on 
 terms to be dictated by itself But it is essential to 
 observe that the bitterness of these contests is not the 
 result of legitimate competition, but is caused by the 
 control of the pools. The pool abolishes the natural 
 competition, w^hich brings rates into just relations to the 
 cost of service, as completely during its periods of rupture 
 as during its periods of success. The fierce and ruinous 
 rivalry which springs up whenever the members of the 
 pool fttll to quarrelling is simply the effort to re-estab- 
 lish the combination. The violence of such contests is 
 the reaction from the arbitrary character of the com-
 
 The Pooling Policy, 233 
 
 pacts, and has no more actual kindred with legitimate 
 competition than the compacts themselves have. 
 
 A grave eftect of this policy, though not easily cal- 
 culable, is the ability it gives to railway officials to 
 control the prices of stocks, and the temptation to 
 enhance their fortunes by doing so. The unprece- 
 dented speculation which followed the inception of the 
 pooling policy caused an advance in the value of 
 railway securities to the amount of hundreds of millions 
 of dollars ; and it is an open secret that great fortunes 
 were built up from 1877 to 1882 by bold speculatioUy 
 relying upon the effect of the pooling policy upon the 
 Wall Street valuations of railway property. Prob- 
 ably a correct estimate of the affection of railway 
 men for the pooling policy would be reached by a com- 
 parison of the increase of the net railway earnings be- 
 tween 1877 and 1880, with the total advance in prices of 
 stocks, and by the discovery that the actual gain of 
 earnings was not a tithe of the speculative profits 
 from the inflation produced b}^ the pool. It is not 
 alone in speculation for an advance that the power 
 and knowledge of the railway in the pool can be used 
 to individual advantage. How many of the disputes 
 among the pooling railways, during the last three or 
 four years, were really incited to make profitable 
 speculations on the short side of stocks is of course be- 
 yond liuman knowledge ; but if the actual number is 
 one half of the number of assertions of this kind in the 
 public press, the evil from this one source is greater 
 than all the advantages of pooling. A dispute can be 
 precipitated to affect the stock market far more easily 
 than a pool can be reorganized for the same purpose. 
 It takes the united action of all the leading officials of
 
 234 The Hallways and the Republic. 
 
 the rival roads to form a pool ; but a single traffic 
 manager or general agent can, by the indirect and se- 
 cret methods of which the history of pooling is so pro- 
 lific, start a rivalry in rate-cutting that will make 
 " bear " operations profitable. Such a man, if brought 
 to account, can defend his action on the plea or suspi- 
 cion that his rivals were cutting rates. It may be 
 hoped and believed that the majority of railway men 
 are superior to such temptations ; but the nature of the 
 case gives the unscrupulous man an advantage over 
 others in being able to enrich himself by stirring up 
 complications in the pool ; while the legitimate interests 
 of the shareholders suffer. It is a heavy indictment 
 against the pooling system that it gives power to 
 avaricious and unscrupulous men in railway manage- 
 ment, to enrich themselves at the cost of shareholders 
 and investors, both by forming combinations and by 
 exciting disputes or ruptures in them. 
 
 These objections to pooling combinations are not 
 fanciful, nor are they prompted by animosity towards 
 the railway system. They rest upon public principles 
 which are inherent and fundamental in our system of 
 law, and have been applied in a long line of judicial 
 decisions holding all such contracts to be against public 
 policy and void. The illegality of agreements restraining 
 trade and limiting competition was a well-established 
 principle of jurisprudence before railways were thought 
 of. " As for back as the reign of Henry V.," said the 
 Supreme Court of Massachusetts, nearly half a century 
 ao-o, " it was held as old and settled law that bonds in re- 
 straint of trade are void." It is further reported that 
 when a bond of this sort Avas produced in court by the 
 plaintiff's law^yer, the fifteenth-century judge flew into a
 
 The Fooling Policy. 235 
 
 passion and declared in old law Freneb,that "if the plain- 
 tiff was here, he should go to prison until he had paid 
 a good round fine to the king for his pains, by G — ." 
 The early decisions in this country adopted the same 
 principle. In Massachusetts, when the seller of a gro- 
 cery store agreed not to start a new one within a cer- 
 tain distance, and when a contractor bound himself not 
 to run a stage in opposition to the obligee, the contracts 
 were sustained, "as of limited application and for a 
 valid consideration." But it was insisted that in every 
 such case a limited a23plication and a valid considera- 
 tion must be unmistakably shown.'"^ The distinction 
 between such agreements and illegal contracts in re- 
 straint of trade was clearly drawn, in 1837, in the case 
 of Alger vs. Thatcher, by the Supreme Court of Mas- 
 sachusetts.f This leading decision, made before the 
 railways came into prominence in commerce, and de- 
 fining the principles on which the law protects trade 
 against artificial restraints by combinations and con- 
 tracts, applies to the railway pools precisely as if writ- 
 ten with them in view. It shows that the common 
 law, from the first, forbade agreements to restrict the 
 freedom of trade, that this principle has been preserved 
 
 * In Pierce ts. Fuller (8 Mass. 223), 1811, Judge Sedgwick said that 
 "bonds to restrain trade in general are unquestionably bad, as tending to 
 create a monopoly injurious to the public. . . • And if it does not appear 
 ■whether the contract was made on good consideration, so that the con- 
 tract may be either good or bad, it is the prima facie presumption of law 
 that the contract is bad, because it is to the prejudice of trade and hon- 
 est industry. . . . Therefore all contracts barely in restraint of trade, 
 where no consideration is shown, are bad." But the court in tliis case 
 sustained the contract as of limited influence and for a valid considera- 
 tion. The report cites numerous authorities to show that in order that 
 a contract in restraint of trade may be valid it must be " partial, reasonable, 
 and for a valid consideration." Also 1 Pickering, 450, 3 Pickering, 188, 
 and G Pickering, 208. 1 19 Pickering, 51.
 
 236 The Railways and the Repiiblic. 
 
 by all enlightened jurisprudence; and is "universal 
 in its application, salutary in its effect, and in accord 
 with the spirit of our institutions." After stating, as 
 objections to such contracts, that they injure the parties 
 making them, by a surrender of their commercial 
 rights, tliat they deprive the public of the full benefit 
 of the extension of trade, and that they discourage the 
 growth of enterprise and industry, the court almost 
 prophetically added : "They expose the public to all the 
 evils of monopoly. This is especiall}^ applicable to 
 lar2;e corporations, "who have the means, unless re- 
 strained by law, to exclude rivalry, monopolize busi- 
 ness, and engross the market. Against evils like these, 
 wise laws protect individuals and the public by de- 
 claring all such contracts void." When the mere 
 agreement to abstain from a contingent competition 
 in the iron - founding business called for the enuncia- 
 tion of legal principles like these, which have been rec- 
 ognized authoi-ity forforty-eight years, it is not surpris- 
 ing that the railways do not care to submit their pool- 
 ins: a2:reements to iudicial criticism. 
 
 The illegality of all combinations to suspend com- 
 petition has been affirmed by almost every court be- 
 fore which the question has been brought. By the Su- 
 preme Court of Ohio, a contract for a combination 
 among salt-manufacturing companies was declared un- 
 lawful, in language wliich is strikingly applicable to 
 railway pools.* Still more emphatic was the language 
 
 * " The clear tendency of such an agreement is to establish a monopoly 
 and to destroy competition in trade ; and for that reason, on grounds of 
 public policy, courts will not aid in its enforcement. It is no answer to 
 say that competition in the salt trade was not in fact destroyed, or that 
 the ijrice of the commodity was not unreasonably advanced. Courts 
 will not stop to inquire the degree of injury inflicted upon the public;
 
 The Pooling Policy. 237 
 
 of the Supreme Court of Pennsylvania in declaring the 
 illegality of an agreement between five coal-mining com- 
 panies to fix the amount of each one's product, to bi'ing 
 the prices and sales under the control of the combination, 
 to provide for payments in adjustment of the fixed pro- 
 portions, and, in short, to apply the essential features of 
 the pooling system to their business. This combina- 
 tion was declared, in terms much stronger than any yet 
 quoted, to be unlawful and intolerable to the public 
 interest.'^ " Such a combination," said Judge Agnew, 
 " is more than a contract : it is an offence ;" and he cited 
 a former eminent justice as authoi'ity for saying that, 
 where the public is subjected to the power of confed- 
 erates, " a combination is criminal." This view is fur- 
 ther confirmed by the Court of Appeals of New York, 
 in a case involving the precise methods of the railway 
 pools, the chief difterence being that the combination 
 was less powerful, and the public interests affected were 
 of less magnitude, than in any railway pool. The pro- 
 prietors of boats on the Xew York canals formed a 
 pool to regulate the rates of freight and passage; the 
 profits were to be divided according to the number of 
 boats operated by each, and members were forbidden 
 to conduct business outside of the association. This 
 miniature of tlie railway pool was lield by the court 
 to be "nothing less than the attainment of the exemption 
 of the standard of freights, and the facilities and accom- 
 modations to be rendered to the public, from the whole- 
 some influence of rivalry and competition."f 
 
 it is cnougli to know tliat the inevitiible tendency of sucli contracts is 
 injurious to the public." — Salt Company vs. Guthrie, 35 Ohio State Re- 
 ports, 672. 
 
 * Morris Run Coal Co. m. Barclay Coal Co., 68 Pa. St, 173. 
 
 t Stantcn vs. Allen, 5 Dcnio,434 ; also Ilookcr rs.VaudcvjItcr, 4 Deuio, 349.
 
 238 The Railways and the Bepublic. 
 
 This principle of the common law, laid down in Eng- 
 land four hundred and sixty years ago,was announced by 
 Coke," forcibly enunciated by a high American court be- 
 fore the railway system was created, and has been main- 
 tained, defined, and applied by a series of decisions in the 
 federal and state courts, so that it is now easy to apply 
 it to the prevailing practices of the railways. All that 
 has been said concerning the illegality of contracts in 
 restraint of trade applies irith multiplied force to the 
 railway pools. If such contracts are injurious to the 
 public interests, when they affect but a single iron-manu- 
 facturing establishment, or combine a dozen salt com- 
 panies, or five coal-mining organizations, or the carriers 
 on a cou2:)le of canals, how much greater is the public 
 necessity for the protection of law against them when 
 the influence of a single pool controls the trade of half 
 a dozen states, and its orders run from ocean to ocean ? 
 Every word quoted from the older decisions is a pro- 
 phetic warning against the policy of combination which 
 now rules the railway world. Every condemnation of 
 pooling devices found in the later decisions is a judi- 
 cial condemnation of the railway pools, and their ex- 
 istence is a defiance of the law and the courts. 
 
 The antagonism between the pools and the law is 
 sharply defined by contrasting their practices in detail 
 with the utterances of the higher courts on the subject. 
 The primary object of these combinations is to raise 
 the rates of freight, and the first means adopted is to 
 suspend competition, and place the trafiic under the 
 exclusive control of the combination. The traffic is di- 
 
 *"A monopoly has three incidents miscliievous to the public: 1, the 
 raising of the price ; 2, the commodity y<\\\ not be as good ; 3, the im- 
 poverishing of poor artificers." — Davy ts. Allen, 11 Coke, 384.
 
 The PooUnrj Policy. 239 
 
 vided by fixed percentages ; each member of the pool 
 is limited to its allotted share of the business ; in some 
 cases the members of the pool are bound to abstain 
 from certain classes of traffic, and in otliers the total 
 volume of the traffic is limited in advance. Yet it is 
 combination for these precise purposes that has been 
 denounced by English decisions for four centuries, and 
 forbidden by the American courts for the last half-cen- 
 tury. Such contracts were declared by the Supreme 
 Court of Massachusetts, in 1837, to expose the people 
 to all the evils of monopoly : " And this is especially 
 applicable to large corporations, who have the means, 
 unless restrained by law, to exclude rivalry, monopo- 
 lize business, and engross the market." Chief-justice 
 Parker had previously declared, " Another reason is 
 the great abuses these voluntary restraints are liable 
 to; as, for instance, from corporations who are perpet- 
 ually laboring for exclusive advantages." '•" There is no 
 reason why railways should be excepted from the ap- 
 plication of these principles. The reasons on which 
 the courts have based them have much greater co- 
 gency in railway transportation than in any other pub- 
 lic interest. " This doctrine," said Justice Morton, 
 " extends to all branches of trade and to all kinds of 
 business. ... It is founded on great principles of pub- 
 lic policy, and carries out our constitutional prohibition 
 of monopolies and exclusive privileges." 
 
 Some of the remarks upon pooling, in the preceding 
 pages, may be regarded as extreme. But none of them 
 are so severe as the judicial condemnation of exactly 
 similar devices. The learned and conservative judges 
 who have been called upon to determine whether such 
 
 * Mitchell ts. Reynolds, 1 P. Williams, 190.
 
 240 The Hallways and the Be^pulliG, 
 
 combinations are lawful, have not been content to de- 
 clare their injurious tendencies; they have denounced 
 them as criminal offences and conspiracies against the 
 public. " I take it," says Judge Gibson, " that a com- 
 bination is criminal, wherever the act lias a necessary 
 tendency to prejudice the public or to oppress individ- 
 uals, by unjustly subjecting them to the power of con- 
 federates." "' "Sucli a combination," says the Supreme 
 Court of Pennsylvania (of a coal compact similar to 
 the anthracite pool), "is more than a contract: it is an 
 offence. ... In all such combinations where the pur- 
 pose is injurious or unlawful, the gist of the offence is 
 conspirac}^' It is not a defence, either to claim, as has 
 been done by the pooling advocates, that the operations 
 of the pools are only partially successful in suspending 
 competition, or that their effect has not so far been un- 
 duly to raise rates. The mere fact of a combination to 
 restrain free competition, whether its effect is moder- 
 ate or extortionate, is enough to secure its condemna- 
 tion by the courts. " It is no answer," says the Su- 
 preme Court of Ohio, " to say that competition in the 
 salt trade was not destroyed, or that the price of the 
 commodity was not unreasonably advanced. Courts 
 will not stop to inquire as to the degree of injury in- 
 flicted on the public; it is enough to know that the 
 inevitable tendency of such contracts is injurious to 
 the public." 
 
 When the courts express themselves in terms of 
 such severity concerning merely locab combinations in 
 the canal, coal, or salt interests, what burning words 
 could be found adequate to express the judicial indig- 
 nation at agreements ^vhich affect the price of trans- 
 
 * Commonwealth of Penusylvania vs. Carlisle, Brightley, 40.
 
 The Pooling Policy. 241 
 
 portatiou for the entire country aud control the freight 
 traffic of half a dozen states. Few judges have had 
 occasion to make such a severe draft on the vocabu- 
 lary of condemnation, for the pooling authorities have 
 never allowed their combinations to be seriously tested 
 in any court. The radical and decisive declarations 
 by the courts, of the illegality of similar combinations, 
 have given the railroads good reason to keep their 
 agreements from the criticisms of any independent and 
 impartial judge. Not only have the pooling railways 
 abstained from asserting in the courts the legality of 
 their contracts, but whenever those contracts have been 
 a collateral issue in a suit, they have allowed it to pass 
 practically without defence. The result has been that, 
 while the decisions on similar cases are abundant and 
 conclusive, those directly involving the railway agree- 
 ments are very few. In England the subject was 
 brought directly to a legal test by a suit to enjoin a 
 pool representing two railroad companies, and the vice- 
 chancellor declared the contract " so clearly and palpa- 
 bly illegal that I do not think the court ought to hesi- 
 tate." "' In this country the question of railway pooling 
 
 * " An agreement tli:it the profits and loss shall be brought into one 
 common fund, and the net receipts divided into two shares of nine tenths 
 and one tenth without the authority of Parliament, appeared to me so 
 clearly and palpably illegal that I do not think the court ought to hesi- 
 tate in its views in that respect ; otherwise it might be that all tlie rail- 
 ways in tlic kingdom might be collected into one large joint-stock con- 
 cern" (Charlton ts. New Castle, etc.. Railway Companj', 5 Jur. U. S. 1100). 
 It is, indeed, claimed that the authority of Parliament has since been 
 given to certain combinations of a similar character. But if so, the fact 
 simply illustrates the power which capital can exert in that land of plu- 
 tocracy and privilege. Further light is thrown upon this claim by the 
 following extract from Mr. Glasscock's speech in the House of Represen- 
 tatives last winter: " Considerable has been said in the course of this de- 
 bate concerning the English policy of railway amalgamations, and the 
 
 16
 
 242 The Railways and the liejpuUic. 
 
 has been involved in four suits, all of which were, I 
 believe, brought before the courts of the United States. 
 In each of them the suit was ao-ainst a member of the 
 combination, brought to prevent the enforcement of 
 some of the rules by which the pools are sustained, 
 and in each the decision of the court was against the 
 legality of the rules. One of these suits was between 
 the Denver and New Orleans and the Atchison, To- 
 peka, and Santa Fe railways. In this case the pooling 
 agreement, b}^ which the latter company refused to take 
 passengers and freight from the former, on equal terms 
 with those from the two other roads with which it 
 was combined, was judicially characterized as a "con- 
 spiracy to grasp commerce and to suppress the build- 
 ing of railroads in two great states." * The Delaware, 
 Lackawanna, and Western Railway applied for protec- 
 tion by injunction against the order of the pooling 
 
 impression has been conveyed, ■whether designedly or not, that in Eng- 
 hmd pooling is recognized as lawful. Not so. On the contrary, when- 
 ever a pooling contract has come before the courts it has been declared 
 void. The common-law doctrine, that all contracts between companies 
 to pool their earnings and divide the profits on other than a natural basis 
 are void, has been steadily adhered to, and is still the rule. One citation 
 will answer for a dozen. There are two lines of railway between Eugby 
 and Slirewsbury. These roads, as to competitive tratiic, entered into a 
 pooling contract. This contract came before the courts in the case of 
 the Shrewsbury and Birmingham Railroad Company ts. The Northwest- 
 ern Railroad Company (4 De G. & McN. 134), and was held unlawful, on 
 the grounds that it j^rovided for an alienation by one of these companies 
 of a portion of its traffic to the other, and that it was against public jiol- 
 icy." 
 
 * 15 Fed. Rep. 650. In this decision, Avhich was sustained by Judge 
 McCrary, .Judge Hallett made use of the following forcible language : 
 "An association of carriers to regulate the price of freight, with provi- 
 sions prohibiting the members from engaging in similar business out of 
 the association, has a tendency to increase the price of carriage and to 
 suppress competition, and is therefore illegal."
 
 The Pooling Policy. 2-13 
 
 officials making higher rates upon its freight than on 
 that of other roads, thus placing its traffic under the 
 ban of the railway empire. Thus the issue more 
 directly concerned the discrimination which the pool 
 sought to enforce, than the public character of the pool 
 itself. Whether the decision involved the illegality of 
 the pool or only the illegality of its methods, it was 
 very decidedly against the pool. The suit of the Con- 
 tinental Sugar Refining Company against the Chicago, 
 Kock Island, and Pacific Railroad involved another of 
 the practices by which the pools sustain themselves, 
 that of diverting fi-eight from the line designated by 
 the shipper. The temporary injunction was granted, 
 on the ground that the diversion could not be allowed 
 against the wish of the shipper. The fiict that the 
 railways refrained from further contest was referred to 
 by one of their organs as an evidence of their mag- 
 nanimity.'^ But their course was evidently prompted 
 by other considerations. The maintenance of the pool 
 was too important to be set at risk by appeal to a 
 court whose decision would be final. AVhile they ac- 
 quiesced in the decision, as far as it affected the 
 shipments of the plaintiff, they violated its principles, 
 and maintained the practice it declared illegal, on the 
 shipments of thousands of others. What their con- 
 duct showed, therefore, was not that the case was not, 
 
 * "A temporary injunction was granted, ■whereupon some anti-railway 
 enthusiasts -went so far as to claim that this complaint would be a death- 
 blow to pools, coniidcntly expecting the railway would contest the legal- 
 ity of the injunction and be conclusively overthrown. Rightly consider- 
 ing, however, that the importance of the case was not such as to warrant 
 any protracted and expensive litigation, the Southwestern pool refrained 
 from any decided opposition, and allowed the Boston concern to continue 
 forwarding its sugar over the lines of the Chicago, Kock Island, and Pa- 
 cific Railway." — Bailway World.
 
 244 The Railways and the Hepvhlic. 
 
 as tbeir organ said, of importance enough to warrant 
 "protracted and expensive litigation," but tliat, Low- 
 ever important tlie particular case might be, the prin- 
 ciple which it involved was one of far greater impor- 
 tance; and they preferred quietly to accept defeat in 
 this instance, rather than give an opportunity to the 
 law to express itself authoritatively on their entire sys- 
 tem of operation. They doubtless apprehended that if 
 they contested this decision in the higher courts the 
 suit might be, as " confidently expected," fatal to the 
 pools. The matter was dropped by the railways in this 
 case, as in all others which bring the question of pool- 
 ing before the courts, simply because of the belief of 
 the railway managers that to submit the validity of 
 pooling agreements to the courts would be a death- 
 blow to the pooL 
 
 Another pooling question recently came before the 
 courts, which not only called out a sharp condemnation 
 of pooling contracts, but suggests that the railway of- 
 ficers who have carried out some of their provisions 
 occupy a rather perilous position before the criminal 
 law. An agreement, in the common form of money 
 pools, existed between the roads engaged in the trans- 
 portation of coal from the Hocking Valley regions, by 
 which one of them, conducting a large trafiSc, was to 
 pay a considerable share of its earnings to other com- 
 panies; a draft upon its life-blood which eventually 
 sent it into the hands of a receiver. The receiver, after 
 operating the road for some time, accumulated ^100,000 
 of earnings, which, by the terms of the agreement, was 
 to go to the other pooling companies. Hesitating to 
 make a gift of funds to the competitors of the road, 
 while the bondholders were waiting for their interest,
 
 The Pooling Policy. 245 
 
 lie submitted the matter to the court which had appoint- 
 ed him, the District Court of the United States for 
 Northern Ohio. Judge Baxter, with some of the indig- 
 nation of the old fifteenth-century judge already referred 
 to, ordered that he should "not only not pay out this 
 money, but to pay no money whatever for any such 
 purpose while the road is in the custody of this court," 
 adding, ''such contracts as these are no more to be 
 respected by the law than any other gambling con- 
 tracts." This w^as conclusive as regards the duty of a 
 receiv^er; but how does his duty, in this respect, differ 
 from that of the officers of a solvent corporation ? One 
 is trustee for the creditors of an insolvent concern, 
 the others are trustees for the creditors and owners of 
 a solvent concern. Both hold funds as trusts for cer- 
 tain purposes. It is clear that the receiver has no 
 right to divert the earnings of the company from the 
 payment of the bondholders, after it has defaulted on 
 its interest. What right had the president and board 
 of directors to make the same diversion of funds just 
 before it defaulted ? What is to prevent the creditors 
 of this road, who are waiting for their money, from in- 
 stituting proceedings for breach of trust against these 
 officers, in paying out, for unauthorized purposes, money 
 which should have been, but was not, applied to the 
 payment of interest? What prevents the stockholders 
 of any solvent raih'oad from instituting criminal pro- 
 ceedings against the officers \\\\q> pay out funds, which 
 have been fairly earned for dividends, to enrich rival 
 companies who have earned less? It would be an un- 
 expected and startling result of these devices for the 
 improvement and elevation of the i-ailway interest, if 
 some of the respectable pooling officials should find
 
 246 The Bailways and the Repvhlic. 
 
 themselves lodged in the penitentiaries for breach of 
 trust, criminal conspiracy, and embezzlement of rail- 
 way funds. 
 
 With such uniform judicial condemnation of the 
 principle upon which all pooling combinations are 
 founded ; with such a marked care on the part of the 
 railways to keep their agreements from the scrutiny 
 of the courts ; and with so universal a condemnation of 
 every feature and method of the pools that has been 
 legally tested, is not every consideration of public in- 
 terest and welfare that has been urged against this 
 practice fully sustained by unquestionable authority? 
 What an absolute and irreconcilable conflict there is 
 between pooling and the principles of law may be seen 
 from the fact, that a thorough review of the case by an 
 able writer, who seems personally favorable to the idea 
 of pooling combinations, leads him to declare that, in 
 a legal point of view, "all of them are illegal, criminal 
 conspiracies to suppress comj^etition and establish mo- 
 nopolies."* But apart from these authoritative decla- 
 
 * In the above argument on the legal aspects of pooling, the ■writer has 
 drawn largely on the citation of authorities and the application of them 
 in the case of the railway pools, given in a very able and exhaustive 
 pajjer by Mr. Adelbert Hamilton, published in connection with his report 
 of tlie Denver and New Orleans r«. Denver and Rio Grande case, and 
 afterwards revised by him for the Chicago Tribune. Mr. Hamilton's ex- 
 amination of the subject leads him to express his conclusion on the il- 
 legality of pools in the following strong terms: "There is but one con- 
 clusion to be drawn from tlie study of the law on the railway pools. 
 That is that they are unlawful. Tliore is no difference in principle or 
 reason between railway j^ools and pools of salt manufacturers, coal miners, 
 or canal boatmen. All of tliem are illegal, criminal conspiracies to sup- 
 press competition and to establish monoijolies. They are instruments of 
 robbery and extortion. They belong in the same category of crime as a 
 ' corner.' There is no difference between a corner in brcadstuffs and a 
 corner in the railways that carry the brcadstuffs, except that the latter is
 
 The Pooling Policy, 247 
 
 rations of the illegality of pooling agreements, it is 
 plain that there is nothing in common between a sys- 
 tem of laws designed to foster independent trade, and 
 to protect the weak members of society against the 
 strong, and a policy which combines powerful corpora- 
 tions created by the state into an organization mightier 
 than the state itself; which directs the currents of trade, 
 and fixes the price of services and commodities through- 
 out the nation. If there had never been a word uttered 
 from the bench on the public character of combinations 
 to suppress competition and erect barriers between 
 producers and consumers, they w^ould still be evident- 
 ly opposed to the public welfare, and at ^va^ with the 
 enlightened policy of the law. Their growth in the 
 last eight years, in spite of the decisive and universal 
 condemnation of the courts, excites wonder at the blind- 
 ness of the public, and its supineness in protecting its 
 rights, as well as at the utter disregard of public policy 
 and law by railway managers. It w-as forcibly de- 
 clared, during the Congressional debates on the sulgect 
 of railway regulation during the past winter, that the 
 law forbids the combination of a few comparatively 
 poor and insignificant canal boatmen to sustain their 
 
 infinitely more pernicious and dangerous to the welfare of the people, be- 
 cause it is the greater and is at present almost permanent." Yet Mr. 
 Hamilton's personal toleration for the idea of pooling is shown by the 
 fact that, after this powerful denunciation of the illegality of pools, he ex- 
 presses the opinion that they should be recognized and enforced by law ! 
 He founds this grave non sequitur upon the mistaken 2)rcmise tliat " every 
 abuse, every evil in railway management, has its root in competition." If 
 this were so the outlook for the public welfare would be bad indeed. A 
 better judgment of the case can be formed by recognizing the fact, which 
 this work attempts to make plain, that all these al)uses and evils arise 
 from imperfect competition, and from the efforts of railway policy to sus- 
 pend even the partial effects of that great remedial influence.
 
 24:8 The Hallways and the Bepxiblic. 
 
 rates, but winks at exactly the same practice by the 
 great and powerful railway corporations. The law 
 makes no such discrimination, and if this question were 
 brought before impartial and independent courts, the 
 rulings already referred to show that ^vhatever power 
 the courts possess would be brought to bear against 
 these combinations. Yet the practical effect is that, 
 while the smaller combinations have been forbidden, 
 and the details of the greater ones condemnetl, the 
 power of the latter is such that they continue their 
 operations without regard to law. A great public 
 danger is disclosed in the ability of these immense cor- 
 porations to nullify the principles of equity enunciated 
 by the courts for centuries. The public welfare de- 
 mands that this defiance of the fundamental law shall 
 stojx 
 
 No less than the public welfare, the true interests of 
 the railways demand that they shall cease to offend 
 popular opinion and to alienate popular support, by 
 maintainimr these combinations a2;ainst the freedom of 
 trade. No f)i"operty is more deeply interested in the 
 favor of the public or in the stability of order than the 
 railways. This country has already learned by exj^eri- 
 ence that its entire railway system can be taken pos- 
 session of by an organization of dissatisfied employees, 
 and either be operated by them for weeks at a time, 
 or uttei'ly destroyed, as the moderation or desperation 
 of the laboring element may dictate. The only safe- 
 guard against a repetition of the experiences of 1877, 
 with perhaps still more disastrous results,lies in teaching 
 the laboring classes that the operations of the railways 
 contribute to their employment and sustenance. All 
 thinking men know that the stoppage of railway opera-
 
 The Pooling Policy. 249 
 
 tioiis, or the destruction of railway propert}^, would be 
 an infinite calamity, of Avliich the direct results would 
 fall upon labor. But hungry and idle working men 
 with starving children do not always listen to the calm 
 counsels of reason. The condition of trade and in- 
 dustry durino; last year should suo-o-est the iri'avest 
 reflections to all classes of business men, and more 
 especially to the railway interests, which will be the 
 first to suffer by disorder or revolt. Unemployed labor 
 has been restless under the pressure of idleness and 
 want. The apostles of anarchy have been openly sow- 
 ing the seed of revolution and destruction. They have 
 found their greatest support iu the hardships produced 
 by the existing constitution of trade. With grain so 
 abundant and cheap in the great agricultural states 
 that it has been burned for fuel; with all classes of 
 manufactured goods produced in such excessive supply 
 that the factories have had to shut down, the fiirmers 
 of the AYest have been unable to buy goods, and the 
 mechanics of the East have sufi^ered for the lack of 
 food. Writers on economic subjects tell us of over- 
 production ; but wdien, in the midst of universal over- 
 production, or, in other words, excessive abundance, we 
 find the presence of grim want, the only explanation 
 left is in the presence of abnormal restraints upon 
 the exchange of products. When too much grain, too 
 much meat, too much iron, too much cloth, and too 
 much coal is produced in the country, the fact that 
 labor suffers from the lack of grain, meat, cloth, and 
 coal, proves that there are barriers to trade between 
 the producers. 
 
 The most prominent and most universal of these bar- 
 riers are the raihvay pools. The combinations ^vhich
 
 250 The Railways and the Republic. 
 
 are formed with the purpose of raising the cost of ex- 
 chanc-infr the o-rain of the West for the efoocls of the 
 East above the level that would be reached by the 
 workings of competition ; which restrict the production 
 of fuel and sustain artificial prices to consumers, when 
 thousands are freezing ; which build up mono2:)olies iu 
 the agents of light and heat; and which are every- 
 where imposing restrictions ujjon trade which create 
 the paradox of general want in the presence of uni- 
 versal abundance, are offering the greatest provocation 
 to violent and dangerous attacks upon the railway in- 
 terest. Whether the popular feeling is provoked to ex- 
 press itself in adverse and extreme legislation, or wheth- 
 er the work of combination is perpetuated and extended 
 until monopolies like the petroleum and coal pools be- 
 come universal, and an exasperated and maddened 
 proletariat tears the whole system down in general 
 ruin, the evils of that polic}^ will, if continued, eventu- 
 ally bring a revulsion beside which its questionable 
 pecuniary gains will be as a mole-hill on the side of 
 Himalaya. Not only in the interest of public justice 
 and free competition should the railways abandon their 
 present work of suspending competition and building 
 up monopolies; but the instinct of self-preservation 
 should lead them to restore the free and unrestricted 
 working' of the lesjitimate influences of trade. The 
 abandonment or continuance of the pooling policy, as 
 sketched in the preceding pages, may involve the safety 
 or ruin of the entire railway interest of the nation.
 
 CHAPTER VII. 
 
 THE FICTITIOrS ELEMENT IX RAILWAY POLICY. 
 
 The public representatives and apologists of the 
 railways have experienced a remarkable change of 
 views since the agitation for railway reform began. 
 The failure of voluntary combinations to destroy or 
 control competition among the roads has suggested a 
 demand for legislation to accomplish this end. A few 
 years ago the advocates of these corporations unani- 
 mously insisted that legislation must not meddle with 
 their business. The subject was so intricate, the traf- 
 fic involved so vast and varied, and the business prin- 
 ciples which controlled the railways so just and infal- 
 lible, that the government must not, as one enthusiastic 
 Congressman put it last winter, " lay the mailed hand of 
 political power upon one of the most complicated and 
 sensitive business adjustments of modern times." Until 
 one year ago, this principle of non-interference had the 
 unanimous support of the spokesmen of the railways. It 
 is somewhat startling, therefore, to find them now, one 
 after another, joining in the demand that, after all, 
 legislation shall interfere with the railway business, 
 shall legalize the pools, enforce their decrees, and so 
 lend its aid to the suppression of free competition. 
 
 This change of policy is a result of experience in ad- 
 ministering the pools. It has become plain that the 
 laws of trade will revenge themselves, that competi-
 
 252 The Railways and the Re-public. 
 
 tion will spring up, despite combinations to suppress 
 it, and that the most successful pools lead to the 
 building of new parallel roads and to violent and ruin- 
 ous conflicts. But all this has not convinced the rail- 
 way magnates of the wisdom of abandoning such de- 
 vices. They choose rather to demand that legislation 
 shall abandon its fundamental principle of protecting 
 free competition, and support the railways in suppress- 
 m<y that influence, and in maintainincr whatever arbi- 
 trary rates the railway combination shall decree. Their 
 reasoning seems to be founded on the assumptions that 
 the policy of the corporations is infallible ; that the 
 practice of pooling is the grand specific for all evils in 
 the railway system; and that to preserve the public 
 and the corporations alike from " unlicensed competi- 
 tion," to use the phrase of a prominent advocate of the 
 corporations, the state must uphold combinations by 
 law, and subject the business of the country to the 
 railways, united in that grand federation of which Mr. 
 Adams is the leading apostle. This principle, tenta- 
 tively urged before the New York Eailway Commission 
 last winter, was more maturely and definitely presented 
 to the Cullom Committee last summer. It is, in the 
 words of Mr. Fink, that " Kailroads should he compelled 
 by law to oiganize themselves into associations for this 
 purpose," i. ^., the purpose of establishing rates by pool- 
 ing organizations such as Mr. Fink represented ; and, 
 while "not prepared to recommend a law" to compel 
 the corporations, after they had entered upon an agree- 
 ment in regard to rates, to keep it, he was " quite cer- 
 tain that such a law should be drafted and passed by 
 the legislatures or by Congress." The same idea was ex- 
 plained in greater detail by Messrs. Geo. R Blauchard,
 
 The Fictitious Element in Railvmy Policy. 253 
 
 W. K. Ackerman, and J. II. Devereux, in their argu- 
 ments at various sittings of the Senate Committee. 
 They attributed all the evils of the railway system to 
 the ravages of competition, drew a moving picture of 
 the inability of the railways to earn dividends, and in- 
 ferred that while competition might still be left free 
 on the lakes, rivers, and canals, it must be restrained 
 by law in railway traffic* The railway managers were, 
 he acknowledged, powerless to curb this evil, "from an 
 inherent weakness and defect in the disjointed and un- 
 guarded system of railway construction," which permits 
 every one to build a railroad who has the capital, 
 whether it suits the older corporations or not. In or- 
 der to remedy these dangers to the railways, the only 
 interest, as Mr. Devereux appears to think, ^vhich re- 
 quires the protection of the state, he proposed legisla- 
 tion as follows: first, to restrict the building of new 
 railroads, except upon the consent of a state tribunal or 
 commission, which must, of course, be organized in the 
 interest of the existing railways; and, second, to sanc- 
 tion the combination of i-ailways to establish rates, to 
 forbid an}^ withdrawal from such an agreement once 
 made, unless upon thirty days' notice, and to provide 
 that " any person or persons who shall disregard such 
 published rates, by allowing or conniving at any form 
 of concession from such published rates, through di-aw- 
 backs, commissions, or by any form of subterfuge what- 
 soevei', shall., vjyon conviction, he lyunished hy fine, or hn- 
 
 * "But a competition that is wholly unrestrained will ultimately work 
 in these matters a harvest of general disaster. Liberty is not license; 
 competition may not be limitless. Competition should not be a free- 
 booter in this matter, which enters into every material interest of the 
 land, and affects the welfare of all people. Nor is competition to be per- 
 mitted to run amuck in the destruction of vested capital."
 
 254 The Railways and the Re-public. 
 
 prisonment^ or lotli. This being the plan which the 
 leading spokesmen of the railways propose for binding 
 the commerce of the country to the chariots of the rail- 
 way combinations, it is unnecessary to quote from 
 men of less note. 
 
 Thus a wonderful and sudden transformation seems 
 to have taken place, in the principles by which these 
 corporations wish the state to be guided. Five years 
 ao-o, Mr. Gr. T. Curtis held that neither Congress or the 
 leo-islatures can " dictate the terms on whicii they [the 
 railways] can be used, or prescribe the contracts which 
 may be made with customers." INIr. Fink asserted that 
 "the state cannot regulate tariffs," and that "neither 
 Congress nor legislatures can fix a limit as to charges." 
 As lono- as the reirulation or limitation was to be in the 
 interest of the people, all such governmental interfer- 
 ence was unconstitutional and wrong. Those who 
 urged such things were guilty of socialistic or com- 
 munistic principles. But when the power of the gov- 
 ernment is invoked for the benefit of the railways, the 
 constitutional principles of their advocates are reversed. 
 The interference which would be intolerable, if made 
 to protect commerce against injustice or favoritism on 
 the part of the railways, is invited for the protection 
 of the railways against themselves. To limit charges 
 in the interest of the people is injustice and confisca- 
 tion, but to limit them in the interest of the railways 
 is benign and commendable. The public must trust to 
 competition for protection ; but to protect the railways 
 from throwing away their own money, by carrying 
 freio-ht too low, the building of new railways must be 
 forbidden, and the evil of unrestrained competition must 
 be abolished. Competition will answer for the public
 
 The Fictitious Element in Railway Policy. 255 
 
 needs as long as the railways are able, by combiuation, 
 to suspend and check it ; but when it endangers their 
 earnings the law must make such competition a crim- 
 inal offence, punishable b}^ fine and imprisonment. The 
 technical knowledge and fiiirness of the raihvay man- 
 airers, and their " enlis-htened selfishness," are sufficient 
 safeguards for commerce ; but the ruin witli which 
 they threaten their own interests is such that they ap- 
 peal to the law to save them from it. The very meth- 
 ods which are condemned when proposed for the j^ub- 
 lic protection, are urged in an exaggerated form for the 
 furthering of railway combination. The long-and-short 
 haul provision of the Reagan bill, and the requirement 
 that rates shall be posted, were condemned as imprac- 
 ticable because the}^ would prevent competition. But 
 it is now proposed that the state shall join the railway 
 in a far more direct attack on competition, while a 
 proposition to enforce the posting of rates with sixfold 
 more stringency, when urged by a raihvay president, 
 becomes wise, conservative, and statesmanlike. The in- 
 tricacy of the subject certainly seems appalling, when 
 we listen to the authoritative expounders of raihvay 
 policy, and leai'n that every rule proposed in tlie in- 
 terest of shippers and of the public will work irretriev- 
 able injury; while similar or more rigid rules and 
 restrictions, designed to hamper the freedom of trans- 
 portation, to prevent competition, and to aid tlie rail- 
 way managers in upholding charges, are safe and bene- 
 ficial. Such contradictory arguments amount to a 
 practical avowal that legislation has corporate aggran- 
 disement for its chief end, to the disregard of public 
 rights and interests. "We are told that competition 
 must not be protected by the law, when the railways
 
 256 The Hallways and the Republic. 
 
 obstruct it; but that when it breaks its fetters and 
 revenges itself upon the corporations which have tried 
 to suppress it, the law must restrain it. What does 
 this mean, but that the advocates of these corporations 
 regard the interests of the railways as paramount, and 
 the interests of the public as nothing ? 
 
 AVhat is the cause of this change of policy in rail- 
 way statesmanship ? To understand it clearly, we must 
 examine it more in detail than it would otherwise de- 
 serve. The argument advanced by Mr. Devereux at 
 length, and urged by Mr. Fink, Mr. Blanchard, and 
 numerous other authorities of the railway school, rests 
 upon two leading assertions : 
 
 First, that unlicensed competition is the source of 
 discriminations which injure the public, and that these 
 can be prevented by combinations of the railways to 
 maintain uniform rates. 
 
 Second, that the railways are impoverished and 
 ruined by competition, and ought to be restrained by 
 law from thus wasting their resources. 
 
 From these premises the inference is, that relief for 
 the public and the railways alike is to be obtained by 
 laws which shall forbid the railways to cut rates, and 
 shall restrict them to the tariff which shall be prescribed 
 by the pools. 
 
 The assertion that discriminations are the result of 
 competition is an error which is fully refuted in other 
 chapters. It is enough here emphatically to deny that 
 competition is their cause, and to add that, if it were 
 so, the proposition to remedy them by combination 
 would be absurd, since the most permanent and suc- 
 cessful railroad combinations that have been known 
 have inflicted the most persistent and unjustifiable dis- 
 criminations.
 
 The Fictitious Element in Railway Policy. 257 
 
 The second assertion in question has a better founda- 
 tion, and discloses the real cause of the desire to legalize 
 combinations against the laws of trade. The railways 
 have not earned enough ; their failure is ascribed to 
 competition ; pooling contracts are looked to as an 
 artificial support for earnings. Mr. Fink said before 
 the Senate Committee : " There is very little complaint 
 of excessive railway charges. Indeed, many railroads 
 have been driven into bankruptcy, because their charges 
 have been too low to pay expenses;" and he inferred 
 the necessity of an artificial maintenance of rates. Mr. 
 Blanchard " compared the ruin which has overtaken 
 investors in railway property with the prosperity which 
 has attended the farmers." Mr. Devereux drew a mov- 
 ing picture of the inability of his own road to earn fair 
 dividends, and ascribed it to the steady reduction of 
 rates through unbridled competition. This brings us 
 to consider whether the average rates of the i-ailways 
 are unprofitable, and whether they, by rivalry, have 
 reduced themselves to a condition that requires the 
 fostering care of the nation, at the expense of other in- 
 terests. The prima -facie case on the part of the rail- 
 ways was made out by Mr. Fink in his testimony be- 
 fore the Senate Committee of 1883. He said that, in 
 the previous year, the capitalization of the railways 
 was about $7,000,000,000 and their net receipts about 
 $300,000,000, of which the stockholders received about 
 $100,000,000, or 3 per cent, on their stock. Applying 
 his form of statement, but substituting the later figures 
 for 1884, we find that the total of stock and funded 
 debt of the railways at the close of that year Avas 
 $7,431,732,450. The net traffic earnings for the year 
 were $268,106,258, or 3.52 per cent, on the capitaliza- 
 
 17
 
 258 The Railways and the BejpuUic. 
 
 tioD. Of these earnings, $176,694,302 were paid in 
 interest on $3,669,115,772 of funded debt, or 4.51 per 
 cent., while the amount paid ont in dividends was 
 $93,244,835, or 2.48 per cent, upon the stock. These fig- 
 ures, after allowing for the fact that they represent the 
 traffic of an unprosperous yeai', do not indicate exorbi- 
 tant earnino;s. But whether an interest that obtained 
 31 per cent, on its total capitalization, during a period 
 of general dej^ression and bankruptcy, needs especial 
 aid from the state may be considered hereafter. It 
 must be conceded that these a2'2;re2;ates do not show 
 the railways as a whole to be excessively remunerative. 
 But the cpiestion that first arises is whether the bonds 
 and stock on which these moderate returns are shown 
 represent actual and hona-fide investments, or are in 
 any degree fictitious. In other words, the argument in 
 favor of artificially maintaining rates, because profits 
 are low, brings up the subject of over-capitalization or 
 stock-^vateriug. 
 
 Does the capital on which Mr. Fink shows such very 
 modest profits represent money actually invested in 
 railways, or does it comprise a large share of alleged 
 securities which represent nothing but paper ? No man 
 has, to my knowledge, seriously asserted that the en- 
 tire stock and debt of the railways of the United States 
 represent money actually invested. The nearest ap- 
 proach to such a claim was in Mr. Fink's remarks be- 
 fore the New York commission last winter, which he 
 introduced by saying, "There is a great hue and cry 
 about watering stock," adding that, as to the New York 
 roads, with which the commission was then concerned, 
 "there cannot be much water in that estimate of cost." 
 Yet the leading railways of New York are notorious
 
 The Fictitious Element in Eaihoay Policy. 259 
 
 and promiuent instances of the practice of stock-water- 
 ing. The New York Central and Hudson E,iver Rail- 
 road, the most prominent of tbem, has a capital stock of 
 $89,428,300, and a debt of $56,497,223, making, with 
 mortgages of $109,320 upon its real estate, an ag- 
 gregate capitalization of $146,034,853. The fictitious 
 securities included in this total, as was shown by the 
 New York legislative investigating committee in 1880, 
 amount to a large percentage of the W'hole, and there 
 is no more conspicuous example of capital inflated by 
 stock dividends, under the pretence of consolidation. 
 The stocks of the several roads which were united to 
 form the New York Central were increased in the con- 
 solidation by $8,894,560, or more than one third their 
 original capitalization, w^hich the legislative committee 
 declares to have been " so much water or fictitious capi- 
 tal added to the road ;" but this is reduced to common- 
 place, by contrast w^ith the magnificent creation of 
 financial values by the printing-press, when the con- 
 solidation of the New York Central and Hudson River 
 Railroads took place in 1869, and a capitalization of 
 $90,000,000 w^as effected, which, as the secretary of that 
 corporation testified before the committee, "was " about 
 twice the original capital " of the two companies. The 
 fictitious addition is stated by the committee to reach 
 $53,507,060, which, considering that the $8,894,000 of 
 fictitious capital in the New York Central underwent 
 the subsequent inflation of 27 per cent, on the second 
 consolidation, is about $2,000,000 within the mark. 
 Without inrpiiring into the legitimacy of an increase 
 of nearly $17,000,000, which has taken place in the 
 capitalization of this company since the investigation 
 by the legislative committee, it appears from the figures
 
 260 The Hailvjays and the Repuhlic. 
 
 of the committee that, of the total capital of the New 
 York Central and Hudson River Railroad, includinsr 
 stock and bonds, 36 per cent, is " water," while of the 
 stock whose profits are under discussion the fictitious 
 addition is 59 per cent, of its present total, or about 
 145 per cent, upon the original investment. 
 
 This remarkable manufacture of capital is rivalled, if 
 not surpassed, in the well-known history of the Erie 
 Railway. The remarkable story of successive issues of 
 securities, representing little or no money or property, 
 has been so gra])hically told by Mr. C. F. Adams that 
 it need not be repeated here. It is suflicient for the 
 present purpose to cite the conclusion of the New 
 York legislative committee, from the testimony of ex- 
 perts, that the property of the company, caj^italized at 
 $155,000,000,* could be replaced for $65,000,000 ; that 
 the most moderate estimate of the actual "water" in 
 its securities was $53,163,881, not including a loss of 
 $10,800,000 by discounts in the sale of $25,000,000 of 
 bonds. The capital stock of the company is $85,000,000, 
 representing, according to this most moderate view, 
 $22,000,000 of actual investment; while others esti- 
 mate that the bonded securities of the company alone 
 represent the entire amount invested in the property, 
 and $10,000,000 more ; so that the entire share capital 
 and part of the bonds are a stupendous mixture of 
 wind and water.f These two leading corporations of 
 
 * This was the caiiitalization in 1880, and lias since been increased 
 to $100,601,385 by tlie issue of coUateral trust bonds. 
 
 t"It matters little for the purposes of this report ■whether fifty or 
 seventy millions, representing nothing save mismanagement, prodigality, 
 and pilfering, have been injected into the capitalization of this road, and 
 are now seeking to drain interest and dividends from the commerce of 
 the countiy. In either case the wrong is equally glaring and the de-
 
 The Fictitious Element in Railway Policy. 261 
 
 New York are among the most important members of 
 Mr. Fink's organization ; together they issue more than 
 $300,000,000 of the securities in which the investors 
 of the country are interested. In view of the fact that 
 of the $300,000,000 not less than $116,000,000 are 
 based solely on the fiat of the corporations, represent- 
 ing DO property whatever, and that, of the $175,000,000 
 of capital stock of the two companies, 66 per cent, is fic- 
 titious and not more than 34 per cent, is genuine, it 
 appears that Mr. Fink's assertion that " there cannot 
 be much water" in the capital of these I'oads is not 
 founded on a careful study of the facts. 
 
 In extending the inquiry to other railways it is not 
 always easy to determine the exact amount of inflation 
 in the capital. The great competitor of the two New 
 York corporations, the Pennsylvania Railroad, is, apart 
 from one or two stock dividends, supposed, to be free 
 from the burden of securities issued without a fjiir 
 foundation in property. But the total stock and debt 
 of this company, as represented to the public, are in- 
 flated in another way. The cost of the construction 
 and equipment of its line is stated at $75,000,000, 
 which, when compared with the $160,000,000, "estate 
 of Erie Railway and construction account," and the 
 $114,800,000 for "roads and equipment" in the bal- 
 ance sheets of tlie New York Centra], seems reasona- 
 ble, and suggests a stock comparatively free from 
 "water." But the difi'erence between the cost of the 
 line and the total capitalization of $156,870,453 re- 
 quires some explanation. We find it in the fact that 
 the $81,000,000 of stock in excess of the cost of the 
 
 mand for a remedy equally imperative."' — Jiepoi't of New York Legislative 
 Committee, p. 18.
 
 262 The Bailways and the Itejpublic. 
 
 road is balanced, together with a portion of the sur- 
 plus, by an investment of $96,000,000 in the stocks 
 and bonds of other corporations having a par value of 
 $128,000,000. This practice of doubling the stocks or 
 bonds which a railway corporation may purchase, by 
 an additional issue of its own securities, is common 
 enough, but has hardly been carried elsewhere to such 
 a magnificent extent. 
 
 Whether or not it is proper, as a matter of account 
 in the business, that a railway's capitalization should 
 represent anything but construction and equipment, it 
 is certain that, for the purpose of this inquir}", we should 
 take nothing else into consideration as the basis of earn- 
 ings. The low earnings of the I'ailways, in proportion 
 to their cost, is advanced as a reason for askins: leo;is- 
 lative aid in the artificial maintenance of rates. Yet 
 here the total of railway capitalization is swelled by 
 counting the stocks of certain corporations twice ; the 
 stocks and bonds which the Pennsylvania Kailroad 
 owns, comprised in the grand total of the railway cap- 
 ital, being reported by each company which issues 
 them, and then represented again by $81,000,000 of 
 stock which it has issued, not as a railway buikler but 
 as an investor. It is plain that if this class of double 
 entry is practised by many companies, on any such 
 scale, it will account for a very large proportion of the 
 total capital of the railways ; and if the earnings are 
 not also counted twice, the apparent percentage of net 
 earnings on that part of the capital would be just half 
 the real percentage." Thus the Pennsylvania Railroad 
 
 * Suppose a railway "whose whole capital of $10,000,000, earning 10 
 per cent, net, or $1,000,000 annually, is bought by another company, 
 which issues its own stock, representing this investment, to the amount
 
 The Fictitious Element in Baihoay Policy. 2G3 
 
 earued, in 1884, $12,621,000, or apparently about 8 
 per cent, on the capital stock. But the cost of the 
 roads and equipment which made these earnings was 
 but $75,000,000; $81,000,000 of the capital being in- 
 vested in other roads. On this $75,000,000 the net 
 earnings were 17 per cent., or more than twice the rate 
 acknowledged by the company.* 
 
 Such a device as this may easily be employed to con- 
 ceal large profits, and for this purpose is the precise 
 equivalent, in its effect upon the published statements, 
 of fictitious issues of stock, or " watering." We may 
 remark, in dismissing the subject of inflation in the 
 stock of the trunk lines, that the Baltimore and Ohio 
 Railroad, with its very reasonable capital of $19,792,- 
 000 and bonded debt of $23,959,000, stands in strik- 
 ing contrast to the inflated book-keeping capital of its 
 competitors, however closely allied with them it may 
 be in other practices no less questionable. But the 
 inflation of capital has been practised on a large scale 
 by roads in other lines of traffic ; the most conspicuous 
 case being that of the anthracite - coal roads, several 
 of which have inflated their capitalization, by issuing 
 stock or bonds to purchase other railwa3^s, or mining 
 and manufacturing property, at an excessive valuation. 
 The history of the anthracite ■ coal pool is reviewed 
 
 of $10,000,000. There is now $20,000,000 of capital against this prop- 
 ertj', and the net earnings of $l]K000,000 annually may appear as 5 per 
 cent, on the investment instead of 10 per cent., as they really arc. 
 
 * The difference between the actual cost of railroads and tlieir equip- 
 ment in the United States and their aggregate capitalization is esti- 
 mated in "Poor's Manual" at .$700,000,000. The most charitable view 
 is that the difference mainly represents such investments in the securities 
 of other roads. As more than one tenth of the difference is accounted 
 for in the figures of the Pennsylvania Railroad, the presumption is not 
 violent.
 
 26-i The Railways and the Repiiblic. 
 
 elsewhere; but it is pertinent to the present discus- 
 sion to point out that, in fourteen years, tlie Reading 
 Kailway increased its debt more than $100,000,000 by 
 the purchase of mining properties at inflated values ; 
 that the same company's debt, which, in many ways, 
 is largely fictitious, includes $25,568,000 of deferred 
 income bonds for which it received but $7,670,000; 
 that out of the $270,000,000 of cai^ital of the four 
 anthracite - coal roads, the cost of roads and equip- 
 ment accounts for only $114,000,000, the remaining 
 $156,000,000 being charged to investments in coal 
 property, in the stock of other roads, and in various en- 
 terprises, and that investigation by legislative com- 
 mittees has proved that the total capitalization of rail- 
 road and mining property held by the members of this 
 combination is not less than $500,000,000. It has 
 often been asserted, and is not, I believe, denied, that 
 the stocks and debts of these railroads are fictitious to 
 the full extent of one half of their aggregate. That 
 the vast additional capital representing mining prop- 
 erties, upon which they have united to extort profits 
 from the public, is inflated in an equal or greater pro- 
 portion is beyond doubt. But, for the purpose of this 
 discussion, we need not look beyond the illegitimate 
 value in the caj^ital stock and bonds of the roads 
 themselves. 
 
 A still more notorious and flagrant example of stock 
 inflation is that of the Pacific railroads. The public 
 are familiar with the record of this creation of stupen- 
 dous wealth, out of the loan of a government subsidy 
 and the gift of an empire in land. It has been told 
 by Mr. Charles Francis Adams, in detail and with an 
 authority that is emphasized by his present position
 
 The Fictitious Element in Baihoay Policy. 265 
 
 at the Lead of one of the companies. The story of the 
 Construction Company, the " Credit Mobilier," upon 
 whose stock, the investment in which was nominal, the 
 greater portion of the shares and debt of the Union 
 Pacific Railway was distributed as dividends, is part of 
 the record of national politics. It is also well known 
 how the Central Pacific Railway was built. A com- 
 pany of capitalists, whose resources at the beginning of 
 the enterprise were $195,000, with the aid of loans 
 from the city of Sacramento and Placer County to the 
 extent of $550,000, built enough road to draw $848,- 
 000 from the United States Treasury as the subsidy 
 for the first section, and by repeating the process con- 
 structed the entire road ; with which, as a nucleus, 
 they have now gathered a total capitalization of $139,- 
 000,000. Similar illustrations might be found in the 
 financial " ballooning " of the Northern Pacific, the 
 Texas Pacific, and the Atlantic and Pacific; but an 
 outline of the history of the two older corporations is 
 sufiScient for our present purpose. Their aggregate 
 capital is $120,000,000 ; their funded debt, apart from 
 the government subsidy, is $136,000,000 ; and the con- 
 tribution of the United States to their construction 
 was $61,000,000, in the form of a loan, on which less 
 than half the interest has been repaid l)y the compa- 
 nies. Pg is well known that, of this capitalization, the 
 stock does not represent a dollar of actual investment; 
 that a large jiortion of the debt was pocketed by the 
 constructors of the roads in the shape of contracts, 
 which they made with themselves, to build the tracks 
 at two or three times the legitimate cost; that the 
 roads were almost if not wholly paid for by the gov- 
 ernment subsidy ; and that of the $259,000,000 of ad-
 
 266 The Railways and the BepuUic. 
 
 clitional stock and bonds issued upon the properties, 
 an estimate that one third represents invested cash 
 will be too liberal. Let us, however, assume that ratio, 
 as the average proportion of cash paid for securities 
 issued in the work of railway construction, in the trans- 
 Mississippi states and territories, on the authority of 
 an eminent Congressional advocate of the railroad side 
 of the question.* 
 
 Another method of inflating railway securities, 
 though much less notorious, deserves some attention. 
 Mr. J. H. Devereux's recent argument before the Cul- 
 lom Committee, based the claim for legislative aid, in the 
 work of sustaining artificial railway combinations, upon 
 the small profits of railway 2")roperty. He illustrated 
 this with figures from his own road, showing that, 
 while the stock and debt of the Cleveland, Columbus, 
 Cincinnati, and Indianapolis Railroad was $6,425,000 
 in 1867, the average net earnings were $653,000 ; that 
 in the next five years, after an increase of the stock to 
 $18,366,275 on mileage, increased from 188 to 391 
 miles, the net earnings averaged $857,000; while in 
 the next eleven years, the stock and debt being in- 
 
 *Hon. William Walter PheljDS, one of the leading oiDponents of the Rea- 
 gan bill in the House of Representatives, said, in a letter dated April 24, 
 1884, in ans\\-er to criticisms on Mr. Blaine's investment in Western rail- 
 vray securities : 
 
 " He negotiated for a block of the securities, -which were divided, as 
 usual in such enterprises, into three kinds — first-mortgage bonds, second- 
 mortgage bonds, and stock. The jjrice, I think, was 3 for 1. That is, 
 the purchaser got first - mortgage bonds for his money, and an equal 
 amount of second mortgage or land-grant bonds, and of stock thrown 
 in as the basis of possible profits. ... I went myself at this time into 
 several adventures of the kind on that ratio, and have always under- 
 stood that Senator and his friends got their interest in the Burling- 
 ton and Missouri road on the same basis of 3 for 1."
 
 The Fictitious Element in Bailway Policy. 2G7 
 
 creased to $22,286,000, the net earnings only averaged 
 8650,000 a year. This Mr. Devereux presented as an 
 illustration of the disastrous results of competition ; 
 and it certainly has that appearance on its face. But 
 he adroitly concealed the fact that while the capitali- 
 zation per mile of his road, at the period when his com- 
 parison commenced, was 833,000, the expansion of his 
 lines, in the next five years, had afforded the opportu- 
 nity of a still greater expansion of the stock and debt, 
 making the capitalization nearly 847,000 per mile; 
 while eleven years later, at the end of 1888, when, as he 
 says, the further enlargement of the capitalization was 
 due "to having acquired, partly by ownership and 
 partly by lease, 345-1 miles of additional road," owned 
 by the compan}^, according to " Poor's Manual," the 
 mileage was exactly what he states it to have been 
 eleven years before, while the debt and stock had 
 grown to the very large sum of $57,000 per mile. 
 Had Mr. Devereux stated this fact, his picture of the 
 trials of his road mio;ht not have been so movins;. 
 Suppose that the capitalization, so largely increased 
 during a period of decidedly cheap railway construc- 
 tion, had been kept down to the original average of 
 $33,000 per mile. The capitalization would then have 
 been $12,902,000 upon the increased mileage, on which 
 the average net earnings of 8650,000 would have been 
 more than 5 per cent. ; not immense prosperity, but 
 less disastrous than Mr. Devereux would have our 
 legislators believe. Add to this the recent stock divi- 
 dend of the Chicago and Northwestern Company, of 
 25 per cent, on 837,000,000 capital, in which there was 
 already estimated to be 810,000,000 of water, and the 
 case of the Wabash road on which a capitalization of
 
 268 The Railways and the Eejniblic. 
 
 $126,000,000 was formed, of wbicli lialf is confessed 
 to be fictitious, and it appears that tlie Middle States 
 and the granger railroads are not free from this prev"- 
 alent dropsy. 
 
 In conclusion, one more class of railway enterprises 
 may be referred to in connection with this subject. In 
 a recent paper Mr. Edward Atkinson asserts that "the 
 elimination of Avhat has been called watered stock 
 and bonds" against which "the silly crusade of so- 
 called anti-monopolists has been directed is in process 
 of accomplishment by methods far more potent than any 
 possible legislative acts," and that we " have reached 
 the end of construction companies, speculative build- 
 ing, and of the issue of two, three, or four dollars of 
 securities for every dollar actually paid." It is pleas- 
 ant to be assured of this comfortable conclusion by so 
 high an authority as Mr. Atkinson, if even his author- 
 ity can destroy the force of certain conspicuous facts. 
 Otherwise the extreme examples of this practice fur- 
 nished by capitalists in the cases of the Nickel Plate, 
 West Shore, and South Pennsylvania roads indicate 
 that the evils of construction companies, speculative 
 building, and the issue of several times the cost of the 
 enterprise in securities, were never more rife than now. 
 The three roads named were built when the cost of 
 construction was lowest. They were projected by cap- 
 italists whose large resources should have enabled 
 them to carry out their projects without floating ficti- 
 tious securities. Yet these eminent representatives of 
 railway finances overloaded their projects with many 
 times their cost in stocks and bonds, in a manner that 
 fairly rivals the achievements of the transcontinental 
 corporations. The New York, St. Louis, and Chicago
 
 The Fictitious Element in Railway Policy. 269 
 
 company, by contracting with its own members to build 
 the road for the bonded debt, created a capitalization 
 of 875,000,000, or $148,000 per mile. Their project 
 was called into existence by the fjictitious profits of the 
 trunk-line pool from 1877 to 1881 ; and by thus water- 
 ing the stock, while building their road parallel to the 
 Lake Shore railway, they were able to force upon the 
 Vanderbilt roads a controlling interest in their shares 
 at a depreciated price, but one which left tliem a vast 
 profit. The New York, West Shore, and Bufl^ilo Rail- 
 way, a project paralleling the New York Central, also 
 suggested by the temporary successes of the trunkdine 
 pool, created a capitalization of $49,000,000 of stock 
 and $70,000,000 of funded debt upon 498 miles of road, 
 or $221,000 of securities per mile. A contract with a 
 construction company, composed of the projectors, at 
 $100,000 per mile for single track and $200,000 per 
 mile for double track, to be paid in stocks and bonds, 
 is presumptive evidence of inflation; and the propor- 
 tion of actual value to the total of capitalization was 
 revealed by the ofters of the construction company, in 
 1882 and 1883, to sell the securities of the company, 
 with the stocks thrown in as a bonus, so that the cash 
 returns would be from two thirds to less than half 
 their fiice value. The President of the North River 
 Construction Company declared, in a pamphlet, in 
 1883, that the cost of the work for which it received 
 about $75,000,000 in securities was $34,160,000. This 
 was intended to facilitate the sale of the construction 
 company's shares ; but with tlie issue of $20,000,000 of 
 securities to purchase an existing road included in the 
 line, it showed the legitimate capitalization to be $00,- 
 000,000. It will Ije a more liberal estimate than that
 
 270 The Railways and the Repiiblic. 
 
 of the builders of the road to suppose that all the 
 bonds represent a legitimate investment and that the 
 stock is fictitious. The price placed upon the prop- 
 erty, in its recent purchase by the New York Central, 
 indicates that $20,000,000 of the bonds are also re- 
 garded as water. 
 
 The South Pennsylvania Railroad project illustrates, 
 in many striking features, the great railway abuses of 
 the times. The projectors of this enterprise, in itself 
 legitimate and desirable, had an offer to build and 
 equip the road for $10,000,000, and they planned a 
 liberal inflation, by raising that sum on bonds and 
 making the stock capital wholly fictitious. But the 
 project fell into the hands of the Vanderbilt interest, 
 and the plan was found to be wholly insufficient. The 
 stock was placed at $20,000,000 and the bonds at the 
 same amount. A contract was made with a construc- 
 tion company, said to consist of Mr. Vanderbilt's clerks 
 and brokers, to do for $15,000,000 the work which a 
 responsible contractor had offered to do for $6,500,000. 
 The $15,000,000 were to be furnished by a syndicate 
 of capitalists from New York, Cleveland, Philadelphia, 
 and Pittsburgh, -who were to receive for their subscrip- 
 tions the $40,000,000 of securities. It is now asserted 
 on good authority that the sum of $10,000,000 is an 
 ample estimate of the legitimate investment represented 
 by the $40,000,000. Upon this basis of four dollars 
 in capitalization for one of cost, the -greatest railway 
 capitalists of the country conducted this enterprise, un- 
 til, in pursuance of a broader policy, they sold out to 
 the Pennsylvania Kailroad, deserting the men who had 
 put their money into the project in good fiiith, to se- 
 cure a competing line, that they might to establish the
 
 The Fictitious Element in Railway Policy. 271 
 
 monopoly of the New York Central and Pennsylvania 
 roads over their respective districts. 
 
 We have thus glanced at fifteen of the important 
 railroads, with reference to the issue of fictitious or du- 
 plicate stocks. They are leading lines, and their man- 
 agement includes the greatest magnates of railway 
 finance. The largest railway stockholder of the land 
 was the master-mind of two of these companies ; the 
 two next largest shareholders in the nation joined in 
 inflating the stock of another. These instances com- 
 prise fair illustrations, from each class of railway traf- 
 fic, including three trunk lines, four anthracite - coal 
 roads, two transcontinental railways, three grain-carry- 
 ing roads of the Western States, and three recent proj- 
 ects constructed or attempted when labor and mate- 
 rials were cheapest. Wlien we find, upon a summary 
 of the figures, that the total capitalization of these fif- 
 teen corporations is $1,466,000,000, or more than one 
 fifth of the entire railway capitalization of the nation, 
 and that on their securities the lowest estimate of the fic- 
 titious element is $596,000,000, or nearly one half, some 
 conception is reached of the extent of this practice of 
 inflation, AVhen we call to mind the many roads that 
 have been built on bonds throughout the West, often 
 on bonds sold at three cpiarters or half their face value; 
 when ^ve reflect on Mr. William Walter Phelps's decla- 
 ration that the practice of issuing in securities three 
 times the amount of cash subscriptions is " the usual 
 one" in trans-Mississippi projects; when we remember 
 the hundreds of millions of securities issued in dupli- 
 cation of securities owned by the railway companies 
 themselves; surely the estimate of "Poor's Manual," 
 that the actual cost in money of all the railroads in
 
 272 The Hailways and the Bej)ublic. 
 
 tbe United States in 1883 did not exceed their funded 
 and floating debts, an aggregate of $3,787,000,000, and 
 that the fictitious capitalization was $3,708,000,000, is 
 moderate and conservative."^'' 
 
 How does all this affect the public interests ? Mr. 
 
 * Mr. H.V. Poor estimates the actual cost of all the railways of the United 
 States at 830,000 per mile. When equipment is taken into consideration, 
 this estimate must imply the partial scaling down of the cost towards tlie 
 present low prices of labor and materials. This may seem severe on 
 roads which were built at high prices ; but Mr. Poor has too often been 
 cited as a witness on the railway side of the case to allow any contradic- 
 tion of his testimony at present; and the following extracts from his 
 "Manual" for 1884 are conclusive as to the extent of stock watering: 
 "The increase of share capital and indebtedness of all the companies for 
 the three years ending December 31, 1883, was $3,093,433,054, the cost of 
 the new mileage, as represented by sliare capital and debt, being about 
 $70,000 i)er mile. The increase in the tliree years ot the funded debts 
 of all the companies was $934,165,440 ; of tlieir floating debts, $169,880,- 
 40G ; of the two, $1,094,045,846. It is not probable tliat the cost of the 
 mileage constructed in the three years equalled the increase of funded 
 and floating debts by at least the sum of $300,000,000. The cost of the 
 mileage constructed certainly did not exceed $30,000 to the mile. The 
 whole increase of the share capital, $999,387,308, and a jjortiou of the 
 funded debt, was in excess of cost of construction. 
 
 " It is in this immense increase of fictitious capital that is to be found 
 the cause of the general distrust which prevails, and the enormous decline 
 in the price of railroad securities. From 1879 to near the close of 1883 a 
 most singular delusion rested upon the public as to their value, and this 
 delusion was taken advantage of on a vast scale by able and unscrupu- 
 lous adventui'ers. Whatever was manufactured and put afloat was seized 
 with avidity by an eager and uninformed ijublic. The delusion was in- 
 creased and prolonged by payments on a very large scale of intereit and 
 dividends from capital. In this delusion the most loud-mouthed and un- 
 scrupulous promoters usually had the greatest success. . . . 
 
 " If it be assumed that the cost in money of all the roads in operation 
 in the United States in 1883 did not exceed, as it certainly did not, the 
 amount of their funded and floating debts, $3,787,410,738, the actual in- 
 vestment was a most profitable one. The net earnings for the year were 
 $336,911,884, a sura equalling about 9 per cent, on their cost. If the fic- 
 titious capital could be eliminated from their accounts, their success, as 
 investments, would have no parallel."
 
 The Fictitious Element in Railway Policy. 273 
 
 Edward Atkinson and Mr. Fink insist that there has 
 been an unnecessary outcry against " stock watering"; 
 so that it is pertinent to ask whether this gigantic 
 manufacture of purely paper values has any evil i-e- 
 sults. The instances cited show that securities in ex- 
 cess of cash investments are produced: (1), by stock 
 dividends of prosperous companies, capitalizing what 
 are called surplus earnings ; (2), by issuing the secur- 
 ities of unprosperous roads, for which the companies 
 receive only a portion of their face value; (3), by the 
 purchase of other railways, of mining or manufacturing 
 propert}', or of real estate, or by consolidation with other 
 companies, paying for the property prices lai'gely in ex- 
 cess of the real value, either in the capital stock of the 
 company or in new securities; and (4), by the construc- 
 tion of railways under contracts by which the projec- 
 tors, as a railway company, pay to themselves, as con- 
 tractors, from two to four times the cost of the work 
 in stocks and bonds, selling these to the public as they 
 can. The first method usually involves a deception as 
 to the percentage of profits which will be earned on 
 the inflated stock, and is a more or less transparent 
 fraud on investors as to the real value of their shares. 
 The second is often excused by the necessities of com- 
 panies, compelled to raise money on the best terms they 
 can ; but it is no less deceptive as to the actual invest- 
 ment, and is, by the secrecy which always attends it, 
 more demoralizing than the open stock watering of the 
 first method. Tlie third is a conspiracy to cheat both 
 the corporation and purchasers of its securities. The 
 fourth is a conspiracy of the founders of the coi'jiora- 
 tion to enrich themselves by robbing it, that, when they 
 have ruined their corporation, they may sell out their 
 
 18
 
 274 The Bailways and the lie-public. 
 
 stocks and bonds before tlie swindle is discovered, and 
 finally inflict the loss upon the investing public. 
 
 The effect of stock inflation upon the financial inter- 
 ests of investors is more direct and vast than its bear- 
 ing upon the shipping interests of manufacturers, mer- 
 chants, and producers. Although the latter is our spe- 
 cial subject in this work, the importance of the former 
 question warrants this sketch of the financial evils of 
 fictitious values. In fine, this practice of creating secu- 
 rities in excess of actual values has, by one method or 
 another, imposed upon investors a volume of fictitious 
 stocks and bonds more than double the amount of the 
 national debt. According to the estimate of the most 
 widely acknowledged statistical authority upon rail- 
 ways, through the methods of sale or hypothecation, 
 $3,700,000,000 of purely paper values have been sold 
 to the public. The creation of these fictitious securi- 
 ties has sometimes been so open and notorious that the 
 successful sale of them seems to indicate eao-erness to 
 be cheated on the part of the public. In other cases 
 the methods used have been so secret and so plausible 
 that it has been almost impossible for the legitimate 
 investor to detect them. In the end, the false values 
 have been so mingled with the real, and the fraudulent 
 investments made to bear so close a resemblance to the 
 honest ones, that at the present time the greater part 
 of the railway securities of this country are clouded by 
 the suspicion of illegitimacy. In the presence of this 
 mass of falsehoods and pretences, imitating real invest- 
 ments, it is not strange that a period of public creduli- 
 ty should be followed by a period of general suspicion, 
 when none of these doubtful investments are trusted; 
 but it is strange that another period of credulity should
 
 The Fictitious Element in Railway Policy. 275 
 
 come, allowing new inflations and fresli issues of ficti- 
 tious capitalization. Suspicion is the natural and le- 
 gitimate condition \vbile such practices are possible. 
 The gigantic wrong upon investors, perpetrated in the 
 creation of this $3,700,000,000 of fictitious railway in- 
 vestments, is one of the most serious and unanswerable 
 counts in the indictment ao-ainst the railway kiufrs. 
 Besides this imposition on the confidence of the public, 
 the practice of stock inflation reacts disastrously upon 
 legitimate railway interests. The loss which this wan- 
 ton violation of public confidence inflicts upon the rail- 
 ways themselves, is apparent in the rate of interest 
 which they must pay on their bonded debt. If the 
 bonds of tlie railways wevQ confined to one lialf the 
 actual and honest cost of construction, they would be 
 eagerly sought for at 4 per cent. ; and in that case, 
 $72,000,000 would have sufficed to pay the interest 
 charges in 1884. This would have left from the net 
 earnings of that year $196,000,000 as net profits instead 
 of the $91,000,000 realized under the rule of inflation ; 
 so that the second count in the indictment against stock 
 inflation is that it has for several years inflicted an an- 
 nual loss upon the honest shareholders of the railways 
 exceeding a hundred millions a year. 
 
 Again, the inflation of railway capital is intimate- 
 ly connected with the artificial combinations, which 
 seek to sustain rates and create fictitious prosperity, 
 and which lead, now to rivalry and ruinous conflicts 
 among the roads, and now, when the pools have been 
 temporarily successful, to the construction of parallel 
 lines to share the profits. In fact, the purpose and ex- 
 cuse of pooling are found in this vast volume of unwar- 
 ranted capitalization. The object of the pools is to
 
 276 The Raihoays and the BepuUic. 
 
 earn dividends on the watered stock. Under competi- 
 tion they conld earn a fair dividend on the legitimate 
 investment ; but when their stock and debt are doub- 
 led, the combinations are necessaiy to maintain rates 
 which will yield a profitable return on the inflated ag- 
 gregate. But when that result is attained, the violated 
 laws of trade work out their own revenge. The pros- 
 perity of the lines under the pools stimulates the con- 
 struction of new and parallel roads, either to share the 
 profits of the pools, or to force the older corporations to 
 buy them off. Against the $500,000,000 of watered 
 securities, on which the combination attempts to sustain 
 rates, $15,000,000 or $25,000,000 can establish a new 
 competing line, and the inducement to do so is vastly 
 enhanced when, in addition to a share of the pooling 
 profits, millions may be made by selling watered stocks 
 to the investing public. The $15,000,000 or $25,000,- 
 000 required to construct the new road become $40,- 
 000,000 or $100,000,000 on paper. The "securities" 
 (so called in irony) are thrown upon the market, at a 
 price which yields the speculators a great profit. A 
 conflict breaks out between the newer and older roads, 
 which throws Wall Street into convulsions, makes the 
 new investments of the confiding public nearly, worth- 
 less, sets the great corporations at the work of cutting 
 each other's throats and throwing away their own 
 money, produces the wildest fluctuations in rates, sur- 
 rounds leoritimate business with the hazards of iram- 
 bling, and plunges all the vast interests connected 
 with railway transportation into uncertainty and ap- 
 prehension. Throughout all this, the presence of ficti- 
 tious values is at once the cause and weakness of the 
 pools. It creates the demand for artificially enhanced
 
 The Fictitious Element zVi Railway Policy. 277 
 
 earnings ; it exposes the older roads to danger from the 
 competition of new capital ; it gives fresh projectors a 
 double resource in the prosecution of their enterprises; 
 and so the evil grows, with no prospect before it but 
 that it shall utterly destroy the public confidence which 
 is its foundation, and collapse in general disaster. 
 
 Our last charge against the practice of over-capitali- 
 zation is that it assists railway managers to manipulate 
 the financial markets. It is unfortunate that the rail- 
 way men, who have lamented, before investigating com- 
 mittees, the unremunerative character of railway invest- 
 ments, were not asked to explain the remarkable in- 
 crease of personal wealth among railway managers, 
 which has taken place during years unprofitable for 
 shareholders. Of the seven great fortunes of the East, 
 five have been made in railway management; of the 
 eight on the Pacific coast, four are the result of the 
 same business. Of these nine great railway capitalists, 
 eight have been connected with the creation of fictitious 
 securities and excessive capitalization, described in the 
 preceding pages. Unscrupulous management can not 
 only impose fictitious securities upon the public, but it 
 can make enormous profits by artificially causing vast 
 fluctuations in prices, to the hurt and demoralization 
 of the financial world. By their agreement or their 
 discord the managers can produce large advances or 
 declines in the market value of railway securities. 
 When the New York Central and the Pennsylvania 
 railroads combined to establish their respective mo- 
 nopolies in New York and Pennsylvania, the gain to 
 the Vanderbilt interest, by the advance in stocks, was 
 greater than its entire investment in the property 
 which it sold out. This is but one instance. The ad-
 
 278 The Bailways and the RepuUic. 
 
 vance ou railway investments succeeding the formation 
 of tbe pool, from 1876 to 1879, has been estimated to 
 exceed a thousand millions of dollars ; the gain in div- 
 idends from that cause has not amounted to a tenth of 
 that sum in all the succeeding years. The depreciation 
 in railway values brought about by rivalry, by the 
 weakness of watered capital, and by the efforts to en- 
 force the combination policy, has been more than five 
 hundred millions; the decrease in profits to sharehold- 
 ers has been less than 2 per cent, of that amount. Can 
 there be a doubt, in the presence of such vast changes 
 in market values, and such comparatively slight fluctu- 
 ations in the actual results of railway operations, that a 
 large share of the railway management of the nation 
 has consoled itself for the misfortunes of stockholders, 
 by accumulating private fortunes, the speculations be- 
 ing made safe and easy by prior knowledge of the com- 
 binations or quarrels which produced these results? 
 
 The financial freebooting which railway managers 
 have the power to practise is a vast subject. Even the 
 practice of stock watering and pooling seem to be sur- 
 passed by the achievement of a prominent railway ad- 
 venturer, who, practically confessing the betrayal of his 
 trust as President of the Erie Kailway, restored $9,000,- 
 000 of the diverted securities, and then made a profit 
 of his shame, realizing, by the advance in Erie shares, 
 more than the value of the stocks and bonds which he 
 had returned to the corporation. If this is part of the 
 history of the second railway shareholder of the nation, 
 what doubt remains that many methods of enhancing 
 their fortunes at the expense of the public, and of their 
 own shareholders, are habitually practised by railway 
 managers who value great wealth more than obscure
 
 The Fictitious Element in Eailway Policy. 279 
 
 integrity ? They have the power to transfer the money 
 of investors to their own pockets, by the sale of inflated 
 stocks and bonds, by contracts with themselves as con- 
 struction companies, by forming combinations or de- 
 claring wars of rates to produce wide fluctuations in 
 the stock market, by ruining subsidiary or rival lines, 
 and by such practices as were described in former chap- 
 ters — discriminations, contracts with fast freight lines, 
 with eveners, stock-yards, transfer companies, and ware- 
 housemen ; and whether the exercise of these powers 
 is general or infrequent, the investing public needs pro- 
 tection as much as the shipping public. But in each 
 case the danger is not, as the railway advocates insist, 
 from unrestricted competition, but from the inflation of 
 stocks, the policy of combination, and the entire ab- 
 sence of restraint upon reckless and dishonest manage- 
 ment. But there is some reason for holdino; that in- 
 vestors, as a body, are largely responsible for the inju- 
 ries they have sufi^ered, and that their claim for legisla- 
 tive protection is less valid than that of the mercantile 
 and manufacturing interests. Shippers have no re- 
 source against discriminations and the monopoly of 
 transportation except the law; and if this fails them, 
 they must surrender their business to the railway man- 
 agers and their ftivorites. The investing j^ublic has, to 
 some extent, a remedy in its own hands. Capitalists 
 may refuse to invest in securities that are not above 
 the suspicion of dishonest inflation ; shareholders may 
 forbid such practices, and depose every railway man- 
 ager who attempts them ; the bondholders of bankrupt 
 corporations may reorganize them with a legitimate 
 capitalization ; in fine, the actual owners and purchas- 
 ers of the railways have the powder to protect their
 
 280 Tlie Railways and the RepuUic. 
 
 property from spurious securities and fraudulent con- 
 tracts. But while investors raiglit, by common consent, 
 find a remedy for these abuses, the duty of the law to in- 
 terfere is no less clear. There is not much ground for 
 sympathy with the victim of a confidence game, who 
 parts with his money in the hope of illegal gain; but 
 the law justly punishes the sharper who appeals to his 
 dishonest cupidity. If the gigantic confidence game 
 of issuing fiat railway securities has been aided by the 
 cupidity or blindness of investors, they have been pun- 
 ished for it ; but the po^verful perpetrators of the fraud 
 should not be left free to repeat it on new victims. 
 
 Many sug-o-estions have been made for le2;islation to 
 prevent stock watering and financial freebooting; and 
 their detailed discussion is not necessary for the pur- 
 poses of this work. But it is pertinent to point out 
 that this evil, like discriminations and combinations, 
 is possible only because of the unrestrained power of 
 the railway managers. It would seem reasonable to 
 ask that the law should impose restraint on the class 
 which perpetrates these abuses, rather than on the class 
 which has suftered from them. But we are confronted 
 with a proposition that legislation shall abolish compe- 
 tition, and restrain the building of new railways; in 
 other words, that it shall establish the managers, who 
 have imposed these fictitious securities on the nation, 
 in the full enjoyment of their profits, and restrain the 
 freedom of the public which has been their victim. 
 This would be a mockery of private rights and public 
 justice. Let the law ordain that the stock and bonds 
 of a corporation shall not exceed the true cost of its 
 construction and equipment ; that the funded debt of 
 a railway shall not exceed half its total capitalization ;
 
 The Fictitious Element in Railway Policy. 281 
 
 aucl that a railway sold nnder foreclosure shall be re- 
 organized on the basis of the capital nctually paid on 
 such reorganization, and the unforeclosed mortgages. 
 These provisions, with the prohibition of the capitali- 
 zation of surplus earnings, recommended by the New 
 York Chamber of Commerce, and the uniformity and 
 publicity of railway accounts shown to be necessary 
 by Mr. Simon Sterne, in addition, would restrain the 
 real abuses instead of rewarding the men who have 
 committed them. The wild construction of railways, 
 stimulated by pooling and facilitated by the pi-actice 
 of stock watering, can be prevented, by j-equiriiig that 
 every dollar of stock or bonds issued by a new road 
 shall represent a dollar invested. To enact that capi- 
 tal shall not be free to embark in a leeritimate enter- 
 prise, without the approval of some official body, is to 
 place the freedom of trade under the control of bureau- 
 cracy, and to set the claims to i:)rotection of the spu- 
 rious railway issues above the freedom of honest capital. 
 The duty of the law is to restrain abuses, and to leave 
 legitimate investments open to all. By proper restric- 
 tions it can accomplish that result, insure security to 
 the capital invested under its provisions, and if the is- 
 sue of bonds is confined to half tlie actual investment 
 on the property, raise that class of securities to a level 
 of stability approximating that of government bonds. 
 
 It has been denied by Messrs. Fink, Atkinson, and 
 Devereux, that over-capitalization affects commerce. 
 They insist that competition fixes rates, and prevents 
 watered stocks from earning dividends. But they de- 
 stroy their own aigument, by asking legal support for 
 the polic}?- of combination, on the ground that the rail- 
 roads, under competition, cannot earn a fair return
 
 2S2 The Railways and the Republic. 
 
 upon tlieir stock and bonds. It is the advocates of the 
 railwaj's then who introduce this question ; for if the 
 capitalization is not honest and real, their reasoning is 
 valueless. Watered stocks are used to prove that the 
 rates which will pay a profit on them, as if they were 
 invested money, are reasonable rates. It is suggested 
 that rates are too low, that the railways have done 
 too much for the public, and now need aid from the 
 law to obtain fair profits. Let us examine the facts. 
 The earnings of the railways on their apparent capital- 
 ization last year were only 3.52 per cent., and for 1882, 
 as stated by Mr. Fink to the Senate Committee on 
 Labor and Education two years ago, 4 per cent. But 
 this apparent capitalization, as we have seen, is .about 
 twice the real investment ; so that the earnings are 
 about twice as large a return upon the real capital as 
 appears from the statement. Let us be more liberal to 
 the railways than Mr. Poor, and assume that the rail- 
 ways of the nation actually cost $4,000,000,000. On 
 that sum the net earnings of $268,000,000 amount to 
 6.7 per cent. If the cost were represented half by stock 
 and half by bonds, the unquestioned security of the 
 latter would make 4 per cent, an ample rate of interest, 
 requiring $80,000,000 of the net earnings. This would 
 have left $188,000,000 for dividends, or 9.4 per cent, 
 upon the stock. In this view, the conditions of rail- 
 way business do not seem to be so devoid of recom- 
 pense as Messrs. Fink, Devereux, and Blanchard would 
 have us believe. Mr. H. Y. Poor, in reviewing the rail- 
 way earnings for 1883, afiirmed that "if the fictitious 
 capital could be eliminated from their accounts, their 
 success as investments would have no parallel." This 
 remark applies with double force to the railway busi-
 
 The Fictitious Element in Railway Policy. 283 
 
 ness of 1884. In a year of great business failures and 
 general depression, when business men were exception- 
 ally fortunate if they were able to preserve their capi- 
 tal unimpaired ; when the prices of agricultural prod- 
 ucts were so low that corn was burned for fuel in the 
 West, and the market price of ^vheat in Europe would 
 hardly pay the transportation charges from Kansas; 
 when manufactories stood idle and artisans confronted 
 starvation — in such a year as this the railway interest 
 earned 6.7 per cent, on its actual cost, and, if its debt 
 had been placed on a secure basis, would have yielded 
 the shareholders 9.4 per cent, profit on their invest- 
 ment. Instead of the railways being in distress, they 
 have been the most prosperous of the great investments 
 of the time, and in the year of alleged disaster, when 
 earnings and profits fell tar belo\v their former average, 
 secured a return upon their cost which, as Mr. Poor 
 says, "is unparalleled." * 
 
 The real purpose, then, of the efforts to legalize com- 
 bination, is to obtain ^^I'ofits on fictitious capital by 
 abolishing competition. Fictitious capitalization affects 
 the interests of the public as shippers, mainly by afford- 
 ing at once the provocation and the excuse for an at- 
 tack upon the principle of competition, by combining 
 in pools to earn dividends on inflated capital If 
 
 * It is not intended to assert that rates are unreasonably liigh ; but to 
 show the falsity of the claim that they are so ruinously low as to call for 
 governmental interference. The average earnings of nearly seven per cent. 
 on legitimate railway capital arc not objected to by any sensible man, but 
 the fact tliat the average rates conceal the abuses of discriminations. 
 The case was succinctly stated by Mr. F. B. Thurber, before the Cullom 
 Committee, as follows: "Rates as a whole on inter-state traffic are now 
 lower tiian ever before, and in some cases unreasonably low, but in cer- 
 tain sections and on certain kinds of traffic rates arc still excessive, and 
 unjust discriminations pervade the entire system."
 
 2S4 The Railways and the Republic. 
 
 the capital had been limited to the legitimate cost, 
 there would be no excuse for arbitraiy devices to affect 
 rates; since even in a year when the pools were un- 
 successful, and all other business was unprofitable, rail- 
 way property earned a good average profit on a true 
 valuation. The effort of the railway kings to destroy 
 competition, after years of partial success, has of late, 
 for a considerable period, entirely failed; and it is in- 
 dustriously taught, by advocates of the railways, that 
 competition in raihvay traffic means ruin, and that the 
 state must interfere to prevent it from wrecking the 
 system. A railway president in the United States 
 Senate gi'avely says to that eminent body,* "the gen- 
 eral rule that competition is best for the community 
 and for the trade does not ahvays work, and will fre- 
 quently not work at all in railroading," and proceeds 
 to support this denial of the laws of trade, l)y showing 
 how railways will cut each others throats in the eflbrt 
 to establish arbitrary rates, until their rivalry, sustained 
 solely by the hope of obstructing competition, drives 
 the weakest or the most highly watered corporation 
 into bankruptcy. Another railway president tells the 
 Senate Committee that " competition that is wholly un- 
 restrained will ultimately work in this matter a harvest 
 of general disaster;" and this idea, advanced by Senator 
 Brown and Messrs. Devereux, Adams, Fink, Blanchard, 
 Ackerman, and a score of others, is echoed by the rail- 
 way journals. But the complaint against competition 
 really means that it has done much to reduce the ex- 
 cessive inflation of railway values, and to bring them 
 down nearer to the true standard of actual investment; 
 
 * Senator J. E. Brown's speech, Congressional Record, vol. xvi. pp. 875 
 and 876.
 
 The Fictitious Element in Railway Policy. 285 
 
 and that it Las thus exposed the stock-watering prac- 
 tices of the railway magnates. It is ruinous and de- 
 moralizing, because, when the ]'ailwa3's have earned fair 
 profits, it has prevented them from levying, upon the 
 business public, rates which will double these profits, 
 and return high interest on their fictitious securities. 
 And now, in order to defeat this influence, and make 
 the imposition of the false railway capital on the busi- 
 ness interests of the country completely successful, every 
 organ of these corporations calls on the legislative power 
 to legalize pools, and, as Mr. Fink puts it, to " compel " 
 the railways to form associations for maintaining rates. 
 A similar course might be grateful to other depressed 
 interests. Half of the blast furnaces have stood idle 
 most of the last year, under the competition of works 
 erected with improved appliances and at lower cost. 
 The owners of these useless establishments would 
 doubtless like to force their competitors, by law, into 
 associations, to maintain such prices for iron that their 
 obsolete stacks might go into operation ; but railways 
 would be the first to plead the interests of the public, 
 as consumers of iron, against suck conspiracies. The 
 owners of houses might approve a scheme to suppress, 
 by legislative aid, the competition for tenants, and so 
 raise the rents of houses to twice the fiiir return for 
 their actual cost. Such schemes are, of course, absurd 
 and impossible, in branches of business open to indef- 
 inite numbers of private citizens; but in principle the 
 policy supported by all the power of the great railway 
 magnates is the same. The demand for protection of 
 the railways against competition is no less a defiance of 
 the laws of trade and of the connnon law, as well as 
 of the constitutions of many states. Business intei'ests
 
 286 Tlie Bailways and the Republic. 
 
 in general nfay meet adversity and depression as best 
 they can ; but the railways must be helped to increase 
 an already exceptional prosperity by the utmost power 
 of the law. Commerce is not only to be left to struggle 
 against ordinary adversities, and the current railway 
 abuses of discrimination, extortion, and monopoly, but 
 it is to be bound hand and foot to the chariots of the 
 railway kings and forced to bear the burden of an il- 
 legitimate valuation of $3,700,000,000 on the railways; 
 while legislation is to give its attention to the great 
 work of confirming the corporations in their control of 
 transportation, and of enabling them to extract from 
 trade a revenue upon fictitious securities, amounting to 
 two and a half times the national debt ! 
 
 The project of authorizing the railways to join in 
 one vast combination, to control transportation and 
 abolish competition, will be accepted or rejected, as the 
 nation is willing to make the railways absolute sover- 
 eigns of commerce, or chooses to preserve the indepen- 
 dence of trade, and to assert the supremacy of popular 
 rights. If personal and commercial integrity are to be 
 maintained, and our political system freed from the 
 domination of corporations, then the aim of legislation 
 will be to restrain the corporations, to prevent all en- 
 croachment on public rights, and to maintain and ex- 
 tend the influence of competition, as the best agency 
 for regulating their conduct and checking projects of 
 inflation. So long as the public welfare, the preserva- 
 tion of justice and equality among citizens, and the 
 prevention of the growth of privileged and favored 
 classes are controlling principles in legislation, this 
 spurious remedy will find no favor.
 
 CHAPTER VIII. 
 
 COMPETITION AND COMBINATION. 
 
 The policy of the railroads is to suppress the free 
 action of economic law, denying the healthful influence 
 of competition. This policy has certainly had an im- 
 portant influence in limiting competition, impairing its 
 regulative power, and disturbing the natural work of 
 economic laws. The question, therefore, arises, what 
 these law^s would accomplish if they were entirely nn- 
 obstructed. What would be the efl^'ect upon the rail 
 way business, and upon its current abuses, if competi- 
 tion were as free and universal in it as it is in any oth- 
 er branch of trade ? 
 
 Competition is intimately connected with discrimina- 
 tion in rates. Its presence or absence is the determin- 
 ing fiict which forbids or permits the railways to bur- 
 den the public with unequal and unjust rates. The 
 presence of competition at one point, and its absence at 
 another, produce all discriminations between localities. 
 The practice of charging less for a long haul than a 
 short one does not arise from any love of the railways 
 for doing a greater service for less money, but from the 
 fact that there is competition for freiglit for the longer 
 distance and none for the shorter. The practice of 
 charging " wliat the freight will bear" cannot stand be- 
 fore free competition for the carriage of sucli freight. 
 If there is no competition, tlie decision of the railway
 
 288 The Railways and the Bejpuhlic. 
 
 that freight from one mine or factory will bear a high- 
 er rate than that from a riv^al, is final. If competition 
 is free, its effect is controlled by the common judgment 
 of the competing roads as to what chai'ge will yield 
 them a fair return. The policy of the railway pool to 
 suspend competition between rival routes, and, w^hen 
 necessary, to imite their forces to suppress it, shows 
 how the railways appreciate its power and desire to 
 abolish it. In all these respects, the presence or ab- 
 sence of free competition exerts an active and control- 
 ling influence in favor of impartiality in railway rates. 
 The vast importance of this influence warrants an in- 
 quiry into its character and operations. 
 
 Competition, in commerce, is the rivalry of produ- 
 cers, merchants, and carriers ; each of them striving to 
 secure business by holding out superior inducements for 
 the employment of his services. The superiority may 
 be either in cheapness, or in the quality or the prompt- 
 ness of the service. But in any case the purpose of 
 competition, in manufactures, trade, or transportation, 
 is to secure patronage or custom by doing more for the 
 same money than any rival. Thus competition seeks 
 to increase profits by enlarging the volume of transac- 
 tions, so that a small profit yields greater returns than 
 a larger margin on a small volume of business. Its le- 
 gitimate operation secures increased gains to active and 
 intelligent enterprise. But the interests among which 
 the railway methods have been prevalent seem to im- 
 agine that the old axiom, "competition is the life of 
 trade," has been repealed by the modern conditions 
 of commerce. No doubt it may be plausibly asserted 
 that corporate influences have, in these times, destroyed 
 much of the power of competition in commerce ; but
 
 Corrvpetition and Combination. 289 
 
 the assertion tliut free competition has always produced 
 the healthiest and most prosperous condition of trade 
 remains indisputable. Yet the practical denial of it is 
 so general, in the current combinations and pooling de- 
 vices, that it is worth while to review some of the ben- 
 efits which unhampered competition confers on com- 
 merce. 
 
 The first of these, already mentioned, is the expan- 
 sion of commerce — competitors increasing their business 
 by narrowing their mai-gin of profits. In tins respect 
 there is no other power which can take its place. Ex- 
 cept under the pressure of competition no man has the 
 foresight to cut down his prices, so as to stimulate trade a 
 hundredfold, thereby increasing profits tenfold. Again, 
 competition off'ers such rewards for cheapening the cost 
 of any product, that it powerfully stimulates all devices 
 or inventions to accomplish that end. All plans for 
 facilitating the o2:)erations of commerce, and all im- 
 provements in the character of manufactured products, 
 are encouraged by competition and obstructed by the 
 want of it. Under its sway manufactures seek the 
 places best suited for economical production, and mer- 
 cantile business centres where the distribution to cus- 
 tomers w^ill be most expeditious. Monopolies will lo- 
 cate such interests wherever whim or prescription may 
 dictate. With competition, every invention for \)vo- 
 ducing better or cheaper staples, all improved methods 
 for transacting business, and every device for lessening 
 cost are quickly seized upon, to secure the gains of en- 
 larged business; without it all such improvements may 
 be discarded or smothered by the prejudice or interest 
 of those commanding the market. Under competition 
 commerce is active, intelligent, strong, and independent; 
 
 10
 
 290 The Railways and the BepuUic. 
 
 without it commerce is inert, lifeless, stupid, and un- 
 healthy. This is simply repeating truisms ; but they 
 must be made prominent when railway advocates sug- 
 gest that free competition is an evil to be suspended or 
 abolished. 
 
 There is similar occasion to reassert another princi- 
 ple which belongs to the alphabet of commercial sci- 
 ence. Legitimate competition never requires the sale 
 of merchandise or the performance of services at a loss. 
 Mr. Fink, in his testimony before the Senate Commit- 
 tee in 1883, made a distinction between legitimate and 
 ruinous competition. The distinction is important, al- 
 though Mr. Fink's application of it is questionable. As 
 the sole aim of competition is increased gains, by the 
 expansion of business, the policy which expands busi- 
 ness by reducing prices, so that every increase involves 
 a greater loss, is not competition at all ; and a little 
 examination will show the nature of the difference. 
 The man who gives away a horse or a barrel of sugar, 
 to prevent his rival in trade from selling them, does 
 not take counsel of competition. No merchant will at- 
 tack his rivals by doing business at a loss, unless he 
 hopes either to drive them out of business or to force 
 them into a combination to sustain prices. Such ruin- 
 ous rivalry is only resorted to where free and natural 
 competition is impeded, or has so narrow a basis as to 
 make combination or consolidation possible. It is a 
 universal law that, in proportion as the basis of com- 
 petition is broad and unlimited, the pushing of rivalry 
 to the extent of loss is impossible. Take the case in 
 which competition is most universal. The farmer has 
 seven millions of competitors in this country in supply- 
 inir the markets of the world with breadstuffs. Did
 
 Competition and Combination. 291 
 
 any one ever hear of a farmer cutting clown the market 
 price for grain, in order to prevent a rival from making 
 a sale ? In a city where there are a hundred merchants 
 engaged in the same line of trade, it would be absurd 
 for one of them to give away a quarter or a tenth of 
 the cost of his goods, out of rivalry with his competi- 
 tors. He will labor and scheme to bring his prices 
 down to the lowest level consistent with a narrow mar- 
 gin of profit ; but there he will stop. It is only where 
 there are a few competitors that the policy of selling 
 below cost is resorted to ; and its purpose is invariably 
 to force rivals out of trade, or into a combination to 
 maintain artificial rates. The law of trade is that free 
 and general competition always brings the price of 
 commodities into the closest relation with their cost; 
 and whatever instances may be cited of rivalry that 
 has reduced prices below cost, it will invariably be 
 found that it was not the result of legitimate com- 
 petition, but was practised where competition was 
 limited and obstructed for the purpose of suppress- 
 ing it. 
 
 Notwithstanding the recent teachings of the railway 
 advocates, these principles apply to transportation, as 
 directly and forcibly as to any mercantile or manufact- 
 uring interest. In observing their application to the 
 railway business, the first question is, how far the prin- 
 ciple of competition prevails in railway operations. In 
 the criticisms which have been made upon the railway, 
 it has been very common to hear them called monopo- 
 lies — a term which the defenders of the corporations 
 pronounce demagogical and unjust, or, as one writer of 
 more than ordinary courtesy put it, "produced by mis- 
 information spread by the politicians and a portion of
 
 292 The Railways and the Republic. 
 
 tlie press." Whether there is truth in the charge of 
 monopoly depends on the question, how fully the prin- 
 ciple of competition is allowed to work in the conduct 
 of railways, or how far it is disturbed or suspended. 
 The character of the railway as a monopoly is very 
 easily determined, by applying a standard furnished by 
 one of the most extreme advocates of the present rail- 
 way system.* He declared that the railways are not 
 monopolies, because they lack " that absolute and ex- 
 clusive proprietorship which is the decisive criterion 
 of monopoly." Absolute and exclusive proprietorship 
 of any traffic being the decisive criterion of monopoly, 
 it seems necessary to inquire how for it may be asserted 
 of the railways, before confessing that it is unjust to 
 call them " monopolies." It is certain that the railways 
 practically have absolute and exclusive proprietorship 
 of their tracks. The state having established a public 
 highway, to be improved and operated by the railway 
 corporation, the corporation has obtained a monopoly 
 of transportation over that highway. It is as if a turn- 
 pike corporation were empo\vered to exclude all vehi- 
 cles from its highway, save those which itself should 
 furnish. Of the justice and legality of this exclusive 
 and absolute proprietorship, discussion may be reserved 
 for the future. It is sufficient to note, at this point, 
 that under the present system every railway in the 
 land possesses a monopoly in transportation over the 
 line which the state has granted to it. The essence of 
 a monopoly is its ability to prevent competition. The 
 burdens which it lays on the public may be mild and 
 easy, or may be onerous and grinding; but the essen- 
 tial nature of a monopoly is its ability, by whatever 
 
 * C. S. Patterson, Princeton lievieic, January, 1884.
 
 Competitioji and Combination. 293 
 
 means, to suppress or avoid competition in its business. 
 In other words, where there is no com2?etitioii^ there is 
 either active or passive monopoly ; where free competi- 
 tion exists, inono'pohj is impossihle. 
 
 There is no doubt that competition has an influence 
 over railway policy and rates ; but it is no less certain 
 that, as railways are now managed, there are some im- 
 portant departments of traffic in which competition has 
 no direct influence. The railways have no monopoly 
 over transportation as a \vhole ; but each railway has a 
 monopoly over the transportation on its own line, and 
 the attempt of the railways is to establish, by combin- 
 ing their exclusive privileges, a practical monopoly over 
 all traffic that cannot advantageously take other routes. 
 Every railway is free to do what it pleases with its 
 local traffic. It may charge five times as much in pro- 
 portion to distance as it does from competing points, 
 as in the case of Winona and Memphis; it may assess 
 upon the business any rate which, in its judgment or 
 whim, "the freight will bear;" or it may charge to the 
 local point the full rate for hauling it through the local 
 station to the terminus of tlie road, and the local rate 
 for hauling it back again, as has been done by both the 
 Central and Nortliern Pacific roads. This local busi- 
 ness, however small at eacli station, is vast in the ag- 
 gregate. It is probable that, of all the railway traffic 
 in the country, there is not five per cent, that does not, 
 at some point, experience this absence of competition. 
 The manufacturer whose works are located where two 
 or more railways compete for his business, may not feel 
 it on the sliipment of his products ; but the raw mate- 
 rial from which the product is made, the coal, ore, pig- 
 iron, or cotton, has felt it somewhere. The shipments
 
 294 The Railways and the liejpublic. 
 
 of grain from the Western cities often get the full bene- 
 fit of competition ; but the grain has suffered the effect 
 of exclusive control at the local station where it was 
 first shipped, and where the rate for carrying it a hun- 
 dred or two miles, to the nearest competitive point, may 
 be greater than the charge for carrying it from that 
 competitive point to the seaboard, 1000 or 1200 miles 
 away. The shipper who starts freight at local points 
 has no check upon the absolute rule of the railway, 
 save as it is influenced by considering what the freight 
 will bear, or by the more remote apprehension that the 
 competition of capital may construct a parallel line to 
 share its business at way stations. Neither of these 
 considerations has ever been known to prevent dis- 
 crimination. The work of actually present or impend- 
 ing competition cannot be done by the expectation that 
 it may arise in the future. 
 
 While competition is almost excluded from the va.^t 
 volume of traffic at local points, its operation on all 
 other business is suspended in proportion to the suc- 
 cess and permanence of the pooling combinations, into 
 which nearly every important railway in the country 
 has entered. The pools have not been able to abol- 
 ish competition altogether ; and it is impossible to as- 
 certain on what proportion of the railway traffic of the 
 country they have at any time succeeded in suspend- 
 ing it. But we know that the union of the railways 
 in pooling combinations has for its purpose the sus- 
 pension of direct and natural competition between 
 them. The instances in which these pools have been 
 established on a firm basis, and have controlled the 
 traffic pooled for a series of years, show their character 
 and tendency. The petroleum-carrying pool, which built
 
 Competition and Combination. 295 
 
 •up the Standard Oil Company; the anthracite pool, 
 which has broken down independent shippers, and 
 charges more for fuel, almost at the mouth of the mine, 
 than two or three hundred miles away ; the live-stock 
 pool, which sustained the eveners' discrimination, and 
 deprives the public of the economy in transporting 
 dressed beef; the Pacific Railway pool, which main- 
 tains the " special contract " iniquity — all these show 
 how the successful and permanent workings of pools 
 abolish competition, and what abuses and evils fol- 
 low when competition is abolished. One of the ablest 
 attempts to represent competition as still regulating 
 railway traiSc was made in a magazine a year or t\vo 
 ago/'* It is valuable, not only for its proofs of the 
 beneficial results of natural competition, but also as 
 showing, in spite of the writer's indisposition to make 
 the fact prominent, that the present railway system 
 perpetually aims to hamper and obstruct every active 
 form of its influence. He first points out how the com- 
 petition of capital is felt in building new lines, when- 
 ever the profits of railways exceed those of other in- 
 vestments. If this is a regulative influence, what is to 
 be said of the present policy of the railways to crush 
 out, absorb, or buy off this form of competition when- 
 ever it becomes active ? Nor does this writer observe 
 how this remedy has often amounted simply to creat- 
 ing two tracks where one would suflSce, witliout afford- 
 ing any relief against discrimination in local traffic. 
 The aim of railway reform is not to restrict the earnings 
 of capital, but mainly to prevent abuses and injustice, 
 which are of no benefit to the capital. The competition 
 
 * " The Railway and the State," G. L.La.ns'mg, Mrth American lieview, 
 
 May, 1884.
 
 296 The Bailways and the Repxiblic. 
 
 of 23arallel lines and of water routes is pronounced by 
 the same writer " the surest possible guarantee of the 
 lowest rates and the best service." There is some 
 truth in this, but the extraordinary instances of discrim- 
 ination against localities, noticed in the early part of 
 this work, have shown us that the competition of par- 
 allel routes only protects those directly reached, and 
 imposes a burden on others. But does not the ad- 
 mission that this form of competition is important to 
 the public interests amount to a confession that the ef- 
 forts of railway managers for ten years past to suspend, 
 by all means in their power, the competition of parallel 
 railway lines, and, by their combined strength, to neu- 
 tralize the competition of water transportation, are 
 against public policy? If such competition is bene- 
 ficial to the public interests, and affords " the surest 
 possible guarantee" against excessive charges, can the 
 banding together of all the important railways, wher- 
 ever their contact would naturally produce competition, 
 for the sole purpose of abolishing tliat guarantee, be 
 less than a public danger ? 
 
 We are next confronted with a fanciful theory, that 
 "markets that are common to various points of pro- 
 duction or supply control the rates from all these points, 
 by the competition which may exist with any one of 
 them. The lowest rate to the market by any one route 
 controls the rates by all the routes." This is explained 
 to mean that if any one of half a dozen places can, by 
 commercial nearness, supply a market with merchandise 
 at cheaper rates than other places, it is necessary for 
 the railways to reduce rates to the other places, so that 
 they shall be equal to all. This is so far from being 
 true as a rule that, although some railway practices
 
 Competition and Comlination. 297 
 
 might be cited to support it, we should hardly discuss 
 it seriously, had it not been suggested also by Messrs. 
 Fink and Atkinson. Having the support of their 
 authority, it may be regarded as illustrating the pre- 
 vailing tendency of the railways to ignore the cost of 
 service as a consideration in freight rates. New York 
 and Philadelphia can act as entrepots for the agricult- 
 ural interests of Ohio, at less cost for transportation 
 than Charleston or Savannah, but this is no reason 
 why the railways should attempt to put them all on an 
 equality, by making the same rates to all. Nor can 
 they do so, if the rates to the former ports bear any 
 reasonable proportion to the cost of service. Mr. Lan- 
 sius: furnishes his own reductio ad ahsurdam. in the 
 assertion that if the cost of production of grain were 
 the same in Dakota as in Germany, the rate of freight 
 on taking the products of the two countries to the Eng- 
 lish market would be the same. This is a surprising 
 reversal of the relations of cause and effect. AVhy is 
 the cost of producing grain less in Dakota than in 
 Germany? Labor is dearer, the rate of interest on 
 capital much higher, and the cost of implements no 
 less. The one condition that enaldes Dakota to pro- 
 duce grain in competition with Germany is that land is 
 cheaper. But why is the land cheaper? Simply be- 
 cause it is farther from market, and the cost of trans- 
 porting its products to consumers is greater, so that 
 the products are "worth proportionately less. INIr. Lan- 
 sing's proposition needs to be reversed. He should 
 have said, that if the rate for transporting grain could 
 be made the same from Dakota as from Germany, land 
 would be as dear, and therefore the cost of production 
 as high, in the Western States as in Europe. Certainly
 
 298 The Hallways and the Bepuhlio. 
 
 the cost of transportation cannot be made the same, 
 unless by violent interference with the laws of trade, 
 such as is practised in some degree wherever this theory 
 is applied. " The rates from Bristol, Liverpool, Cardiff, 
 and Newport," says the manager of the Great Western 
 Eailway of England, as quoted by Mr. Lansing, " have 
 to be fixed so as to enable them to compete with Glou- 
 cester." Not unless the conipetition rests on the nat- 
 ural basis of equal advantages. There is no obligation 
 to do it on behalf of the stockholders, if the rates tall 
 below the cost of service on the more circuitous routes, 
 for that is simply throwing away the corporation's 
 money. There is no obligation to do it on behalf of 
 the public, for it is not the duty of the railway to bring 
 Cardiff as near to Birmingham as Gloucester is. It is 
 for the public advantage to have commerce transacted 
 by the most direct and economical routes. Political 
 economy abhors the waste of human effort in ti'ansport- 
 ing merchandise a greater distance than is necessary, as 
 much as nature abhors a vacuum. The theory of put- 
 ting all markets on a dead level of equality, without 
 regard to distance, can spring only from the vicious 
 practice of disregarding the actual cost of service. Mr. 
 Lansing's idea of the competition of markets as affect- 
 ing railway rates involves, as a premise, the suspension 
 of natural competition in transjiortation. 
 
 Mr. Lansing concludes his account of the work of com- 
 petition among the railways by an important and use- 
 ful statement, showing the extent to which earnings have 
 been increased by the expansion of business, when com- 
 petition has reduced rates.* But he omits to state the 
 
 * Mr. Lansing compares the earnings of four trunk-line roads in 1875 
 and in 1880 ; and the earnings of tlie Central Pacific in 1877 and in
 
 Competition and Comlination. 299 
 
 fact whicli is really the key to the whole discussion; 
 that such reductions of rates are always the result of 
 direct competition with other routes. This exposition 
 
 1882. In the case of the trunk lines, a reduction of 25 per cent, in the aver- 
 age rate brought an increase in tonnage of G9 per cent, and an increase 
 in the net earnings per mile of road of 47 per cent. To the Central Pa- 
 cific, a reduction of 33 per cent, in rates brought an increase in tonnage 
 per mile of 47 per cent. The general operation of the principle can be 
 shown more fully by a comparison extending over a time so long that 
 the varying circumstances of successive years will be eliminated in the 
 average results. For this purj^ose the following table is compiled from 
 the reports in " Poor's Manual," giving for the Pennsylvania, the New York 
 Central, and the Erie Railways, for four periods of five years each, their 
 average rate per ton-mile, the aggregate tonnage carried one mile, the 
 gross and net freight earnings, and the profits on freight per mile of 
 road : 
 
 ,,., ^ Rate per Agjjrcgate Gross freight Net freight Profit 
 
 Miicnge. tQii.iuiie. ton-mileage. earnings. earnings. per mile. 
 
 1S55-59 lero $2.51 462,283,681 fn.CC.V'!) $5,538,063 $3460 
 
 1865-09 2204 2.3T 1,1588,98'.), 433 35,802,734 10,212,493 441T 
 
 1ST5-T9. 2956 O.OC 4,695,055,078 45,100,293 15,185,723 5092 
 
 1380-84 3260 0.81 6,990,801,870 50,835,191 19,972,049 5905 
 
 Similar results are seen in the following summary of the rate, aggregate 
 volume of freight, and gross earnings of the six leading Western railways, 
 known as Granger roads, for the periods from 1870 to 1874 inclusive and 
 1880 to 1884, compiled from " Poor's Manual :" 
 
 Kate per tou-mile. Aggregate ton-mileage. Gross earnings. 
 
 1870 ?2.42 1,234,078,291 $29,919,953 
 
 1S71 2.50 1,233,0.')S,058 30,947,254 
 
 1872 2.53 1,337,038,003 31,074,609 
 
 1873 2.13 1,719,496,090 37,029,776 
 
 1874 2^ 1.851.64.5,824 40,004,035 
 
 Averages $2.30 l,477,r83,3Sl $33,715,138 
 
 ISSO $1.2C 4,M4,409,655 $.'57,551,693 
 
 1831 1.42 4,435,202,005 0.'!,007,705 
 
 1882 1.36 5,041,330,034 08,792,350 
 
 1883 1.30 5,708,173,429 7.5,504,744 
 
 1SS4 1.2.'S 5,940,110,011 74,.S.^)3,290 
 
 Averages $l.S-.i 6,145,857,027 $07,853,909 
 
 Thus it is a general law that the reduction of rates under competition 
 gradually brings increased prosperity to the roads l)y the enlargement of 
 business. In the case of the trunk lines this process, in twenty-five 
 years, reduced the average rate by 08 per cent., but it cx2)andcd the 
 net freight earnings per mile of road by 72 per cent. In the case of the 
 Granger roads the reduction of the rate by 40 per cent, in a period of ten
 
 300 The Railways and the Republic. 
 
 of the true railway prosperity which comes from com- 
 petition, is convincing, and is a valuable contribution 
 to the discussion of the railway problem. Its value 
 lies in the proof that only the pressure of competition 
 brings this kind of prosperity to the railways. There 
 may have been somewhere in the country, as Mr. Lan- 
 sing seems to thinlc, a railway board so liberal in its 
 vie'ws that, without external pressure, it established for 
 its traffic rates which in the first instance would be 
 ruinous, solely in the expectation of enhanced earnings 
 from the future increase of business. But such cases are 
 certainly too rare to affect the general statement, that the 
 policy of what is virtually the entire railway manage- 
 ment of the country is to stop this reduction of rates 
 by suspending competition, and that for this purpose 
 pooling combinations have been formed embracing all 
 the parallel and competing lines between the Sierra 
 Nevadas and the Atlantic coast. 
 
 In tliis respect it cannot be said that railway com- 
 panies are exceptionall}^ short-sighted in their selfish- 
 ness. No business man holdino- exclusive control of 
 his trade will reduce his margin of profits for the sake 
 of expanding his sales. However intelligent and far- 
 years expanded gross earnings 100 per cent. These figures sliow that a 
 reduction of rates, accomplished by economy in working the roads and 
 by narrowing the margin of profits, brings its reward to the raih'oads in 
 the increased volume of tonnage. In this case it is indisputable, as Mr. 
 Crafts says, " that an increase in the profits of the rn,ilroad is not at the 
 expense of the community, but is an accompaniment of the general in- 
 crease of wealth which has been made possible by the lower rates of trans- 
 portation."' But it is also important to bear in mind that this is a very 
 diflTerent kind of prosperity from that which the prevailing railway policy 
 aims at, when it forms artificial obstacles to the reduction of rates, and 
 establishes arbitrary tariifs, suspending the influence of competition, 
 which has benefited the public and the railways alike.
 
 Competition and Comhination. 301 
 
 sighted tlie merchant or manufacturer may be, or what- 
 ever his command of capital, it is not in ordinary com- 
 mercial nature, working for present profit, willingly to 
 surrender that profit in the hope of getting it back 
 after many days. In every branch of trade and manu- 
 factures experience shows that the man who can keep 
 up his prices will do so ; but it also shows that when 
 competition does its work, reduction w^ hich would have 
 been deemed ruinous, benefits, in the end, the trade it- 
 self, as well as the purchasing public. From roller- 
 skates to railways, and from telephones to steel rails, 
 this law has been demousti"ated by experience, with the 
 certainty of a proposition in geometry ; yet, in view of 
 the practical ignorance of it often displayed, it might 
 be termed the pons asinoriun of commercial science. 
 There is no reason to suppose that it needs any quali- 
 fication in its application to the conduct of railways ; 
 but the disposition of the railway world to obstruct 
 its operation, demonstrates that the incentive to rail- 
 way managers for the increase of their trafiic, by the 
 voluntary reduction of their rates, is not so strong that 
 they can be expected to pursue this policy without the 
 pressure of external competition. 
 
 These remarks do not detract from the value of Mr. 
 Lansing's convincing demonstration, that the general 
 reduction of rates caused by competition has rapidly 
 developed the traffic of the railways and the resources 
 of the country. With the comment that this enlarged 
 railway policy is only produced by competition, it fur- 
 nishes important aid towards the solution of the rail- 
 way problem. It is a matter of the first importance 
 that a reduction of from one fouiih to one tliird in 
 the average rates of leading railways during five years,
 
 302 The Bailways and the Re-piiblic. 
 
 expanded their average net earnings more than forty 
 per cent. It aj^pears, therefore, that the direct and in- 
 direct forces of competition, already reviewed, have been 
 so general as to exert a vast influence on railway man- 
 agement. It has made railway officials quick to per- 
 ceive and adopt inventions for increasing their facili- 
 ties or improving their service. It has made them ac- 
 tive in measures that will enhance their business, and 
 prompt in adopting new economies. More than this, 
 wherever business has been reached by direct compe- 
 tition, it has forced a gradual reduction of rates, bring- 
 ing with it a vast expansion of traffic, and benefiting 
 alike the railways and the public. When all this is 
 duly recognized, the fiict remains that competition does 
 not reach the local ti'affic ; that it has been artificially 
 and arbitrarily abolished by the few railway pools that 
 have been successful for any considerable time, and 
 that the prevalent policy of railways is further to limit 
 or to abolish it. The good wrought by competition, 
 wherever it reaches, proves the necessity for extending 
 it to the traffic which it does not reach, and for resist- 
 ing all efforts to abolish it. The dangerous forms of 
 inequalities and injustice, which have been practised 
 wherever it was suppressed, forbid that the power to 
 suppress it by artificial combinations shall be extended 
 or continued. 
 
 It is important to observe that, with the present ten- 
 dency to combination, the livalry which springs up be- 
 tween the railways, when the combinations are broken, 
 is not legitimate and natural competition. The natu- 
 ral aim in competition is to secure increased gain by 
 increased traffic ; and the expansion of traffic on which 
 every increase brings additional loss is utterly incon-
 
 Convpetition and Comhination. 303 
 
 sistent with such an aim. In fact, iincler the present 
 railway methods, such legitimate and healthful compe- 
 tition is unknown. Mr. Fink very properly draws the 
 line between legitimate and ruinous competition ; but 
 he seems to take the ground that all competition be- 
 tween railways is of the ruinous variety. And it is 
 true that nnder the influences which he, more than 
 any other man, has helped to establish, the rivalry into 
 which the railways enter, Avhen any of them break 
 away from the pools, seems to be as to which can 
 make the most extreme and violent reductions in rates. 
 But what is the reason of this ? Are such eccentrici- 
 ties the fault of comjDetition ? The true reason is that 
 one or more of the contending parties is striving to 
 force the others to accede to its terms in the combina- 
 tion. The blame for this " cut-throat warfare" lies, not 
 with the principle of competition, but with the policy 
 of railway combination struggling for monopoly. When 
 one railway strikes what is called ''a decisive blow," 
 by cutting down the freight rates from Denver to Chi- 
 cago to twenty-five cents, or another enters a railway 
 combat by putting the price of emigrant fare from New 
 York or Philadelphia to Chicago or St. Louis at a dol- 
 lar, it is not competition, but a means of enforcing com- 
 bination. The purpose of such reductions is to impair 
 or threaten the revenues of rival lines, until they come 
 to terms, abolish competition, and establish another pool. 
 The difference between the operation of the machinery 
 of combination and that of legitimate competition ap- 
 pears in the violent and unnatural changes caused by 
 one influence, and in the steady and gradual reduction 
 which takes place under the other. One railway an- 
 nounces a reduction of one tliird on its tariff rates from
 
 304 The B,ailways and the RepuUic. 
 
 a competitive point. Its rival follows witli a cut of 
 one half; and the policy of destroying each other's 
 revenue is kept up until one or the other is driven to 
 terms. This is not competition, nor does it belong to the 
 same class of economic causes. True competition, striv- 
 ing for gain by reducing the cost of service, is gradual 
 and careful in its operation. The idea of striking off 
 one half the freiirht char2;es at a sino-le blow is iucon- 
 sistent with the pursuit of profit, which is the motive 
 in competition. Such a reduction admits but two pos- 
 sible explanations; either the railway which makes it 
 is throwing a^vay its stockholders' money to injure its 
 rivals, or it has broken away from a combination which 
 maintains excessive rates. In either case the extreme 
 change is due to the influence of combination, past or 
 prospective ; and the wasteful strife arises fi'om hostil- 
 ity to true competition. 
 
 This is no mere theory, but is the practical lesson 
 of the contests which have impoverished stockholders 
 and disturbed business for the past ten yeai'S. This 
 must be emphatically insisted on, now that railway ad- 
 vocates are urging that competition threatens ruin to 
 the raih'oads and must be stopped. It is time to check 
 this persistent misrepresentation, and to fix it in the 
 public mind that the railroads are suffering, not from 
 competition, but from their self- chosen methods of 
 forcing each other into combination. It may be shown 
 that every railway war which has carried rates below 
 cost clearly arose, not from competition, but from the 
 effort to compel comljinations or agreements, which 
 would end it. The first railway war that reduced 
 freights from Chicago below the cost of service, was 
 wao;ed to force the Baltimore and Ohio Kailroad to
 
 Competition and Combination. 805 
 
 abandon its differential rate from that city to Balti- 
 more ; the last one Avas a struggle to crush or prevent 
 competition in the local traffic of the Kew York Central 
 and Pennsylvania Kailroads. Every one of the inter- 
 venino; conflicts had a similar orio-in. In all of them 
 warring corporations have avowed their purpose to 
 force their rivals to terms, in the combination which 
 they are equally determined to establish, or to destroy 
 the competition of the ne^v roads. It is only when the 
 question of regulation by the state is at issue, that these 
 reckless struggles are represented as showing the evils 
 of competition. Such a representation is idle and point- 
 less. "Cut-throat warfare" has nothing in common 
 with legitimate competition, although the superficial 
 resemblance between them enables the misrepresenta- 
 tion to be plausibly made. All the loss and insol- 
 vency often ascribed to competition has come from con- 
 flicts undertaken in the interests of combination, as 
 clearly as the chill comes from the same fever as the 
 heat which follows it. 
 
 This is the character of nearly all the direct rivalry 
 among railways in this country, since the policy of 
 combination became prevalent ; and Mr. Fink's state- 
 ment of its ruinous effects applies to most of the his- 
 tory of the railways in late years. But this I'ivalry is 
 not properly called competition. Why is it that nat- 
 ural and legitimate competition has been practically 
 unknown among the railways for the past ten years ? 
 Mr. Fink disclosed the cause when he pointed out to 
 the senate committee, in 1883, that combination among 
 carriers on water routes is impracticable, because a 
 small capital is enough to raise new competitors against 
 any pool that may be established. Competition is free 
 
 20
 
 30G The Railways and the Rejpublic. 
 
 OD the lakes, rivers, and canals, because there are many 
 competitors and their number is easily increased. Mi*. 
 Fink omitted to state that, among these competitors, 
 the policy of throwing away one half of the prevailing 
 rates for transportation at a single reduction is un- 
 kno\vn. The carriers by water are not more intelligent 
 and conservative men than railway officers ; they are 
 simply preserved by free competition from reckless ri- 
 valry. On the other hand, the possibility that the rail- 
 way can, l)y just such rivalry, force its competitors to 
 terms and secure the suspension of competition, incites 
 it to ruinous Vv'arfare in rates. The rule holds good 
 in all branches of business. One competitor among a 
 hundred can never gain anything by cutting prices to 
 half their cost ; one among two or three may, by de- 
 stroying the business of his rivals, force them, either out 
 of business, or into combination with him at his dicta- 
 tion. Had there been so many competitors, in the 
 East-bound railway traffic in Chicago, that any agree- 
 ment on rates, beyond that naturally fixed by the cost 
 of transportation, ^vould have been impossible, no one 
 would ever have conceived the notion of beginning a war 
 of rates, because a new" road undertook to charge four 
 cents less on one hundred and forty miles less of trans- 
 portation. If there had always been as many competi- 
 tors in the railway business, at the leading centres of 
 transportation, as there are in the lake traffic, the con- 
 flicts which have arisen between the lines would have 
 been impossible, simply because the desired combina- 
 tion would have been evidently unattainable. These 
 suicidal conflicts aflford no aro-ument a2:ainst free and 
 permanent competition, but they condemn tlie ham- 
 pered competition and the policy of combination which
 
 Competition and ComMnation. 307 
 
 provoke tnem. To assert that these wasteful struggles 
 prove the ruinous nature of competition, is the same 
 sort of logic as to argue that, because a man suffei-ing 
 from alcoholism craves spirits, abstinence is an evil 
 practice. 
 
 Such unnatural and expensive rivalry between the 
 railways is harmful alike to the public and to the rail- 
 ways themselves. The effect of violent and unexpect- 
 ed changes in rates of transportation is to disturb le- 
 gitimate business, and to introduce needless uncertainty 
 into its operations ; while to the railways it is wasteful 
 and ruinous. In view of Mr. Fink's description of their 
 disastrous character, I am unable to see how any rail- 
 way oflScial who engages in them can escape the cliarge 
 of throwing away the money of the shareholders. No 
 arjxument is needed, where one half or two thirds of the 
 rates are cut off in a few days, to show that either the 
 revenues of the corporation ai-e recklessly tlirown a\\'ay 
 or that the original rates were exorbitant. Either con- 
 clusion condemns, both the extravagant rate-cutting oc- 
 casioned by the policy of combination, and the combi- 
 nations themselves which are established by such 
 means. These contests injure the railways more di- 
 rectly than does the success of the pools, when it stim- 
 ulates the building of parallel lines, as shown in anoth- 
 er chapter. But both together show the essential fact 
 that the resort to sucli contests, for the sake of estab- 
 lishing combinations among railways, is an attack upon 
 their true prosperity; while natural and legitimate 
 competition secures it in the best and most permanent 
 way. 
 
 No less important is the relation of competition to 
 discriminations between individual shippers. In the
 
 308 The Railways and the Bepublic. 
 
 presence of active competition, any serious advantage 
 given to a shipper is at the expense of the railway and 
 not of other shippers. True, a railway manager may 
 give an exceptionally low rate to a firm which he de- 
 sires to foster; hut competitors have their remedy in 
 turning their shipments to rival routes. While com- 
 petition operates freely among all the transportation 
 agencies at any point, so that all are seeking to- obtain 
 freight by legitimate inducements, it is certain that 
 rates will be brought down equally to a moderate mar- 
 gin above the cost of service. While the discriminat- 
 ing railway keeps its favors to iwoteges within that 
 limit, other shippers can obtain the same advantages 
 elsewhere. If the special rate, rebate, or drawback re- 
 duces the freiirht char2:e below the cost of service, that 
 is, indeed, an advantage which competing roads are not 
 obliired to o;ive ; but in that case the loss and burden 
 must be borne, not by the rival shij)pers, but by the 
 railway itself This is a gross abuse ; the fairly earned 
 money of the stockholders is 2:>aid out to enrich the fa- 
 vorite of the railway manager; and both the public 
 duty of equality and the private I'ights of the corpora- 
 tion are violated. But the most dangerous feature of 
 favoritism is qualified, when the discriminating official 
 cannot make up for reductions to one shipper by high- 
 er rates to others. AVhere the railway has exclusive 
 control over transportation, it can practice effective dis- 
 crimination, b}'' maintaining high rates against the dis- 
 favored shippers. In the presence of free and legiti- 
 mate competition by other routes, this power is lost. 
 This is a principle of the utmost importance, as indicat- 
 ing a remedy for individual discriminations, that free 
 competition at any point destroys the power of the rail-
 
 Comjpetition and Conibination. 309 
 
 way to impose the burden of its discriminations upon 
 those against whom it discriminates, and allows it to 
 maintain them only at a loss to itself. This fact not 
 only limits the burden of the discrimination, but shows 
 how to remove the entire abuse. Neither the rail- 
 way corporation, nor the official, as an individual, can 
 afford to show partiality or injustice in rates, where 
 competition requires them to seek all the business they 
 can get; and shippers, if treated unfairlj'-, are free to 
 take another route. Such a course will diminish its 
 earnings, destroy its popularity, and strengthen its ri- 
 vals. Here is the key to the whole problem. Free 
 competition makes vital discriminations im])ossihle. 
 
 It is true that there have been instances, at so-called 
 competitive points, of the maintenance of special rates 
 for the benefit of favored individuals or firms. But 
 the general rule has asserted itself in such cases also, 
 since, in each of them, the discrimination was made 
 possible only by the combination of all the railways 
 engaged in the traffic to suspend competition. Instead 
 of the pooling practice preventing discriminations, as 
 alleged by Mr. Fink and others, its most successful 
 Avorkings have been where the union of the railways 
 upheld discriminations, which would have been imj^ios- 
 sible if competition had not been abolished. A signal 
 instance of tlie suspension of competition by the pools, 
 disclosing their relation to discriminations, is shown in 
 the difference between the live-stock and grain-carrying 
 rates from Chicago to the seaboai'ds. The railway pool 
 has never Ijeen able permanently to destroy comjietition 
 in carrying grain. Its inability to control water routes, 
 and the ability of grain shippers to hold Ixack their 
 freight for favorable rates by water, have rendered the
 
 810 The Railways and the Rej^ublio. 
 
 control of the combication over that traffic irregular 
 and uncertain. No great and permanent discrimina- 
 tion, therefore, can be established by the raihvays be- 
 tween the grain shippers at Chicago, But the traffic 
 in live-stock requires direct and inunediate shipment. 
 It cannot wait for the slower and cheaper water route, 
 but must use the expeditious transportation of the rail- 
 ways. Hence the railways were able, for many years, 
 to maintain a combination which gave notorious dis- 
 criminations to the live-stock " eveners." The same 
 principle, established by comparing hundreds of other 
 cases under free competition, and under its suspension, 
 may be expressed as the converse of the preceding 
 proposition. The suspension of competition hy raihcay 
 combination or monopoly renders discriminations pos- 
 sible. 
 
 Reinforce these two propositions with the law, ex- 
 plained a few pages back, and the argument for com- 
 petition is complete. Let it be seen that natural and 
 legitimate competition secures the prosperity of the 
 competitors, by enlarging the volume of their opera- 
 tions; that it prevents ruinous and extravagant reduc- 
 tions of rates; that the contests of the railways, during 
 the last eight 3'ears, have been results of combination 
 and not of competition, and that the transportation 
 interests on the lakes, canals, and rivers, subject to ex- 
 actly similar influences as the railways, except that 
 competition is permanent and secure, are free from these 
 violent and abnormal fluctuations of rates, and the in- 
 evitable conclusion is that natural and leo'itimate com- 
 petition would have saved the railways from the evils 
 which they liave inflicted on themselves for nearly a 
 decade. Suppose that competition in railway traffic
 
 Competition and Combination. 311 
 
 rested on as permanent and universal a basis as it does 
 in lake transportation or in the dry-goods trade. Im- 
 agine that any one of five hundred or a thousand rail- 
 way carriers could reach all shipping points, and per- 
 form the service at rates which competition would fix. 
 Is it not evident that the rates would constantly bear 
 a due relation to the cost of the service? Would any 
 one of the thousand competitors ever conceive the pol- 
 icy of trying to secure all the traffic, by offering to car- 
 ry it for half the cost? Or, if he did, what would he 
 effect, save recklessly and wantonly to thro^v away his 
 money, or that of the capitalists for whom he acts? A 
 careful study of these considerations will prove that, if 
 direct and free competition can be made permanent 
 and imj^regnable on all classes of railway traffic, it \vill 
 stop railway wars, preserve steady and remunerative 
 rates, and confer an infinite benefit on the railway sys- 
 tem, by the enlargement of the most profitable traffic. 
 This establishes the third proposition : Free and legiti- 
 mate competition ivill secure the Diost lastinfj 'prosperity 
 to the raihcays!'' 
 
 * Since the above pages were written Professor Hadley's woik on 
 " Railroad Transportation " has appeared, in which the author, while 
 showing some appreciation of the abases of the railv/ay sj'stcm, adopts 
 the railway theory that competition between the railways will not bring 
 rates into the proper and due relation to the cost of service, including a 
 fair return on the permanent investment. He supports this plea by the 
 usual illustration of the way in wliich railways will cut under each oth- 
 er's rates, until they are reduced to a ruinous level, without jjcrceiving 
 that all such rivalries are but methods to force the establishment of arbi- 
 trary combinations ; and that if sucli combinations were impossible, the 
 rivalry would cease at the point where further reductions would inflict 
 loss. lie endeavors to show that the investment of ca])it:d dors not prac- 
 tically act as an clement in fi.xing rates, from the oft-cited example of 
 bankrupt railroads, wliich, as he, in common with many railway tlieo- 
 rists, insists, are able to carry rivalry to a ruinous point without reference
 
 312 The Railways and the Bepullic. 
 
 These propositions point clearly to the true aim of 
 all efforts to reform the railway system. To institute 
 a reform for all time, tlie cause -which produces the 
 abuses must be dug up by the roots, the power to car- 
 ry them out must be abolished, and the temptation to 
 use that power must be removed. The cause of all 
 these abuses is the irregularity or absence of competi- 
 tion in railway traffic; the power of the railway offi- 
 cials to perpetrate them lies in their ability, through 
 imperfect competition, to maintain discriminations and 
 
 to the necessity of earning any return on capital. It is true that, under 
 the jH-esent system, the element of interest on capital, like other elements 
 of cost, is disregarded. But to suppose that, under a system in Avhich 
 only natural competition was possible, the bankrupt roads would still 
 discard the element of capital in fixing their rates, is to assume that no 
 one owns tire bankrupt roads. The fact is that, when a railroad passes 
 out of the hands of the stockholders by bankruptcy, it becomes the prop- 
 erty of the bondholders, and if they are allowed to manage their proper- 
 ty, tliey will have the same interest in sustaining rates that the stock- 
 holders of a solvent road have. While combinations are allowed to use 
 their power to freeze out weak roads, with a view to ultimate consolida- 
 tion, they will be disturbing elements. But if combination is made im- 
 possible, the cost of service will be just as powerful an element in deter- 
 mining their rates as it is with solvent corporations or in any other class 
 of business. Professor Hadley further supports the theory that, where 
 there are " large permanent investments," competition will not stop at 
 the point of loss, by the course of prices in pig-iron from 1873 to 187&. 
 He says: "For a period of six years millions of tons of pig-iron were 
 produced and sold below cost." The illustration has one fatal defect, 
 and that is its incorrectness. The i^rice of pig-iron during the period re- 
 ferred to was below cost for many furnaces that were old-fashioned or 
 disadvantageously located, and such furnaces were forced to go out of 
 blast. It was just about at cost for most of those which kept in ojiera- 
 tion ; and the furnaces of the newest construction and most approved 
 appliances made a slight margin of profit, even during the period of de- 
 pression. Ricardo's theory, which Professor Hadley appears to think is 
 disproved by this illustration, is confirmed by it. The works which could 
 not produce iron at the market price went out of blast, and production 
 fell so far below^ consumption as to produce a rapid rise of prices in 
 1879.
 
 Convpetition and Combination. 313 
 
 practice abuses; and the almost irresistible temptation 
 lies in the vast wealth, which can be gained by manip- 
 ulating rates in individual interests, and in the great 
 pressure Vi\)oi\ honest railway managers, under existing 
 methods of business, to maintain abnormal and absurd 
 discrepancies between the rates on local and those on 
 competitive traffic. The permanent remedy lies in the 
 restoration of full, free, and natural competition ; and 
 the aim of a thorou<2:h and lastiuf? reform must be to es- 
 tablish competition so that it can never be overthrown. 
 We must remove the causes of these evils, instead of 
 simply prohibiting them, and leaving the causes to 
 work, either in secret or open violation of the law. It 
 is well to forbid a hungry man to steal ; but it is not 
 wise to leave him, while still hungry, in custody of 
 food. The safest way is to remove both the tempta- 
 tion and the ability to commit the wrong. 
 
 This leads us to reverse the conclusion reached by 
 the advocates of the combination theory, that the 
 abuses of the railway system are produced by competi- 
 tion, and must be cured by combinations between the 
 railways. They assume that the pi'inciple of natural 
 and legitimate competition in trade does not apply to 
 the railways; that, in the business of transporting 
 freight over railwa3^s by steam, there is something pe. 
 culiar and exceptional, \vhicli suspends the general prin- 
 ciples of trade. But there is no reason for imagining 
 that the fundamental laws of demand and supply, and 
 the necessary consequences of them in the workings of 
 competition, were repealed and overthro^vn by the dis- 
 covery that steam could draw a load over an iron track. 
 These laws are universal and unchangeable. The pe- 
 culiarity of the railway system is that, while the mag-
 
 314 The Railways and the liepublic. 
 
 nitude of its influence upon trade Avas not understood, 
 it was alloAved gradually to acquire the power to 
 suspend or partly abolish the influence of competition. 
 To the proposition to cure the abuses, arising from the 
 imperfect and stifled condition of competition, by smoth- 
 ering it wholly and completel}', the reply is that the 
 remedy does not lie in that direction. If a doctor 
 treats a fever by aggravating it, so that the patient 
 presently dies, the fever is removed ; the patient is not 
 benefited. The abuses of discriminations, pools, and 
 the manipulations which they produce, and of the vio- 
 lent and wasteful railway wars waged in the interest 
 of combinations, cannot be remedied by handing over 
 the business interests of the country, bound hand and 
 foot, to the unrestrained sway of the influences which 
 have produced such evils. The only natural and effect- 
 ual reform must be in the revival of that unrestrained 
 and legitimate competition, which has been practically 
 unknown in railway management for many years, and 
 the free workinsrs of which would render all these ab- 
 normal and injurious features of railway business im- 
 possible. 
 
 "The best possible results to all will follow where 
 there is the freest operation of the natural forces of 
 competition." This is the concluding sentence of Mr. 
 Lansinfr's article in the Nortli American Review. He 
 intended this assertion as a protest against interference 
 with the railways by legislation. But, Avhatever the 
 ajjplication, the statement is pregnant with truth. 
 The free operation of competition will rectify the in- 
 equality of charging four times the rate to one point 
 that is charged to another ; it will prevent the build- 
 ing up of monopolies by raihvay rates; it will give
 
 Competition and Comlination. 315 
 
 shippers a prompt aiul sure relief from discriminations 
 adverse to their interests; it will forbid the improper 
 application of the rule to charge " what the freight will 
 bear;" it will place all persons on a practical equality, 
 and make it necessary for carriers to treat all with im- 
 partiality ; and, finally, it will abolish the vicious and 
 dangerous forms of railway rivalry, by making the com- 
 binations at which they aim impossible. All the evils 
 which have sprung from imperfect competition, and 
 from the tendency towards combination which exists 
 as a consequence, can be removed by fully re-establish- 
 ing competitioD, and giving its forces as complete sway 
 as they have in any normal and healthful department 
 of trade. 
 
 How shall this natural and legitimate competition 
 be restored, and established on a secure and permanent 
 basis? What means are open to the republic, to bring 
 its railway system under the same healthful and legiti- 
 mate laws of trade as those which control lake and riv- 
 er transportation ? If it can be shown how that great 
 and beneficial reform can be effected, and the forces of 
 competition be made supreme, not over a part, but over 
 the whole of the railway traffic of the nation^ the pur- 
 pose of this work will be attained.
 
 CHAPTER IX. 
 
 THE DISCUSSrOX OF REMEDIES. 
 
 While it is beyond dispute that the state has the 
 right to regulate the railways, and that, in some form, 
 the exercise of this right is demanded by the general 
 welfare, the question how to exercise it is diiEcult, and 
 is not yet fully solved. The difficulty lies in finding 
 methods of holding the great transporting agencies of 
 commerce to their public obligations, without impairing 
 their practical efficiency. This difficulty has indeed 
 been exaggerated in the interests of the railways. And 
 while the danger of interference with the vast railway in- 
 terests, and of hampering their work, has been harped on 
 as an objection to such legislation, the objection has been 
 weakened by tlie greater danger of submitting to the 
 present railway policy. Yet it must be fairly con- 
 sidered, and must have its due weight. In proj^osing 
 measures to regulate the railways it should be borne 
 in mind that the interests involved are vaster than 
 were ever before the subject of commercial legislation. 
 These interests are by no means those of the railway 
 companies alone. The rights of the thousands of mill- 
 ions of railway property are important, but not more so 
 than those of the tens of thousands of millions of pri- 
 vate property and business capital that suffer for want 
 of such legislation. The vastness of the interests con- 
 cerned requires a cautious and thorough study of the
 
 The Discussion of Bemedies. 317 
 
 subject, not only by legislators, but by the AvLole 
 people. But the magnitude of the lesser interest can- 
 not be pleaded against the protection of the greater. 
 The rights of botli the railways and the people should 
 be fully guarded ; but the importance of caring for the 
 welfore and prosperity of $4,000,000,000 of railway in- 
 vestments is not greater than of securing the rights of 
 $30,000,000,000 of the property of the people. 
 
 It is clear that legislation which would hamper or 
 destroy the free operation of the railways would be a 
 public misfortune. What is wanted in the interest of 
 the people is greater freedom in the use of the railways. 
 One serious charge against the prevalent railway policy 
 is that their own acts have restricted their operations. 
 It may be doubted whether any legislation, which is 
 seriously proposed, would hamper their freedom nearly 
 so much as do their own pooling combinations. It is 
 a strong commentary upon the position of their advo- 
 cates that, at the very time when they are Avarning the 
 public not to hamper the free operations of the railways 
 by legislation, their united efibrts are exerted to restrict 
 their freedom by mutual agreement; and they are seek- 
 ino; for lecjislation to enable them to make the restric- 
 tion complete and permanent. It is public policy to 
 make the railways free in their operation under the 
 workings of natural competition ; and this is just the 
 opposite of the prevailing railway policy. Legislation 
 to secure the public rights should stop only the exer- 
 cise of dangerous and illegal powers; and its main 
 purpose should T)e to extend and secure that freedom 
 in the use of the railways which is essential to their 
 function as public liighways. 
 
 With regard to the legislative power which should
 
 318 The Railways and the Republic. 
 
 be exerted to secure tbis purpose, it is necessary to 
 distinguisli briefly between the province of the nation 
 and that of the state. It is conceded that the opera- 
 tions of a railway which lies within a state are solely 
 under the power of that state. Most of the railways 
 are chartered by the state in which they operate; they 
 have obtained their right of way by the exercise of the 
 sovereign power of that state ; and within its borders 
 they are, under our constitutional law, subject to its 
 legislation. But when, as most important railways do, 
 they carry on their operations from one state to an- 
 other, they become highways of inter-state commerce, 
 and are subiect to re2;ulation by Concrress under the 
 national constitution. The assertion of this right of 
 Congress has, within the last three or four years, been 
 stigmatized as a new claim. One eminent representa- 
 tive of a leading railway has attempted to show, be- 
 fore a Cono;ressional committee, that Cono^ress has no 
 power to regulate the railways ; but his position was 
 clearly shown to be untenable by the authoi-ities cited 
 in the subsequent debates.* But this power was as- 
 serted on behalf of the railways, before the demand for 
 national regulation arose. In the Granger cases, the 
 attempt of a state to regulate trafSc be3'(md its respec- 
 tive borders was declared by the railway counsel to 
 be unconstitutional, because Congress alone could regu- 
 late inter-state conunerce. ISTone of the great constitu- 
 
 * The judicial declarations of the power of Congress over the regula- 
 tion of inter-state commerce were set forth clearly and exhaustively in 
 the debates of last winter. They cannot be repeated in tliis work; but 
 those who wish to refer to them can find them properly presented, either 
 in the speech of Mr. Barksdale in the House (Congressional Record, 48th 
 Congress, vol. xvi. p. 170), or that of Mr. Kcuna in the Senate (ibid. p. 
 1429).
 
 The Discussion of Remedies. 319 
 
 tional lawyers engaged in those cases, whether as 
 counsel or judges, questioned this power of the 
 nation ; but tlie decision of the Supreme Court recog- 
 nized greater power in the states than had some- 
 times been thought consistent with the control of in- 
 ter-state commerce by the nation. AVhile the chief- 
 justice's decision incidentally recognized the power of 
 Congress to treat the subject of inter-state commerce as 
 a whole, he also upheld the power of any state, in the 
 absence of national legislation, to regulate such traffic 
 as affects its citizens, whether the transportation ex- 
 tends beyond the state or not. This practically leaves 
 the whole subject under the control of united legisla- 
 tion by all the states. All railway traffic either origi- 
 nates or terminates with one state or another. If all 
 the states in the Union should pass uniform legislation 
 to regulate railway ti-affic, none of it could evade these 
 laws on the plea that it is inter-state commerce. That 
 all the states will take such action is improbable. On 
 the other hand, effective and thorough regulation by 
 Congress would practically reach the same result. 
 There is, indeed, a large amount of railway traffic that 
 does not cross a state line. But it is upon that which 
 traverses two or more states that the most serious 
 abuses are practised. K such traffic were fully sub- 
 ordinated to public rights, the wrongs of traffic within 
 state limits would be comparatively of slight impor- 
 tance. Let discriminations, combinations, and favorit- 
 ism be made impossible on inter-state traffic, and they 
 will not be maintained to any great extent on the rem- 
 nant of the railway business. 
 
 It will be seen, therefore, that either national legis- 
 lation, or the general action of the states, will be ade-
 
 320 The Bailvjays and the Repvhlic. 
 
 quate to reach the case if wisely drawn. But it should 
 also be borne in mind that the influence which pro- 
 duces such action from one power will be sure to pro- 
 duce it from another. If the popular demand forces 
 legislation in the states to restrain railway abuses or 
 wholly to sweep them away, the same cause will ob- 
 tain similar legislation from the national authority. 
 Public intelligence and the public will must eventually 
 compel practically uniform legislation, by the state and 
 the national legislatures alike. Indeed, the measures 
 already introduced in Congress and in the state legis- 
 latures, and passed in some of the latter, have possessed 
 the same leading characteristics. It may be confident- 
 ly predicted that whatever legislation public opinion 
 may extort from Congress will be substantially adopted, 
 under the same influence, in most of the states. 
 
 But, in view of the legal principles already explained, 
 it may be asked why the common law does not pro- 
 tect the public suflficieutly. The question is pertinent, 
 but is answered by the experience of the last ten 
 years. The common law is sufficient in theory ; but it 
 has failed in practice. The decisions forbid discrimina- 
 tion, even for the benefit of the connecting lines of the 
 railway concerned; affirm the right of all persons to 
 equal privileges, even if they are rivals of the railway 
 in the transportation business; deny that the largest 
 shipper is entitled to the lowest rates; they vigorously 
 denounce pooling, and its attendant practices of divert- 
 ino: freis^ht from subordinate roads and discrimiuatino; 
 airainst them are declared illeixal and subversive of lus- 
 tice. But pooling is nevertheless the universal policy 
 of the railways ; discriminations are maintained, both 
 to turn freight to connecting roads and to keep it from
 
 The Discussion of Remedies. 321 
 
 rival roads ; favors have been granted in rates sufficient 
 to determine the control of the trade, and thus the 
 fundamental rules of the common law have been nul- 
 lified by the railways. One branch of business has es- 
 caped them, and this exception is significant as explain- 
 ing why the common law fails to protect the public. 
 The express companies, after a hard fight, have fully 
 established their right to compete in their business 
 upon any railway in the United States. The fact that 
 none but corporations, almost equal in financial strength 
 to the railways themselves, are able to assert rights 
 which, in our political system, belong to all, may teach 
 us why exactly these rights in the case of private citi- 
 zens are overridden with impunity. 
 
 In practice, legal i-emedies against railway injustice 
 can be applied through the courts, only by figliting the 
 railways at such disadvantages that the ordinary busi- 
 ness man will never undertake it except in desperate 
 cases. Every advantage of strength and position is 
 with the railways. In the first place, the business 
 man may suffer from discriminations long before he 
 has any evidence of the fact. Finding his rivals un- 
 derselling him in distant markets, and his own busi- 
 ness dwindling, he may suspect that this is the work 
 of railway fiivoritism. But the burden of proof is on 
 him, if he seeks a legal remedy, and the fact that his 
 favored competitor is able to crowd him out of busi- 
 ness does not prove his case. The common law per- 
 mits a man to sell his merchandise at a loss if he 
 chooses, and will not assume that the cost of a product 
 has not been reduced by new economies to unprece- 
 dented cheapness. If he succeeds in proving the dis- 
 crimination, he still has an antagonist of boundless re- 
 
 21
 
 322 The Railioays and the Bepyhlic. 
 
 sources, which, if really discriminating against him, 
 will resort to delays, technical objections, and even cor- 
 ruption to defeat him. The merchant or manufacturer 
 is commonly deterred by such a prospect from enter- 
 ing into litigation ^vith a great corporation. But sup- 
 pose that he overcomes these difficulties, what does he 
 gain? First, he can obtain an injunction, directing the 
 railway to discontinue its injustice. This might be of 
 value, but that a new injunction, with new difficulties, 
 is required to meet every subterfuge by which the rail- 
 way will attempt secretly to evade the order. Then 
 the litigant may obtain as damages the excess which 
 he can prove that he has paid, above the rates allowed 
 to the most favored shippers. Such damages are ut- 
 terly inadequate. On the one hand, the plaintiif can- 
 not hope to prove in detail a tithe of the instances of 
 discrimination which have been practised. On the 
 other hand, the amount of overcharges, even if they 
 were all legally proved, is not a fair measure of the 
 damage done. In such cases his greatest loss is in the 
 restriction of his business, just as the main profit of 
 the favored shipper lies in his power to expand his 
 trade by underselling his rivals. Thus Messrs. Scofield, 
 Schurmer &, Teagle obtained last year a verdict for 
 $5000 for the excess of charges on 50,000 barrels of 
 petroleum. But for the discriminations against them, 
 thev mvAit have sold 200,000 or 300,000 barrels: 
 while, by discriminations in its favor, their great rival, 
 the Standard Oil Company, was enabled to sell 5,000,- 
 000 barrels or more. The damages in this case would 
 pay but a part of the plaintiff's legal expenses, W'hile 
 the Standard Oil Company could well afford to reim- 
 burse the railways for such verdicts every month in
 
 The Discussion of Remedies. 323 
 
 the year, for the maintenance of its monopoly. With 
 such odds against him, the private litigant, who seeks 
 justice from these corporations, may read over the 
 courts the iuscrijDtion which Dante found upon the 
 portals of hell, " Leave all hope, ye who enter here." * 
 Finally, the business man is well aware that, if he 
 bring such a suit he will arouse the enmity of the 
 power whose friendship is the first condition of his 
 success. If he overthrows one form of injustice b}^ a 
 lawsuit, he will soon be confronted with another, de- 
 manding further litigation. There is no end to the 
 ruinous forms the contest may assume. He may be 
 obstructed and injured in ways which afford no tangi- 
 ble ground for legal proceedings. The side-tracks from 
 which his freight is shipped may get out of repair; a 
 remarkable scarcity of cars may occur just when he is 
 
 * " The damage in tliese cases of secret discrimination is not merely 
 tiie diflFereuce between rates, but it goes deeper than that, and does an 
 injury of a subtile character difficult of analysis, and under the rules of 
 evidence still more difficult of a specific pecuniary computation. In 
 the Baltimore case which I have cited, there was complaint that the 
 plaintiffs' business had been injured, and the plaintiffs offered to show 
 that a difference of two cents on the hundred pounds of sugar was not 
 only a considerable loss of profit in such transactions, but that a competi- 
 tor in business, enjoying this discriminating rate, would gradually absorb 
 the business and drive his rivals out of the market. But the court held 
 that this evidence was too remote, and refused the oflfer. Now, suppose 
 that tliis discriminating rate had been lower still, it is a matter of dem- 
 onstration that the business of the plaintiffs might have been utterly de- 
 stroyed, and yet, under the rule of damage laid down, all that they could 
 recover would l)e the actual difierence between rates. Again, systematic 
 discrimination of this sort is necessarily a corrupt act. It is not bestowed 
 without some corresponding advantage to the donor." — Hon. J. V. Find- 
 ley, Congressional Record, 48tli Congress, vol. xvi. p. 111. Mr. Fiiullcy 
 might have added that, under tliis rule, the more completely discrimina- 
 tion restricts the business of the plaintiff, the less damages he can recover, 
 until, if he has been completely shut out from the market, he can recover 
 nothing at all, because he has made no shipment.
 
 324 Tlie Railways and the BepuUic. 
 
 ready to make large shipments ; or when the freight 
 is under way, the mysterious dispensations of railway 
 providence may cause it to encounter a blockade, from 
 which it will be extricated weeks after it should have 
 been delivered to the consignee. All these dangers 
 and discouragements are well understood by business 
 men. It is a practical maxim among them that to 
 quarrel with the railways is commercial suicide. In 
 the general opinion of merchants and manufacturers, 
 as shown by their acts, it is better to accept such share 
 of business prosperity as the railways will allow them, 
 than to defy the railways by invoking the protection 
 of the law against them. This may not be manly or 
 independent. It has already been remarked that the 
 worst result of corporate supremac}^ is the demoraliza- 
 tion and cowardice which it produces among business 
 men. It is, however, a prominent fact in the problem, 
 and at once proves the necessity of thorough reform, 
 and explains the insufficiency of legal remedies. 
 
 Much the same may be said of the constitutional 
 provisions against railway abuses, which have been re- 
 ferred to in another chapter. It is a humiliating con- 
 fession to make, but one which shows the magnitude 
 of the power with which legislation must measure its 
 strength, that the constitutional prohibitions of a dozen 
 states, traversed by great railway lines, against discrimi- 
 nations, rebates, the consolidation of competing lines, 
 the granting of free passes, and other practices, are prac- 
 tically waste paper. The constitutions of California 
 and Pennsylvania are strikino- illustrations. Their Ian- 
 guage is clear and strong enough, if enforced, to pre- 
 vent nine tenths of the abuses which unregulated rail- 
 ways practise. Yet, in California, the rule of the
 
 The Discussion of Remedies. 325 
 
 Central Pacific Railway over commerce is nuchecked, 
 the commissioners provided for in the constitution are 
 expensive figure-lieads, and the constitution, as a restraint 
 upon that great corporation, is a dead letter. In Penn- 
 sylvania a similar result has been obtained, by the suc- 
 cess of the Pennsylvania Railroad in preventing legis- 
 lation to give effect to the constitution. Last winter 
 a bill, designed solely to carry out its provisions, was 
 opposed by assei'tions that these provisions are imprac- 
 ticable, and was defeated. It has even been seriously 
 claimed that, because the Pennsylvania Railroad ob- 
 tained its charter before the adoption of the present 
 constitution, it is free from the restrictions of the fim- 
 dameutal law.'"' It is in arrogant assumption of this 
 immunity that the Pennsylvania Railroad has now 
 bought off the competition of the South Pennsylvania, 
 in defiance of the constitutional prohibition of the pur- 
 chase or consolidation of competing lines. A similar 
 weakness of unsupported constitutional law, against the 
 might of the railway system, is found, to a greater or 
 less degree, in nearly all of the states whose constitu- 
 tional provisions on this subject were collated in Judge 
 Reagan's argument last winter.f 
 
 The measures suggested to do away witli the railroad 
 
 * " If you will look at the Constitution of the State of Pennsylvania, 
 as amended in 1873, you will find in the 17th section a series of provisions 
 ■U'liich, if carried out and enforced, would be amply suflicient. 15r.t the 
 railroad men and their advocates have managed to impress the legislat- 
 ure with the idea that they are above the constitution. They assert that 
 every restriction imposed upon them in the interests of jus- tice, equity, and 
 fair dealing is a violation of the charter embodied in their contract. All 
 this is no doubt very false doctrine, but they contrive in some way (I really 
 do not know how) to make the state authorities accept it as true." — Judge 
 Blaclca letter to New York Chamher of Commerce, Nov. IGth, 1880. 
 
 t Congressional Record, vol. xvi. p. 309.
 
 326 The Bailways and the Rejpublic. 
 
 wrongs may be classed iindei* three Leads: (1), owner- 
 ship and management of railways by the state ; (2), reg- 
 ulation of railways by public officers, generally a board 
 of commissioners ; and, (3), regulation by laws, prohibit- 
 ing discriminations and other abuses under criminal pen- 
 alties, and providing better remedies for the recovery of 
 civil damage by the suffering parties. Of these meas- 
 ures the ownership and management of the railways by 
 the states was early proposed, but has received little 
 public support. There seems to be a general and well- 
 founded belief that, while the management of the rail- 
 ways by the government might remove many of the 
 evils of corporate control, it would certainly, in our 
 jDolitical system, cause others as great or greater. There 
 are still some very respectable advocates of this sys- 
 tem, who allege that it has proved a success in Europe. 
 But the examj^le of European railways cannot be cited 
 as conclusive for this country. The military consider- 
 ations, which govern the leading governmental railways 
 in Europe, are of no weight in this country, while the 
 commercial pui'poses which are primary here are there 
 secondary to the rapid concentration of troops at stra- 
 tegic points; nor does a comparison of their finan- 
 cial results with those of the American railways com- 
 mend the plan. In Belgium the ratio of expenses to 
 earnings is somewhat less on the state railways than 
 on those of private companies ; while in Germany the 
 private railways have a slight advantage in this re- 
 spect. But, making allowance for the business which 
 the governments of these countries can put on their 
 own roads at their own rates, the su^^eriority of the 
 private railways is marked, and confirms the the- 
 ory, generally accepted in England and America, that
 
 The Discussion of Remedies. 327 
 
 in any business, private enterprise, with free competi- 
 tion, furnishes more economical and efficient service to 
 the public than the ownership and management by 
 the state. 
 
 A conclusive argument against the operation of rail- 
 ways by tlie state is, that it would introduce into our 
 politics a vast amount of patronage, which must largely 
 become tlie spoil of professional ]3oliticians. If the 
 present business of the government, involving the col- 
 lection and distribution of about $300,000,000 of rev- 
 enue, cannot be administered with a view solely to 
 efficiency and economy, but is used as the reward of 
 skill in swaying the popular vote, any reformation of 
 our politics would be made utterly hopeless, if that 
 patronage were increased by an interest involving $900,- 
 000,000 additional gross revenue, controlling nearly $4,- 
 000,000,000 of property, and exercising a power over 
 the business interests of the country beside which that 
 of political parties is now trifling. When our politics 
 are purified, so as to exclude from them selfish ends 
 and improper means, it may be possible to bring the 
 railways under political control without making them 
 a source of general corruption. But when such a mil- 
 lenial stage in human progress is reached, there will be 
 no need of railway or other reform. At present, -wher- 
 ever railway management is closely connected with pol- 
 itics, it leads to bribeiy, manipulation, and betrayal of 
 the public trust. All forms of corruption would be 
 multiplied by making that connection universal and 
 permanent, and converting the control of the railways 
 into the prize and sustenance of politicians and wire- 
 workers. 
 
 Apart from the danger to public morals of a state
 
 328 The Railways and the JRepiiblic. 
 
 railway system, what guarantee is there that it w^ould 
 act with more impartiality and justice than the private 
 corporations? "Why should political control be more 
 unselfish and equitable in managing transportation 
 than financial control ? If we must choose between 
 the union of all the railways under the power of the 
 state, and a combined corporate power such as the pol- 
 icy of pooling and federation seeks to establish, the 
 former might be the least of the two evils. The ad- 
 ministration of them would at least represent the whole 
 people and be responsible to them, and not to the 
 stockholders alone. But no such scheme offers any 
 remedy for the evils of the system. Our study of the 
 abuses of railway management is a failure, if it has not 
 shown that they all spring from the centralization of 
 power in the hands that control the agencies of trans- 
 portation. Further to centralize and increase that 
 power, whether under state or corporate control, would 
 but enhance the danger. A healthy public opinion 
 will doubtless decide that the railways can best serve 
 society, if constructed and managed by private capital 
 and enterprise, provided that free competition is se- 
 cured, both among the railways and among their cus- 
 tomers, and the impartiality which their public char- 
 acter demands is enforced. Such conditions are impos- 
 sible under a centralized system of railways, whether 
 it is under political or corporate ownership ; and the 
 general rejection of the project of state railways shows 
 that the popular judgment has a clear understanding 
 of its incapacity to secure the necessary reforms. 
 
 Management by the state being out of the question, 
 the obvious sufjirestion is that the law shall ree^ulate 
 the management of railways by the corporations, so as
 
 The Discussion of Remedies. 329 
 
 to prevent abuses and punish wrongs. The first crude 
 steps towards legislative regulation took the form of 
 fixing by law a maximum limit for rates. It was im- 
 agined that the railways, if restricted to a moderate 
 maximum, must adjust all their rates with substantial 
 equity, and that thus both extortion and discrimina- 
 tion would be held in check. Experience fully refutes 
 this idea. Effective discriminations are always pos- 
 sible within the limits of any maximum rates that 
 would allow the railway to earn its interest and div- 
 idend charges. Not only will a legal maximum of 
 freight rates fail to prevent discriminations, but no 
 legislative ability can frame a tariff of rates without 
 inequality and injustice to the railways, especially in 
 inter-state commerce. Any rate which would be just 
 to the trunk lines of the Central States would be de- 
 structive to expensive railways reaching the mines of 
 Colorado or California. Rates which the mines in the 
 Rocky Mountains or Sierra Nevada can pay, and must 
 pay, if railroads are to be built for them, would amount 
 to confiscation if applied to tlie coal mines of Pennsyl- 
 vania or the grain of Iowa and Nebraska. The sched- 
 ule which would be just for a railway at one time 
 would be unjust at another. The branch line tlirough 
 a new country must collect higher rates at first, than 
 when it has developed the productive powers of the 
 region. The varying conditions which may properly 
 influence rates are innumerable. It is a lio[)e]ess task 
 to adjust the schedules to suit all circumstances, and 
 it is futile to expect an adequate reform of railway 
 abuses by such means. The uselessness of attempts 
 to establish equitable i-ates by law appears in the fiict 
 that every such schedule wliich has been in exist-
 
 330 The Railways and the Rejpvhlic. 
 
 ence for ten years is now obsolete, being far above the 
 rates now fixed by the railways. This progressive re- 
 duction of the cost of transportation has been cited as 
 showing that all regulation of the railways is unneces- 
 sary. It is far from proving this : but it does prove 
 that attempts to prescribe rates by law are unneces- 
 sary and futile. The laws of trade can bring about 
 whatever cheapening of the cost of transportation com- 
 petition and economy will produce. The province of 
 legislation is to insure the free, universal, and regular 
 operation of these laws, so that the benefit shall be 
 equitably distributed among all interests and locali- 
 ties, and not monopolized by a few, while others bear 
 the burden. When this aim is secured, and artificial 
 interference with these laws is removed, the question 
 whether rates are low enough or not can safely be left 
 to them. 
 
 One remedy for railway abuses, which is too severe 
 and radical to command general approval, has always 
 been within the reach of legislative power, as shown 
 twenty-nine years ago b}^ the decision of the Supreme 
 Court of Pennsylvania in the famous case of the Erie 
 and Northeast Railroad V8. Casey.* At that early 
 stage in the development of railway law, it was held 
 by this high tribunal that the legislature could declare 
 a forfeiture of the charter of its corporate creatures, 
 for the " abuse or misuse " of corporate privileges, and 
 that offence was defined as follows : " Misuse or abuse 
 of corporate privileges consists in any positive act in 
 violation of the charter or in derogation of the public 
 right, wilfully done or caused to be done by those ap- 
 pointed to manage the general concerns of the corpo- 
 
 * 2 Casey, 287.
 
 The Discussion of Remedies. 331 
 
 ration." Apply this principle to current raihvay prac- 
 tices, as characterized by the courts during the past 
 few years, and how many companies could escape the 
 penalty of acts " in violation of their charters or in 
 dero2;ation of the public ricrhts T It has been a^^ain 
 and again declared by the courts that the first obliga- 
 tion of the railways is thorough impartiality to all cus- 
 tomers ; that it is a condition of their charters that 
 they shall offer equal facilities to all persons or corpo- 
 rations alike. It has been placed beyond dispute by 
 the courts that the obligations of the public highway 
 forbid combinations to exclude any person or persons 
 from the enjoyment of their services. The declarations 
 of the bench have been overwhelming, to the effect 
 that all agreements to restrict competition, and to arti- 
 ficially control the supply of services or commodities, 
 are against public policy and an attack upon public 
 rights. It is not necessary to rely upon individual or 
 popular opinion that such acts are "in derogation of 
 the public right." The courts have distinctly declared 
 them to be so. How many railroad corporations are 
 there, which have not, by such acts as these, exposed 
 themselves to forfeiture of their charters ? There may 
 be some unimportant branches that have committed 
 no such transgressions ; but there is hardly an inipor- 
 tant line in the country that is not liable to this pen- 
 alty. The four great trunk lines were partners in the 
 perpetration of the Standard Oil infamy, now known 
 to have been a most persistent and unscrupulous vio- 
 lation of the public duty of impartiality. Every road 
 that exercises an appreciable influence on the com- 
 merce of the country has, at one time or another, been 
 a member of such pooling combinations as are charac-
 
 332 The Eailways and the Republic. 
 
 tei'ized by eminent courts as " criminal conspiracies." 
 Nearly every road has discriminated in its rates, so as 
 to control the route to be taken by traffic shipped be- 
 yond its lines, a practice declared by Justice Strong, 
 of the Supreme Court of Pennsylvania to be illegal and 
 in the nature of monopoly. Under the principles of law, 
 laid down by the highest courts, there is no doubt that 
 tlie trunk lines, the anthracite-coal roads, the Western 
 combinations, and the Pacific railways have subjected 
 themselves to the penalty of forfeiting their charters, if 
 the people, through their legislatures, choose to resort 
 to that severe and radical remedy. 
 
 No thinking man desires to see a crusade started, for 
 the annihilation of the great railway corporations, by 
 the destruction of their corporate existence, and the re- 
 turn of the public property placed in their charge to 
 the control and disposal of the states. Such a measure 
 would be destructive, and might fairly provoke the 
 charge which has been too freely made against much 
 milder proposals for legislation, that it is of the nature 
 of confiscation. But it may be well to remember that, 
 if the railways succeed in making milder legislation fu- 
 tile, or in defeating all legislation, until popular feeling 
 is aroused to extreme and destructive measures, their 
 transgressions have placed this radical remedy within 
 the reach of the people. The hope and desire that oth- 
 er legislation will prove efficient render it unnecessary- 
 further to discuss this last resort. It is enough to say 
 that, under the decision quoted, the corporations could 
 be dissolved by the legislatures, and the railway tracks 
 seized by the state, or ceded to new corporations under 
 sufficient guarantees of the public rights. There can 
 be no question that one or two examples of this sort
 
 The Discussion of Remedies. 333 
 
 would efficiently check the aggressions of the railways. 
 The destruction of a single great corporation, for efforts 
 to build up monopolies, would make others extremely 
 careful in their policy for a long time. 
 
 In planning measures for a conservative policy of 
 railway regulation, legislators and writers are divided, 
 as shown in the debates at the last session of Congress, 
 between the establishment of a railway commission, 
 and legislation of the character provided in the Reagan 
 bill, prohibiting, under suitable penalties, the more 
 pronounced abuses. The different measures proposed 
 in the national and state legislatures vary widely in de- 
 tails; but, in their main characteristics, the two which 
 were prominently discussed in Congress last winter are 
 types of the respective classes. The same division of 
 opinion found expression in the debate during the last 
 session of the Legislature of Pennsylvania, and, indeed, 
 wherever the subject has been brought up for legisla- 
 tive action during the last two years. The more active 
 and radical advocates of railway reform generally favor, 
 in substance, the plan of what is known as the IJeagan 
 bill. Legislators of more moderate views commonly 
 adopt the distinctive idea of the Cullom bill, the es- 
 tablishment of a Board of Railway Commissioners, and 
 are often supported by the I'epresentatives of the rail- 
 ways, who prefer this as an alternative to more radical 
 measures. The two propositions have much in com- 
 mon. Both attempt to define and prohibit discrimina- 
 tions and unreasonable rates, declare sucli offences mis- 
 demeanors, and provide civil remedies and criminal pen- 
 alties for them.'"^ They differ in that the Cullom bill 
 
 * The Cullom \n\\ has but two sections iirohibitlng railway abuses. 
 The first defines the dcmandin" or roceiviii" of " more than a reasonable
 
 33J: The Bailways and the BepuUic. 
 
 forbids rebates and drawbacks only wbere tliey in- 
 flict unjust discriminations, while the Reagan bill pro- 
 hibits these practices altogether ; that the Reagan 
 bill forbids pooling, while the Cullom bill refers the 
 subject to the commission ; and that the Reagan bill 
 forbids the charging of a greater rate for a shorter than 
 for a longer haul which includes the shorter. The most 
 
 rate of compensation " for any of the services of a transportation com- 
 pany as "extortion," and makes it a misdemeanor. The next section 
 provides that for a railway to " demand, collect, or receive from any per- 
 son a greater comj^ensation for any service it may render in its transac- 
 tion of inter-state commerce,'" tlian it charges to another pei'son for "sim- 
 ilar and contemporaneous service, under substantially the same circum- 
 stances and conditions," shall be a misdemeanor; and that -whether it is 
 effected "directly or indirectly, by rebate, drawback, or other device," 
 the fine for each offence shall be $1000. 
 
 The Reagan bill, in its prohibitory sections, declares it to be unlawful 
 "for any person or j^ersous engaged in the transjiortation of property by 
 railroad or by pipe line or lines," from one state or territory to another, 
 or to foreign countries, to " directh" or indirectly charge to or receive 
 from any one person or persons any greater or less amount of freight, 
 compensation, or reward than is by liim or thcra charged to or received 
 from any other person or persons, for like and contemporaneous service 
 in the carrying, receiving, or hauling of the same." Another addition to 
 this section, wholly foreign to the purpose of the bill, fixes the maximum 
 rate of fare on passenger travel at 3 cents per mile. The next section 
 prohibits the granting of " any rebate, drawback, or other advantage in 
 any form," directly or indirectly. The third section makes it unlawful, 
 on the jjart of the railways, to enter into combinations to jjrevent tlie car- 
 riage of property "from being continuous from the place of shipment to 
 the place of destination ; or to enter into any contract, agreement, or 
 combination for the pooling of freights, or to pool the freight of diflerent 
 and competing railroads, or to divide between them the aggregate or net 
 proceeds of the earnings of such railroads." The fourth section makes it 
 unlawful for the railways to charge a greater rate for performing a given 
 service for a shorter than for a longer distance which includes the short- 
 er, and applies to all the roads in use by a corporation whether owned or 
 leased by it. These prohibitions are reinforced by the fifth section, re- 
 quiring the posting of rates in all depots where freight is received, at least 
 five days before any change goes into effect. The violation of any of 
 these sections subjects the offender to a fin-e not exceeding §2000.
 
 The Discussion of Remedies. 335 
 
 important difference, however, is in the legal reme- 
 dies which they provide against offences prohibited. 
 The Cullom bill establishes a board of nine railway com- 
 missioners, who are authorized to hear and investigate 
 complaints in all parts of the United States ; to assess 
 damages if unlawful acts are proved ; and if any rail- 
 way fails to pay such damages and to discontinue the 
 offence, to certify the case to the district courts of the 
 United States, which may enforce the collection of the 
 damages and, by mandamus, compel the railway to 
 obey the law. The Keagan bill leaves its provisions 
 to be enforced by the existing courts, only seeking to 
 make the remedy more direct and easy. For this pur- 
 pose it permits the injured party to bring suit in any 
 state or federal court, within whose jurisdiction the of- 
 fending railway has an office ; it awards him exemplary 
 damages, three times the loss which he can prove 
 that the discriminations have inflicted upon liim ; it 
 makes the resort to a mandamus from the Circuit 
 Court of the United States cumulative, and where per- 
 ishable freights are involved, it authorizes that the 
 writ of alternative mandamus shall be returnable forth- 
 with. These are the main points of difference, briefly 
 stated, between the two proposed forms of regulation: 
 one would establish a commission, armed with certain 
 governmental powers, and supposed to represent the 
 people; while the other simply seeks to render easier 
 and more effective the resort of aggrieved shippers to 
 existing courts. 
 
 The plan of a governmental tribunal, wliich shall give 
 exclusive attention to the abuses of railway manage- 
 ment, has mucli that is attractive. It aims to bring 
 the strength of the government to aid the weakness of
 
 336 The Railways and the Republic. 
 
 aggrieved individuals, in their suits against powerful 
 corporations. It recognizes the fact that the failure of 
 common-law remedies to j)revent discriminations is due 
 to the insuperable difficulties which confront private 
 citize'U'S in litigation against the railways. It pro- 
 poses, therefore, to establish a body armed with the 
 power of the state, in behalf of oppressed shippers, such 
 as can meet on equal terms the strength of the corpora- 
 tions. The idea of a tribune of the people, established 
 to defend private rights against corporate aggressions, 
 and strong enough, as representing the whole people, 
 to restrain the undue and threatening powers of the 
 railways, is very enticing in the abstract. If it oould 
 be made certain that this conception would be realized 
 in foct, that commissions so established would faith- 
 fully and energetically represent and protect the peo- 
 ple, that the powers which it is proposed to vest in 
 such bodies would be sufficient to enforce the law, and 
 that the nine commissioners would not themselves hold 
 an undue and dangerous control of commerce, the meth- 
 od of regulation by a commission would present advan- 
 tages over any other plan yet formulated. But while 
 the plan is, in theory, very attractive, its practical op- 
 eration involves such wide ^possibilities, with such a 
 range of possible results, from absolute uselessness to 
 excessive and undue restriction, that it may be doubt- 
 ed whether its ideal purpose could be realized. 
 
 The powers conferred on commissions, by the meas- 
 ures enacted or proposed in various legislatures, diffiir 
 very widely. Such a bodj^ may have entire control of 
 the railways or may have no powers at all ; it may have 
 definite and stringent legislation against railway abuses, 
 which it is authorized to enforce, or it may have no di-
 
 The Discussion of Remedies. 337 
 
 rect statute under which to act in restraint of such evils. 
 It may be empowered to fix rates for the railways, as in 
 Georgia, or it may be authorized only to hear and in- 
 vestigate complaints and make recommendations to the 
 leo^islature, as in New York. A commission mio-ht be 
 erected to enforce the provisions of the Keagan bill, or 
 it might be so constituted that drawing its salary, and 
 holding stated sessions to discuss railway interests, 
 would be the limit of its usefulness, as is substantially 
 the case with the Massachusetts Railroad Commission 
 at the present time. In the wide range of measures 
 proposing commissions, the Culloni bill is a fair exam- 
 ple of those which sincerely aim to restrain by law the 
 abuses of discrimination and exorbitant charges. It 
 does not invest the commission with such extraordinary 
 powers as some state laws in existence, nor does it, like 
 others, stop short of giving it any powers at all. Hav- 
 ing been made prominent by its passage through the 
 Senate, it must be accepted as fairly representative of 
 the method and aim of a large class of similar measures. 
 If ftiirly construed and enforced, this bill seems likely 
 to suppress the most serious railway abuses. But its 
 effectiveness depends so entirely upon its construction, 
 that what the bill would accomplish cannot be fore- 
 seen. Its language may be understood as prohibiting 
 almost everything now practised by the railways. Al- 
 though the eleventh section distinctly refers the subject 
 of pooling to the commission for subsequent report, it 
 was declared by one of the supporters of the bill, on 
 the floor of the Senate, that the second and third sec- 
 tions clearly prohibit pooling.* A much less forced 
 construction will find in the same sections prohibitions 
 
 * Senator Pugh, of Alabama, Congressional Record, vol. vi. p. 1360. 
 
 99 
 
 ^ ill
 
 338 The Railways and the Rejpvhlic. 
 
 of discriminations between localities. If the railways 
 are anxious to carry cotton from Memphis to New Or- 
 leans at $1 per bale, does not that make the chai'ge of 
 $3.25 per bale from Winona, about one third as far, ob- 
 viously " unreasonable V It is plainly a discriraination 
 to transport two car-loads of freight a given distance 
 for one man, at the price charged on one car-load for 
 another, for it is practically transporting each car-load 
 for the first at less than for the second. Is it any less 
 plainly a discrimination, when the railway hauls freight 
 for one shipper a given distance, for the rate it charges 
 another for half the distance ? That part of the haul 
 ■which is common to both shipments is evidently made 
 much cheaper to the freight that comes farthest. But if 
 the railways interpret the provisions of the bill, it would 
 make no change in their methods. Rates are always 
 reasonable to them. Mr. Fink is on record as declar- 
 ing that such a freak as the Winona and Memphis 
 freight tariffs might be reasonable, because there was 
 competition at Memphis and none at Winona. There 
 never was a discrimination, that was not justified, in the 
 view of the railways, by some difference in the condi- 
 tions. A radical construction of the Senate bill, vigor- 
 ously enforced, might make it the most restrictive leg- 
 islation ever proposed on the subject. Construed ac- 
 cording to the railway views, or enforced weakly and 
 negligently, it would be a dead letter. The pi'actical 
 decision, therefore, whether such a law should be a 
 dead letter or a living power, would rest witii the com- 
 mission it creates, which could, at will, fipply its provi- 
 sions vigorously, or make them of no effect. 
 
 On this point the plan of regulation by commissions 
 must turn. It stakes the protection of commercial in-
 
 Tlie Discussion of Remedies. 339 
 
 terests upon the sincerity, energy, and intelligence of 
 a board of commissioners, appointed by political influ- 
 ences, and subject to the same temptations and induce- 
 ments to neglect their duty as the executive depart- 
 ments of the government. But, by the very natui'e of 
 the commission, the pressure of these inducements and 
 temptations will be multiplied. No matter how strin- 
 gent or specific the law may be, in prohibiting extor- 
 tionate rates, discrimination, or pooling, its effectiveness, 
 if its enforcement is put into the hands of a commis- 
 sion, will depend entirely upon the vigor and faithful- 
 ness of that body. What guarantee have we, in the 
 provisions of the bill or in the influences that would 
 control the selection of commissioners, that they would 
 display these qualities? It must be remembered that 
 this legislation seeks to restrain the greatest power in 
 the country, except the united and aroused popular will. 
 It confronts not a local or private wrong-doer, but the 
 organized and combined power of the railway corpo- 
 rations, with unlimited political influence, infinite le- 
 sources for corruption, and secret methods for control- 
 ling appointments and legislation. This power has 
 kept courts in its pay, it defies the princijiles of com- 
 mon law, and nullifies the constitutional provisions of 
 a dozen states; it has many repi'esentatives in Congress, 
 and unnumbered seats in the State Legislatures. No 
 ordinary body of men can permanently i-esist it. Here 
 is the fatal weakness of laws establishing railway com- 
 missions, whether tlieir other provisions be radical or 
 mild. If, by any happy suspension of the nature of 
 things, the stream turned out to be purer than its 
 source, what hope is there that it could Ije kept clear 
 and undefilecl, under the corrupting influences which
 
 34:0 The Railways and the Bepublic. 
 
 would a\vait it at every turn of its future course? It 
 is possible that, in obedience to an imperative public 
 demand, such a body might be organized with the sin> 
 cere purpose of restraining and preventing corporate 
 abuses. The popular will has established such bodies 
 in one or two states. But le<2:islation must resi-ard the 
 future, and seek a remedy that will be effective, not 
 merely for the next year or two, but for future gen- 
 erations. Let popular vigilance be lulled, or the pub- 
 lic attention directed to other issues, and will not 
 this stealthy and almost resistless power gradually 
 fill the commission with its tools, or win over the mem- 
 bers to its purposes? It is idle to hope that a board 
 of nine commissioners, with salaries such as a great 
 railway pays its third-class subordinates, will perma- 
 nently remain superior to the manifold forms of press- 
 ure and corruption that can be exerted by four thou- 
 sand millions of railway capital, until it has been dem- 
 onstrated that a house-maid's mop can keep back the 
 tides of the Atlantic Ocean. 
 
 Pessimistic as this view of the susceptibility of offi- 
 cial nature to the influences of corporate power may 
 appear, it is abundantly borne out by glaring instances, 
 in a much higher range of official life than would be 
 awarded to the members of a railway commission. When 
 a department of the national government is believed, 
 by the secret use of its authority, to have served the 
 interests of land-grant corporations, it is not unreason- 
 able to apprehend that corporate influences might cor- 
 rupt a body of much lower standing. AVhen the Su- 
 preme Court of Pennsylvania, so long eminent for abil- 
 ity and integrity, has become a proverb for its services 
 to the Pennsylvania Railroad, it seems hopeless to ex-
 
 The Discussion of Remedies, ' 3il 
 
 pect a body of mucli humbler position to withstand a 
 far greater and more direct pressure. The dignity and 
 honor of the national cabinet, or of a supreme court, 
 afford far stronger iutrenchments for integrity and pub- 
 lic duty than the position of railway commissionei', 
 while the duties of the latter bring against them, with 
 a hundredfold greater energy, the forces combined to 
 assail them. Such a body would sooner or later be- 
 come a mere bulwark or outpost for the defence of cor- 
 porate abuses, instead of a fortress of popular rights. 
 To expect this is simply to recognize the limitations of 
 human strength, when pitted against the vastest power 
 for corruption ever known. The result of the unequal 
 match is as certain as if nine men, however expert and 
 strong, were ordered to stand in the path and arrest 
 the destructive course of a mountain avalanche. 
 
 The force of this objection to the regulation of the 
 railways by a few commissioners is shown in the his- 
 tory of such bodies, when established by state legisla- 
 tion. Kailway commissions are in existence in Mas- 
 sachusetts, New York, Georgia, Illinois, Iowa, Kansas, 
 Colorado, and California.* Some of these are invested 
 with large powers, while some are merely supervising 
 and advisory boards. Only two of these bodies have, 
 within four years, made any active effort to restrain 
 abuses which have aroused the press and the jiublic to 
 impatience. The other six, for any practical benefit 
 they have secured to the people, might as well have 
 charge of regulating the movements of the heavenly 
 bodies. It is instructive to notice that the efl\ictiveness 
 
 * In nearly a dozen other states, the office of railroad commissioner is 
 established by law, for the tiicoretical purpose of collecting statistical re- 
 ports, but it is practically, in almost every case, a sinecure.
 
 342 The Railways and the Rejpvhlic. 
 
 of these boards appears to liave no relation to tbe 
 thoroughness or radicalism of the legislation by which 
 they are established. The Georgia raihvay commission 
 has perhaps as great powers as were ever proposed for 
 any such body ; and its energy in enforcing them has 
 attracted the enmity of the railways, which have recent- 
 ly demanded the restriction of the powers of the com- 
 mission. The California commission, with powers al- 
 most if not quite as great, has not vitality enough to 
 make even a passing impression on the sway of the 
 Central Pacific over California commerce. The Illinois 
 commissioners, holding about the same powers pro- 
 posed by the Cullom bill, with the additional preroga- 
 tive of prescribing maximum rates, has of late years 
 shown a disposition to investigate and correct the most 
 serious of the abuses which it is its duty to check. 
 The commissions of other states exhibit varying evi- 
 dences of inefficiency, from futile attempts to restrain 
 corporate power, to supererogatory efforts to strengthen 
 the railways in their supremacy over commerce. It is 
 a significant measure of the adequacy of this device, 
 that even in Illinois, where the commission was estab- 
 lished in obedience to the same overwhelming public 
 demand for regulation of the railways which produced 
 the famous Granger legislation, it served for several 
 years only to show how useless and lifeless such a 
 guardianship of the public interests can be. And even 
 now the charge is made in that state, through the press, 
 that " the railroads, in violation of the law, are making 
 unjust discriminations whenever it suits the convenience 
 and interests of some pool, and that the commissioners 
 are doino- nothing to protect the people's interests." 
 Certainly the plan of regulation by commissions has
 
 The Discussion of Remedies. 343 
 
 not shown itself to be an adequate or permanent 
 policy. 
 
 The commission that has been in operation for many- 
 years in Massachusetts, and that more I'ecently estab- 
 lished in New York, deserve attention, as embodying 
 the idea that such a board, with the mere power of 
 supervision and advice, can restrain railway abuses 
 through "the moral influence of public opinion." This 
 view was made especially prominent in the debates of 
 Congress by representatives from Massachusetts, who 
 lauded the commission of that state as the panacea for 
 all railway ills. Hardly any idea is more hard-worked, 
 in proportion to its strength, than this of the moral in- 
 fluence of bodies which have no power to enforce their 
 opinions. It was asserted in Congress, as an evidence 
 of the influence of such commissions, that the Massa- 
 chusetts commission had, by its recommendations, se- 
 cured the building of a new depot in Boston, and that 
 the New York commission had brought about reforms 
 which cost the railways $200,000. I can imagine that 
 when public attention is aroused, the railways may 
 concede minor points on the recommendation of the 
 commission for the purpose of allaying agitation. But 
 that the moral influence, either of the commissioners or 
 of public opinion, would have weight against the vast 
 prizes to be secured for railway managers and their 
 friends by really vital aggressions, is a figment of the 
 imagination. The moral influence and I'H'otests of the 
 press and the public, against crushing an independent 
 and prosperous industry, did not weigh a scruple, when 
 a petroleum monopoly worth $100,000,000 was in tlie 
 other side of the scale. The moral influence of the press 
 and the public, of magazine writers and public oflicials,
 
 344 The Railways and the Rejpullic. 
 
 even of such standing as the Governor of Pennsylvania, 
 has never had the slightest effect on the anthracite- 
 coal combination. Moral influence may be worth a 
 few thousand dollars to a railway company, but when 
 weighed against the millions at stake in any important 
 railway abuse, it seems a trifle. 
 
 It is not difficult to see how, in a state whose stock- 
 holders largely outnumber, among the influential class- 
 es, the traders who sufter from unequal rates, a com- 
 mission, which gives its principal attention to the evils 
 of stock watering and market manipulation, should 
 be as satisftictory to the public as to respectable rail- 
 way managers. But the Massachusetts commission 
 affords little promise of dealing effectively with such 
 great evils as have been most conspicuous in railways 
 outside of its respectable but somewhat contracted 
 jurisdiction. Evidence that such a body could grapple 
 successfully with an abuse like that wdiich built up the 
 Standard Oil Company, or break down the tyranny of 
 a combination like the anthracite-coal pool, or check 
 the aggressions of an unscrupulous power like the 
 Southern and Central Pacific plutocracy, will be sought 
 in vain among its records and reports. On the con- 
 trary, a signal and mournful instance of the inability 
 of the most eminent men who can be placed on a rail- 
 way commission to resist the pressure of corporate in- 
 fluences, and to maintain independence as defenders of 
 public rights, is furnished by its founder. There was 
 no man in the country more conspicuously pledged to 
 the support of public interests against corporations 
 than Charles Francis Adams; there w^as no man whose 
 social position and personal character seemed to be 
 better fortified a2:ainst influences which mic^ht induce
 
 The Discussion of Remedies. 345 
 
 ordinary men to suiTender tlieir independence. I do 
 not believe that he has consciously surrendered any of 
 his convictions on these questions in exchange for place 
 or fortune ; nor do I think his pi-eseut position, as presi- 
 dent of the Union Pacific Railway, inconsistent with a 
 genuine indignation at the gigantic frauds which he 
 exposed in its former management. But one of the 
 most powerful influences in forming a man's conviction 
 is the consciousness where his interest lies. The irre- 
 sistible force of private interest, in shaping the views 
 of eminent men on public questions, is the most promi- 
 nent lesson in the career of Charles Francis Adams. 
 The Eno-lish lan2:uao-e contains no more vio^orous or 
 telling exposure of the dangers from great corporations, 
 of their attempts to control legislation and courts, and 
 of the necessity for protecting the people against their 
 encroachments in all forms, than the earlier writings of 
 this able gentleman. Yet the very prominence given 
 to him by these writings marked him as one on whom 
 corporate influences must be brought to bear; and by 
 successive steps he passed from one position in the rail- 
 way hierarchy to another, until he is now one of the 
 two leading advocates of the policy of bringing tlie 
 nation under the sway of a vast corporate fedei'ation. 
 This result shows the hopelessness of staking public 
 rights upon the issue between the independence and 
 integrity of a few individuals, and the practically in- 
 finite resources for corruption held l)y the railway 
 managers. 
 
 The commission that lias been in existence for a 
 couple of years in New York occupies a different posi- 
 tion from that of Massachusetts. It is brought direct- 
 ly into the conflict between the greatest of the railway
 
 346 The Railways and the Republic. 
 
 powers aud the largest business interests. Represent- 
 ing a large stockholding public and a still larger trad- 
 ing public, it would naturally seek to secure protection 
 for shippers without impairing the earnings of the rail- 
 ways. But if there were any hope in railway commis- 
 sions for the protection of public rights, such a body, 
 founded after the most searching legislative investiga- 
 tion ever made into railway abuses, could not shut its 
 eyes to those abuses, and sustain, in its recommenda- 
 tions, the offensive theory of railway ownership in the 
 traffic of the section through which it passes. Yet this 
 seems to be, in substance, what the jS^ew York com- 
 mission has done. Two of its three members seem 
 to have adopted the views of the railways, while 
 one member has faithfully represented the public 
 interest. The proportion has not been favorable to 
 the effectiveness of the board. It has secured the 
 reduction of the rates on milk to New York city, 
 and it has unsuccessfully advised the railways to dis- 
 continue the diversion of freights. The net value of 
 the influence of an advisory commission is shown by 
 the fact that sundry other recommendations to the rail- 
 ways have been disregarded, until the commission it- 
 self asked the legislature for power to enforce their 
 advice by applying to the courts for a mandamus. 
 The anthracite-coal pool, the trunk-line pool, the Stand- 
 ard monopoly, and the practice of diverting freights, 
 are carried on within the jurisdiction of this body, but 
 it recommends no legislation on these topics. The 
 Court of Appeals of New York has declared an associa- 
 tion far less important and dangerous than the least of 
 these combinations to be unlawful, as "nothing less than 
 an attainment of an exception of the standard of freights
 
 The Discussion of Remedies. 3i7 
 
 and of the facilities and accommodations to be rendered 
 to the public from the wholesome influence of rivalry 
 and competition.'' With this decision before them, the 
 sole deliverance which these tribunes of the people 
 could make, on the subject of pooling, was the tentative 
 remark of one of them, that they were " not satisfied of 
 the legality of pools ;" while their nearest approach to 
 recommending legislation on the subject is the prep- 
 aration of a bill to sustain the combinations against 
 competition by restraining the construction of new 
 roads ! 
 
 This proposition is based on the view that new 
 railway construction " is frequently at the expense of 
 vested rights and grave public interests." "' This is 
 the first official enunciation of the doctrine that the 
 railways have a proprietary right in the traffic of the 
 localities which they serve. The extreme claim of rail- 
 w'ay proprietorship is that it owns the shipping busi- 
 ness of the men who depend on its services, and that 
 all efforts to compete with it are " robbery." But it 
 is startling to find a body, founded to protect the pub- 
 lic against the railway power, asserting that ownership 
 as a " vested right " and a " grave public interest." No 
 legal franchise or actual property interest of the rail- 
 ways can be impaired by competition. This idea, that 
 the railways have a vested right in the absolute con- 
 trol of their traffic, is repeated in the next sentence, 
 which affirms the " obligation " of the state " to pro- 
 tect existing railroads from useless and disastrous com- 
 petition by unnecessary new ones." Such extraordi- 
 nary tenderness for the power of the railways over their 
 shippers, and such readiness to assert that the monop- 
 
 '■^- Report of New York Commission to tlic legislature, December, 1884. 
 
 r
 
 348 The Railways and, the Bepuhlic. 
 
 oly of tlie railways at points where they have no com- 
 petition is a vested right, contrasts strangely with the 
 failure of the commission to find any subject for \)vo- 
 posed legislation in the notorious evils of pooling and 
 combinations to control great interests of trade. But 
 the commission's action and its inaction explain one 
 another. Men who could propose to restrict the pub- 
 lic right to build new railways wherever capital de- 
 sires to find an investment, could, of course, see nothing 
 wrong in combinations to prevent competition between 
 railways already existing. Such a body would natu- 
 rally adopt the notion that competition is the great 
 evil, which must be prevented at whatever cost to pub- 
 lic or individual rights. The people, whom this body 
 is supposed to represent against the railways, may be 
 thankful that its guardians did not make their work 
 complete, by presenting a bill forfeiting the charter of 
 any railway that dares to keep up competition against 
 the mandates of the pool. 
 
 An exhaustive examination of the nature and acts 
 of the railway commissions in the several states is be- 
 yond the limits of this work. We here simply inquire, 
 how far the workin2:s of these bodies encoura^je the 
 hope that the general adoption of the plan, in national 
 and state legislation, would afford adequate and per- 
 manent protection to the public. Upon this question 
 the facts stated seem to be decisive. A plan which, 
 amono" the state commissions already constituted, re- 
 sults in, at most, two out of eight that are efficient and 
 useful, does not promise to grapple successfully with 
 the vast railway powers of the entire country, in the 
 interests of independent commerce. The power which 
 has converted the Charles Francis Adams of 1875 into
 
 The Discussion of Remedies. 349 
 
 the Charles Francis Adams of 1885, cannot be con- 
 quered and held in subjection by any body of nine 
 men at salaries of $7500 each. Such legislation as re- 
 sults, in the greatest state of the Union, in a commis- 
 sion which, constituted for the public protection, as- 
 sumes the guardianship of the railways, and proposes 
 to limit competition by forbidding capital and the pub- 
 lic to build new roads, will never adequately protect 
 the public interests. To ^^ut such a body of weak and 
 fallible men in charge of the vast interests of commerce, 
 against the aggression of the immense power of com- 
 bined railway capital, is not less fatuous than it would 
 be to station a pigmy sentinel at the doors of the treas- 
 ure-house, and bid him guard it against an army. 
 
 The estimate Avhich the railway corporations form 
 of the probable value of commissions, ii> restraining 
 their cherished abuses, appears from the fact that 
 wherever regulative legislation has become inevitable, 
 the railway advocates have, of late years, urged the 
 establishment of them. Their preference for this form 
 of legislation rests on an accurate estimate of the re- 
 spective powers of official independence and corporate 
 influence. There is nothincf in the character of a com- 
 mission to insure moderation or conservatism. Left to 
 itself it may be either a scourge or a cipher. What 
 guarantee have the railways, that the commission con- 
 stituted to supervise them may not practise the most 
 vexatious and harmful interference with their opera- 
 tions?* "What security have the public that such a 
 
 *Aa an illustration of what a commission might do, take; the com- 
 plaints which have been made within the past year concerning the oper- 
 ations of the Georgia board. It was rejjresented, in an apjjcal to the 
 legislature, by the railroads centring in that state, that the reductions
 
 350 The Railways and the Repvhlic. 
 
 body might not attempt unjust measures, exercise their 
 power arbitrarily, or, in fixing rates, compel the rail- 
 ways to carry some classes of freight at a loss, or at 
 the expense of other business ? To set up a board of 
 nine men, with the power to govern these vast inter- 
 ests, is to subject the public welfare to the mere chance 
 of their being wise, moderate, and disinterested be- 
 yond the common lot. Assuming that such a body 
 will have energy and intelligence enough to control 
 the situation, the vast power it can exert for evil is 
 as serious a difficulty as its liability to sink into ob- 
 scure uselessness. The preference of the railways 
 for the commission plan, where they must submit to 
 some legislation, proves that they have little fear lest 
 any commission be too active or powerful for them to 
 control ; and we have seen that their estimate of their 
 ability to control it is not exaggerated. The commis- 
 sion might interfere arbitrarily and injuriously with 
 all departments of railway traffic ; it is more likely to 
 neglect its duties to the public and to confine itself to 
 enjoying the emoluments and perquisites offered by its 
 position. To subject the vast interests of commerce 
 and transportation to a body which may become either 
 the tyrant of the corporations or their tool, is not the 
 way either to secure true prosperity to the railways, or 
 to protect the freedom of commerce and the rights of 
 the public. 
 
 Opposed to the Cullom or Senate bill in Congress 
 
 in rates made by the commissioners were " simph' crippling the railroads." 
 The fact that this appeal resulted in a bill restricting the power of the 
 commission over rates, is not conclusive as to the accuracy of the statement ; 
 but the railway presentation of the case certainly excludes the view that the 
 commission plan is necessarily the most conservative form of legislation.
 
 The Discussion of Remedies. Sol 
 
 last winter was the Reagan bill ; and measures em- 
 bodying tbe respective principles of tbese bills came 
 before some of the state legislatures. The Reagan bill 
 Las been advocated by the Congressman whose name 
 it bears through many sessions, and made its nearest 
 approach to success in its passage by the House last 
 winter. The title of Mr. Reagan to the authorship of 
 the bill was disputed in the debates, Mr, Rice of Mas- 
 sachusetts attributing it to Mr. J. H. Hopkins, the mem- 
 ber from the Pittsburgh district. Whether Mr. Rea- 
 gan, Mr. Hopkins, Judge Black, or some unnamed 
 author wrote the bill, it clearly expresses a matured 
 policy for correcting the wrongs of railway manage- 
 ment. It proposes to make the legal prohibitions spe- 
 cific and direct, and to facilitate the recourse of private 
 shippers, who may be wronged by the roads, to the 
 courts of law. Rejecting the plan of a commission for 
 the defence of popular rights, it proposes simply to 
 make the definition of these rights as clear as possible, 
 and to leave the protection of them, where it now rests, 
 with the courts. It makes no essential chansfe in the 
 relation of the shipper to the railway, as already set- 
 tled by the courts under the common law. The aim 
 of the bill is to make the resort to the courts easier 
 and more effective. Whether Mr. Reagan devised this 
 form of legislation, or adopted the work of others, the 
 unswerving steadiness and ability with which he has 
 urged it, throughout four terms of Congi-ess, entitle him 
 to give his name to the measure. It was customary 
 in the debates of Congress and in tlie public, press, 
 while these measures Avere pending, to represent the 
 railway- commission plan as conservative and careful, 
 and the Reagan bill as radical and vexatious. It is
 
 352 The Bailways and the Republic. 
 
 hard to find any foundation for such an opinion in the 
 provisions of the latter. It prohibits all forms of dis- 
 crimination and requires reasonable rates, in language 
 rather more painstaking than the Cullom bill ; but the 
 exact application of those prohibitions, in both, depend 
 largely upon their construction, and the practical dif 
 ference in this respect is unimportant. Their points 
 of substantial difference are as follows; 
 
 1. The Eeagau bill prohibits rebates and drawbacks 
 altogether, while the Cullora bill only prohibits giving 
 any advantage by such devices. The latter seems on 
 its face to be equitable ; but as the sole purpose of 
 rebates and drawbacks is to afford a cover for advan- 
 tages to certain shi]3pers, the provision of the Cullom 
 bill is much like makino* it illesral to break into a 
 house for the purpose of stealing, but permitting house- 
 breaking whenever no purpose of robbery is proved. 
 
 2. The Reagan bill prohibits pooling, which the Cul- 
 lom bill, unless an extreme construction is put upon 
 its language, leaves to the reports of the future com- 
 mission, and the action of future legislators. Although 
 this prohibition was made a ground of attack on the 
 former measure, it is but a statutory declaration of a 
 principle already shown to be settled at common law. 
 
 3. The Reagan bill prohibits a higher charge for a 
 short haul than for a long one, which includes the former. 
 
 Here Avas a point of conflict in the Congressional dis- 
 cussion of the subject. The railway advocates cried 
 out in alarm that, if it were enacted, the railways must 
 cease transjoorting through freights ; not observing that 
 sucli a law would only force them to sustain rates on 
 that class of traffic, as the railway pool has long been 
 trying to do in vain. The fear of some of the Western
 
 The Discussion of Remedies. 353 
 
 men was that this section might compel tlieir constit- 
 uents to pay higher rates for transporting grain to the 
 seaboaril. Yet under its provisions a railway could 
 carry grain a thousand miles as cheaply as a hundred, 
 if it chooses ; but it must not charge more for the hun- 
 dred miles than for the thousand. The declaration of 
 the railway advocates, that such a provision is imprac- 
 ticable, sounds strangely in connection with their praises 
 of the Massachusetts law, when it is found that the 
 Massachusetts law contains exactl}' this provision.'"^ 
 
 The affection of the railway interest for the Massa- 
 chusetts style of regulation indicates that this provi- 
 sion cannot be such a terrible one after all. The sub- 
 ject of rates for long and short hauls has been fully 
 discussed elsewhere. It is clear that the cost of sei-- 
 vice in freight transportation comprises two elements ; 
 one of whicli, consisting of terminal charges, is the 
 same on similar classes of freight, whether it is carried 
 a hundred or a thousand miles ; the other, consisting 
 of motive power, wear, and tear, and interest upon cap- 
 ital, varies in exact proportion to the distance.f It is 
 impossible, therefore, that the cost of service can be 
 more for a less than for a greater distance which in- 
 cludes the less ; and charges whicli bear an equital^le 
 proportion to the cost of service must be somewhat 
 greater for the longer haul, to cover the difference in 
 
 *"Xo railroad corporation slmll charge or receive for the transporta- 
 tion of freiglit to any station on its road a greater sum tlian is at tlie time 
 charged or received for the transportation of the like class and quality of 
 freight from tlie same original point of departure." — Maasachusctls lie- 
 vised Statutes, section 190. 
 
 t This Avas clearly demonstrated by Senator Mahone, who may be said 
 to have been almost the only railroad president iu Congress who talked 
 sense on this subject. 
 
 23
 
 354 The Railways and the Eepullic. 
 
 the second element of cost. The Reagan bill does not 
 go so far. As Mr. Keagan Limself said in Congress, it 
 still permits discrimination against shorter hauls, and 
 only seeks to do away with the absurdity of such a 
 proclamation to shippers as this : " If you send a car- 
 load of grain from Chicago to Buffiilo we will charge 
 you $50 ; but if you will send it through to New York 
 we will not only give you the extra haul for nothing, 
 but we will throw off $20 from the charge." The rail- 
 way is still permitted to bring St. Louis as near to 
 New York as Pittsburgh is, if it desires ; but it cannot 
 bring it any nearer. No honest advocacy of the rail- 
 ways can ask more scope for their freedom of action 
 than this.'^'' 
 
 The section requiring publicity of rates was severely 
 attacked in the House of Representatives last winter. 
 But such publicity is essential, and the rates published 
 must be maintained. If the law undertakes to enforce 
 the " reasonable, uniform, and stipulated rates," declared 
 by the Supreme Court of the United States, in 1842, 
 to be the right of all upon the public highways, it must 
 assure to the public full information of what these 
 rates are. Secrecy of rates can be useful only in cov- 
 ering discriminations, special privileges, or surreptitious 
 reductions. 
 
 The most plausible objection to this provision re- 
 fers to the clause requiring the schedule of rates 
 
 * The character of the opposition to tliis provision is exposed by the 
 fact tliat, while the representatives of the Pennsylvania Railroad, last win- 
 ter, both on the floor of Congress and in the Pennsylvania Legislature, de- 
 clared it impracticable, ruinous, and restrictive, the same prohibition is 
 to be found in a law of the State of Pennsylvania, passed in 1861, for the 
 benefit of that corporation and at its instance, conferring upon it mate- 
 lial advantajres.
 
 Tlie Discussion of Remedies, 355 
 
 to be posted five days before it goes into effect. 
 Against this the advocates of the railways in Con- 
 gress protested that it would " destroy competition.'' 
 Admitting that it would do so, the retort is pertinent 
 that the railways, now struggling to prevent competi- 
 tion, ought to welcome the assistance of the law in 
 their great effort. But it would not destroy compe- 
 tition ; although, under existing conditions, it mio-ht 
 work hardship to the railways, at points at which they 
 com2:)ete with transportation agencies not under the 
 control of the act.^ There is some force in the objec- 
 tion that this section does not sufficiently 2)i;ovide for 
 such special cases. In competition between a railway 
 and a water route, for example, the latter could reduce 
 charges and take all the business, for five days before 
 the reduction in railway charges could take effect; and 
 at the end of that time, by another cut, might again 
 take all the business, for five days more. Tlie same 
 course might be taken by a railway not suljject to reg- 
 ulation by the national laws. Provision should be 
 made against this danger. If the ci'itics of the section 
 had been as anxious to perfect the measure as they 
 were to strengthen opposition to it, they could easily 
 have devised an amendment, permitting the railways, 
 on freight subject to competition by routes not con- 
 trolled by the act, to make reductions wliich shall go 
 
 * There is a ratlicr startling contrast between the strenuous opposition 
 to this provision of tlie Reagan bill, and the subsequent proposition of 
 Mr. J. H. Devcrcux, on I)elialf of the rail waj's, before the Cuiloni Coniniit- 
 tce, to require the i^ublication of rates under severer penalties, and to 
 make the period of notice six times as long. Thus we learn that meas- 
 ures which arc unjust and impracticable, if proposed in a moderate form 
 for the public interest, arc practicable and wise when pushed to an ex- 
 treme for the support of railway combinations.
 
 366 The Hailways and the Hepublic. 
 
 into immediate effect \Yhen j)osted. Such a proviso 
 would preserve the principle of publication, and would 
 enable the railways to meet outside competition. The 
 first duty of legislation is to guard public rights. It 
 is less important, but still eminently proper, to protect 
 the railways in the legitimate conduct of their own 
 business. In this matter, at least, the two objects are 
 entirely compatible. 
 
 The recourse given by this bill to the courts is the 
 point in which it is most evidently superior in conser- 
 vatism to the Cullom bill. Instead of introducino; into 
 the decision of such questions a supernumerary body, 
 whose character and influence must remain unknown 
 until fully tested, it refers its provisions for enforcement 
 to tribunals from which the highest independence and 
 impartiality may be expected. The courts may not 
 always be superior to corporate influence; but with 
 liberty of selection, the complainant will have an op- 
 portunity to make his case fairly heard. The shipper 
 will be likely to prefer this remedy to that of the Cul- 
 lom bill. Under the one system he is the defender of 
 his own rights, retains control of his own case, selects 
 his own counsel, and can exert his energy to press his 
 claims. Under the other he must support his claim 
 through two courts, the first of which can decide finally 
 against him, but not against the railway. If his case 
 is not stifled in the commission, nor by the district at- 
 torney into whose charge it passes, it then reaches the 
 same stage in the United States courts at which it is 
 allowed to start by the Eeagan bill. The railways 
 should prefer the direct appeal to the courts; for, un- 
 less they expect to corrupt and control the commis- 
 sion, this will be simply an additional tribunal before
 
 The Discussion of Remedies. 357 
 
 whicli they must defend themselves, with the possibil- 
 ity that it may be an arbitrary and injurious body. As 
 far as any adequate regulation of railway matters can 
 be provided by litigation, the provisions of the Reagan 
 bill afford better j^romise than those of the Cullom bill, 
 for a moderate, conservative, and yet independent and 
 effective decision of disputes. 
 
 The penalties of the House bill go further than those 
 of the Senate bill, in awarding damages for discrimina- 
 tions to three times the amount proved to have been 
 suffered, and in imposing a fine of $2000 for violations 
 of the act instead of 81000. The first provision looks 
 rather harsh at first sight ; but a study of the subject 
 shows that exemplary damages are necessary, to make 
 the prohibition of favoritism effective. If there were 
 any satisfiictory means of computing consequential 
 damages in such cases, it would be better to leave the 
 award wholly to the jury. But no such means can be 
 devised, and the award of triple damages is moderate, 
 when compared with the practical effect of the custom- 
 ary discriminations. As to the question whether the 
 fine, for wilful violations of the law by railway oflScials, 
 shall be $1000 or $2000, either sum is so trifling in 
 j^roportion to tlie immense pecuniary advantages which 
 a railway official can gain by such violations, that it 
 does not make much difference whicli penalty is pre- 
 scribed. 
 
 The Rea2:an bill has been denounced, as establishing^ 
 an iron-bound rule over railways, as interfering with 
 their freedom, and as severe and arbitrary. In its gen- 
 eral features, however, which have been copied in 
 similar legislation proposed in the states, it is really 
 among the most moderate and least likely to produce
 
 358 The Railways and the Bepublic. 
 
 uuAvarranted interference, of all prominent measures 
 proposed for tlie regulation of i-ailway traffic. It at- 
 tempts no interference with the legitimate operations of 
 the railways. No inflexible rule is laid down to con- 
 trol their transactions. It simply prohibits certain 
 common practices under suitable penalties. Its pro- 
 hibitions may be classed, in general terms, under five 
 heads: 
 
 1. The railways must not discriminate between indi- 
 viduals, and their rates must be reasonable. 
 
 2. They must uot discriminate between localities, to 
 the extent of charging more for a shorter distance than 
 they do for a longer one which includes the shorter. 
 
 3. The use of rebates and drawbacks, as a cover for 
 discriminations, is absolutely prohibited. 
 
 4. They must not pool or combine with other roads. 
 
 5. They must give full publicity to their rates. 
 
 The bill is only an authoritative expression, in statu- 
 tory form, of what has already been declared, either 
 directly or inferentially, by the best authorities, as 
 common law. Discriminations, excessive rates, and 
 pooling combinations have been declared illegal by a 
 line of decisions from Chancellor Walworth to Judge 
 Hallet. The Reagan bill goes beyond the common 
 law, only in forbidding rebates and in requiring public 
 rates, which are essential means of enforcing the main 
 prohibitions, and in its long-and-short-haul provision. 
 It differs essentially in its prohibitions from the Cul- 
 lom bill, in forbidding pooling, and in the long-and- 
 short-haul provision. No one, who accepts the principle 
 that rates must be reasonable, can consistently object 
 to a provision that the railways shall not commit the 
 offence against reason of charging more for a less ser-
 
 The Discussion of Remedies. 359 
 
 vice tliau for a greater. Of all 'legislation which aims 
 merely to regulate existing methods of railway business, 
 this is the most reasonable and conservative measure 
 yet matured, and affords the best promise of some effec- 
 tive remedy for prevailing evils. 
 
 But, admitting all this, the chance that it will be 
 adequately and permanently effective is very slight. 
 The same causes which make the common-law remedies 
 inefficient in preventing or punishing these practices, 
 will continue to operate under the Keagan bilh In 
 addition to the expense, delay, and difficulties of the 
 litigation, the great fact, that will place the relief con- 
 templated beyond the reach of the mass of sufferei's, is 
 that whoever seeks it must incur the enmity of a power 
 whose good-will is essential to his prosperity. If he 
 becomes aware of one species of favoritism from which 
 he is suffering, he may apply to tlie courts, and, after 
 long and vexatious delays, may win his case ; but in 
 the meantime some other form of discrimination may 
 begin against him, only to be rectified by another in- 
 definite season of litigation, and so on without limit. 
 It has been asserted that a railway can ruin a large 
 shipper, merely by delay and interference in the trans- 
 mission of his goods, on which no definite charge of 
 unfairness can be made. Whether this is true or not, 
 it is certain that the man who attempts by litigation 
 to meet all the devices tlirough which an inimical cor- 
 poration can obstruct his business, and to force it to 
 treat him with absolute fairness, entei's upon a course 
 which will exhaust an ordinary purse, and drive any 
 but the most imperturbable to lunacy. It was defiant- 
 ly said, in the Congressional debate, that if the l)ill were 
 made law, the railways would ostentatiously ignore its
 
 360 The Railways and the Bepullic. 
 
 provisions. It is not likely that they would do so, 
 with such ostentation as to afford proof that would 
 convict thera in the courts. Their managers are too in- 
 telligent to furnish such a weapon against themselves; 
 but it may be confidently assumed that these, or any 
 other provisions against abuses which can be enforced 
 only by litigation, would be habitually violated with 
 impunity, because the great mass of business men dare 
 not enter upon a legal fight with corporations control- 
 ling their means of communication with their customers. 
 To set a private individual against the railways in such 
 a contest as this, is like pitting the bows and arrows 
 of the ancient archers who fought in the Greek galleys 
 at Salamis against the Krupp guns and steel-clad ves- 
 sels of the present day. 
 
 In short, the Reagan bill brings a little help to the 
 defence of commercial rights by the common law. It 
 specifies the act prohibited. It brings the remedie3 
 somewhat more easily within the reach of the injured 
 party; and makes the damages and penalties slightly 
 heavier. All this is only strengthening a rampart 
 which has been shown by experience to be wholly in- 
 sufiScient to check the advance of the enemy. When 
 all the kindred restrictions of the law upon discrimina- 
 tions and combinations for pooling have been nullified 
 for years — the railways ignoring the law, obstructing 
 suits in the courts, and smothering the assertion of in- 
 dividual rights — there is not much reason for believing 
 that a slight strengthening of these provisions will 
 adequately protect public rights. It might temporarily 
 check certain abuses ; but when the corporations should 
 discover the little difference between the new law and 
 the old one, the process of subjugating commerce would
 
 The Discussion of Remedies. 361 
 
 be resumed. Something more is needed tban tlie patch- 
 ing up of the old methods of enforcing the common haw, 
 over which the corporate power has riddeu without 
 check from its inception to the present time. If an in- 
 vading army has marched over the earth-works of a 
 defensive position with hardly a pause, is it less than 
 fatuity to raise the next parapet by a few more shovel- 
 fuls of earth, and to invite the enemy to a fi-esh attack? 
 Not thus is the liberty of a nation defended against 
 conquest. How can a weak and paltering policy avail 
 more in the defence of commercial independence against 
 corporate invasion ? 
 
 Another weakness of the Reagan bill is that, while 
 its provision concerning long and short hauls is a sin- 
 cere attempt to solve that difScult question, it fails to 
 prohibit any but the most glaring inequalities between 
 localities. As Mr. Heairan himself confessed, and as a 
 Senatorial opponent of the measure urged with some 
 success, it still leaves room for vital discriminations in 
 favor of the longer haul. The cause of these discrimi- 
 nations is the uneven pressure of competition, which 
 the Reagan bill does not attempt to correct. They 
 are practised in forms which, if less startling than some 
 of those which have been cited, are yet decisive in 
 determining the f\te of many business firms, wherever 
 the short haul is between competitive points and the 
 long haul is not. The discriminations already noted, 
 which oppressed the iron trade of Pittsburgh, from 
 1875 to 1879, were mainly of this chai-acter. The 
 farmer near Abilene, Kansas, whose grain has to bear 
 a freight charge of 15 cents per bushel for transporta- 
 tion 1350 miles to the seaboard, finds in tlie Reagan 
 bill no alleviation of the advantage given to the farmer
 
 362 The Railways and the BepuhUc. 
 
 near Kansas city, who gels Lis grain carried 1200 miles 
 for 5 cents a bushel. This is not the fault of the author 
 of the measure. It is impossible for any mere prohibi- 
 tory clause to secure exact justice in rates to and from 
 all the numberless localities. Althou^-h the charsje 
 was made ag^ainst the Reaoran bill, that this section re- 
 quires rates to be strictly in proportion to distance, ev- 
 ery leading advocate of railway reform recognized the 
 folly and uselessness of such requirement. The provi- 
 sion as to lono; and short hauls in the Keasran bill is 
 the best that can be done by that kind of i-egulation ; 
 but its failure to afford any remedy for a vast multitude 
 of discriminations shows the weakness of the scheme. 
 These inequalities must be left unchecked, until leg- 
 islation finds a way to give free play to the laws 
 of trade, which will determine rates with unerring 
 justice. 
 
 Perhaps the most thorough regulative measure yet 
 formulated is that which was proposed by the Hep- 
 burn committee of the legislature of New York, com- 
 prising the leading features of both the classes of bills 
 just discussed. It was the result of a searching investi- 
 gation which occupied nearly eight months. The com- 
 mittee took some five thousand pages of testimony, 
 made a report, "which was recognized as one of the ablest 
 presentations of this question yet given to the j^ublic, 
 and accompanied it by bills which were embodied in 
 the New York anti-discrimination bill of 1880. The 
 essential provisions of this bill were : First, requiring 
 publicity of rates; second, prohibiting preferential 
 rates; third, prohibiting drawbacks and rebates; fourth, 
 enactiuir that no more should be char2;ed for a shorter 
 haul than for a longer one over the same line; fifth,
 
 The Discussion of Remedies. 363 
 
 declaring pools illegal; and, sixtb, establishing a 
 board of commissioners to see that these provisions 
 are enforced, to investigate complaints, and to secure 
 justice between shippers and carriers. Such a measure 
 would have more chance of practical success than any 
 of the measures heretofore discussed. It goes as far as 
 the Eeagau bill, in enumerating and defining the pro- 
 hibited abuses, and brings to the aid of the shipper the 
 commission, whose theoretical duty it would be to hear 
 his complaint and espouse his cause, if well-founded. 
 The public sentiment which would secure the passage 
 of such a measure would doubtless insure the appoint- 
 ment, as commissioners, of active and earnest champions 
 of public interests. But whether such a good begin- 
 ning would be followed by permanent efficiency in this 
 mode of regulation, or whether the influence of the 
 corporations would gradually gain control of the board, 
 is a question on which we have seen reason for doubt. 
 The measure was defeated in the legislature of New 
 York by the influence of the railways. An act creat- 
 ing a commission was passed, and as JNIr. F. B. Thurber 
 informed the Cullom committee, the board has been 
 " constantly hampered for want of power, and its deci- 
 sions have been disobeyed and disregarded." If we 
 suppose that the same influence which, in New York, 
 robbed the anti-discrimination bill of its best features, 
 and constituted a commission without power, may 
 possibly have reached the members of the commission, 
 some of its strange recommendations to which we liave 
 referred may be explained. 
 
 The vital weakness of all these bills, however, as in- 
 deed of all measures that have taken definite form for 
 the regulation of the railways, is that they seek to pre-
 
 364 The Railways and the Bepullic. 
 
 vent or piiuish only particular modes of exerting the 
 powers of the railway managers for wrong, without 
 destroying either these powers or the immense tempta- 
 tions to exert them. Certain practices are forbidden, 
 but the motives and opportunities which produce them 
 are left as powerful as before. A thorough study of all 
 the cases of discrimination, favoritism, and combination 
 shows that they are the result of the j)ressure of circum- 
 stances which are practically imperative upon railway 
 managers. These are, in general, of two classes: First, 
 the apparent necessity of these practices, to secure the 
 immediate profit of the corporations ; second, the temp- 
 tation, almost irresistible to any but superhuman in- 
 tegrity, to use their control over transportation agencies 
 for private gain. All the acts of injustice complained 
 of can be referred to one or the other of these two 
 classes. While the constitution of the railway system 
 remains as it is, the pressure upon every manager to 
 give competitive points vital advantages, and corre- 
 spondingly to burden non-competitive business, to 
 seek especial classes of traffic by surreptitious reduc- 
 tions of rates, and to sustain rates by combinations, 
 will be too great for human resistance. While secret 
 favoritism to a single interest, or to a class of shippers, 
 can bring unlimited wealth to the railway manager, 
 some will yield to temptation and secretly violate the 
 law, expecting the power of wealth to protect them 
 from legal penalties. It must be remembered that the 
 attempt to rectify these abuses comes into contact with 
 causes as deep and broad as the railway system itself, 
 which, working together with remorseless pressure, 
 forms the most resistless social force that the world 
 has ever known. To prohibit by law particular mani-
 
 The Discussion of Remedies. 365 
 
 festations of such forces, wliile leaving the forces them- 
 selves in uucheckecl operation, is useless. 
 
 It may be questioned, indeed, whether there is not 
 an element of injustice, as well as hopelessness, in such 
 an effort. While the existing conditions of society 
 subject the raihvay traffic to an incalculable pressure 
 of circumstances, forcing these prohibited practices upon 
 them, is it just to require them to be superior to that 
 pressure? I have already expressed my opinion that 
 many of these inequitable and burdensome acts of the 
 railway managers are due to their environment, in such 
 a degree that, w^hile the acts themselves are intolerable, 
 the persons committing them must almost be absolved 
 from individual wrong-doing. However this may be, 
 it is certainly a public injustice to prohibit wrongs 
 while preser\ ing the efficient causes of them. Such 
 a course affords no real and lasting relief to the in- 
 jured. Under such laws, the same wrongs will be 
 practised secretly ; and when they are discovered, the 
 immense resources of those who profit by them will 
 be used in legal subterfuges and delay, or to corrupt 
 courts, commissions, or other public officers, as they 
 have so often been used before. It is all well enough 
 to forbid the growth of Canada thistles; but, if the 
 seed, is left in the ground, the thistles will continue to 
 sprout. If men whose whole ambition is wealth are 
 left in possession of powers which may be stealthily 
 misused to gain the ol)ject of their lives, witli no ob- 
 stacle but the paper barrier of a law, the secret or de- 
 fiant misuse of sucli power is not less certain than the 
 growth of thistles fi'om the seed. 
 
 The most important practical result to be expected 
 from the passage of the lleagan bill \vas the affirmation
 
 366 The Railways and the Rejpuhlic. 
 
 by Congress of its right and intention to regulate the 
 railways. Apart from the temporary check which it 
 would have given to the growth of corporate power, 
 which would hardly have been appreciable, it would 
 have been worth somethino: to secure from Cono-ress a 
 practical assertion of its readiness to support legislation 
 by the states, requiring the railways to respect public 
 interests, and to maintain their character as public high- 
 ways. As a definite beginning of an active regulation 
 of railways in the public interest, this measure, or any 
 other not proposed as a sham and public deceit, would 
 encourage a hope of legislation that might, in the end, 
 prove eflective. For this purpose the Cullom bill was 
 nearly as good as the Eeagan bill. It was a tactical 
 mistake in the supporters of railway reform in the 
 House, when compelled to choose between the bill 
 passed by the Senate and no legislation on the subject 
 at all, that they did not adopt the Senate substitute. 
 Either bill would have a definite value as the formal 
 commencement of the policy of legislative regulation ; 
 and, therefore, either might be supported by advocates 
 of reform who prefer other and more effective provi- 
 sions. It is asserted that the Senate committee on in- 
 ter-state commerce will report, as the result of its in- 
 vestigations during last summer, a bill which combines, 
 to a certain extent, the provisions of the Reagan and 
 Cullom bills of last session. It is said that it will re- 
 tain the commission feature, and reinforce it by strong 
 provisions against excessive rates, discriminations, and 
 rebates, by prohibiting the charge of more for a long 
 haul than for a shorter one, and by requiring publicit}'- 
 of rates. It is said that the new bill avoids the ques- 
 tion of pooling, in this respect falling short of the Rea-
 
 The Discussion of Remedies. 367 
 
 gan bill ; but in view of the heroic doses which the com- 
 mittee received of railway theories on this subject, it 
 must be regarded as an evidence of independence that 
 it does not propose a surrender to the combination 
 policy. Such a new measure, combining the leading 
 features of the t^vo opposing bills, may be a valuable 
 proposition, as affording a good chance for initial legis- 
 lation on the subject. As to its effecting a thorough 
 and permanent remedy for prevailing evils, the consid- 
 erations that have already been suggested will apply. 
 It seeks to restrain the surface effects of certain influ- 
 ences, but it leaves the influences at work to nullify or 
 evade restraint. For an effective remedy another class 
 of measures must be sought. The attempt must be, 
 not to prohibit and punish particular acts, but to re- 
 move their causes ; not merely to forbid discriminations, 
 but to take away the power of making discriminations. 
 When it is made apparent how the unequal and imper- 
 fect workings of competition, from which one great 
 class of abuses spring, can be entirely reformed, one 
 step towards an adequate remedy will be plain. When 
 it is shown how to destroy not only the temptation to 
 use the railway power for private gain, but the power 
 itself, the complete remedy will be understood. To 
 insure permanent relief from the dangerous methods 
 of the railway system, legislation must go deeper than 
 effects and remove the causes. By determining those 
 causes and the means of destroying them, the whole 
 problem will be solved.
 
 CHAPTER X. 
 
 THE PUBLIC HIGHWAY. 
 
 What legislative policy will remove the causes of 
 discriminations, destroy the influences which force the 
 railways into combinations, and take away from rail- 
 way managers both the power and the temptation to 
 enrich themselves and their f^xvorites by the manipula- 
 tion of rates ? 
 
 It was shown, in a preceding chapter, that the princi- 
 pal defects and inequalities in the railway system arise 
 from the imperfect and irregular operation of competi- 
 tion. If this be admitted, it is plain that the true rem- 
 edy lies in making the operation of competition free 
 and universal. To furnish a complete cure, competi- 
 tion must be made free, continuous, and controlling, 
 to an extent at present unknown in railway traffic. 
 If competition is so unrestricted that combinations will 
 but produce fresh competitors, combinations will cease. 
 If it controls all classes of railway traffic, and reaches 
 every shipper, discriminations in favor of one class or 
 shipper, and against others, will be impracticable. If 
 competition enables the railway to carry freight 1000 
 miles for a given sum, while its absence makes it im- 
 possible to carry it 400 miles for the same charge, it is 
 plain that all the interests served by the railway should 
 have the benefit of this great economic principle. Free 
 competition is the cure ; and the legislation which is to
 
 The Public Highway. 369 
 
 extirpate the principal evils of the railways must pro- 
 tect its operation from restriction or interruption. How 
 can this be done by legislation ? 
 
 The answer to this question lies in the principle of 
 the public highway. In all the older forms of the pub- 
 lic highway competition prevailed, and no combina- 
 tions or monopolies could destroy it. Every citizen 
 could enjoy the privileges of the highway, on equal 
 terms and with identical facilities. Monopolies were 
 impossible upon turnpikes, and plank-roads never were 
 monopolized, because every one had the right to run 
 vehicles over them. Combinations were powerless to 
 charge the public excessive rates for freight or travel. 
 If common cari'iers on such highways should combine 
 to establish exorbitant rates, a ne\v competitor could 
 put his vehicles on the road, and, by moderate rates, 
 obtain the business. Even if the task of unitins: all 
 present and prospective common carriers could be ac- 
 complished, merchants and farmers could protect them- 
 selves against excessive and unequal rates by using 
 their own wagons, paying the same tolls as the com- 
 mon carriers. On the canals the same principle, as am- 
 ple experience has proved, maintains the same freedom 
 and stability of competition. Ko combination of canal 
 boats ever brought the grain trade under the control 
 of a single firm, or enabled one mill to monopolize the 
 grinding of flour. One attempt to pool the freight 
 business on the canal, less successful in defying the law 
 than the railway pools, was promptly crushed by the 
 courts; but the circumstances sliow that the fi'cedom 
 of competition on the canals made it impossible to sus- 
 tain artificial rates by such a combination. Under the 
 natural laws of trade new competitors would not en- 
 
 24
 
 370 The Railways and ike Rejpublic. 
 
 engage iu the business unless the traffic was profitable. 
 When the business became unremunerative, the excess 
 of competition was removed, some of the carriers retiring, 
 or takinix their boats where their services were in better 
 demand. The resort to pooling was both unnecessary 
 and impossible, and the practice of performing trans- 
 portation for half its cost to cripple competition was 
 therefore unknown. Of a kindred character is the nav- 
 igation of rivers, improved by a corporation, which col- 
 lects tolls for its remuneration. No such company 
 ever claimed an exclusive right to run freight and pas- 
 senger boats over its highway. Its grant is merely the 
 power to take tolls from all boats plying on its waters ; 
 and this limitation has kept competition as free on such 
 water-courses as on rivers naturally navigable, on the 
 lakes, or the ocean. 
 
 Here are three distinct forms of the public highway, 
 involving radically different forms of construction and 
 methods of operation. The vehicles in use upon one 
 would be useless on the others. The principle of the 
 public highway remains the same, although a steam- 
 boat cannot run upon a canal, or a canal packet upon 
 a turnpike, or a stage-coach u^^ton an improved river. 
 Each is a public highway for the transj^ortation and 
 travel adapted to its character. To establish each of 
 these public highways, the power of eminent domain 
 was delegated by the government. The work of con- 
 structino- and maintaining: each of them was assio^ned 
 to a corporation, with the power to reimburse itself by 
 tolls. In each case, the obligations of the public high- 
 way, accepted by the corporation, were recognized and 
 fulfilled, by allowing all persons the right to use the 
 hio-hway with wagons, stages, canal-boats, or steam-
 
 The Public Highway. 371 
 
 boats, as demanded by the character of each, upon the 
 payment of a reasonable, stipulated, and uniform toll. 
 The result is, that the operation of none of these high- 
 ways ever involved an attempt to build up a monopoly, 
 or threatened the independence of the traders, manu- 
 facturers, or farmers who used them. The railway was 
 established by the exercise of the same governmental 
 power of eminent domain, for the same purpose of a 
 public highway. By similar legislation a company was 
 chartered for its construction and operation, with the 
 right to make a profit by charging tolls for the use 
 of the road. In these respects it is identical, in its pub- 
 lic character, with the other highways; but in its prac- 
 tical operation a radical departure has been made. In 
 the older class of roads, the business of building and 
 maintaining a public highway was kept distinct from 
 the business of the common carrier upon it ; the latter 
 was open to free competition. The railways have con- 
 solidated the two, and made a monopoly of both. In 
 that monopoly lies the source of all the evils which 
 have been set forth in this work. Their exclusion of 
 all competing common carriers, and of the general pub- 
 lic, from the use of their track, except by tlieir cars and 
 trains, and on such terms as they prescribe, is the 
 source of all discriminations, the sustaining power of 
 all pools and combinations, and the founchition of all 
 tendencies to monopoly wliicli tlie railway system has 
 developed. In itself an overthrow of tlie character of 
 the public highway, it has led to numberless other vio- 
 lations of the public obligations attaching to that cliar- 
 acter. Tliis consideration makes clear tlie nature of 
 the remedy to be sought, and the manner in wliicli com- 
 petition can l)e secured. Tlie radical and elTective rem- 
 edy for railway evils is this:
 
 372 Tlie Railways and the liepiiblic. 
 
 Legislation should restore the cliaracter of public 
 highways to the railways, by securing to all persons 
 the right to run trains over their tracks under proper 
 regulations, and by defining the distinction between 
 the proprietorship and maintenance of the railway and 
 the business of common carriers. 
 
 This will seem to people who are accustomed only 
 to the present methods of the railway system a radical 
 innovation ; but it is only returning to the idea upon 
 which railways were first established. " There are some 
 traces," says Mr. W. F. Ci-afts,* " of an intention in the 
 earlier charters to allow the public to use their own 
 vehicles and motive power on the railway tracks ; but 
 this soon proved to be impracticable." The traces are 
 beyond dispute, being distinct provisions, in all the 
 earlier charters, that every one can run his own cars 
 over the railway ; but such provisions were useless be- 
 cause the railways could fix tolls so high as to be pro- 
 hibitor3\ But this Avas "proved to be impracticable," 
 we are told by Mr. Crafts, as well as by other eminent 
 authorities. How was it proved to be impracticable? 
 When was the experiment made, and what proof of 
 impracticability was the result? So far from experi- 
 ence having proved the impracticability of two or more 
 railway carriers using the same track, it has shown that 
 the only serious obstacle to such a practice lies in the 
 desire of all railway companies to monopolize the traffic 
 on their own tracks. The question of the practicabili- 
 ty of opening the railways to the free use of competing 
 carriers involves an inquiry as to what restrictions are 
 necessary in their practical operations. Two great ob- 
 jects are to be aimed at in the movement of trains over 
 
 * Sci'ibner''s Magazine, October, 1881.
 
 The Public Highway. 373 
 
 a railway track : First, safety to the public and em- 
 ployees; second, the highest rate of speed that is con- 
 sistent with such safety. Both these objects are of tlie 
 greatest importance; and the belief that the privilege 
 of using the track must be kept solely in the hands of 
 the corporation owning it is, in a large measure, sound, 
 if it is shown that the safety and celerity of railway 
 service cannot be secured by any other means. To 
 carry on railway operations at the constant hazard of 
 destroying scores of human lives would rob such im- 
 provements of their beneficial character. To adopt 
 methods which would hamper the rapidity of railway 
 services would also be to diminish their public value, 
 though this consideration is less important than the 
 former. If these requisites can only be secured by the 
 present method, of allowing each railway company the 
 exclusive right to run trains and cars over its own 
 track, it may as well be acknowledged at the outset 
 that the practical objections to such a reform as is here 
 proposed would be too great. It is necessary, therefore, 
 to examine the means by which the highest combina- 
 tion of speed and safety is secured, and to inquire 
 wdiether they are inconsistent with the proposed re- 
 form. 
 
 It is evident that the running of a large number of 
 trains over a single railway, in opposite directions, 
 passing at stated points and subject to derangement 
 by delay or accidents, requires tlie liighest degree of 
 orscanization and skill in manaccement. This, it is to 
 be conceded, the railway system, as a whole, has at- 
 tained. Now what are the methods employed, in the 
 delicate and important work of l)ringlng one or two 
 scores of trains over the same track, from different start-
 
 37-i The Hallways and the Bepublic. 
 
 ing-points to different destinations ? They are sent out, 
 in the first place, on exact schedules of time; but the 
 cases in Avhich these schedules are unavoidably modi- 
 fied are multitudinous, and experience has shown that 
 it is useless to rely solely on them for the regulation 
 of trains. All the trains, on any section of railway, 
 therefore, are placed under the control of a train-de- 
 spatcher at a central point. This officer is notified, by 
 telegraph, of the movement of each train. He keeps 
 an exact record, showing the progress and location of 
 each train, at any moment that the information may be 
 required ; and his orders to the officers in charge of 
 each train are transmitted by telegraph to the various 
 stations as it passes, notifying them to what points 
 they are to go, where they are to pass other trains, and 
 W'here they are to w\^it for other trains to pass them. 
 Only an outline of the responsible and intricate work- 
 ings of this office is necessary liere. It is enough to say 
 that, in proportion as its organization is perfect, and the 
 obedience of the train officers to its orders implicit, 
 the highest degree, both of speed and safety, in the 
 running of trains is attained. 
 
 In addition to the control which railway manage- 
 ment no^v universally rests in the train-despatcher, the 
 practical theory of railway operations is, that each com- 
 pany must have exclusive control of the rolling-stock 
 on its road, and supreme authority over the men em- 
 ployed upon it. It must know the condition of each 
 engine or car. It must have the power to condemn 
 all that are unfit for service, and to repair or re- 
 place them. The implicit obedience of conductors, en- 
 gineers, and brakemen must \jq secured by the power 
 of the company to discharge them at a moment's notice.
 
 The PulliG Highway, 375 
 
 Upon the principles of ^vlncll this is necessarily but an 
 outline, the railway system has been successful in meet- 
 ing the important requisites already specified. 
 
 It has also been made plain, by experience, that the 
 practical enforcement of these precautious, and the adop- 
 tion of the highest degree of discipline and the most 
 perfect organization, depend, in some measure, upon 
 causes external to the corporation. Railway compa- 
 nies, like individuals, sometimes practice bad economy. 
 They use cheap and worn-out rolling-stock, they under- 
 pay and overwork their employees, and, in other ways, 
 fall short of the necessary efficiency. Such niggardli- 
 ness often revenges itself by some calamity which kills 
 or cripples a dozen or a score of victims ; and then the 
 railway loses more by one such accident than all the 
 saving that can be effected by such false economy. 
 The loss is twofold. The property of the company is 
 damaged and destroyed, its business is obstructed, and 
 it must spend money lavishly in the work of clearing 
 up the wreck and restoring order. On the other hand, 
 it is liable for damage done to persons or property ; and 
 jurors are so prone to give heavy damages in such 
 cases, that it is the rule with railways to compromise 
 such suits on the best terms possible. It is worth re- 
 membering, in this connection, that the strongest possi- 
 ble inducement for a railway to perfect its organization, 
 establish the most thorougli discipline, and adopt the 
 most perfect safeguards, is the heavy penalty it incurs 
 by the losses from accidents. The same consideration 
 applies to its employees. The loss of position, Avliicli 
 results from disobedience or neglect, is a grave matter 
 to any man ; but it is of slight importance beside the 
 loss of life or limb. As regards the men in charge of
 
 376 The Railways and the Be^puUlc. 
 
 traius, the most overwhelming incentive to strict dis- 
 charge of duty and careful obedience to orders is the 
 knowledge that their own lives, as well as the lives of 
 those in their charge, are at stake. 
 
 Now how do these considerations apply to the prop- 
 osition to open the railway ti'acks to the general com- 
 petition of carriers ? Manifestly, to let any one ruu en- 
 gines or cars over any railway, free from supervision or 
 direction, would produce hopeless wreck and disorder. 
 Such a proposition would be presumj)tive of lunacy. 
 But when we inquire ^vhether a plan cannot be per- 
 fected which shall retain all needful precautions, and 
 enforce by law the authority of the central officer over 
 trains in motion, while giving to carriers the right to 
 compete in the carriage of freight, the question assumes 
 a very different aspect. AVhat is there in these meth- 
 ods which cannot be preserved without the exclusive 
 privilege of carrying freight over the track ? The main- 
 tenance of schedules need not interfere with the free- 
 dom of competition. The carrier wishing to run a 
 train of his own could be required to run a regular 
 train on schedule time, or to follow a regular train with 
 an extra, just as extras are now run on every railroad 
 in the country. The control of the trains in motion 
 must be given to a train-despatcher ; but the trains 
 thus controlled may be owned, loaded, and forwarded 
 by different carriers. If the law secures implicit obe- 
 dience to the orders of the train-despatcher, while the 
 trains are on the railway, can it make any difference to 
 the safety and speed of the service that one train is 
 owned by A, another by B, and that both cai'ry freight 
 at such rates as are fixed by free competition ? Can- 
 not the authority which controls the trains be made as
 
 The Pxiblic Highway. 377 
 
 absolute and unquestioned as now, or even more so, 
 AvitLout vesting the monopoly of transportation in a 
 single company? Cannot the obedience of tbe men in 
 charge of the trains, and their intelligence and care, be 
 secured in as \\vA\ a deirree if comiietins: carriers are 
 allowed to use the same track? And cannot the use 
 of safe rolling-stock and its maintenance in good repair, 
 by frequent inspections, be enforced just as well under 
 a system of competition as under a system of monopoly ? 
 These are the questions which must be answered, in or- 
 der to determine whether tlie idea of competition in 
 transportation over the same track is practicable. 
 
 This proposition does not contemplate sending a 
 number of trains under conflicting control upon the 
 same track. It simply proposes that the right of out- 
 side carriers to load their trains, at whatever rates they 
 choose, and to send them over the tracks of the railway, 
 shall be established, under whatever regulations are 
 necessary for tlie preservation of speed and safety ; and 
 asserts that all these regulations can be enforced con- 
 sistentl}- with the practice of free competition. The 
 first condition that it assumes is, that all sucli compet- 
 ing trains would be started on schedule time, and run 
 either as regular trains, or as extra trains following tlie 
 regular ones. It next supposes, as a vital condition, 
 that all trains will be under the control of the train- 
 despatcher, from the moment that they come upon the 
 track until they reach their destination. All the de- 
 tails of reporting the progress of each train, at every 
 telegraph station wliich it passes, of keeping the record 
 of its location in the central office, and of governing its 
 movements by telegraphic orders, can be enforced as 
 well, whether the trains are owned by a single corpoi-a-
 
 878 The Hallways and the Jxejpxiblic. 
 
 tion or by a dozen. Let the law, or the rules of the 
 railway company, provide absolute control by the train- 
 despatcher, of trains in motion, and the efficiency of 
 that officer need not be in any respect diminished by 
 the fact that the trains are owned and laden by com- 
 peting cari'iers. 
 
 - The same care could be exercised, under legislative 
 regulation, or the rules of the projirietary company, for 
 the safety of the rolling-stock and the discipline of the 
 employees. The powerful motives which now secure 
 the utmost precautions and the highest discipline on 
 the part of the railways will apply as strongly to the 
 carriers and their employees. The penalties now in- 
 curred by the railways, through carelessness or stingi- 
 ness, would fall with just as much severity on negli- 
 gent or niggardly carriers. The loss to them from ac- 
 cidents, caused by allowing their cars or engines to get 
 out of repair, or by sending out their trains in charge 
 of incompetent or careless men, would be far greater 
 than the saving from any such vicious economy. They 
 would be liable, not only to their shippers, but to the 
 railway, for all damages caused by their neglect, while 
 the same liability would attach to the railway company 
 for letting its track become unsafe. Similar considera- 
 tions apply to the officers in charge of trains. Their 
 situations would depend on their care, watchfulness, 
 and strict obedience to orders ; but a far stronger mo- 
 tive, regard for their own lives, would stimulate their 
 discipline and intelligence. AVith such powerful incen- 
 tives to the adoption and observance of every precau- 
 tion, it ouo'ht not to be difficult to insure strict obedi- 
 ence to all proper regulations, and to move trains with 
 the same safety and despatch that is obtained under 
 the present system.
 
 The Piihlic Highway. 379 
 
 These regulations could be established in a variety 
 of ways. With the right of all carriers to transport 
 freight over any railway fully recognized, it might be 
 permissible to leave the rules which must be observed 
 by them, in the movement of trains, to the dictation of 
 the railway corporations. The company might be al- 
 lowed to establish a standard of inspection, and to pro- 
 vide inspectors to secure the safety of rolling-stock, 
 and to exclude all rolling-stock that did not meet tlie 
 requirements necessary for safety and despatch. It 
 could have authority to license qualified engineers and 
 conductors, to be employed by carriers on its track. 
 Let the right of any person to carry freight over its 
 tracks be established, provided its standard of effi- 
 ciency and discipline is reached, and the public need 
 not complain, however high the standard is. The 
 liigher and more exacting the requirement, tlie more 
 perfect will be the security and promptness of the ser- 
 vice. Or these regulations could be made the subject 
 of direct and specific legislation. The law might es- 
 tablish an authority to direct the motion of trains, and 
 enact penalties for disobedience. It might provide a 
 system of inspection for all cars and engines, and for- 
 bid the use of those which are worn out or unsafe. It 
 might establish a system for licensing engineers and 
 conductors, just as it now does for licensing masters, 
 pilots, and engineers of ocean and river crafts. The 
 qualities of care, intelligence, and technical knowledge 
 required for taking charge of a railway train are dif 
 ferent in kind, but not necessarily higher in degree, 
 than those for mana2;in<x a steamer on the ocean, or 
 on the swift and narrow rivers of the West. Judging 
 by the wages paid to conductors and engineers on the
 
 380 The Railways and the HejyuUic. 
 
 railways, and those paid to masters and pilots of steam- 
 ers, tbe qualities required for the railway service are 
 much less difficult to obtain. Yet the law of every 
 civilized country has a system for testing and certif}^- 
 ing the efficiency of men intrusted with the water 
 craft, and when the corresponding risks of the two 
 systems of transportation are considered, the efficiency 
 and safety secured by the laws regulating Avater trans- 
 l^ortation do not compare unfavorably Avith those at- 
 tained under the system of monopoly on the railways. 
 It is not necessary to our purpose to inquire at length 
 whether, in establishing the right of all carriers on the 
 railways, the enactment of regulations, the inspection 
 of trains and the examination and licensing of conduc- 
 tors and engineers should be left to the railway com- 
 pany or reserved for officers of the state. It is enough 
 that in either way the same unquestioned control of 
 trains, the same watchfulness, obedience, and care in 
 running them, the same precautions for the repair and 
 security of engines and cars can be attained under free 
 competition as under a monopoly. 
 
 The methods of conducting an open but properly 
 regulated competition, on a large railway system, may 
 be conceived as varied in many ways. At any impor- 
 tant point of shipment, there might be a number of 
 firms or companies owning engines and furnishing 
 motive power for the loaded cars of shippers. One 
 advantage would be that a small capital could then 
 compete on fair terms with the greatest. An engineer 
 and a conductor, licensed to run over the railroads of 
 New York, and able to buy an engine, could engage 
 in the business of haulinc; cars between Buffiilo and 
 New York, or any other cities of the state, as vrell as a
 
 The Puhlic Highway. 381 
 
 corporation with a capital of millions. The law might 
 require that carriers should give bonds for their good 
 conduct, should satisfy the proper authoiities of their 
 efficiency and sobriety, and should submit their roll- 
 ing-stock to constant inspection, and keep it in thor- 
 ough repair. The plan admits of the widest ran^-e, 
 from the private carrier who runs a train between two 
 stations at stated intervals, to the great transportation 
 company, which may contract to take freight from or 
 to any railway station in the country. Neither the 
 number of competitors engaged in the business, nor 
 the relative extent of their operations, would conflict 
 with the thoi-ough enforcement of all precautions, and 
 the most complete control of trains w^hile in motion. 
 
 Cogent evidence that it is not necessary to vest the 
 exclusive right of transportation over a road in one 
 company is found in the practice of the railways them- 
 selves. Experience certainly has not proved the free 
 use of the railways by competing carriers to bo im- 
 practicable, for no fair experiment was ever made of 
 the plan. The railways have steadily inculcated the 
 idea of the necessity of monopoly in the operation of 
 their roads; but the unfounded nature of the claim is 
 evident from the fact that, even under the hamj)ered 
 conditions which liave prevailed, there are numerous 
 instances in which more than one railway company 
 have used a track jointly for a term of years. Tlie 
 personal observation of the writer comprises five in- 
 stances in which this has been done, with good results 
 both as to safety and speed ; and any one who will 
 take the trouble to inquire can probably find exam- 
 ples, whei'e two or more railway companies use a sec- 
 tion of track in common without dilliculty. Three of
 
 382 The liailways and the Re/puMic. 
 
 the cases within my knowledge comprise important 
 portions of the trunk-line thoronghfores from East to 
 West;* and the simultaneous use of these tracks hj 
 different companies shows that the only reason why 
 such a joint use of tracks by the railways is not more 
 common is the jealous exclusiveness of the railways, 
 especially in preventing competition for local traf- 
 fic. The contracts under which these tracks were used 
 in common expressly excluded competition in local 
 business. In these cases the purpose of the railways 
 was shown in their effort to exclude that influence; 
 but the practicability of allowing more than one car- 
 rier to run trains over the same track was also proved. 
 Monopoly is not essential to safety in railway service ; 
 and, in the few instances in which the exclusive pol- 
 icy of the railways, and their rivaby, have permitted 
 the use of a track by more than one company at the 
 same time, experience demonstrates that it can be safe- 
 ly done, under regulations practically similar to those 
 now enforced. 
 
 The common practice of the railways refutes still 
 more convincingly the claim that the exclusive owner- 
 
 * The most important example of the joint use of a railway by two 
 great corporations is afforded by the track between Newark and Colum- 
 bus, Ohio, thirty-three miles long, which has been owned and operated 
 in common l)y the Baltimore and Ohio and the Pittsburgh, Cincinnati, 
 and St. Louis railways for twenty-one years. Another instance is the 
 fact that the Cleveland and Pittsburgh and the Pittsburgh, Fort Wayne, 
 and Chicago railroads, previous to their lease to the Pennsylvania Com- 
 pany, used the same track from Rochester, Pennsylvania, to Pittsburgh, 
 twenty-five miles in length, for a1>out twelve years. They are still using 
 it under one management. The third instance -was the use, at the same 
 time, by the Cleveland and Toledo (now the Lake Shore road) and the 
 Cleveland, Columbus, and Cincinnati railroads, of the track from Graf- 
 ton, Ohio, to Cleveland, a distance of twenty-four miles, for about twelve 
 years.
 
 The Public Highway. 383 
 
 ship of all rolling-stock nsed on a road is necessary to 
 safety. This idea, which has been enunciated by the 
 high authority of a judge upon the bench, in a deci- 
 sion to be noticed hereafter, is amply disproved by the 
 practice of nearly all the railways. There is not a 
 railway, transacting more than the merest local traffic, 
 which does not permit the cars of other companies to 
 pass over its line. The cars of jS[ew England railroads 
 are found in Nebraska, and those of Southern railways 
 are run over New York roads without a question. 
 This freedom in the passage of cars, like the joint use 
 of occasional sections of track, is permitted, reserving 
 the exclusive privilege of each railway to dictate the 
 rates that shall be charged over its own line ; and the 
 practice shows that exclusive ownership is not necessa- 
 ry to security or safety.'^'" The same precautions which 
 allow the cars of twoscore different railway companies 
 to pass over a single trunk line, while free competition 
 is obstructed, could secure just as high a degree of 
 safety if the cars belonged to scores of competing car- 
 riers. 
 
 All the details necessary to produce efficiency and 
 security of operations could be secured by law, or by 
 the rules of the corporation owning the road ; and all 
 such precautions are consistent with the ownership of 
 any number of carriers, and thus with free competition 
 at every station, side-track, mill, or warehouse along 
 the road. As to any necessity for placing the regula- 
 tion of freight rates, or the reception, shipping, and de- 
 
 *The entire practicability of allowing numerous carriers to own cars 
 and transport freight over the same road was shown in tiic early iiistory 
 of railroading, in the experience of the Allegheny Portage, and tlie I'liila- 
 delphia and Columbia roads, owned by the state of Pennsylvania, which 
 is referred to at the end of this chapter.
 
 384 The Railvjays and the Republic. 
 
 livery of merchandise, under the same control as the 
 construction and maintenance of the railway, there is 
 no foundation in reason for it. There is no more con- 
 nection between the two branches of business, than 
 there was, two generations ago, between the building 
 and maintenance of a turnpike and the running of 
 stage-coaches or freight-wagons over it. In this nat- 
 ural and legitimate division of the service lies tlie solu- 
 tion of the railwa}^ problem. The business of construct- 
 ing and maintaining a road is one enterprise. The 
 business of carrying freight over the highway thus 
 constructed is another and a distinct business. The 
 first, from its character, necessarily implies some exclu- 
 sive rights. Only a single controlling j^ower can lay 
 out a line of railway, direct its construction, furnish 
 the funds, and keep its track in thorough and uniform 
 repair. Having built the railway, it is but just that 
 the corporation should hold the easement in the tracks 
 and right of way, and the franchise to take uniform 
 and reasonable tolls. But there is nothing in the nat- 
 ure of the business to require that only a single com- 
 mon carrier shall engage in the business of running 
 engines and cars over the track, with the power to 
 levy prohibitive rates, or to establish unequal privi- 
 leges in its use. This business should be open as 
 freely to every man on the railways as it is on other 
 highways, whether canals, turnpikes, or navigable riv- 
 ers, subject in this case, as in the others, to all regu- 
 lations which, in the nature of the highway, are nec- 
 essary for public security and efficiency. 
 
 To reform the railway business completely, legisla- 
 tion must secure the perfect and unrestricted operation 
 of competition, and at the same time maintain all the
 
 The PuUic Highway. 385 
 
 legitimate rights of the corporation. It must allow 
 every person desiring it to run trains and engines 
 over a railway, at uniform rates of toll, such as will, 
 in the aggregate, provide for the maintenance of way, 
 and yield a good return on the invested capital. In 
 short, the proposition is to devote the railway to the 
 public use, in the same sense and to the same de<T^ree 
 as turnpikes, canals, and rivers are open to public 
 use, and to make it a public highway in fact as well 
 as in name. The i-ight to this use was plainly reserved 
 in all the earlier charters, and, in early and authorita- 
 tive judicial decisions, was declared essential to the char- 
 acter of the public highway. The roads which were 
 constructed in the first stages of railway development 
 are obliged, by their charters, to allow every one the 
 use of their tracks, upon the payment of a fixed toll. 
 The departure of the present railway system from the 
 original intent of legislation is nowhere more conspicu- 
 ous than in its perversion of this language in the char- 
 ters. In all the early charters, and in many later ones, 
 the sole authority of the railways to charge for trans- 
 portation is in the grant of power to take " tolls." This 
 has been interpreted, in practice, as authority to fix 
 charges for carrying freight and passengers; but the 
 words have no such meaning. A toll is a fixed sum for 
 theuse of a highway or bridge, collected from those using 
 it,* and cannot be made to cover the charges fur trans- 
 portation imposed by a carrier. The charge made by 
 
 * Toll — "a tax paid for some libertj' or privilege, particularly for tlio 
 purpose of passing over a l^'idge, or on a liigliway, or for tliat of vcmliiig 
 in a fair, market, or the like." — Wcbater's Dictionary. 
 
 "A fixed ciiarge made by those intrusted Avith the maintenance of 
 roads, streets, bridges, etc., for the passage of trains, goods, or cattle." — 
 Imperial Dictionary. 
 
 25
 
 386 The Railways and the BejpuUic. 
 
 a steamboat, for transj)orting freight or carrying people 
 from one port to another, is not a toll. Neither can 
 the freight charges imposed by a canal ■ boat, or the 
 fares collected of passengers in stage-coaches on an im- 
 proved highway, in any correct sense be spoken of as 
 tolls. The rates which these canal -boats, or stas^e- 
 coaches, or other carriers, have to pay for the use of the 
 highway are tolls. The general use of this word in rail- 
 way charters shows the original purpose of that legisla- 
 tion. The roads were authorized to collect tolls, and not 
 freight charges or passenger fares. Their function was 
 to afford a highway for the general use of carriers and 
 the public, and to take tolls for their reimbursement, 
 and not to assume the exclusive right of transportation 
 over the highway placed by the state in their charge. 
 But the rates of toll which, at that stage of commercial 
 progress, were regarded as reasonable, have now be- 
 come prohibitory, so that the ability of the company 
 to charge their charter tolls to any other carrier has 
 given them a monopol}^ of transportation over their 
 ow^n tracks for a generation. 
 
 A representative of the Reading Railroad, in a re- 
 cent investigation by a municipal committee of the an- 
 thracite-coal discriminations against Philadelphia, said 
 that any one who was not content with the rates of 
 the company has, by its charter, the right to run cars 
 on its track and haul his own freight. " But," added 
 the railway official, so as to make his jeer more evident, 
 " he must pay a toll of six cents per ton-mile." This 
 he considered a complete answer to the demand for the 
 free use of the railway by the public; but if he had 
 studied the question further, he might have learned 
 that it appeals to principles and authorities above the
 
 The Piiblic Mighivay. 387 
 
 provisions of a railway charter. " If the toll amoimts 
 to a prohibition," says the syllabus of the decision of 
 the Supreme Court of the United States, in the Cam- 
 den and Amboy case, " it is a monopoly and the road 
 is not public." And again, "The declaration in the 
 charter, that the railroad is a public one, does not make 
 it so, if the effect of the charter is to give the exclusive 
 use to the corporation." In that case, the rate of ei^-ht 
 cents per ton-mile on freight was regarded by the court 
 as having "strong features of a monopoly." But, as 
 was natural in that era of commercial j^rogress, the 
 judges did not regard the feature of monopoly as dis- 
 tinct enough to warrant the declaration that the charter 
 was unconstitutional and' void. But if actual experi- 
 ence had demonstrated to the court that this rate, or 
 any other fixed by the earlier chartei's, was prohibitory, 
 and gave the corporation a monopoly of transportation 
 over its tracks, is there a doubt that it would have set 
 aside the charter? The principles of the decision are 
 too clear to leave any doubt on the question. The as- 
 sertion in the charter, that the use of the road is to be 
 public, does not settle the matter, the court declares ; 
 it is the practical operation of tlie road that is decisive. 
 If the rate of tolls is such as to prohibit the free use 
 of the tracks by the public, and to give the corporation 
 the exclusive use, the tolls are not reasonable, the road 
 is a monopoly and not a public liighway, and the act 
 authorizing the appropriation of private property for 
 its right of way would be, as Chancellor Walworth 
 said, a violation of the contract wherel)y the land was 
 granted to the individual, and repugnant to the con- 
 stitution of the United States. 
 
 This principle was, at an early day, the foundation
 
 388 The Railways and the Rej)iiblic. 
 
 both of legislation on the subject, and of its judicial 
 construction. This was conceded by Mr. Crafts, ^vho 
 said :"' " It was expected that the public would furnish 
 its own motive power (horses)," and then passed on, 
 evidently supposing that the word in brackets demon- 
 strates the folly of expecting any one but the railway 
 company to use the motive power of steam. But the 
 susfsrestion is unsound. If the fact that horses were at 
 first expected to be the permanent motive power on 
 railways, furnishes a legal obstacle to the use by the pub- 
 lic of an improved power, when developed, it presents 
 the same obstacle to the adoption of such an improve- 
 ment by the corporation. Questions of construction 
 are to be resolved in favor of the i^ublic right. It Avould 
 be a legal enormity to construe the same instrument, as 
 limiting the public to the use of an obsolete motive 
 power, and giving the corporation the right to use im- 
 proved machinery and a modern system. It is true 
 that the change from horse-power to steam locomotives 
 led the public to neglect its privilege. In the first 
 three decades of railway development, the public did 
 not care to invest money in locomotives. The only 
 carriers w^ho were able to buy rolling-stock and run 
 trains by steam were the railway companies them- 
 selves. The corporation, whose pro2:)erty would other- 
 wise lie idle and unremunerative, was naturally the 
 first to make the additional investment necessary for 
 the carrying business. No doubt the railway managers 
 were also the first to discover the tremendous power 
 over commerce, to be attained by the exclusive control 
 of transportation over their tracks, and to that dis- 
 covery is probably due the appearance of grants of that 
 
 * Scribnefs MontJdy, October, 1831.
 
 The Public Highway. 3S9 
 
 exclusive privilege in the more modern charters, and 
 the industrious circulation, during late years, of the 
 idea that the safety and efficiency of the railways de- 
 pend on it. 
 
 In the first stage of railway development the pub- 
 lic right was reserved ; but in the later stages it has 
 been lost in practice, and many more recent charters 
 positively grant to the corporation the exclusive right, 
 or in other words the monopoly, of transportation over 
 its own highway. But the question arises, can the 
 leirislature srrant such a rio^ht? Can the sovereign 
 power to construct public highways be so exercised 
 that no vehicles shall move or transport goods, unless 
 owned and operated, by the single corporation? It is 
 plain that, in the case of a turnpike or canal, the exer- 
 cise of such a power would have been declared beyond 
 the authority of the legislature. It was clearly shown 
 by Chancellor Walworth, Justice Baldwin, and other 
 judges of the highest authority, that the legislature has 
 no power to establish monopolies under the guise of 
 public highways. Yet this exclusive right of use is aS 
 clearly a monopoly in a railway as in a canaL If, as 
 Judge Baldwin asserted, the permission to the com- 
 pany to exact prohibitory rates would vitiate and de- 
 stroy the entire charter, ho^v much more clearly would 
 the exclusive grant of the privilege of transportation, 
 or the seizure of such an exclusive use under a con- 
 struction of the charter, make the charter itself uncon- 
 stitutional ? According to the broad and consistent 
 theory of law, laid down by the older jurists, the right 
 of eminent domain cannot be used to give any corjiora- 
 tion exclusive rights in a public highway, save such as 
 are necessaiy to the constructi(^n and maintenance of
 
 390 The Railways and the Bepuhlic. 
 
 the road. If either by theory or practice the use 
 of the highway has become the sole privilege of one 
 corporation, then, if the monopoly is granted by the 
 charter, the charter is void ; while, if it is established 
 without the authority of the charter, it is a violation 
 both of the charter and of public rights. 
 
 It must be admitted that later courts of the hie^hest 
 authority have taken a different view. It has been 
 held by the Supreme Court of the United States, and 
 in various forms by other judges, that the exclusiv^e 
 use of its railway by a company does not destroy its 
 character as a public highway, but simply constitutes 
 a regulation necessary for the safety and efficiency of 
 the service. In this assertion some eminent judges 
 have not confined themselves to defining the law, but 
 have attempted to settle a question of fact — the ques- 
 tion whether such exclusive rights are necessary to 
 safety. The Supreme Court of the United States, how- 
 ever, did not undertake to decide this question, but left 
 it to the legislature. In a decision, pronounced twelve 
 years ago, affirming strongly the principle that the rail- 
 Avay is a public highway,* Justice Strong said : " That 
 all persons may not put their own cars on the road, 
 and use their own motive power, has no bearing u^^ou 
 the question whether the road is a public highway. It 
 bears only upon the mode of use, of which the legis- 
 lature is the exclusive iudfje." This laniruaire susrirests 
 a conflict between the Supreme Court in 1842 and the 
 Supreme Court in 1874. Justice Baldwin held that a 
 mode of use under the charter, which gives the corpora- 
 tion an exclusive use of the road, is a monopoly and 
 renders the charter unconstitutional. Justice Strong 
 * Olcott vs. Supervisors, 16 "Wallace. 078.
 
 The Puhlic Highway. 391 
 
 holds that such exclusiveness is a practical question of 
 which the legislative power is to judge. As the point 
 at issue is, simply, what is the actual result of this ex- 
 clusive control, the puhlic is at liberty to choose be- 
 tween the view of Justice Strong: and that of Justice 
 Baldwin. I must accept that of the earlier judge. It 
 is inconsistent with the character of a public highway 
 that the public cannot travel or transport its goods, 
 except in the vehicles of the corporation wliich built 
 the road, and by paying whatever rates it demands, 
 limited only by an obsolete and exorbitant maximum. 
 A monopoly in travel and transportation is at war with 
 the very object of a public highway. But even al- 
 though, upon a direct issue, the later view should pre- 
 vail, that such exclusive rights do not destroy the char- 
 acter of the road as a public highway, the remedy is 
 still within the reach of the people. The exclusive 
 privilege is " a mode of use," of which, according to 
 Judge Strong, "the legislature is the exclusive judge." 
 The subject, then, is entirely within the regulating 
 power of legislation. While the two decisions diifer 
 as to the view which constitutional law takes of the 
 railway monopoly in transportation, they agree that 
 the legislature can enforce the separation of the pro- 
 prietary control of the railway, with its right to take 
 tolls, from the business of the carrier upon it.* 
 
 * Anotlier assertion of the same idea is fount! in Judsc Emmons's very 
 exhaustive opinion in Tiilcott rs. Township of Pine Grove (1 Flippin, 
 151). He said : " It is intimated tliat if the cars of all other companies 
 could enter upon and use the road, this too would make tlie difference 
 between legality and unconstitutionality. Protesting again tliat we arc 
 utterly unable to sec in this anytliing more than a mere mode of use, in 
 reference to which the law-making power beyond doubt is the sole judge, 
 as Judge Cooley as an author so clearly shows, nevertheless we add that
 
 392 The Railways and the Republic. 
 
 The claim that this monopoly is essential to the prosi- 
 er conduct of the railways, was set forth judicially with 
 distinctness by Judge McCrary, in one of the leading 
 exj^ress cases,* in which he founded tlie railway com- 
 pany's right of excluding all other carriers upon " the 
 safety, not only of property, but of life as well." In 
 this opinion, the judge, very sincerely and in good faith, 
 undertook to settle a question of practical railroading 
 
 this criticism also we think is as unfounded in fact as the former one."' 
 The court then says, that the general law secures connections and facili- 
 ties for other roads; an assertion whicli may be seriously questioned. 
 
 * In the case of the Southern Express Company against Memphis and 
 Little Rock Railroad (8 Federal Reporter, 799), the judge quoted the 
 sixth section of the cliarter as follows: "The said comj^any shall have 
 the exclusive right of transportation or conveyance of persons, goods, 
 merchandise, or produce, over said railroad by them to be constructed." 
 With regard to this section the court said : " This language must l)e con- 
 strued in the light of the history of the construction of railroads in this 
 country. W'lien first introduced they were regarded only as improved 
 highways, subject to be used by the general public. It was thought that 
 any person ought to have the right to place his vehicle upon tlie track 
 of a railroad, and to transport his own freight upon it, paying toll for the 
 use of the track ; and it was considered necessary, in order to limit the 
 use of the road, to give a particular person or company the exclusive right 
 to operate it ; that such exclusive right should be resei-ved by law. Ex- 
 perience very soon demonstrated that it was not practicable to apply to 
 the system of railways all tlie principles that obtained in defining and 
 regulating the rights of the public with respect to the common highway. 
 Certain innovations were necessary. Certain exclusive privileges were 
 inevitable, in order to secure safety and liberty in the transjiortation of 
 persons and property by the use of cars and steam-engines. One of the 
 first of these to be generally recognized was that the operation of every 
 railroad should be under the control of a single head. It was seen that 
 the safety, not only of property, but of life as well, depended upon vest- 
 ing in the owuer of the track, or the company operating the road, the ex- 
 clusive right to say what vehicles should be placed upon the track, or, in 
 other words, the exclusive right of transportation and conveyance of per- 
 sons and property over their lines. An examination of the railroad char- 
 ters, adopted by the various legislatures of the Union, will show that this 
 provision has been inserted in nearly all of them, in one form or another."
 
 The Puhlic Highway. 893 
 
 as if it had been a question of law, and, as usual, when 
 the cobbler goes beyond his last, made some striking 
 errors. Experience has doubtless proved that it is im- 
 possible to apply to the railway the precise regulations 
 which serve well on the common higliwa}^ x\s expe- 
 rience had proved the same thing of canals, before rail- 
 ways were invented, reason could, from the first, tell all 
 who studied the subject that still other rules must be 
 adopted for a new kind of highway. A witty newspa- 
 per writer, two or three j^ears ago, sought to disprove 
 the theory that the railway is a public highway, by say- 
 ing that if it is so, it is necessaiy, when t^vo trains meet 
 each other, that each shall turn out to the right until 
 they have passed. He might as appositely have made 
 the same remark of canals, or have said that if two rail- 
 way trains meet each other, one must stop and slacken 
 its tow-rope, while the other passes over it. As railway 
 trains have neither tow-ropes nor tow-paths, so they 
 have no constant facilities for turning out to the right; 
 but in each case, whether of railway, canal, or turnpike, 
 the peculiar form of highway and method of use require 
 not only appropi'iate vehicles, but also appropriate and 
 peculiar rules for their movement and government. 
 The stage-coach requires one set of rules; the canal- 
 boat another; the steamers on the lakes or livers must 
 have a third and wholly different code of regulations ; 
 and the railway train calls for a fourth, equall}' dis- 
 tinct in character from all the rest. But how does this 
 necessity for adapting regulations to the methods of 
 use demonstrate " the impracticability of ''applying the 
 principles that obtained in defining and regulating the 
 rights of the public"' in other highways to the rail- 
 ways? To adapt regulations to particular uses is one
 
 394 The Hallways and the RejpuUic. 
 
 thing; to abandon the principles which underlie their 
 existence is another. While the rules for use vary with 
 the nature of canals, turnpikes, and rivers, the princi- 
 ple that the public shall freely use the highways, un- 
 der these rules, is preserved in them all. Wholly dis- 
 tinct rules are necessary for the movement of trains on 
 railways ; but the principle that the public has a right 
 to the free use of the tracks, either for private trans- 
 portation or as common carriers, should be universal 
 and permanent. 
 
 There are other gaps in the judge's logic. It was 
 found inevitable, he says, " to secure safety and celerity 
 in the transportation of persons and property by the 
 use of steam-engines," that the operation of every rail- 
 road should be under the control of a single " head." 
 This must be admitted of the control of trains in mo- 
 tion ; but it by no means follows that the engines and 
 cars must be owned by a single coi'poration, or loaded 
 by the employees only of the railroad, or that the 
 freiglit may not be taken and transferred by many 
 competing carriers over the same track, at whatever 
 charges may be fixed by free competition. Again, the 
 judge says, " It was seen that the safety, not only of 
 property, but of life as well, depended upon vesting in 
 the owner of the track, or the company operating the 
 road, the exclusive right to say what vehicles should 
 be placed upon the track, or, in other words, the exclu- 
 sive right of transportation and conveyance of persons 
 and property over their lines." This statement is in 
 part indisputable. The railway company must have 
 power to require vehicles suited to the road. It must 
 be able to exclude from its track a stage-coach or a 
 steamboat, cars that are out of repair, or engines in
 
 The Piiblic Highway. 395 
 
 clauger of explosion. But the judge goes too far. It 
 does not follow that the company must own the engines 
 and cars. If the train-despatcher fully controls trains 
 in motion, it can make no difference to the safety of 
 the service who owns the trains, or what charges are 
 made by the owners. The necessity for exclusive own- 
 ership by the company is fully disproved by experi- 
 ence, since two or more companies have often used in 
 common considerable sections of road with safety and 
 success. Indeed, on every important railway, cars l)e- 
 longing to scores of different companies are running 
 every day in the vear. This beinof the case even while 
 competition upon the railway is suppressed, it can be 
 done just as well and in the same way, if the law re- 
 stores competition and gives it full play. 
 
 Let the railway corporations retain all powers neces- 
 sary to direct the movement of trains with safety and 
 speed ; but, under this direction, let the carrying busi- 
 ness be open to all comi3etitors. This plan simply sep- 
 arates two distinct kinds of commercial service. It is 
 no more necessary to combine the work of receiving, 
 classifying, and loading and delivering freight, and of 
 fixing and collecting charges, with the work of control- 
 ling the trains in motion, than it is to combine the min- 
 ing: of coal with the manufacture of iron in blast fur- 
 naces, or the smelting of iron with the making of rails 
 in rolling-mills. If any one should claim, for the pro- 
 prietors of a rolling-mill, the exclusive right to manu- 
 facture pig-iron, or to mine coal or ore for their works, 
 every one would see in the claim a mere pretext for 
 concentratinir these industries under the control of a 
 few large corporations. The only way to jirotect in- 
 dustrial freedom is to open each branch of industry to
 
 396 The Hallways and the RejpuUic. 
 
 every mau on equal terms. The owner of the rolling- 
 mill may own and work blast furnaces or mines if he 
 will ; but others may still build furnaces or open mines 
 in free competition. The same principle should be ap- 
 plied to the railway. The pretence that only a single 
 corporation must have power to carry freight or move 
 trains over a road is set up solely to support a need- 
 less monopoly. 
 
 At present the only powers essential to the prop- 
 er discharge of its functions by the railway company 
 are the exclusive control of its tracks, the right of 
 directing and inspecting the rolling-stock, and the 
 franchise to take uniform tolls. It is possible that 
 the advance of invention might make it necessary to 
 extend these powers. While the motive power on rail- 
 ways consists of steam locomotives, there is no more 
 reason why, with proper guarantees for safety, the 
 power should not be furnished under free competition, 
 upon these roads, than in transportation by steam on 
 the rivers. The skill and care required for the man- 
 ao-ement of locomotives is not sireater than for river 
 steamboats, wdiile the risk of accidents, especially in 
 carrying freight, is much greater in the latter case. If, 
 in the progress of invention, electricity should displace 
 steam on the railways, and an electric current on the 
 track should become the best motive power, it must 
 necessarily be furnished by the company owning the 
 road. Only one authority could provide such a mo- 
 tive power on any one line, and the work would nat- 
 urally belong to the company which constructs and 
 maintains the track. 
 
 The question of tolls presents little practical difficul- 
 tv. The toll should be a reasonable and uniform rate
 
 The Public Highway. 397 
 
 per ton per mile for freight, and per car per mile for 
 empty cars, such as will, in the aggregate, yield reve- 
 nue enough to repair and maintain the track, to pay 
 fixed charges, and leave a fair dividend upon the hona- 
 fide capital invested. The toll should not be the same 
 upon all roads. The road which takes from the point 
 of production 250,000 tons of freight, which would be 
 worthless but for this outlet, is both forced, in order to 
 earn a return on its investment, and justified by its ser- 
 vice to the producer, in charging a greater I'ate per ton- 
 mile than the trunk line which moves five or ten mill- 
 ion tons and forms part of a great highway of the na- 
 tion. While the rates on difterent lines must vary, the 
 reasonable toll for each could easily be calculated from 
 its expenses, fixed charges, and gross tonnage.* The 
 
 *" The following figures are given for the purpose of approximately 
 showing the rate of toll per ton-mile on freight which various railroads, 
 accommodating different kinds of traffic, must charge in order to keep 
 the roads in repair and obtain a good return on their capital. In the 
 case of one of the most prosjierous trunk lines, the low charge of less 
 than ^^ cent jier ton-mile, for the use of the track by outside carriers, 
 would be remunerative to the company. On the least prosperous of tlie 
 trunk lines, with an immensely watered capitalization, and supposing it 
 to earn G per cent, interest and dividends — which it has never done — 
 .431 of a cent per ton-mile would yield the needed revenue. On minor 
 railways, the rate may rise as high, for example, as 2.43 cents on the Den- 
 ver and Rio Grande Railway, where the cost of construction is high and 
 the volume of business small. 
 
 Main Line of the Pennsylvania Railuoad, 
 Ton-miles of freight 5,000,083,175 
 
 Expenditures. 
 
 Maintenance of way $3,000,491 47 
 
 General expenses 003,05'J 89 
 
 Interest on stock and bonds, $150,000,000, at 
 
 per cent 9,000,000 00 
 
 Total $13,264,151 3G 
 
 Deduct GO p;;r cent, of passenger earnings of 
 
 $6,115,323 3,609,253 80 
 
 Tolls required from freight $9,504,897 5(i 
 
 or 0.189 cent per ton-mile.
 
 398 The Railways and the EepuUic. 
 
 periodical adjustment of the tolls for any railway should 
 be based upon the traffic for the corresponding period 
 immediately preceding. Let public interests be fully 
 protected against combinations and discriminations, and 
 there need be no public objection to making a liberal 
 
 New York, Lake Erie, and Western. 
 
 Ton-miles of freight 2,306,946,893 
 
 Expenditures. 
 
 Maintenance of way $2,720,173 91 
 
 Fixed chai-ijes on debt 4,605,392 53 
 
 6 per cent, dividend on $85,000,000 stock... 5,100,000 00 
 
 Total $12,425,566 43 
 
 Deduct 20 per cent., proportion of passenger 
 
 earnings to gross earnings 2,485,113 28 
 
 Revenue required $9,940,453 15 
 
 Rate required per ton-mile 0.431 cent. 
 
 Lehigh Valley Railroad. 
 
 Ton-miles of freiglit 704,020,328 
 
 Expenditures. 
 
 Maintenance of way $1,918,080 31 
 
 General ex^ienses 206,613 51 
 
 Interest 2,031,674 73 
 
 Dividends 2,210,378 00 
 
 Total $6,366,746 54 
 
 Deduct 60 per cent, of passenger earnings.... 467,783 87 
 
 Revenue required $5,898,963 67 
 
 Rate required per ton-mile 0.838 cent. 
 
 (To pay 6 per cent, on capital and debt, -^^ of a cent per ton-mile would 
 be ample, as the above calculation includes 10 per cent, dividends on pre- 
 ferred stock, 8 per cent, on common, and 7 jier cent, on $6,000,000 of the 
 debt.) 
 
 Chicago and Northwestern Railway. 
 
 Ton-miles of freight 1,183,829,358 
 
 Expenditures. 
 
 Maintenance of way $3,252,226 24 
 
 General expenses and taxes 2,417,288 98 
 
 Interest 4,288,633 05 
 
 Dividends (preferred stock, 8 per cent.) 1,781,162 00 
 
 Dividends (common stock, 7 per cent.) 1,107,377 00 
 
 Total $12,846,687 27 
 
 Deduct 60 per cent, of passenger earnings... 3,671,769 45 
 
 Revenue required $9,174,917 83 
 
 Rate required 0.774 cent.
 
 The Public Highway. 399 
 
 margin in calculating tolls, granting the corporation 
 the benefit of any gain in traffic as an addition to its 
 profits. With the public rights fully secured, and the 
 prevailing evils removed, the prosperity of the railway 
 corporations would be entirely consistent with the pub- 
 lic welfare. Nor do the necessary difi*erences in tolls 
 upon difi'erent railways present any insuperable diffi- 
 culty. The fact that the Erie Railway, to pay divi- 
 dends, must charge twice as great a toll as the Pennsyl- 
 vania Kaihvay, would indeed raise the question wheth- 
 er tolls must produce dividends for fictitious stock. 
 The tolls ought certainly to earn dividends upon actual 
 constructive capital; but in this matter also, free com- 
 petition will, in the end, work out a just result. For 
 if a road charges a materiall}^ greater rate per ton-mile 
 than its competitor, in the effi^rt to make dividends on 
 watered securities, it will simply drive the traffic to its 
 competitors. Let it be settled that the tolls shall be 
 
 Denver akd Rio Grande Kailway. 
 Ton-miles of freiglit 193,178,436 
 
 Expenditures. 
 
 Mainteuance of way $1,440,950 61 
 
 Miscellaneous expenses 281,380 27 
 
 Interest on bonds 1,763,891 66 
 
 Dividends, 6 per cent 2,130,000 00 
 
 Total §5,615,223 54 
 
 Deduct 60 per cent, of passenger earnings... 957,126 75 
 
 Revenue required $4,658,095 79 
 
 Rate required 2.42 cents. 
 
 In these cases the proportion of expenses to earnings is about 60 per 
 cent., and, accordingly, tliat percentage of passenger earnings is deduct- 
 ed for the passenger traffic. In the case of the Erie a slightly dillerent 
 method was used, the ratio of passenger earnings to gross earnings be- 
 ing deducted ; while in the case of the Denver and Rio Grande, the ratio 
 of expenses being 65 percent, that proportion was deducted. These 
 figures are, of course, only intended to indicate ajiproximately how tolls 
 might be calculated.
 
 400 The Railways and the Rejpublic. 
 
 the same to all alike on any single line, and competi- 
 tion will insure their practical equality on competing 
 roads. In a case "wliere the traffic is as yet undevel- 
 oped, the rate of toll necessary to earn dividends might 
 be prohibitory, as is shown by the figures taken from the 
 Denver and Kio Grande report for 1883. The practi- 
 cal effect might be to leave the company the exclusive 
 privilege of carrying freight, for the first years of its ex- 
 istence ; and this would be no more than justice. It 
 would inflict no serious hardship on the public, that 
 the company which embarks its capital in a new enter- 
 prise shall have reasonable profits, provided it be per- 
 mitted to make no unjust discriminations, nor to charge 
 oppressive rates. Wlien its trafnc becomes so great 
 that moderate tolls will yield a fair profit on the in- 
 vestment, its track will be thrown open to the services 
 of all carriers, and its profits will be maintained. This 
 insures practical justice to all interests. All these de- 
 tails with regard to tolls are, of course, subject to fur- 
 ther discussion before they can be settled ; but it seems 
 clear enough that general rules may be framed for fix- 
 ing tolls, in accordance with the circumstances of each 
 railway. 
 
 It is not hard to picture the effect of such a reform 
 upon the railways. Let the right of every person to 
 run a railway train over any track to which he may 
 take his engines and cars, be 2:)laced upon the same ba- 
 sis as the I'ight to run a steamer over any river, or a 
 canal-boat over any canal, and the practices of combi- 
 nation and discrimination, which distinguish the use 
 of the railways from that of other liighways, will van- 
 ish. It is not claimed that this would bring a millen- 
 nium in transportation. Common carriers would still
 
 The Pullic Highway. 401 
 
 grasp excessive profits, if they could ; and some rail- 
 way officials would doubtless he willing to enricb 
 themselves by an illegitimate exercise of any powers 
 within their reach. But the leading evils which are 
 the subject of this work would be effectually and per- 
 manently cured, by demolishing their causes; with the 
 right of carrying freight over the railways, free to all 
 on equal terms, the power of railway corporations to 
 enforce disci'iminations, and to build up other monop- 
 olies by combinations with other railways, would be 
 destroyed. 
 
 The first effect of the reform, if it merely gave each 
 railway the riglit to send its trains over connecting 
 tracks, would be to destroy the possibility of artifi- 
 cially sustaining rates by pools. Even if it were pos- 
 sible to bring all existing competitors into a single 
 combination, the certain knowledge that new competi- 
 tion would at once spring up would render such com- 
 bination useless. Arbitrarily to increase rates would 
 only be to bring new capital into the business of trans- 
 portation, and thus indefinitely to exj)and competition. 
 AVhen tlie law enables $100,000 of capital to compete 
 fairly with the mightiest pool, the power of that pool 
 over commerce is no lonfrer dans^erous. On the other 
 hand, such combinations being powerless, rates would 
 be determined, on a natural and legitimate basis, by 
 the cost of service. The fact that all efforts to drive 
 competition permanently from the field must be futile 
 would make the cliai'ges for transportation stable. No 
 gigantic corporation could assert its control of the busi- 
 ness, and drive its competitors to accept its terms, by 
 striking off half or three quarters of its freight charges 
 at a blow; or disturb the calculations of trade by 
 
 2G
 
 402 The Railways and the Be^ublic. 
 
 restoring the old rates with scarcely less abruptness. 
 No corporation has such vast resources that it can un- 
 dertake to drive a hundred present, and ten thousand 
 possible competitors out of the field by such means. 
 Where competition is free, as in all legitimate business, 
 the fluctuation of rates will be gradual and slight, com- 
 pared with the violent changes now inflicted uj)on com- 
 merce. New economies and inventions for improving 
 transportation Avould exert their proper eftect, in reduc- 
 ing charges gradually and progressively. If competi- 
 tion were excessive, rates might be brought down to 
 the cost of service ; and as the lack of profit reduced 
 the competition, the restoration of charges to a paying 
 basis would be as sjradual as their decline. The first 
 eff"ect of making competition universal by this means 
 would, therefore, be to make pooling impossible, and to 
 do away at once with the oppressive rates which the 
 pools maintain, and with the ruinous rates which their 
 conflicts produce. Violent fluctuations would cease, 
 and changes in freight rates would become as moder- 
 ate as the rise and fall of any other commodity, whose 
 price is regulated by the unrestricted laws of demand 
 and supply. 
 
 Another effect of this reform, no less valuable, would 
 be the permanent abolition of all vital inequalities and 
 favoritism to shippers, by destroying the power of the 
 railways to make such discriminations. It has been 
 seen that this power rests entirely in the exclusive con- 
 trol, by each railway, of transportation over its own 
 track; so that a number of railways can combine to 
 favor or oppress an interest or an industry. Make the 
 privilege of transportation free to all, and this power 
 is utterly destroyed. If a shipper cannot get as good
 
 The PubliG nighway. 403 
 
 rates or facilities as his competitors from one railway 
 carrier, he can get them from another. If all the car- 
 riers at a single point should combine to oppress any 
 interest, carriers can be found elsewhere to bring their 
 trains to its relief. Even in the impossible contingen- 
 cy that all who are engaged in transportation should 
 refuse to compete for traffic, still merchants or manu- 
 facturers could run their own trains. As long as any 
 shipper can, by investing a few thousand dollars, secure 
 the carriage of his freight at nearly first cost, no rail- 
 way or common carrier can destroy his trade by dis- 
 criminating rates. In any month of the period in 
 which the independent petroleum refiners were strug- 
 gling against the growth of the Standard monopoly, 
 there were railways enough which would gladly have 
 transported their freight on fair and equal terms, if they 
 could have reached the refineries with their cars. At 
 any time before they finally succumbed to the Standard 
 the refiners could have raised the means to buy all the 
 cars and engines rerpiired for their transportation, if 
 they could have taken their cars over the railways to 
 market. Had these railways been conducted as pub- 
 lic highways ten 3'ears ago, the Standard Oil iniquity 
 Avould have been impossible. But each of the four 
 trunk lines was able to exclude competition from its 
 tracks, and, by combining to destroy the competition 
 of independent refiners, they were able to crush out a 
 prosj)ei'ous interest, and to build up in its place a 
 gigantic and unscrupulous monopoly. 
 
 The proposed refoi'm offers a complete remedy for 
 all inequitable adjustments of rates between localities. 
 It is not to be supposed that it would give the inte- 
 rior point the very same rates for transportation i)er
 
 404: The liailways and the Republic. 
 
 ton-mile as the great distributing-point; or that the 
 farming regions of the Middle States could send their 
 produce to market, at a charge as mucli lower than 
 that on grain, from Nebraska or Dakota, as the dis- 
 tance is less. But the cost of transportation, from all 
 places, would be fixed by the natural forces of compe- 
 tition, which would bring it into due relation to the 
 cost of service. Even if this era of pools and fictitious 
 business methods has shaken the public faith in these 
 forces, every locality which is, or imagines that it is, 
 unjustly treated in the rates of its freight traffic could, 
 by the investment of a few thousands of dollars, es- 
 tablish a transportation line for its own freight, in- 
 stead of having to lay out millions for a comi^eting 
 road. If Pittsburgh, Buffalo, or Indianapolis should 
 have a real or imaginary grievance, in the lower rates 
 given to Chicago or St. Louis, the former cities would 
 have a remedy within their own grasp. A quarter of 
 a million of dollars would give the merchants of these 
 cities engines and cars to take their goods wherever 
 they chose, over any railway that they might select, 
 on payment of regular tolls. It is not likely that 
 action of this kind would be often necessary. The 
 power of competition to fix the just price for any ser- 
 vice is practically universal, when it is perfectly free. 
 
 Besides the great results already pointed out, there 
 are others to be expected from the proposed reform, 
 which, while they may seem of minor importance, 
 would yet be of real public value. Thus it would 
 take away the power of railways to obstruct other 
 means of communication, a power often exercised by 
 one railway against another, and by a combination of 
 railways against the water routes. One great trunk
 
 Tlie Pxiblic Hujlivoay. 405 
 
 liue can shut off anotber from its connection with the 
 metropolis, by holding a connecting link, or Ly the 
 well-timed purchase of the shares of a subsidiary road 
 which its rival needs. A central railway can exclude 
 a lateral road, which has no other outlet, fVom all com- 
 munication with the outer world, until the latter is 
 forced to surrender its independent existence, upon 
 such terms as the master corporation may dictate. A 
 combination of railways may force an important water 
 route into disuse, except for merely local traffic, as the 
 trunk lines have done in the case of the Ohio river, by 
 discriminating against it, and in favor of their railway 
 allies, west of Pittsburgh and Wheeling. All these 
 combinations and discriminations, designed to exclude 
 competition, or to force subsidiary lines to sul)jection, 
 violate the character of the public highway and the 
 law as expressed in many decisions. But, like other 
 illegal practices, they are maintained and the law is 
 habitually nullified by the railways. Let the roads 
 be opened to connecting roads on equal terms, and 
 these practices will defeat themselves. If a great rail- 
 way refuses equitable rates to a smaller one, the latter 
 can run its own trains over the tracks of the former. 
 If the Pennsylvania Railroad succeeds in preventing 
 the Paltimore and Ohio from reaching New York with 
 its own line, the Baltimore and Ohio can send its 
 freight cars and engines over the Pennsylvania Kail- 
 road. Carriers from the Mississippi and Missouri riv- 
 ers, })y way of the Ohio, could command their own 
 railway facilities, fi'om Pittsburgh or Wheeling to New 
 York, Philadelphia, or 15altimore. The foundation of 
 monopoly in freight traffic being destroyed, the railway 
 would lose both the motive and the power to punish
 
 406 The Railways and the RejpvhliG. 
 
 shippers for selecting a route for their freight beyond 
 its line. The railway manager could no longer say to 
 the shipper in his rates: "Unless your freight patron- 
 izes the connecting road, -which it is my interest to fa- 
 vor, you mast pay double or triple rates for the use 
 of my line." The power to drive freights to particu- 
 lar routes by differential rates would be taken away. 
 Commerce might seek the cheapest and best avenues 
 for traffic, and freely use any highway established by 
 the state. Besides, the railway interests, as a whole, 
 Avould be sounder and stronger, if the smaller lines 
 were made independent of the more powerful ones. 
 It is not for the welfare of the railways, as a class, 
 that the great fish shall always swallow the small 
 ones. It may, indeed, in a narrow sense, be for the 
 interests of those which swallow. But the sound and 
 healthy growth of the whole railway system requires 
 that all its members, small or great, should have equal 
 chances for life. The character of railway investments 
 will be improved, when new roads can be built with- 
 out the sure prospect of yielding up their autonomy, 
 and most of their profits, to some main line, before they 
 can obtain the connections they need. It can be done 
 when the right of every railroad company, or of every 
 carrier, to transport freight over any line, at the same 
 rate of toll, is establislied and enforced. Such a reform 
 would prevent the greater roads from first freezing out, 
 by discriminating rates, and then absorbing, all the 
 branches and feeders dependent on them ; and thus 
 end a practice as hostile to the railway system as to 
 the interests of the public at large. 
 
 In short, the reform proposed will afford a practical 
 solution of every issue between the railways and the
 
 The Public Highway. 407 
 
 people. Let it once be fully eamed out, and all the 
 detailed questions of rates, the discussion of which is 
 necessary to an understanding of the present raihvay 
 methods, will settle themselves. If there is any unsus- 
 pected virtue in the long hauls, which makes it as prof 
 itable for the raihvay to take cotton from Memphis to 
 the seaboard at $1 per bale as to take it from local 
 points, half the distance, for $3.50, free competition will 
 prove it. If live-stock and dressed beef have some oc- 
 cult peculiarities, which make the latter cost seventy- 
 five per cent, more to carry than an equal weight of 
 the former, free competition will maintain the differ- 
 ence. But if these anomalies arise from imperfect com- 
 petition, which brings competitive traffic near the cost 
 of service, and extorts a compensation where there is 
 no competition ; or if they are founded on the power 
 of the railways to adjust rates for the benefit of pri- 
 vate investments by their managers, they will be re- 
 moved and rates will be made equitable. Under free 
 and open competition it is certain that there would be 
 no such disproportion in the rates compared with the 
 cost of service as now prevails. The rates for carrying 
 freight a tliousand miles would not be the same per 
 mile as for a hundred ; for the terminal charges are a 
 constant element, as great in the one case as in the 
 othei". But it would be impossible, for instance, tliat 
 the Central Pacific Railway should charge $800 for a 
 car of freight from New York to Virginia City, while 
 accepting $300 for carrying it from New York, through 
 Virginia City, hundreds of miles farther to Sacramento. 
 The greatest effect of the reform would be to bring 
 rates into proper relation to the cost of service. The 
 fixed element in that cost would then be the stated
 
 408 The Railways and the Republic. 
 
 toll per ton-mile necessary to maintain tbe railway in 
 repair, and to yield a fair profit on the capital invested 
 in it. Whatever differences of rates arise under the nat- 
 ural and legitimate conditions of transportation, would 
 remain under free competition. Whatever differences 
 are produced by the monopoly of the i-nilways as car- 
 riers, which hinders or disturbs competition, or discrim- 
 inates between particular interests, will be abolished. 
 When transportation on the railways is as open as on 
 canals or rivers, one locality can have no advantage 
 over another, save as it is legitimately entitled to it by 
 superior accessibility or natural facilities for business. 
 The localities which enjoy the cheapest rates will be 
 those from which the cost of transportation is least, or 
 those which are able to furnish the largest traffic and 
 attract the greatest competition. Thus, under the legit- 
 imate laws of trade, industries would seek the locali- 
 ties best adapted to them, and if any locality secured 
 better advantages of transportation for its mines or its 
 mills than another, it could only be as the result of 
 the natural tendency of mercantile or industrial enter- 
 prises, to go where they Avill be most economically and 
 advantageously prosecuted. 
 
 Let competition have its free course in every de- 
 partment of railway traffic, and it will fix the rates of 
 transportation so as fairly to reward the service ren- 
 dered, give to all branches of trade their just due in 
 relative charges, and make the fluctuations in rates of 
 freight as gradual and moderate as they are in lake 
 or ocean transportation. The completeness and per- 
 manence of free competition is to be secured by tlie 
 method proposed in this chapter. When the law main- 
 tains the right of every man to carry freight over the
 
 The Public Highway. 409 
 
 railways, subject to proper tolls and necessary restric- 
 tions, the public interests which depend on free com- 
 merce ^vill be fully protected. Let the work of rail- 
 way cor^^orations, in building and maintaining tracks, 
 be kept distinct from the l)usiuess of common carriers, 
 in transporting freight over the roads, and let the lat- 
 ter be thrown open to all, and the abnormal develop- 
 ments of the modern railway power, the domination 
 of the great corporations over trade, and the danger- 
 ous tendency of the corporate kings of commerce tow- 
 ards monopoly and favoritism will be radically de- 
 stroyed. 
 
 While such a reform woidd invade privileges which 
 the corporations claim, it would really infringe upon 
 no interests which are legitimately vested in them. 
 The railway owner regards all traffic on his road as 
 the propert}^ of his corporation, h. rival who com- 
 petes for the traffic is stigmatized as " robbing the 
 road of its business." While the business of carrying 
 freight over a railway is thus held to l)e its property, 
 the proposal to abolish its exclusive control of the 
 business will, no doubt, be denounced as an attack 
 upon its rights. But it does not attack or affect any- 
 thing which railway capital and enterprise have cre- 
 ated. It neither disturbs any tangible property be- 
 longing to the company, nor impairs its a])ility to earn 
 a fair return on its invested capital. The easement of 
 the railway corporation in its right of way, and its 
 ownership of tracks, bridges, and tunnels ai'e property 
 rights, partly paid for and created by its own capital 
 and labor ; Avliile its franchise of taking tolls is neces- 
 sary to reward its enterprise. But it does not follow, 
 because the railway coi'poration has received from the
 
 410 The Railways and the Hejpublic. 
 
 sovereign power the right to construct and control a 
 public highway, and has these legitimate proprietary 
 interests, that it must be invested, in addition, with a 
 monopoly of transportation over the highway. That 
 monopoly which, under the most tolerant view, is a 
 material impairment of the character of the public 
 highway, is all that it is projDosed to take from the 
 railwa}'. The right of the railway to a legitimate re- 
 turn on its investment is fully secured by maintaining 
 its franchise to levy adequate tolls. No property right 
 can be said to exist in a monopoly upon a public high- 
 way, when the I'ight of the company which has con- 
 structed it to full I'eturn upon its invested capital can 
 be perfectly secured without the monopoly. 
 
 But we may safely go further, and insist that the 
 stability and legitimate prosperity of railway invest- 
 ments would be materially improved by establishing 
 free competition. It is a law of trade that interests 
 which depend upon monopoly for their foundation are 
 subject to extreme fluctuations, and rapid alterations 
 of prosperity and depression. In commerce, as in phys- 
 ics, the law^ of nature that is violated will work out its 
 own revenge. The artificial establishment of high rates 
 which check traffic, and the violent recourse to extreme- 
 ly low ones which give it an unnatural stimulation, 
 are both due to the exclusive privileges of the railways, 
 and would be alike removed by leaving rates to the 
 regulation of free competition. Competition is the true 
 regulator of the operations of commerce, as the gov- 
 ernor is of the steam-engine. Railway earnings will be 
 steady and secure, when they depend on uniform and 
 fixed tolls, made sufiicient to maintain the roads and 
 to yield a fair return on their capital. To separate
 
 The Public Highway. 411 
 
 the business of transportation, Avitli its risks and fluctu- 
 ations, from the business of building and owning rail- 
 ways, is to place the revenues of the latter upon a fixed 
 and certain basis. It is not desirable that the tolls 
 should be subject to great or rapid changes. They rep- 
 resent the fixed and permanent elements in the cost of 
 transportation. The cost of keeping a railway in re- 
 pair, the demand of bonded debt for interest, and that 
 of capital for dividends, are constant, and should be met 
 by steady and unchanging sources of revenue. This 
 end would be largely attained by the reform wow ad- 
 vocated. We have seen that free competition will less- 
 en the fluctuations of charges for transportation ; but 
 besides, the separation of the carrying business from 
 the functions of the railway company would wholly re- 
 lieve the latter from the eflects of such fluctuations, 
 and give its prosperity the secure foundation of a uni- 
 form revenue from tolls. On such a basis the income 
 of the railways would be as certain as the revenue of 
 the government from tarifts and excise; and their se- 
 curities, instead of being, as at present, subject to un- 
 certainty and surrounded by the hazards of speculation, 
 would attain much of the stability and popularity of 
 government bonds. 
 
 The improvement in the position of legitimate railway 
 interests would be further promoted, in that the power 
 of railway managers to manipulate the stock market, or 
 to use the railways in their private interests, -would be 
 greatly restricted. Let the business of the railways be 
 limited to the collection of uniform tolls, and the wild 
 fluctuations of the stock market, produced by the alter- 
 nations of railway wars and railway combinations, w'ith 
 the prospect, now of bankruptcy, and now of enormous
 
 412 The Railways and the Rejpublic. 
 
 dividends, would cease to build up enormous private 
 fortunes for manao;ers, while disturbingr and disfrracinor 
 the financial coiumunitv. We should no lonsrer see 
 speculating managers destroy the earnings of a road, by- 
 diverting traffic, until they have bought up its shares, 
 and then advance their price, by turning business back 
 upon it, until they can sell the shares at a vast profit. 
 Under this reform, directors could no longer fasten par- 
 asites upon their I'aihvays, in the shape of fast freight 
 lines, to transfer all the profits of the freiglit from the 
 pockets of the stockholders to their own. For these 
 fast freight lines bear no resemblance to the common 
 carriers who would use the railways undei- this reform. 
 The ri2;lit to use the roads would then be free to fren- 
 eral competition. The freight lines wljich were so nu- 
 merous eight years ago, and are still not unknown, 
 were protected against competition by the railways ; 
 but the prosperity of carriers, mider free competition, 
 would depend solely on their efficiency and enterprise. 
 The old system established parasites to suck the finan- 
 cial life-blood of each railway, for the benefit of a few 
 powerful officials; the new one would i-aise up numer- 
 ous patrons, all paying fair rates for the use of the rail- 
 ^vay, and each adding to its revenues. One system is 
 an imperiam in imperio^ a monopoly within a monop- 
 oly ; the other is free competition, upholding alike the 
 independence of trade and the true prosperity of the 
 railways. Railway officials would doubtless still be 
 tempted secretly to reduce tolls to can iers in whose 
 prosperity they might be personally interested. But 
 the new system would make such a discrimination 
 much more liable to disclosure and defeat. The only 
 customers who have succeeded in forcing the railways
 
 The PicUic Highway. 413 
 
 to respect their right to unrestrained and equal facili- 
 ties are the express companies. Their capital has en- 
 abled them to carry on litigation against the railways 
 on nearly equal terms ; while the dependence of their 
 prosperity on this right made it imperative on them to 
 assert it persistently and in the highest courts. Simi- 
 lar organizations engaged in general freight traffic upon 
 the railways, under a system of free competition, would 
 defend their business a2;ainst fjivors to a rival with 
 equal success. Moreover, no serious discrimination could 
 be made in tolls between different carriers, without be- 
 coming apparent in the decreased revenue of the rail- 
 way. A comparison of the tonnage reports with the 
 aggregate income of the railway from tolls would dis- 
 close any departni'e from uniform and avowed rates. 
 Any such discrepancy would at once show that the 
 shareholders had been robbed in their revenues, and 
 that the shippers had been wronged by undue ffivors 
 to a I'ival ; and both classes would unite to correct and 
 punish such abuses. 
 
 One effect of such a change would be to diminish 
 the complexity of railway reports, and make them in- 
 telligible to all. The annual report of any great trunk 
 line is now a sealed book to the average shareholder. 
 He is confronted with tables of construction accounts, 
 investment accounts, freight and passenger movements, 
 gross earnings, revenues from leased lines, payments 
 of rentals, loss or profit on branch lines, surplus, divi- 
 dends, and sinking funds, and other details almost to 
 infinity; his bewildered brain fails to comprehend how 
 all this affects the value of his property ; and he grate- 
 fully accepts the fact that the managers have allowed 
 him a quarterly dividend of 1^ per cent. The removal
 
 414 The Railways and the Hepublic. 
 
 of the business of transportation from the charge of 
 the railways would relieve these reports of two thirds 
 of their complexity. Their expenditures would be con- 
 fined to the construction account (practically closed at 
 their completion), the repairs and betterments, and the 
 payments for interest, dividends, and sinking funds; 
 their revenue would be drawn from a fixed rate per 
 ton-mile. All this could be put in a form plain to the 
 humblest investor. He could know from the figures 
 whether his property had V>een honestly and justly 
 managed, or the reverse ; and he could act intelligently 
 in supporting the management, or votiug to displace 
 it. It is a strong incentive to such a reform that, while 
 tlie railway manager may now be the master of the 
 stockholders and the tyrant of commerce, he would 
 then be relegated to his proper place, as the servant 
 and employee of the owners of the road. 
 
 Again, such a reform would offer strong inducements 
 for the free movement of local freight, and would vastly 
 increase the volume of that traffic, both by the greater 
 freedom of commerce, and by cheapening rates to the 
 freight which bears the heaviest charges. Figures have 
 already been referred to, showing the immense develop- 
 ment of business from the reduction of charges during 
 the last twenty years, mainly on through shipments and 
 at special rates. Let local business enjoy the same stimu- 
 lating effect of moderate charges, and its growth will 
 show similar surprising results. The productive ca- 
 pacities of the regions which the railways traverse are 
 never developed, until they offer the inducement of 
 cheap rates. The development must need be imper- 
 fect, while their products must bear charges greater by 
 50 or even 150 per cent., in proportion to service, than
 
 The Public Highway. 415 
 
 the products of Western lands. When all freight 
 charges are brought, by universal competition, into 
 equal relation with cost, the development of local traf- 
 fic, in every district capable of development, will make 
 previous records of expansion seem trivial. Such an in- 
 crease will be the greatest good that can come to any 
 railway. The development of its own section is the 
 true aim of any enlightened railway policy, and the 
 traffic which, under universal competition, would have 
 no inducement to open competing routes, will bring 
 the most permanent prosperity to the corporation. 
 
 Another benefit, which this refoi'm promises to the 
 railways, is that it will take away all incentives to un- 
 necessary railway construction. The building of rail- 
 ways where they are not needed, or, more precisely, the 
 construction of two rival tracks, wliere one would suf- 
 fice for the business, is a double evil. It permanently 
 sinks a large capital, which might be advantageously 
 employed in other enterprises, and it impairs the capi- 
 tal, both of the new corporation and of the old one, by 
 dividing between them the business which can fairly 
 remunerate only one. There may be a few cases in 
 which the business will fairly sustain two parallel 
 railways; but, if so, tlie second line is not superfluous, 
 and the case does not belong to the class now con- 
 sidered. The proposal, heretofore referred to, that new 
 railway enterprises be restricted by law, recognizes an 
 undoubted evil, but undertakes to apply to it an un- 
 justifiable remedy. Enterprise must be left free to go 
 where commerce and industry may call for it; and the 
 capital it employs must take the risk of its possible 
 mistakes. It is no duty of legislation to im])ose arbi- 
 traiy checks on any class of entei'prises, whether rail-
 
 416 The Railways and the Republic. 
 
 ways, rolling-mills, or wholesale stores; but it is its 
 proper function to promote conditions under wLicli 
 their direction shall be natural. It cannot, consistently 
 with the freedom of commerce, forbid railway construc- 
 tion anywhere ; but it can and should remove unnatural 
 conditions, wliich make it necessary to build new roads, 
 in order to obtain the facilities which existing roads 
 ought to afford ; and which stimulate the building of 
 unnecessary roads to share an artificial and temporary 
 prosperity. To forbid the investment of new capital 
 would be a legislative outrage ; to remove the stimulus 
 upon building unnecessary roads, and to establish con- 
 ditions which will make the growth of new enterprises 
 natural and leiiitimate, is the hio-hest and w^isest leo^is- 
 lation. The difference is exactly that between regulat- 
 ing trade by legislative monopolies, and protecting it 
 in the unhampered working of its own la^vs. 
 
 The conditions which now force the building of 
 superfluous railways are mainly these: First, when 
 communities or sections suffer under excessive or dis- 
 criminating rates, imposed by the monopoly of a single 
 railway or combination, a new road is their only relief; 
 second, the artificial prosperity of existing railways, ob- 
 tained by monopoly or by pooling combinations, often 
 tempts capital to build an unnecessary new line, in the 
 hope of sharing it. Superfluous railway construction 
 is sometimes the last resort of commercial interests, suf 
 fering under the exactions of a railway monopoly, and 
 sometimes the result of the desire of speculators with 
 capital for a share in artificial i"ailway pr6sperity. The 
 two inducements have often acted together in produc- 
 ing new railways, parallel to old ones which are compe- 
 tent to carry all the business. Both alike result from the
 
 The Public Highway. 417 
 
 monopoly wliicli tlie corporations claim in transporta- 
 tion over their tracks. The first inducement is clearly 
 illustrated by the example of the railways carrying 
 freifrht from Pittsburo;h to Lake Erie and the West. 
 For forty miles three railways run side by side, through 
 the Beaver and Mahoning valleys, and for fifteen miles 
 of that distance a fourth weak and unimportant line 
 is added. At no point in the forty miles are these 
 tracks a mile apart. For nearly as great a distance, 
 the three princij)al lines run to Pittsburgh, in a strip 
 of country from five to fifteen miles in width, and for 
 sixty miles farther, to the southeast, connecting railways, 
 practically parallel, share the coal and coke trafiic of 
 southwestern Pennsylvania. Thus, for one hundred 
 and forty miles, three railways run side by side, shar- 
 ing the same traffic, offering virtually the same service, 
 and in times of depression destroying each other's 
 profits. The construction of two of these lines was the 
 only escape from exactions of the monopoly of trans- 
 portation in these regions twelve years ago. But they 
 represent a vast waste of capital and labor. The traffic 
 of these three single-track railways could be carried 
 more expeditiously and economically by one double- 
 tracked railway. Had a system of free competition, 
 such as is proposed in this chapter, been in existence 
 twelve years ago, commerce would have been free from 
 the discriminations and exactions which compelled the 
 building of the superfluous railways. The growth of 
 traffic under competition would have enabled the first 
 railway to build a double track, while its monopoly 
 has forced into existence, at far greater expense, paral- 
 lel lines to share its business and depreciate its value. 
 All the interests concerned in the construction and 
 
 27
 
 4:18 The Hallways and the Hepublic. 
 
 operation of these three parallel roads would have 
 reaped far greater benefits, if, from the first, there had 
 been but one road ojien to the free competition of car- 
 riers. The method of securing competition by build- 
 ing parallel lines, in comparison with that which legis- 
 lation should provide for the public highways, involves, 
 as in this case, a vast amount of wasted labor and 
 capital. The objects might be much more efitectually 
 reached at a fraction of the cost. 
 
 Not less striking instances of parallel and unneces- 
 sary railways are the West Shore and "Nickel-Plate" 
 enterprises. In these cases, local points on the Vander- 
 bilt lines secured the benefit of competition by the new 
 lines, while these maintained an inde2:>endent existence; 
 but the chief cause which attracted capital to their 
 construction was the artificial prosperity of the trunk 
 lines, produced by the temporary success of the pools. 
 The extraordinary projects carried out, first by the 
 Nickel-Plate road, and next by the West Shore, expose 
 the necessary tendencies of the pooling policj^ Each 
 of these projects was an attempt to share the factitious 
 profits which the trunk-line pool had arbitrarily cre- 
 ated. Both took advantage of the temporary stimulus 
 it gave railway investments, to market vast amounts 
 of fictitious securities ; and while the projectors of one 
 made a brilliant success in selling to the chief share- 
 holders of the opposition, both companies became 
 bankrupt and inflicted heavy losses upon investors. 
 Together they represent a loss of more than two hun- 
 dred millions of dollars, sunk in wholly unnecessary 
 works. They are alike a loss to the country and a 
 burden to the older companies which have bought ofl.* 
 their competition at high prices. This is the " competi-
 
 The PuUic Highvxiy. 419 
 
 tion of capital," so liigbly extolled by Messrs. Atkinson 
 and Lansing, as it really operates. Similar instances 
 might be multiplied. All this is the i-esiilt of the vi- 
 cious claim of the railways to a monopoly in transporta- 
 tion. Their oppressive exactions, and the unhealthy 
 prosperity temporarily created by their combinations, 
 are punished by the outraged laws of trade, in the con- 
 struction of rival lines, which divide the traffic, which 
 sink capital in unnecessary tracks, and which destroy 
 much of the value of the earlier roads. Such a condi- 
 tion of affairs calls for correction. The trade of all 
 sections should be protected from excessive and unjust 
 burdens ; but the relief should not be souglit in a wan- 
 ton waste of property. Capital should be left free to 
 embark in railways as in other enterprises; but the 
 conditions produced by legislation should not offer a 
 premium on the building of wholly superfluous rail- 
 ways. It is an injustice and wrong that labor and 
 capital should be sunk in the construction of two or 
 three railways, where all the service they render could 
 be had from one under proper conditions. And the 
 irony of the situation culminates in the obvious fiict, 
 that the interest which suffers the greatest loss, in the 
 depreciation of its investments by the building of com- 
 peting roads, might have secured vast advantages from 
 free competition on the original lines. 
 
 The natural remedy for these evils is, to place the 
 business of transportation over tlie railways on the 
 same basis of free competition as that over canals and 
 turnpikes. This measure will entirely remove one 
 great cause of unnecessary railway construction. No 
 one ever heard of the towns along the line of a canal 
 projecting a parallel canal, to secure relief from exces-
 
 420 The Railways and the Repvhlic. 
 
 sive charges. Free competition was established, so that 
 a dozen canals, side by side, would have made it no 
 more complete. It is only where there is a monopoly 
 in transportation over a highway that communities are 
 forced to seek relief from oppression and favoritism by 
 sinking capital in rival routes. The relief afforded by 
 opening transportation to all carriers, on equal terms, 
 would be far more thorough and ftir less expensive. 
 Fifty thousand dollars would enable any town, that 
 does not think itself fairly treated, to place engines and 
 cars for its own use on the railway, where millions would 
 be required to construct a new road. Each communi- 
 ty could be sure of sending its freight at will by any 
 route, to any destination, upon equal terms with any 
 other ; while now, if it builds a new road, that road 
 may still be absorbed by the greater corporations, and 
 for transportation beyond its immediate termini it must 
 depend on connecting lines. When it is within the 
 power of such communities to obtain better transpor- 
 tation fj\cilities by I'unniug new trains upon existing 
 roads, the railways, too, will be benefited. Every such 
 step adds to their traffic, increases their tolls, and justi- 
 fies the further improvement of the highway; while 
 the building of parallel lines divides their traffic, and 
 permanently diminishes their value. For both the 
 railways and the public, the remedy of free competi- 
 tion offers unqualified benefits, instead of the vast waste 
 and loss incurred by the present practice of construct- 
 ing parallel and unnecessary roads. 
 
 In another respect, the remedy would hardly be so 
 complete or radical. Men -would still be likely, in 
 times of speculation, to rush into reckless schemes of 
 railway expansion ; and many would always be ready to
 
 The Public Highway. 421 
 
 improve an opportunity for floating fictitious stocks, and 
 for building roads under contracts with themselves at 
 the expense of the bondholders. Giving the public the 
 right to carry freight over the railways will not cure 
 the cupidity and recklessness of financial adventurers; 
 but it will take away the great prizes now offered for 
 such anomalies as the two parallel routes already men- 
 tioned. It will do this in two ways: First, by estab- 
 lishing free competition, it will prevent the railways 
 from using their monopoly of transportation to create 
 an abnormal and transient condition of railroad pros- 
 perity, such as calls these parallel lines into existence; 
 and second, when the activity of transportation makes 
 the carrying business extremely profitable, it will attract 
 new capital to share the profits, without creating new 
 tracks, as a permanent burden to commerce and a last- 
 ing menace to the existing lines. When pooling is 
 made impossible by the unlimited number of competi- 
 tors in transportation, the factitious and fleeting pros- 
 perity caused by pooling, which called the West Shore 
 and Nickel-Plate roads into being, will also be impos- 
 sible. 
 
 The parallel routes that have; been built under the 
 existing conditions are fiicts which commerce must ac- 
 cept. But, like other abuses, springing from the rei^-n 
 of exclusive privileges on the railways, they furnish a 
 warning and an indication of what is needed for the 
 future. Together with the creation of monopolies over 
 great interests, the crushing out of independent con- 
 cerns by preferential rates, and the combination of the 
 railway corporations, they point out the course which 
 legislation must take for the future. What has been 
 done may be regarded as a matter of the past ; but if
 
 4:'2'2 Th£ Bailways and the Rejpiiblic. 
 
 the oppression of independent trade and the erection 
 of monopolies, on the one hand, and the depreciation 
 of legitimate railway interests by mad rivalry and reck- 
 less construction of parallel routes, on the other, are 
 public evils, it is the duty of legislation to prevent 
 their repetition in the future. That every one of these 
 evils finds its support and cause ia the exclusive con- 
 trol, by each railway, of the transportation over its 
 tracks, has been clearly shown. That the complete 
 and just remedy for these evils is to remove their cause, 
 by throwing the right of transportation over the rail- 
 ways open to free competition, is the necessary conclu- 
 sion. 
 
 It has been frequently urged by writers on the rail- 
 way side of the question, that all inequalities and 
 abuses should be left to the operation of the natural 
 laws of commerce, and to the influence of free competi- 
 tion. This is exactly what is now proposed as the aim of 
 lesrislation. The true function of lesrislation is to remove 
 the restrictions upon free commerce, which have grown 
 up under the claim of each railway to a monopoly of 
 transportation over its own line, and to place transpor- 
 tation upon the broad and natural basis of competition, 
 by making the right to transport freight over the rail- 
 ways as universal as it is over canals, turnpikes, and 
 navigable rivers. This is wholly within the power of 
 government. The restrictions upon competition, im- 
 posed by the exclusive privileges of the railways, are 
 due to the laws, or the perversions of law, by which 
 those privileges have been seized. Legislation must turn 
 from the support of exclusive rights and partial monop- 
 olies, and must protect the independence of trade and 
 the freedom of every man to engage in transportation
 
 The Public Highway. 423 
 
 on the public liighways. Such a policy will promote 
 the widest freedom and most unrestricted operation of 
 trade and industry, and the most natural and stable 
 prosperity of tlie railways. 
 
 The way to legislation of this sort is made easy by 
 the fact that, if adopted in one state, or made applica- 
 ble only to inter-state commerce, it will not hamper the 
 railways subject to it in competition with others. The 
 objection to restrictive regulation, by commissions or 
 by such provisions as those of the Reagan bill, that, un- 
 less adopted by all legislatures, its effects will be un- 
 even and inequitable, has been sufficiently considered 
 in the preceding chapter; and it is only necessary to 
 say here that it has no force against this proposal. 
 The railway thrown open to general competition, by 
 establishing the public right to engage in transporta- 
 tion over its track, will not be placed at a disadvantage 
 as compared with its rival in another state. It will 
 rather have a decided advantage in competition. It 
 will have a steady and reliable revenue, from uniform 
 tolls upon its entire traffic. It will expand its local 
 traffic, by removing the inequalities which have dwaifed 
 and checked it. It will attract through traffic, by in- 
 viting carriers from every section. Give the "Western 
 carriers the right to run their trains to New York over 
 one of the trunk lines, and to bring them back, taking 
 freight on their own terms, and they \^ill invariably 
 choose that route, in preference to one where their 
 cars must pass beyond their control and, perhaps, not 
 be returned for many months, where their rates must 
 be subject to the decisions of a dozen different railway 
 powers, and where the safety or promptness of the 
 service, ^hich they contract to perform, is at the mercy
 
 424 The Railways and the Republic. 
 
 of half a dozen transportation agencies wholly be3'ond 
 their control or knowledge. It seems almost self evi- 
 dent that if any one of the trunk lines should offer 
 carriers such great attractions as the free use of its 
 track upon the payment of a reasonable toll, the rival 
 lines would be forced to adopt the same course, in or- 
 der to maintain their through traffic. The only inter- 
 ests that would be hampered would be those of monop- 
 olies that have been created by the unjust exercise of 
 the railway power, and those of officials who now en- 
 rich themselves by discriminations in rates and by ma- 
 nipulating the price. 
 
 The measures necessary to establish the public rights 
 in the railways are next to be considered. It may veiy 
 plausibly be argued that, upon the principles defined 
 by the courts as fundamental, in the early days of the 
 railway system, no legislation whatever is needed. Un- 
 der the rulino;s of Justice Baldwin and Chancellor Wal- 
 worth, the use of the railways as public highways is the 
 right of every citizen. If these decisions are law, any 
 one may bring his trains to a railway and demand pas- 
 sage. This is a plain deduction from the decision of 
 the Supreme Court of the United States in the Camden 
 and Amboy case. The corporation must furnish a pub- 
 lic highway, in foct as well as in name. The legislature 
 could not have delegated the power of eminent domain 
 to the railway on au}^ other conditions, if w^e accept the 
 authority of Justice Baldwin in this case. " The dec- 
 laration in the charter that it (the railway) is for pub- 
 lic use does not make it so, if the effect of the cliarter is 
 to give the exclusive iise to the corporation^'' says the syl- 
 labus ; and we are told, in the body of the decision, that 
 to take land for private or exclusive use, by i-ight of
 
 The Public Highway. 425 
 
 eminent domain, " is opposed to every constitutional 
 principle which protects the right of property." AVhat 
 constitutes this right of public use is no less clearly set 
 forth. It exists " if the public have the right of pas- 
 sage thereon, by paying a reasonable, stipulated, and 
 uniform toIV (not passenger fares or freight charges); 
 and, again, " the true criterion is . . . whether the pub- 
 lic can participate in them by right or only by permis- 
 sion." Under this principle, laid down in a decision 
 in favor of the railway, there is no doubt of the right 
 of the public to use the railway tracks, on equal terms 
 and conditions with the railway companies themselves. 
 There is certainly no doubt as to such right in the case 
 of the sevei'al important roads operated under the older 
 charters, in which the grant of power to build and 
 work the railway, and to take toll, is not accompanied 
 by an exclusive privilege of transportation. When we 
 come to the cases where the leirislatures have made a 
 direct grant of that exclusive privilege, it still remains 
 a fiict that the early rulings referred to decisively deny 
 the constitutionality of such grants. They rest upon 
 the principle that, if the legislature should attempt to 
 endow the railway corpoi'ations witli any privileges in- 
 consistent with tlie preservation of the road as a public 
 highway, it would exceed its power, and could not be 
 permitted to so use the sovereign right of eminent do- 
 main, in a wa}', as Chancellor Walworth said, " repug- 
 nant to the constitution of the United States." The 
 unanimous decision of the courts was that the leo-islat- 
 ure had not so used its power; but that it had provid- 
 ed for the establisliment of public highways, which 
 should be open to the use of the public. With regard 
 to the charters then under consideration, the decision
 
 426 The Railways and the Rejpublic. 
 
 was riglit ; for they required that the use of the tracks 
 for transportation should be open to all carriers, on what 
 was then " a stipulated, reasonable, and uniform toll." 
 The Camden and Amboy decision unmistakably assert- 
 ed that the legislature cannot, directly or indirectl}', 
 grant any monopoly over its highways. The mere sus- 
 picion that the right of charging a high toll might give 
 the corporation such a monopoly, was held to cast a 
 doubt on the validity of the charter, and it was only 
 passed over because the doubt was not strong enough, 
 in the particular case, to warrant the declaration that 
 the charter was unconstitutional. But if the Supreme 
 Court then regarded the right of taking a high toll as 
 containing " strong features of a monopoly," with what 
 crushing promptness would it have overruled the direct 
 grant of exclusive privileges in transportation over the 
 public highway, as beyond the power of any legislat- 
 ure, and wholly ''opposed to every constitutional prin- 
 ciple which protects the right of private property." 
 
 If these principles, defined by the most eminent 
 courts at the beginning of the railway era, and by vir- 
 tue of which the railways gained their existence, are 
 final, no legislation is needed to establish the public 
 right of transportation over the railways. Under them, 
 all that any man has to do, when he wishes to trans 
 port freight over a railway, is to demand that right 
 If it is denied, he can assert it in the courts. In op 
 posing his action, the railways would be confronted by 
 one of two unpleasant alternatives. Either their char- 
 ters must reserve this public right, which has been long 
 denied in railway practice, or it must be claimed that 
 they contain such a grant of monopoly as exceeds legis- 
 lative power, and vitiates their constitutionality. Under
 
 The Public Highway. 427 
 
 the law, as laid down by the courts of half a century 
 ago, the railways must either concede the public right 
 of transportation over their tracks, or must forfeit their 
 corporate existence. Under this view, all that is need- 
 ed for the establishment of free competition is the as- 
 sertion of the public right and its protection by the 
 courts; and the railways would promptly choose be- 
 tween surrendering their usurped monopoly of trans- 
 portation, and subjecting themselves to tlie risk of hav- 
 ing their charters declared unconstitutional and null. 
 It is possible that legislation might assist in the asser- 
 tion of this right, by declaratory measures, or by bring- 
 ing the law officers of the state to its support. But 
 the essential fact is that, if the common-law principles 
 applied to railway charters by the most eminent judges 
 of two generations ago, and which furnish the very 
 foundation of the railway system, are still valid, the 
 legal right of every man to the free use of the public 
 highway exists to-day, just as fully in the case of the 
 railways as in that of the turnpikes or the canals, and 
 only requires a bold and vigorous assertion to estab- 
 lish its reformatory and restraining influence through- 
 out the railway system. 
 
 Will the courts uphold the principle in question? 
 It must be acknowledged that its strength has been 
 impaired by later judicial utterances. The Supreme 
 Court of the United States in 1874 differed from the 
 Supreme Court of the United States in 1842, on the 
 question whether tlie grant to a railway corporation of 
 a monopoly in transportation over its o^vn track is con- 
 sistent with the character of a public highway. The 
 later ruling, as clearly as earlier ones, requires that the 
 railway shall be a public highway, and denies that a
 
 428 The Railways and the Rejpvhlic. 
 
 legislature can exercise the rio-ht of emiueut domain in 
 behalf of a railway, unless it is to be a public highway. 
 But when the question arises, Is it essential to the nature 
 of a public highway that it be open for transportation 
 to all persons ? Justice Strong says : " It bears only 
 upon the mode of use, of which the legislature is the 
 exclusive judge." Almost the same phraseology was 
 employed in the Circuit Court of the United States by 
 Judge Emmons, who said : " We are utterly unable to 
 see anything more than a mere mode of use, of which 
 the law-making power is beyond doubt the sole judge." 
 But if the legislature is the exclusive judge of the ne- 
 cessity of this mode of use, the whole subject ap2:)ears 
 to be open to reform by legislative enactment. The 
 legislature being the sole judge, it may regulate the 
 mode of use of the public highway, with a view to the 
 public interests as well as the permanent prosperity 
 of the roads. Experience having shown that the mode 
 of use of these highways, practised by the companies, 
 and sanctioned in later years by legislation, leads to 
 pooling combinations which defy the law, to discrimi- 
 nating and preferential rates which outrage justice, and 
 to reckless and wasteful warfare between parallel lines, 
 it is the duty of the legislature to re-establish the 
 " mode of use " which opens the roads to all carriers 
 and renders such abuses impossible. 
 
 It will doubtless be claimed that the exclusive privi- 
 lege of transportation over its road is a vested right 
 of the railway corporation, which the legislatures can- 
 not amend or take away. But can a corporation ob- 
 tain a vested right in a "method of use" of a public 
 highwa}', and especially in a monopoly of its use? It 
 is settled that the power of the legislature to regulate
 
 The Pullic Highway. 429 
 
 the railways is general, unless limited by express con- 
 tract with the state. Such a contract, according to 
 the later decisions, must be direct and unmistakable. 
 Nothing is to be implied against the state. The grant 
 to a corporation of the exclusive privilege of running 
 cars over its tracks only amounts to permitting that 
 mode of use, and constitutes no contract that the legis- 
 lature will never authorize another mode of use, which 
 may prove better for the public and for the railway 
 itself Nothing short of a specific agreement in the 
 charter, that no future legislature shall alter the mode 
 of use of the railway, would thus bind the state; and 
 even if such an a2;reement were inserted in a charter, it 
 would still be a grave question whether a legislature 
 can bind its successors not to exercise a constitutional 
 power. In cases involving the regulation of rates, the 
 courts have frequently denied that the legislature can 
 do so. The exclusive privilege of transportation grant- 
 ed by a charter stands on no better legal basis than the 
 I'ight to charge certain tolls or freight rates granted by 
 the same charter. Yet, in many cases, the power of sub- 
 sequent legislatures to change and reduce the charges 
 has been affirmed. It is wholly " a method of use " sub- 
 ject to legislative regulation. To change it, so as to 
 secure free competition, without impairing the franchise 
 of the corporation, or destroying its power to obtain fair 
 remuneration for its service, can infringe on no vested 
 right, nor violate any legislative contract. The reason- 
 ing which sustains the legislative power to regulate rates 
 and to prohibit discriminations, applies with equal force 
 to the power to regulate the mode of using the railways, 
 and of which, in tlie words of the Supreme Court of the 
 United States, '■' tlie legislature is the exclusive judge."
 
 430 The Bailways and the Repyhlic. 
 
 But it is unnecessary to press this argument, for the 
 final success of the reform does not depend upon the 
 power of the legislature to regulate the method of use 
 which the existing railway corporations may practise. 
 Even if we assume that what the courts now declare 
 to be a " mode of use," and wliat the earlier courts de- 
 clared to be an unconstitutional monopoly, is a vested 
 right which the legislature cannot touch, yet the estab- 
 lishment of the public right to use the railways is still 
 within the powers of the legislature. Concede to the 
 railway corporations every legal claim they make, and 
 the power which created them still remains supreme. 
 The sovereignty which has taken the property of pri- 
 vate citizens, to establish highways for the public bene- 
 fit, can in turn take away the franchises and easements 
 in those highways, to establish other highways for the 
 public benefit. This principle is established beyond 
 dispute by many decisions, and is admitted in the text- 
 books of railway law. 
 
 The poiDer of eminent domain may he used to appro- 
 priate the rights of xoay and franchises of one public 
 highway^ for the estahlishment of another^ better suited to 
 the public interest. 
 
 This exercise of sovereignty has been essential to the 
 building up of the railway system, and has hitherto 
 been upheld for the benefit of the railwa}' companies. 
 Again and again, rights of ^vay and franchises, already 
 granted to coi'porations by charters from the state, have 
 been condemned and appropriated for the building of 
 railways. The exercise of this power, for the establish- 
 ment of highways more useful to the public than those 
 taken, was undoubtedly just and equitable. The in- 
 terest of corporations, in any public highway wdiich
 
 The Public High-way. 431 
 
 .they control, is not more sacred and inviolable than 
 was the right of private property, in the land originally 
 taken for their benefit. All are sulxject to the sover- 
 eign power of the state, when needed for public use. 
 Railway property is no more sacred than either pri- 
 vate property, or the easements of canals and plank 
 roads; and as the railways have taken, by the power 
 of eminent domain, both private property and the rights 
 of way of other highways, their property and franchises 
 can in turn be taken, to establish free and more useful 
 highways for commerce. 
 
 This principle is established by many authorities, to 
 a few of which we refer. It is fully set forth in Chief- 
 justice Redfield's book on "The Law of Railways." * 
 
 * See Redfield on Railways, chap. xi. sec. 8, page 255. " The fiancliise 
 of a turnpike or bridge or other similar corporation may be taken for a 
 free road or for a railway, which, as we have said, is a public highway." 
 Having remarked that this can be done where the franchise is situated 
 partly within the limits of diiferent states, but that one state can only 
 take what lies within its limits, and that compensation must be provided 
 for in exercising the power of eminent domain, Redfleld adds : " So also 
 may tlie franchise of one railway be taken for the construction of another 
 railway." In a recent case the law was thus stated by Shaw, C. /. .■ " Tlie 
 courts are of the opinion that it is competent for the legislature, under 
 tlie right of eminent domain, to grant authority to a railway to take a 
 liighway longitudinally in the construction of their road. The power 
 of eminent domain is a prerogative of sovereigntj', founded upon public 
 exigency, according to the maxim, solus reipubliccB lex stiprema est, to 
 wliich all minor considerations must yield, and whicli can only be lim- 
 ited by such exigency. The grant of land for one public use must yield 
 to another more urgent." 
 
 As to the inviolability of corporate franchises and the obligation of 
 contracts, this author remarks tliat, " where exclusive privileges are con- 
 ferred upon private corporations by express words or necessary im2:)li- 
 cation, the grant is irrevocable and inviolalile. But the grant of any 
 privilege or franchise carries no implied exclusion of similar franchises 
 and privileges being conferred upon other persons, natural or corporate." 
 Again, in the tenth paragraph of tliis chapter he says: "But the cxclu-
 
 432 The Railways and the Itejpublic. 
 
 This standard work on the legal principles which un- 
 derlie the existence of the railways shows this princi- 
 ple to be so firmly established that, to use the words 
 
 sive character of a corporate grant vvill not preclude the power to take 
 a franchise upon making compensation, under the right of eminent do- 
 main; the stipulation in the cliarter, that the grant shall be exclusive of 
 all others, being sul^ject to the same law as other projjerty whether in 
 possession or action; all of which is confessedly subject to the exercise 
 of eminent domain by the sovereign. 
 
 " It has sometimes been characterized as a refinement or invasion to 
 identify the covenant in the charter of a private corporation, that the 
 grant shall be exclusive of all others, with the charter itself, and thus 
 subject it to the law of eminent domain. But it seems to us an entirely 
 sound view, in all cases where the whole franchise of the corporation is 
 proposed to be taken, and that the charge of refinement is ratlier to be 
 laid at the door of such as attempt to raise a distinction between the ex- 
 clusiveness of the grant and the grant itself, in order to preserve the in- 
 violabilitv of the former, which is the lesser and subordinate franchise, 
 when the latter and paramount franchise of a corporation is confessedly 
 subject to the law of eminent domain." For these principles the author 
 refers to Enfield Toll Bridge Co. rs. Hartford and New Haven Railway, 
 17 Conn. 40 and 454, and says: " Tliis doctrine has been so repeatedly 
 asserted by all the courts of the country that it seems scarcely requisite to 
 multiply references. And the right to take the franchise of another cor- 
 poration, by parity of reason, carries the right to impair another franchise 
 to any extent upon making indemnity. Matter of Kerr, 24 Bart. 119." 
 Judge Redfield also cites the case of the West River Bridge Co. xs. Dix, 
 to which we shall refer more fully hereafter, approving the view of Jus- 
 tice Woodbury : " It is difficult to comprehend why the exclusivcness of 
 the grant to a private corporation should, upon principle, be any more 
 inviolable by legislative authority than any other part of the corporate 
 franchise. It is only as property that it is valuable, or that it is pro- 
 tected at all. And property is, in cases of proper necessity, subject to 
 the law of eminent domain." But of Judge Woodbury's suggestion in 
 this case that, if the charter contained an express stipulation against the 
 exercise of the right of eminent domain against the corporation, it might 
 be binding, Redfield says, " This is certainly not the prevailing opinion." 
 Adding : 
 
 "In regard to the right of eminent domain, it seems now to be con- 
 ceded that no legislature, upon any consideration or pretence whatever, 
 can deprive a future legislature of its exercise in tlie absolute annihila- 
 tion of corporate franchise upon just and adequate compensation. In
 
 The PuMic Highway. 433 
 
 of the author, " it seems scarcely requisite to multiply 
 references." Not only does Redfield assert the power 
 of the legislature to subject the property of railway 
 corporations, as well as other public highways, to the 
 right of eminent domain, but he maintains that it is 
 impossible for a legislative contract to be made by 
 which the exercise of that right in the future can be 
 prevented. After referring to the one decision which 
 intimates the possibility of binding the state by such 
 a stipulation, he says that "this is certainly not the 
 prevailing opinion," but " that no legislature, upon any 
 consideration or pretence whatever, can deprive a future 
 legislature of its exercise (that of the right of eminent 
 domain) in the absolute annihilation of corporate fran- 
 chises upon just and adequate compensation." Among 
 the leading cases on this principle is one* in which the 
 
 Backus vs. Lebanon (11 K H. 19), Parker, C J., says: "Had tlie char- 
 ter contained an express stipulation that the property of the corporation 
 should never be taken in the exercise of the power of eminent domain, 
 the question would at once have arisen, whether it was competent for 
 any legislature to make a contract of that character; whether any legis- 
 lature has authority by contract to lay restrictions upon this power." 
 (Reference is here made to Piscataqua Bridge rs. New Hampshire Bridge, 
 7 N. n. 35, 69. See also Brewster ts. Hough, 10 X. H. 138; Northern 
 Railway xs. Concord and Claremont Railway, 7 Foster, 183.) 
 
 Greenleaf says of powers of government of this class: "They are in- 
 trusted to the legislature to be exercised, not to be bartered away ; and 
 it is indispensable that each legislature should assemble with the same 
 measure of sovereign power which was held by its predecessors. Any 
 act of the legislature disabling itself from the future exercise of powers 
 intrusted to it for the public good must be void, being in effect a cov- 
 enant to desert its paramount duty to the whole people. It is therefore 
 deemed not comi)etent for a legislature to covenant that it will not, un- 
 der any circumstances, open another avenue for the public travel, within 
 certain limits or a certain term of time ; such covenant being an aliena- 
 tion of sovereign power and a violation of public dutj'." Greenleaf on 
 Cruse, vol. ii., note to pp. G7, G8. 
 
 * West River Bridge Co. rs.Dix (6 Howard, 507, U.S., 1848). The syllabus 
 says: 28
 
 434 Tlie Railways and the Bepullic. 
 
 appropriation of a toll-bridge, cLarterecl by the Ver- 
 mont legislature for a hundred years, was declared by 
 tlie Supreme Court of the United States to be subject 
 
 "A bridge held by an incorporated couipanj' under a cliarter from a 
 state may be condemned and taken as a 2)art of a public highway under 
 the laws of that state. 
 
 " This charter was a contract between the state and the company, but, 
 like all private rights, it is subject to the right of eminent domain in the 
 state. 
 
 " The constitution of the United States cannot be so construed as to 
 take away this right from the states. 
 
 "Nor does the exercise of the right of eminent domain interfere with 
 the inviolability of contracts. All property is held by tenure from the 
 state, and all contracts are made subject to the right of eminent domain. 
 The contract is therefore not violated by the exercise of the right. 
 
 "Property held by an incorporated company stands upon the same 
 footing with that held by an individual, and a franchise cannot be dis- 
 tinguished from other property." 
 
 In 1795 the legislature of Vermont granted to the plaintiffs in error 
 the right to erect a bridge over the West Kivcr, which was by the act 
 made exclusive for a term of one hundred years. In 1839 the legislature 
 passed an act authorizing the courts to take, for the use of new high- 
 waj's, any real estate, casement, or franchise of a turnpike or other corpo- 
 ration, and in 1843 the courts of Vermont ordered, upon petition, the tak- 
 ing of this bridge for the highway. 
 
 The decree was sustained by the Supreme Court of Vermont and, on 
 appeal, by the Supreme Court of the United States. The exhaustive 
 opinions of Justices Daniels, McLean, and Woodbury affirmed the points 
 given in tlie syllabus. Justice Woodbury says: "I exclude, therefore, 
 all conclusions as to my opinions here being otherwise than is in con- 
 formity to these suggestions, though where, as in the present case, a free 
 public use in a highway and bridge is substituted for a toll-bridge, and 
 on a long or great and increasing line of public travel, and thus vests a 
 new benefit and use and a more enlarged one, in the public, and not in 
 any few stockholders, I have no doubt that these entitle that public, for 
 such a use, to condemn private property. (Boston Water-Powcr Com- 
 pany ts. Boston and Worcester Railroad, 23 Pick. 360.) And it is mani- 
 fest that, unless such a course can be pursued, the meaus of social and com- 
 mercial intercourse might be petrified and remain for ages, like the fossil 
 remains in sandstone, unaltered; and the government, the organ of a pro- 
 gressive community, be paralyzed in every importantpublic improvement." 
 
 The case of the Central Bridge Company rs. Lowell (4 Gray, 474, 1855),
 
 The Public Highway. 435 
 
 to the right of eminent domain. The charter was rec- 
 ognized as a contract with the state ; " but like all pri- 
 vate rights," says the syllabus, " it is subject to the 
 right of eminent domain," and " the constitution of the 
 United States cannot be so construed as to take away 
 this right from the state." The claim that such a char- 
 ter is protected by the inviolability of contracts was 
 considered. " All contracts are made subject to the 
 right of eminent domain." And finally. Justice AVood- 
 bury's opinion seems almost prophetic, as preparing 
 the way for the reform now needed in the railway sys- 
 tem. He asserts that the obtaining of " a new benefit 
 
 in which exclusive privileges for a bridge, granted for seventy years, were 
 taken by the City of Lowell for a street, is similar in principle to that of the 
 West River Bridge Company ts. Dix, We cite it for the sake of Justice 
 Bigelow's impressive words : " Nor is the principle thus recognized any 
 violation of justice or sound i)olicy, nor docs it in any degree tend to im- 
 pair the obligation or infringe upon the sanctity of contracts. It rests 
 on the basis that the public convenience and necessity are of jiaramount 
 importance and obligation, to which, when duly ascertained and declared 
 by the sovereign authority, all minor considerations and private rights 
 and interests must be held, in a certain measure and to a certain extent, 
 subordinate. By the grant of a franchise to individuals for one pur- 
 pose, the legislature do not forever debar themselves from giving to oth- 
 ers new and paramount privileges, wlien required by public exigencies, 
 although it may be necessary, in the exercise of such riglits and privi- 
 leges, to take and ai)propriate a franchise previously grunted. If such 
 were the rule, great public improvements, rendered necessary by the in- 
 creasing wants of society, in the development of civilization and the prog- 
 ress of the arts, might be prevented by legislative grants whicli were 
 wise and expedient in their time, but which tlie public necessities have 
 outgrown and rendered obsolete. Tlie only true rule of policy, as well 
 as of law, is that a grant for one public purpose must yield to another 
 more urgent and important; and tliis can be effected witliout any in- 
 fringement on the constitutional rights of the subject. IC in sucli cases 
 suital)lc and adequate provision is made by the legislature for the com- 
 pensation of those wliose property or franchise is injured or taken away, 
 there is no violation of faith or private right. The obligation of the con- 
 tract created by the original cliartcr is thereby recognized.
 
 436 The Railways and the Repuhlic. 
 
 and use, aud a more enlarged one, in the public and 
 not in any few stockholders," is a proper function of 
 the state, and that without that power " the means of 
 social gind commercial intercourse might be petrified 
 and remain for ages like the fossil remains in sand- 
 stone, unaltered, and the government, the organ of a 
 progressive community, be paralyzed in every impor- 
 tant public improvement." 
 
 In other cases the same principle has been affirmed, 
 both for the benefit of railways and in restriction of 
 their privileges. In Indiana the Supreme Court held 
 that one railway could appropriate the right of way 
 of another, notwithstanding a provision in the earlier 
 charter which, more directly than in any other case, 
 seemed to bind the state not to inteifere with the 
 I'ights or privileges of the older corporation.* In a 
 Vermont case, the appropriation by a i-ailway of a con- 
 
 * In the case of the New Castle and Richmond Railroad Company vs. 
 the Peru and Indianapolis Railroad Company (3 Ind. 464, 1852), it -was 
 held that the former road had the right to ai^propriate the track of the 
 latter, subject to its riglit of way. The grant by the charter of a right 
 by which it became seized in fee simple of the land it obtains, does not 
 release the fee from sulijection to the power of the state, but " vests it 
 subject to the right of the state to take the same on compensation being 
 made for the public use." 
 
 A clause in the charter provided that " no person, body politic or cor- 
 porate, shall in any way interfere with, molest, disturb, or injure any of 
 the rights or privileges thereby granted, or that would be calculated to 
 detract from or affect the profits of said corporation." It was held that 
 the slate did not thereby relinquish the right to charter any other com- 
 pany which would compete with said Peru and Indianapolis Railroad 
 Company, nor the right to take such land for public use. In this case 
 the court said : " It is not necessary that we should here decide whetlier 
 the state can deprive herself, by contract, with a citizen, of any part of her 
 sovereignty, her right of eminent domain. It is sufficient for this case to 
 eay that she will not be taken to have done it without a very clear ex- 
 pression to that effect."
 
 Tlte Public Highway. 437 
 
 siderable portion of the rigbt of way of a turnpike 
 was unequivocally affirmed by the Supreme Court of 
 the state. " It now appears to be too well settled to 
 be controverted," said that court, in 1849, " that there 
 is no implied contract, in the charter of a turnpike or 
 other private corporation, that their property, or even 
 their franchise itself, shall be exempt from the common 
 liability of the property of individuals to be taken for 
 the public use ; " and that the property of a turnpike 
 may be taken for a railway as well as the property 
 of private individuals for a turnpike.* In Massachu- 
 
 * See White River Turnpike Company rs. Vermont Central R. R. Company 
 (21 Vt. 590, 1849). This case involved the right of the railway to appro- 
 priate the right of way of the turnpike company, not only for crossings, but 
 for a considerable distance. On tiie right of the legislature to grant this 
 jiower the court said : " Upon this question it is deemed sufiicieut to say 
 that it now appears to be too well settled to be controverted tliat there 
 is no implied contract by the state in a charter of a turnpike, or other 
 private corporation, that their property, or even their francliise itself, shall 
 be exempt from the common liability of the property of individuals to be 
 taken for the public use ; that it may l)e taken on proper compensation 
 being made ; that a railroad is an improved highway, and tliat property 
 taken for its use, by authority of the legislature, is property taken for the 
 public use, as much as if taken for any other higiiway, and that the legis- 
 lature may delegate its powers to a railroad corporation to take private 
 projjerty for public use in the construction of the railroad, as well as to a 
 turnpike corporation to take the like property for tlic public use in the 
 construction of a turnpike road." (Armington vs. Bennett, 15 Vt. 745; 
 Enfield Toll-Bridge Company vs. Hartford and New Haven Railroad, 17 
 Conn. 454 ; and the West River and Water-Power cases, elsewhere quoted 
 from, are cited I)y the court. 
 
 The Enfield Bridge case (in 184G) was an aflirmation of the right of 
 the railway to condemn the exclusive franchise of the bridge. • The 
 syllabus says, "Tlie franchise of tlie Enfield Toll Bridge, aside from 
 any special legislation in regard to it, is subject to the same legislative 
 control for public use as any other species of property," and, " that a fran- 
 chise issuing out of land was an incorporeal hereditament, which miglit 
 be treated as real estate in the charter, and an injury done to it would 
 be subject of assessment."
 
 438 The Bailways and the BepuUio. 
 
 setts* the same doctrine was affirmed in 1839, Finally, 
 it was distinctly declared, in 1851, by the Supreme 
 Court of the United States.f These are early cases, 
 since of late the power of the legislature to appropri- 
 ate other highways for the use of railways has been 
 undisputed. 
 
 The principle so long applied to build up the rail- 
 way system is equally applicable to its reformation. 
 If the exclusive right of transportation over their tracks 
 is vested in the railway companies, the legislatures may 
 
 * Boston Water-Power Company xs. Boston and Worcester Railroad (23 
 Pick. 3G0). Full control over the waters of an arm of the sea was granted 
 to plaintiffs, for the purpose of furnishing water-power. The building of a 
 railroad across tlie basin, injuring the property, Avas held to be within the 
 power of the legislature upon compensation for injury. Shaw, Chief-jus- 
 tice, also held that the grant to the w-ater-power corporation " did not 
 withdraw it from a liability which all lands in the commonwealth are 
 subject to, to be taken for public use, for an equivalent, when, in the ojiiu- 
 ionof the legislature, the public exigency requires it; and that the efiect 
 of the railroad act was merely to appropriate to another and distinct pub- 
 lic use a i^ortion of the land over which the franchise of the water-power 
 company was to be used. If the whole of the franchise should become 
 necessary, it seems that the right of eminent domain would authorize the 
 legislature to take it on payment of a full equivalent. Such exercise of 
 right of eminent domain does not impair the obligation of contracts." 
 
 t Richmond, «S;c., Railway ts. Louisa Railway (13 Howard, 71). The 
 opinion of the court, by Justice Grier, affirmed the right of the legis- 
 lature to authorize the latter road, notwithstanding an agreement to 
 the contrary in the charter of the former. The court said: "The 
 counsel, very properly, have not insisted, in their argument in this court, 
 on this point made in their bill, that the legislature had no power to au- 
 thorize the construction of one railroad across another. The grant of a 
 francliise is of no higher order, and confers no more sacred title, than a 
 grant of land to an individual; and, when the public necessities require 
 it, the one as well as the other may be taken for public purposes; nor 
 does such an exercise of the right of eminent domain interfere witii the 
 inviolability of contracts." The principle was not denied in Justice 
 Curtis's dissenting opinion; but he claimed that it did not apply to this 
 case.
 
 The Pullic Highway. 439 
 
 still charter corporations wliicli will give the public " a 
 new benefit and use and a more enlarged one," to quote 
 Justice Woodbury's language, by opening the railways 
 to all carriers, ^vith their own engines and cars ; and 
 may appropriate, for such improved and free railways, 
 the rights of w^ay and franchises of the existing roads. 
 In Justice Grier's words, " the grant of the franchises 
 of the railways is of no higher order, and confers no 
 more sacred title, than the grant of land to an indi- 
 vidual." The power that appropriated private proper- 
 ty, and gave it to the railway for the public benefit, 
 can, when it is made apparent that the public benefit 
 will be subserved thereby, take it from the present 
 railway corporation and give it to another ; stipulating 
 for its free use by the public. For such a reform as 
 this, '' the only true rule of policy as well as of law," in 
 Chief-justice Shaw's words, "is that a grant for one 
 public purpose must yield to another more urgent and 
 important; and this can be effected without any in- 
 fringement on the constitutional rights of the subject." 
 In all this, as declared by the Supreme Court of the 
 United States, and the courts of Massachusetts and 
 Vermont, there is no violation of contract. It is tak- 
 ing private property for public use, just as the right of 
 way was taken for the railways, but for public use in 
 a higher and more perfect form. It is appropriating a 
 qiiasl public higlnvay, on which transportation is a 
 monopoly, for the creation of a true public highway, 
 with its essential features — equal rights and free com- 
 petition. Such a reform, witli the consequent sup- 
 pression of the methods by whicli monopoly in the 
 railways now oj^presses trade, is the greatest attainable 
 improvement in the modern system of public highways,
 
 4:40 The Railways and the Bejoublic. 
 
 and one of the worthiest objects for Mbicli tLe legis- 
 lative power of eminent domain could be exerted. 
 
 The means by Avliich legislation may establish fi-ee 
 competition in railway transportation are thus made 
 clear. With reirard to roads whose charters m-ant no 
 exclusive privilege of transportation, and but simply 
 authorize them to take tolls, all that is needed is a 
 legislative declaration of the rights of the public, the 
 enactment of regulations to secure safety and conven- 
 ience in running ti'ains, and possibly instructions to the 
 legal officers of the state to enforce the public rights 
 through the courts. Similar laws might be passed 
 even for the railways whose charters make them the 
 sole carriers on their tracks. It would be worth while 
 to test the question whether, under our constitutional 
 government, any legislature can grant a monopoly in a 
 public highway established by seizing private proper- 
 ty. It would be salutar}^ to make this question a 
 political issue, and so to direct the public mind to 
 the principles on which public rights and the freedom 
 of trade rest. But, however such an effort might result, 
 the legislature has in reserve a power which is ample 
 to secure the end in view. Let a general act grant the 
 right of eminent domain to corporations, whose charters 
 shall open their lines on equal terms to every carrier, 
 and authorize the appropriation by them of the rights 
 of way and franchises of any railway which monopolizes 
 its track, and the problem will be solved. Upon the 
 enactment of such a law, existing railways would make 
 baste to divest themselves of the monopoly they now 
 claim, and to proffer to the entire public unobstructed 
 privileges of transportation. 
 
 Of course, such a law must provide methods for de-
 
 The PiibliG Highway. 441 
 
 termin'mg tLe proper value of the property and fran- 
 chises to be taken under it. Full compensation, on the 
 basis of real value, is an es-seutial incident to the exer- 
 cise of the power of eminent domain. ISo inflated 
 bonds or fictitious stocks could be imposed on the cor- 
 poration taking the property, for the owner is entitled 
 to compensation for actual value only; but, on the 
 other hand, the corporation whose property is taken 
 must have a real equivalent, detei'mined by legal pro- 
 cess, for its rights and franchises. Legislation would 
 also be necessary to settle many incidental questions 
 relating to the use of the roads. It must determine 
 whether regulations fur safety and promptness in mov- 
 ing trains should be established by each corporation 
 over its own track, or by general law. It must deter- 
 mine whether carriers desiring to run trains shall give 
 bonds for the safety of their rolling-stock, and for the 
 conduct of their employees, or whether they should 
 merely be liable for daraao-es resultinir from neglect or 
 disobedience. The question whether a discrimination 
 between carriers, on the part of a railway corporation, 
 either in tolls or in facilities, should be punished by 
 forfeiture of the charter or by other penalties, should 
 also be answered by this legislation. 
 
 Another question of great importance is, whether a 
 railway corporation shall be permitted to compete as a 
 carrier, or whether it shall, by law, be confined strictly 
 to the function of building and maintaining a railway 
 for the use of the public. We have hitherto assumed 
 that the company miglit be permitted to run its own 
 trains. But there are serious objections to this, and it 
 may be necessary to separate the functions of the rail- 
 ways wholly from those of the carrier. The grav-
 
 442 The Railways and the Republic. 
 
 est abuses of the railway system have arisen when the 
 railways, or their officers, engage in business dependent 
 on them for transpoitation. It is then only a question 
 of time, unless the moderation of the railways is super- 
 human, how long they will permit the existence of 
 rivals who are wholly at their mercy. One considera- 
 tion or another may prevent a railway from entirely 
 crushing out the shippers who compete with it in its 
 subsidiary business ; but the existence of the power to 
 do so, and the fiict that it has often been exercised to 
 the full extent, are reasons enough for demanding that 
 the boundary be definitely and clearly drawn between 
 the function of the railway and that of the transporter, 
 and that the law limit the railway corporation strictly 
 to its own work. It may still be doubted whether 
 that work should be only to build and maintain the 
 railway, or should include the furnishing of motive 
 power for all carriers. The latter view will seem to 
 many to indicate the proper division of duties be- 
 tween the railways and the carriers. It finds much 
 support in the early history of railroads, in the experi- 
 ence of the public works of Pennsylvania. 
 
 The canals and railways built by that state, and 
 operated by it for nearly twenty years, are well known 
 as an illustration of the evils of political management 
 in business enterprises. They are salient examples of 
 the demoralizing effect which politics and public works 
 can exert on each other; and the constant strife for 
 their patronage, its use for political rewards, and the ex- 
 pensive administration and unsatisfactory revenues of 
 the roads finally led the state to part with them. But 
 they have another lesson for us, as an instance in which, 
 for many years, the business of transporting freight
 
 The Public Highway. 443 
 
 over an improved public highway, including canals and 
 railways, was open to general competition, while the 
 state corporation owning it confined itself to the func- 
 tions of building and maintainiug the roads, and fur- 
 nishing the motive power on the railways. These rail- 
 Avays were the Allegheny Portage and the Philadelphia 
 and Columbia. The former connected two sections of 
 the state canal on each side of the Allegheny moun- 
 tains, while the latter connected the eastern end of the 
 canal with Philadelphia. Over the canal, of course, 
 every one was free to run canal boats; while over the 
 railways carriers could send their freight, either in sec- 
 tions of the canal boats, mounted on wheels, or in or- 
 dinary freight cars, to be hauled by motive power fur- 
 nished by the state, at fixed charges per ton per mile. 
 
 As compared with present methods of railway trans- 
 portation, those employed on this route were rudiment- 
 ary. In its earlier operations, before the locomotive 
 was perfected, the motive power was furnished by 
 horses; while for nearly a generation the inclined planes 
 of the Portage road were worked by stationary engines. 
 But these early methods of railroading did the work 
 of one of the great trans-Allegheny thoroughfares, and 
 demonsti'ated the practicability of a railway which per- 
 mits carriei's to run their own cars, while it furnishes 
 the motive power. The ability of transporters and car- 
 riers at large to compete on this route caused no con- 
 fusion and no practical difficulty. All shippers and 
 carriers enjoyed impartially the same rates and privi- 
 leges. In adequacy and economy of service, this route 
 compared favorably with others in that era of railway 
 development; and, although, in the latter part of its 
 history, a competing railroad took a^vay the passenger
 
 444 The Bailways and the Bepublic. 
 
 traffic of the canal, by connecting with the Philadelphia 
 and Columbia Kailroad at Lancaster, the freight business 
 still sou2:ht the route wliich 2:ranted this modified free- 
 dom of transportation. While the political influences 
 which surrounded this system of transportation insured 
 its destruction, the privilege of free transportation by 
 competing carriers was of undoubted value. When 
 the Pennsylvania Railroad finally obtained control of 
 the state roads, and imposed charges for hauling the 
 cars of other carriers which were practically prohibit- 
 ory, thus establishing a monopoly in transportation, 
 there was a general protest from the shipping interests. 
 The history of the Pennsylvania public works, and 
 the common practice of the railways in transporting 
 the cars of other railway companies, prove that a sys- 
 tem in which the business of the railways shall be con- 
 fined to hauling the cars of common carriers, or shippers, 
 at uniform and fixed charges, is entirely practicable. 
 But I am hardly prepared to admit that this would be 
 the most natural division of the functions of railway 
 companies from those of common carriers, or the sim- 
 plest and most effective practical reform. The natural 
 division is between the duties of transportation, which 
 can be thrown open to competition on the one hand, 
 and those of constructing and tnaintaiuing the railway 
 on the other. There is hardly more reason for exclud- 
 ing the general public from the right to own and run 
 locomotives, under proper restrictions, tlian for exclud- 
 ing them from owning and running cars ; and in this 
 work, also, the regulative influence of competition would 
 be the best safeguard against encroachments by the 
 railway company. In the case just referred to, the ex- 
 clusive right of furnishing the motive power enabled
 
 The Piiblic Highway. 445 
 
 the railway company to usurp the exclusive right of 
 trausportation. Had both fuuctious, that of transport- 
 ins: freio^ht in cars and that of haulino- them after thev 
 were loaded, been free to general competition, the evils 
 of favoritism and monopoly now rife in the railway sys- 
 tem of Pennsylvania would have been impossible. Nor 
 is it at all clear that if the tolls charsced to carriers at 
 large were limited to what is necessary for maintenance 
 and for interest on the investment, there would be any 
 necessity for excluding the railway companies from the 
 general business of trausportation. The Pennsylvania 
 Kailroad was able to exclude all other cars but its own 
 from its track, by prohibitory charges for hauling them. 
 Other railways have been able to drive out competition 
 in the coal industry, by the same ability to show favor- 
 itism in charo-es or services. But if their charires to 
 the competing carriers were fixed, on the distinct and 
 permanent basis of the rate per ton-mile required to 
 pay dividends, the exclusion of competition by prohib- 
 itory charofes would be iruarded ao-ainst with tolerable 
 security. The railways and railway officials interested 
 in mines or manufactures are enabled to destroy com- 
 petition only by their monopoly in transportation. 
 Let the right of every one to transport freight on equal 
 terms with them be enforced, and coiupetition will 
 be free and ftiii'. There may be practical reasons in 
 favor of a system, in which the railway could furnish 
 the motive power and nothing more, or of one in which 
 cari'iers might make up and haul tlieir own trains; but 
 the final determination of this question may be left to 
 discussion and experience, provided that the principle 
 of free competition is secured. Tliei'e are otlier details 
 of the reform, which must be left for farther considera-
 
 4iG The Hallways and the Hepublic. 
 
 tioD. Some of them will be of great practical impor- 
 tance, but they are secondary to the essential principle 
 of the reform. Let them be settled in whatever way the 
 legislatures may determine, so that this great principle 
 is established and made effective, that transportation 
 over the railways is open to any man who will conform 
 to the necessary regulations, and pay " stipulated, uni- 
 form, and reasonable tolls." Place the public right 
 above all dispute and be^'ond all obstruction, and the 
 minor problems of the reform will solve themselves, by 
 experience, under free and natural competition. 
 
 At present the tendency of opinion is strongly tow- 
 ards the enactment, at the present session of Congress, 
 of some such measure as the Reagan bill, or that in- 
 troduced by Senator Cullom's committee. The friends 
 of railway reform certainly desire some assertion by the 
 government of its purpose to stop such outrages as 
 those which railway management has committed upon 
 public rights, in the creation of the Standard Oil mo- 
 nopoly, the anthracite pool, and many minor, but no less 
 unjustifiable, discriminations and combinations. Such 
 legislation would be a first step in railway reform ; but 
 no complete or permanent remedy for these evils can 
 be found in a mere jirohibition of effects which leaves 
 the causes at work. Let the history of the discrimina- 
 tions and oppressions inflicted by the railways upon 
 commerce be fully understood, and the public mind 
 will see that a single statute is too frail a barrier to 
 withstand forces which have defied the common law 
 and the constitutions of many states. Sooner or later, 
 by intelligent discussion or through the failure of oth- 
 er means, it will become plain that the only effective 
 reform is to destroy the cause out of which all the evils
 
 The PuMic Highway. 447 
 
 of the system spring, by taking away the mouoj^oly of 
 the railways, and making them public Ligtways in fact 
 as well as in name. 
 
 AVlietlier legislation sLall attack the mere surfoce in- 
 dications of these evils or strike at their root ; whether 
 the law shall seek to restrain discriminations and com- 
 binations, by establishing commissions, which may be 
 inefficient or may become mere tools of the great cor- 
 porations ; whether it shall enact prohibitions of abuses, 
 leavinsr their causes to work in secret, and leavinsr the 
 guilty parties the power and the motive to override and 
 nullify the law; or whether it shall remove the cause 
 of the great wrongs of railway management, by abolish- 
 ing the monopoly of the corporations in their tracks, 
 and substituting for it the free competition wliicli pre- 
 vailed on all public highways before the railway sys- 
 tem was conceived — these questions must be deter- 
 mined by the power of enlightened public opinion ; 
 and when the decision is made, it will be registered in 
 laws by Congress and the legislatures. 
 
 A proper understanding of this plan of reforming 
 the railways "will recognize its moderate and conserva- 
 tive character. It is conservative in its preservation 
 of the principles, which, from the earliest stages of rail- 
 way development, have been acknowledged as essen- 
 tial to the public rights on the highwa3"s. It aims to 
 maintain the great principle of competition, and to give 
 free scope to the natural laws of trade. It is conserva- 
 tive in its opposition to the innovation by which the 
 railways have seized exclusive privileges on their tracks, 
 and in antai^onizim]: the still G:reater and more radical 
 violation of principles which they are attempting, in 
 abolishing competition through combination. It does
 
 448 The Railways and the Hejpublic. 
 
 not resort to the novel and untried expedients of plac- 
 ing the vast interests of commerce under the supervi- 
 sion and tutelao-e either of ejovernraent commissioners 
 or pooling officials ; nor does it rely on restricting the 
 operations of transportation by legislative regulation, 
 either in the interest of the public or for the support 
 of the railway policy. The sole purpose is to preserve 
 and make effective well-established principles of la\v 
 and of trade, and to uproot all dangerous and revolu- 
 tionary practices that have grown up with a new in- 
 dustry. Such a plan of reform, seeking to enhance the 
 best interests of the public, and to promote the legiti- 
 mate prosperity of the railroad interest, cannot be light- 
 ly rejected. Its harmony with the fundamental laws, 
 both of democratic government and of independent 
 commerce, must command the earnest consideration of 
 all unbiassed students of the subject.
 
 CHAPTER XL 
 
 COKPORATIONS IN POLITICS. 
 
 Whether railway reform is sought by legislative 
 restrictions, by commissions, by state ownership, or by 
 enforcing equal rights upon the roads as real public 
 highways, in any of these cases there will be need, first, 
 of wise legislation, then of energetic and incorruptible 
 officers to administer it, and finally of upright and able 
 courts to interpret and apply it. Any reform must 
 begin by subordinating the railway coi'porations to the 
 ^vill of the people. While the organization of both 
 parties, in many states and even in the nation, is largely 
 controlled by agents of these corporations, ^vho regard 
 all popular rights and convictions as secondary to their 
 own interests, the work appeal's not only arduous but 
 almost impossible. If the executive government can be 
 influenced by the corporations, every appointment of a 
 commission will merely arm them with a new instru- 
 ment to amuse and delude the public; every legal pro- 
 hibition will be a dead letter in administration, and 
 the courts themselves may be made tools of monopolists. 
 If the railways were purchased by the state, while the 
 great railway kings can control its officers, the transfer 
 would be the most stupendous and infamous job in 
 financial history, and the roads would become vast and 
 permanent engines of corruption and favoi'itism. What- 
 ever is attempted is certain to be delayed at eveiy step, 
 
 29
 
 450 The jRailwmjs and the Bepublic. 
 
 from the ward meeting to the cabinet, by the obstruc- 
 tive and corrupting influences of corporate wealth. On 
 the other hand, these very obstacles strengthen the 
 motive for reform, and furnish overwhelming reasons 
 by which the champions of the public interests may 
 advocate it. That corporate power, as it is now exer- 
 cised, is a standing danger to popular integrity and re- 
 publican freedom ; that it is corrupting the machinery 
 of government and perverting it from an agency of the 
 people to an agency of the corporations, is the essential 
 fact in the relations between the railways and the re- 
 public which forces the issue upon the nation. Kepub- 
 lican government is attacked, in the centre of its life, by 
 the persistent dishonesty and corruption with which 
 these ao-frreaations of m-eed and wealth have defiled 
 our political system. 
 
 The power of the corporations in politics lies in the 
 control of unlimited wealth, without the restraints of 
 conscience. This is not hyperbole, but simple fact. 
 When a public question is to be decided, and millions 
 of dollars are to be made or lost by the decision, a 
 motive is thrown into the scale which is practically re- 
 sistless. The corporation, whose vast interests will be 
 affected by political action, has no other purpose in be- 
 ing but to expend money for the gain of more, and 
 knows no argument so convincing and satisfactory as 
 the almighty dollar. Besides, if any such corporation, 
 with an exceptional and miraculous scrupulousness, 
 should abstain fi-om these methods, it would be crowded 
 out of existence by the competition of its less scrupu- 
 lous rivals. The immense power of the railways for 
 corruption is made available by the practical ethics of 
 the corporate system, which recognize no limitationb of
 
 Corporations in Politics. 451 
 
 honor. It is an old proverb that " corporatioDS have 
 no souls," but it is a terrible fact of our present political 
 life that corporations have no consciences. The im- 
 personal entity for whose benefit legislators are bribed, 
 or ward caucuses purchased, has no scruples at the 
 crime. It is free from the moral restraints which orov- 
 ern individuals in prosecuting their interests before 
 le2:islatures or courts. Accordino- to another readinf*- 
 of the old dogma of monarchical ethics, the corj^ora- 
 tion can do no wrong, and some one can always be 
 found to transact the most shameless or insidious 
 operations of public bargain and sale for its benefit. 
 The agent of corruption is paid for infamy as part of 
 his services; the corporation, devoid of moral character 
 or obligations, has no compunctions to restrain it; 
 while the highly respectable and influential members 
 of the corporation have no connection with such cor- 
 ruption, save to acquiesce in it and to pocket the 
 profits. 
 
 Such practices are not peculiar to railway coi'poi'a- 
 tions. They occur, to a greater or less degree, in the 
 political relations of water corporations, electric com- 
 panies, gas companies, telegraph companies, and even 
 manufacturing companies, where their opportunities for 
 profit can be aflt'ected by the exercise of governmental 
 power. The raihva3's are the greatest and most i~)ower- 
 ful of all these organizations, their interests are most 
 directly affected by legislation and by public adminis- 
 tration, and their relations to the public are the sole 
 subject of this work. But the nature of corporate in- 
 fluence in politics is always the same. Tlie sole aim 
 is pecuniary profit; the impersonal character removes 
 all limitations of conscience or personal responsiVjility;
 
 452 The Railways and the HepuMic. 
 
 and the benefits to be obtained from some lefrislative 
 or judicial action, when filtered tLrough the medium 
 of the corporation to the pockets of its upright mem- 
 bers, are purified of corruption. While such notions of 
 corporate conduct are in vogue, the "best citizens," whose 
 greater activity in politics is so widely urged, will do 
 'or permit, in their capacity as shareholders or direct- 
 ors, acts which they would scorn to do as individuals ; 
 and the lights of society will hold themselves clear of 
 all such transactions, by carefully looking the other 
 way while there is ground for suspicion that they are 
 going on. 
 
 The methods by which corporate interests control 
 political action may be classified broadly in two great 
 divisions. The first includes the election or appoint- 
 ment of representatives of the railways to public trusts 
 in which they can serve the cor2:)orate interests. The sec- 
 ond covers the use of their immense pecuniary resources 
 in downright bribery, or indirect influence, of those 
 already holding such trusts. The first method may 
 involve no direct corruption of the electing or appoint- 
 ing power. The transfer of a railway oflacial to the Sen- 
 ate of the United States, or the election of a railroad 
 attorney to a state legislature, may be secured by 
 the high character and popularity of the candidate; 
 but the character of the representatives in Congress 
 and the legislatures, where the railway power is great, 
 suggest that more tangible arguments prevail in their 
 election than ability or statesmanship. The votes 
 which send a railroad president to the Senate, or place 
 a railroad attorney on the bench may not be directly 
 purchased ; yet the nominating machinery, the popular 
 vote, may have been controlled by influences no less
 
 Corporations in Politics. 453 
 
 coiTupting and effective thcan bribery. However oc- 
 cult and insidious such influences may Lave been, the 
 constant presence of known representatives of the cor- 
 porations in such positions shows the deliberate pur- 
 pose of the great power, wdiose sole end is profit, and 
 whose methods are not restrained by moral obligations, 
 to secure political protection and control. 
 
 The method of directly attacking the integrity of 
 the representatives and servants of the people, to se- 
 cure their adherence to corporate interests, is hazard- 
 ous and expensive when applied to high departments 
 of government, Avhich are under the constant inspection 
 and criticism of the public. It is therefore less frequent, 
 as I am glad to believe, in efforts to influence the ac- 
 tion of the national government, than the former plan. 
 But as we go down the scale of political power and 
 prominence, the dangers of exposure decrease, and the 
 frequency of direct or indirect acts of corruption in- 
 creases rapidly. The character of the men wliose ac- 
 tion is to be purchased renders them more easy of con- 
 quest. The necessity for keeping an unsullied reputa- 
 tion is less urgent, their individual means are less, and 
 their antecedents, when drawn from the lower ranks 
 of political life, often mark them as willing subjects 
 of barter. Hence bribery by corporations, direct or 
 indirect, is far more frequent in the state legislatures 
 than in Congress; while the same practice in municipal 
 bodies may be said to be general. It is a contribution 
 to the maxims of corruption, by one of the lights of 
 lobby management in Pennsylvania, that it is cheaper 
 to buy representatives or delegates after they are 
 elected than to elect the men wanted ; and if this 
 is true of the highest political bodies of a great state,
 
 454 The Railways and the Rejpvhlic. 
 
 it cannot be doubted that corporations in cities find it 
 most economical and satisfactory to gain \vbat votes 
 are wanted by downright purchase, or by equivalent 
 measures more or less veiled. 
 
 Looking first at the high places of national govern- 
 ment, the most prominent evidences of corporate power 
 at present are of the class first named, the corporations 
 having secured representation in the greatest and most 
 responsible offices. Thus current rumor ascribes the 
 appointment of one of the members of the present 
 cabinet to campaign contributions, by hundreds of thou- 
 sands of dolLars, out of the profits of the most defiant 
 and unscrupulous monopoly yet established by railway 
 favoritism. Such a rumor may have no more foundation 
 than any partisan charge, but it is pertinent as show- 
 ing the estimate which public opinion places on the 
 power of the corporations. As a partisan imputation 
 it may be balanced by one on the other side of politics, 
 which hints that a vast contribution to a campaign 
 fund raised an eminent corporation lawyer to the Su- 
 preme Bench of the United States. If this be true, the 
 danger to the public interest is far more serious. The 
 assertion that Jay Gould paid $100,000 to the Eepub- 
 lican campaign fund in 1880, in return for which Judge 
 Stanley Mathews was nominated to the Supreme Bench, 
 is denied as a political slander; but the fact remains 
 that this brilliant advocate of the railway theories of 
 law has been placed in that high tribunal, and that 
 his presence there, together with Justice Field, long a 
 judicial advocate of the corporations, is expected to 
 protect the railways in future against such construc- 
 tions of law as the Granger decisions. 
 
 ISTo consideration of this subject can omit to notice
 
 Corporations in Politics. 455 
 
 the extmordinaiy tenderness towards the land-grant 
 corporations, shown by one great department of the 
 government during two administrations, and by an- 
 other department during at least a portion of that time. 
 Nothing seems to be clearer than that those corpora- 
 tions should have been held to a strict construction of 
 their bargain with the government. The territory 
 which the government could hold open for settlement 
 by the people was rapidly being occujoied ; the royal 
 generosity of the nation to these corporate favorites 
 had in nearly every instance been abused, and a num- 
 ber of these companies had notoriously failed to carry 
 out the conditions on which the public domain was 
 granted to them. Surely the duty of the executive 
 departments charged with such matters was plain. 
 There might be legal technicalities, by which the for- 
 feiture of the land grants could be avoided. There 
 might be some doubt whether Congress should not 
 take the first steps towards restoring the forfeited lands 
 to the public. But it was not the part of a faithful 
 administration to decide these questions against the 
 people. They should be left to the courts, while tlie 
 executive should hold what it could of the disputed 
 territory for actual settlers. The contrast between 
 what should have been done and what has been done 
 reflects severely upon the integrity of these administra- 
 tions. Legal rulings, by the law department of the 
 nation, recognized the lands as still the property of the 
 companies. Patents were issued by the Interior De- 
 partment, on these rulings, between the closing of its 
 offices at night and their opening next morning. Lands 
 were handed over by tens of millions of acres to cor- 
 porations which had obviously ftiiled to fulfd the con-
 
 456 The Railways and the Rejpubllc. 
 
 ditions of the grant; and wliile about 130,000,000 of 
 acres are yet in dispute, the first active steps taken by 
 Congress or the executive for preserving these vast 
 territories to free settlement were instituted within 
 the last year, under the overwhelming pressure of pop- 
 ular opinion. Hardly anything more than the actual 
 history of the land grants is needed to suggest to the 
 people the question whether they or the corporations 
 have been represented by the government. 
 
 The presence of corporate influence in the United 
 States Senate is well understood. The railway mem- 
 bership of that body is the most eminent and weighty 
 representation of the corporate cause; and its ability 
 and respectability make it the bulwark and fortress of 
 that cause, against remedial or restrictive legislation. 
 The high character and large fortunes of those who 
 liave crowned their railroad career with seats in that 
 body, generally raise them above suspicion of direct 
 corruption, whatever may be thought of the means 
 employed to secure their election. The number of rail- 
 way representatives in the Senate cannot be exactly 
 stated, lest injustice be done to several senators who 
 are difficult to classify. A few years ago, it was cur- 
 I'ently asserted in public journals that nineteen sena- 
 tors, one fourth of the whole body, came to it from 
 active connection ^vith railway management, and large- 
 ly as a result of that connection. This number included 
 some senators rather recklessly assigned to the service 
 of the corporations, and has been reduced by the more 
 or less involuntary retirement of several. On the other 
 hand, these losses to the railway cause may have been 
 fully made up, by the recent addition of two senatorial 
 representatives of the Standard Oil Company, and by
 
 Corporations in Politics. 457 
 
 the recent entrance of the great figure-head of the Cen- 
 tral Pacific Railway, as senator from California. It is 
 not fiiir to say that these men deliberately choose to 
 serve their corporate interests rather than the nation 
 in public office. IMany of them believe that the inter- 
 ests of the railways are the public interests. Their 
 habits of life, their associations, their business training, 
 their success in the service of the corporations, and, 
 above all, their interests sujiport that belief. When 
 Senator Brown, of Georgia, last winter seriously in- 
 formed the Senate that all these complaints against the 
 railroads are imfouuded, that "competition will not 
 work in railroading," and, in effect, that the best thing 
 for the nation is to recognize the great and unalloyed 
 benefits which the corporations confer on the people, 
 he doubtless believed every word that he said. His 
 environment as a railroad ])resident jDroduced the 
 conviction in his mind that he was sheddinc: the liirht 
 of truth upon a subject misunderstood ; but the fact 
 that the most radical measures of I'egulation have been 
 adopted in his own state, where the aggressions of the 
 railways have been trifling compared with those prac- 
 tised in some of the Northei-n States, proves that Sena- 
 tor Brown represents the views of the corporations and 
 not the views of the people of Georgia. The presence 
 of this large element, in the highest deliberative body 
 of the nation, pledged to the cause of the corjiorations 
 by their antecedents, their individual interests, and their 
 real though disguised constituency, is a serious obstacle 
 to any thorough reform of railway abuses. Tlie ob- 
 stacle is the greater from the variety of attitudes which 
 the railway representation can assume. Tliey can, as 
 already said, openly advocate legislation while mean-
 
 458 The Railways and the Bepublic. 
 
 iug to render it futile. Xo doubt uiany of the sena- 
 tors who voted for the Culloni bill sincerely desired 
 some conservative and reasonable remedy for the evils 
 it prohibits ; but there is also no doubt that the bill 
 was passed in the Senate by votes designed to prevent 
 any legislation, while appearing to favor it. The rail- 
 way interest in the Senate is a bulwark, which the cor- 
 porations have been erecting about their cause for 
 years. The value of a representative in that body has 
 been long recognized by the great corporations. The 
 demoralizing means by which some such representa- 
 tives were placed there, concern most nearly state 
 politics; but one conspicuous instance is worth recall- 
 ing in this connection. 
 
 Two senators in the present Congress represent, in 
 name, different states, but in reality one great petroleum- 
 refining corporation and master of the trunk lines. One 
 of them was a member of the House of Representatives 
 in the Forty-fourth Congress. Whether the Standard 
 Oil Company has any immediate object to gain from 
 the national government does not appear; and perhaps 
 its recent acquisition of a seat in the cabinet and two 
 seats in the Senate are simply luxuries, such as over- 
 grown riches can afford to indulge in. But in the lower 
 house, these gentlemen were of use to the corporate 
 cause, in smothering one of the earliest attempts at Con- 
 gressional inquiry into the discriminations which made 
 that monopoly a success. On May 16, 1876, a resolu- 
 tion was introduced in the House of Kepresentatives 
 for investigating discriminations, which by the objec- 
 tions of Mr. H. B. Payne, then a member from the 
 Cleveland district, was first deferred, and then put in 
 the hands of the committee on commerce. There Mr. J.
 
 Corporations in Politics. 459 
 
 N. Camdeu, the head of the West Virginia branch of 
 the Standard Oil Company, appeared as the adviser 
 of his representative, the chairman of the committee, 
 and, after a perfunctory opening of the investigation, 
 had it shelved, the question arising whether Mr. A. J. 
 Cassatt, of the Pennsylvania Railroad, should be forced 
 to testify on the subject of special contracts. The pres- 
 ent prominence of the question would make it impos- 
 sible for Senators Payne and Camden to smother in- 
 vestigation in the Senate; but that tljey may yet in 
 some way serve the cause of monopoly is not the less 
 probable, because Senator Camden assumes the guise 
 of a legislator who is in favor of restricting railway 
 abuses. A story of a partnership between the two 
 senators from New^ Jersey, as legislative agents of the 
 Pennsylvania Railroad, which attracted some attention 
 last year, has been denied under oath by the persons 
 involved, and must not be repeated here. But it is, 
 nevertheless, an important fact that one of the sena- 
 tors, an ex-railway official, represents the cause of the 
 corporations in that body. 
 
 The constitution of the House of Representatives, at 
 present, is much less fiivorable than that of the Senate 
 to the political supremacy of the corporations. Some 
 members there are, like the Honorable W. L. Scott, re- 
 cently elected from Pennsylvania, whose ftime is solely 
 that of railway millionaires, and whose vast fortunes 
 are largely the direct result of the discriminations re- 
 viewed in this work. On the other side of the House, 
 the chamj^ion of tlie railway cause in last winter's de- 
 bate has placed himself on record as liaving promoted 
 corporations which deliberately issued stock and debt 
 to three times the amount of the cash investment,
 
 4G0 The Railways and the Repvhlic. 
 
 and imposed the inflated issues on the public. But 
 the House is more directly in connection with the peo- 
 ple than the Senate ; and it is an encouraging sign of 
 the progress of public opinion on this issue, that a great 
 majority of its members in the last session accepted the 
 measure which was presented to them as most efficient 
 for restraining the principal evils in railway traffic. 
 The records of the House of Representatives, however, 
 furnish a terrible warning against the corporate prac- 
 tice of gaining the support of members by pecuniary 
 influence. The most conspicuous instance is found in 
 that cemeter}' of political reputations, the report on the 
 Credit Mobilier. The insidious approaches by which 
 afj-ents of corporate schemes, unrestrained by any scru- 
 ples, gradually bind the people's representatives to 
 their interests, are manifold ; but this wholesale mur- 
 der of national characters typifies them all. How many 
 of the Congressmen, who were quietly and plausibly 
 induced to take shares in that great and successful pub- 
 lic swindle, knew that they were becoming tools of 
 corporate adventurers, it is hard to tell. Some of them, 
 doubtless, thought, as they pleaded in their defence, 
 that they were simply sharing in the general prosperi- 
 ty. Others, no less certainly, took care to quiet their 
 consciences by looking only at their profits. The sali- 
 ent fact is, that a score of most promising careers were 
 cut short, by the discovery that they had been used by 
 the Pacific Railway speculators. Such corruption as- 
 sumes a hundred forms. Gifts, loans, investments, fa- 
 vors of infinite variety may be brought to surround a 
 public man ; until all his circumstances and prospects 
 tie him to the cause of the corporations. The knowl- 
 edge of what has been done, and especially the epi-
 
 Corporations in Polities. 461 
 
 tapbs on political prospects slaughtered by the Credit 
 Mobilier, must always show what unscrupulous and 
 irresponsible corporations can effect, in corrupting the 
 highest political instrumentalities. 
 
 A striking illustration of this power, as exercised 
 upon the machinery of politics, is afforded by the high- 
 est candidates of the two great parties in recent politi- 
 cal campaigns. The acknowledged head of one great 
 party, who in his retirement sways its counsels, and in 
 his former candidacy for the presidency achieved the 
 utmost possibilities of perfect organization, aided by 
 liberal expenditure, owes much of his prominence to a 
 great fortune secured by years of railway operations. 
 On the other hand, two of the presidential candidates 
 of the other party have been accused of connection, dur- 
 ing their congressional careers, with corrupt schemes 
 of the Credit Mobilier variety. One of them, now in 
 his grave, denied all such imputations ; the other has 
 often asserted thiit his investments were leccitimate. It 
 is not the purpose of this work to take part in partisan 
 assaults and accusations. I^ut, apart from tlie question 
 whether the relations of Tilden, Garfield, or Blaine with 
 corporations were in any way inconsistent with their 
 personal integrity, the unquestioned facts are signifi- 
 cant. Men who have held the highest honors of 
 both parties have been connected closely with the cor- 
 porate cause; at least two of tliem were so intiniately 
 allied with tlie railways by their personal interests and 
 j)rivate foi-tunes that, upon any issues between tlie wel- 
 fare of the people and the corporations, their predispo- 
 sition would be in favor of the railways. Add to these 
 great names the list of second-class railway magnates, 
 who have, in their political careers, swayed the ma-
 
 462 The Railways and the Republic. 
 
 chinery of parties as cliairmen, secretaries, or members 
 of the national committees, and it may well be ques- 
 tioned whether the railway power is not more control- 
 ling in the organization of the two great parties than 
 in the national government. 
 
 That a great industr}'^, employing the highest order 
 of administrative abilitv, and extendinic all over the 
 land, should furnish members of Congress and mana- 
 gers of political campaigns, is natural. Indeed, in the 
 present development of our politics, when each great 
 interest claims its representation in legislatures, the 
 railway interest may have as good a right to send sen- 
 ators and representatives to Congress as the silver in- 
 terest or the iron interest. When we reach the politi- 
 cal millenium, in ^vhich every public man will repre- 
 sent the whole people, or Avhen the railways are so or- 
 o;anized that there is no antaironism between their aims 
 and the public welfare, the presence of such men as 
 some of tliose whom the railway power has placed high 
 in politics will be a subject of approval rather than 
 criticism. But when, in the presence of a great ques- 
 tion, on which the railways are united against the pub- 
 lic interests, we find them steadily but stealthily filling 
 the highest places with their representatives and agents, 
 the danger of their political influence is obvious. Every 
 representative of the railways in high office is an addi- 
 tional threat against popular supremacy. Its serious 
 nature will be better understood, if we examine the 
 operations of the corporations uj)on some of the lower 
 levels of politics. 
 
 Our limits forbid any detailed examination of the 
 cases in which raihvay corporations have purchased or 
 controlled the legislatures of states or the councils of
 
 Corporations in Politics. 463 
 
 cities;, but reference to two or three glaring instances 
 will suffice. The most conspicuous of all is the com- 
 plete control which a great corporation Las had, for 
 twenty years or more, over the State of Pennsylvania. 
 The old joke of moving to adjourn the legislature of 
 that state, " if the Pennsylvania Railroad has no more 
 business for this body to transact," dates from the ear- 
 ly stages of corporate development; but hardly a leg- 
 islature has convened in that state, for many j'ears, in 
 ^vhich it would have been felt to be pointless. With 
 one brief interval of legislative independence,- the laws 
 of the commonwealth, as far as that corporation has 
 any interest in tliem, have been made by its managers 
 and registered by the legislature. When the Pennsyl- 
 vania Railroad joined the conspiracy to build up the 
 Standard Oil Company's monopoly, it was expected, as 
 its share of the contract, to control legislation in Penn- 
 sylvania as well as the rates of transportation ; and the 
 contract was fulfilled in one respect as in the othei", un- 
 til the law-makers of two years ago, with exceptional 
 independence, passed a free-pipe law. This body was 
 elected in a year of popular revolt, in the Republican 
 party, from the domination of a corrupt " ring," whose 
 defeat attracted national attention, its influence liaving 
 extended to national politics. This political cabal 
 named leo-islators and Cono^ressmen, nominated c-overn- 
 ors, sent packed delegations to the national conventions, 
 and relegated to private life public men whom it could 
 not use. But it has not been so widely understood 
 that its head, when elected to the Senate of tlie United 
 States, was president of a great railway tril)utary to 
 the Pennsylvania Railroad, and that the active mana- 
 gers of the cabal are the paid agents and lobbyists of
 
 464 The Railways and the Repiiblic. 
 
 the corporation. Aided by the contributions of the 
 railroad, it has swayed for years the politics and leg- 
 islation of the second state of the Union. The 
 natural result has been the degradation and infamy 
 which have characterized the political life of the 
 state. 
 
 The public mind was shocked in this state five years 
 ago, by the exposure of the riot -claims bribery, for 
 which a leading agent of the corporation was sentenced 
 to the penitentiary. But the only surprising filets in 
 the case were the exposure and sentence. The crime, 
 though perhaps on a smaller scale, had been made fa- 
 miliar by frequent repetitions. The riot claims were 
 founded on the losses of the railway in the riots of 
 1877. The railroad corporation presented to the legis- 
 lature an exao-iierated estimate of the damacre ; and the 
 attempt to impose the burden, amounting to $4,000,000, 
 on the tax-payers of the state, excited popular protest, 
 so that the bill was defeated by a small majority. It 
 was in his efforts to secure its passage that the princi- 
 pal lobbyist of the corporation was afterwards proved 
 to have been guilty of bribery. This man, W. H. Kem- 
 ble, of Philadelphia, was convicted and sentenced for 
 the crime ; but the day after the sentence was imposed, 
 the pardon board of the state relieved him of the pen- 
 alty. Mr. F. B. Gowen, who opposed the riot claims, as 
 the head of the railway which, next to the Pennsylva- 
 nia Railroad, is the largest tax-j)ayer in the state, was 
 active in the investigation of the bribery, and after- 
 wards 2:)ublicly declared in Philadelphia, of the lobby 
 agents, municipal wire-pullers, and jury -fixers of the 
 state, that " all of this loathsome class of malefactors 
 were workins: in the interests of those of -whom one
 
 Corporations hi Politics. 4C5 
 
 swore that he was employed by the Pennsylvania Rail- 
 road Company." 
 
 The influence of the railway upon legislation, which 
 had been weakened by these exposures and by the pop- 
 ular agitation of 1882, was revived in the last legis- 
 lature, which refused to enforce the provisions of the 
 state constitution for the restriction of the railway pow- 
 er. Bills were proposed simply providing proper pen- 
 alties for the violation of these provisions. Yet the 
 railroad masters of the legislature determined that these 
 provisions, framed by a convention of the best minds 
 of the state, and approved by an overwhelming majori- 
 ty of the popular vote, should not be enforced ; and 
 both branches of the legislature obeyed them, and re- 
 fused to pass the bills. Like the attempt now making 
 to complete the purchase, by the same corporation, of 
 the South Pennsylvania Raih'oad, in defiance of the 
 constitution, which prohibits the purchase of parallel 
 or competing lines, this event shows that, in the State 
 of Pennsylvania, the will of the railway is greater than 
 the la^v. But worse remains to be told. The corrup- 
 tion of the judiciary is a still greater offence than any 
 which have been mentioned ; and the sarcastic remark 
 in a legal text-book, that the Pennsylvania Railroad 
 I'uns the Supreme Court of that state with the same 
 success that it does its own trains,* points to the suc- 
 
 * John D. Lawsoii, in his work, "Leading Cases Simplified," referring 
 to the decision in the case of Thorogood rs. Bryan, says: "The Ameri- 
 can courts decline to follow it, except in Pennsylvania. Here, perliaps, 
 is the place to warn tlic student, so far as the law of carriers is concerned, 
 not to pay much heed to the decisions of tiie Supreme Court of Pennsyl- 
 vania, at least during the past ten or fifteen years. The Pennsylvania 
 Railroad appears to run that tribunal Avith the same success that it docs 
 its own trains." 
 
 30
 
 466 The . Hallways and the Republic. 
 
 cess of its persistent policy of placing its attorneys on 
 the bench.* 
 
 There are some signs of an attempt to throw off the 
 railway rule in this state. The Democratic governor, 
 elected in the political upheaval of 1882, has, in each 
 of his messages, urged upon the legislature the duty of 
 making the constitutional restraints effective by law. 
 His attorney-general has recently brought a suit in eq- 
 uity to stop the scheme for buying up the South Penu- 
 sylv^ania project and crushing out competition. If he 
 succeeds in enforcing the constitutional prohibition 
 against the absorption of rival routes, it may yet ap- 
 pear that the constitution in Pennsylvania is not per- 
 manently subject to the will of the corporations. The 
 corporate authorities, however, seem confident of suc- 
 cess ; perhaps expecting that the Supreme Court will 
 uphold, in their behalf, au}^ pretence for nullifying the 
 constitution. But their course is likel}^ to strengthen 
 the minority party, which, at the recent convention, 
 declared itself against railway discriminations, in favor 
 of upholding the constitution, and of restraining the 
 railway power. Should the Supreme Court aid the 
 railway power in nullif}'ing the constitution, and should 
 the Democratic ]xu'ty show itself in earnest, a political 
 revolution may result which will overturn the rule of 
 the Pennsylvania Railroad. 
 
 * But while this Tvork is in press the same court has deciclcd, in the 
 case of Duncan vs. the Pennsylvania Railroad, that the company is liable 
 for consequential damages caused by its appropriation of lands. The rea- 
 soning in this case destroys the pretence that the charters of the older 
 rofitls exempt them from control by the state constitution of 1874, and 
 perhaps shows tliat the court will enforce other provisions of that instru- 
 ment which the railways have defied, and thus end some of the most im- 
 portant abuses wc have described.
 
 Corporations in Politics. 467 
 
 This corporate supremacy, tLrongli the Republican 
 party in one state, finds a parallel in another state un- 
 der Democratic ascendency. The power of the Stand- 
 ard Oil Company in the Democratic legislature of 
 Ohio has been asserted in the election of a United 
 States Senator, and in the defeat of a bill to give com- 
 peting refiners equality in pipe-line transportation ^vith 
 that monopoly. It has been charged that wholesale 
 bribery was used to secure these results. Such char'^^es 
 by political opponents might not command belief, al- 
 though the persistent refusal to investigate them is sus- 
 picious. But the Democratic agent of the bribery has 
 acknowledged it. During the last session of the body, 
 stigmatized by its partisan opponents as " the coal-oil 
 legislature," the legislative agent of the " ring," which 
 is credited with its control, appeared on the floor in a 
 state of gross intoxication. The ofi:ence was too pub- 
 lic and notorious to be overlooked, and a committee 
 Avas appointed to enforce discipline. Before the com- 
 mittee had begun its work, the offender declared that 
 the House dared not discipline him; that he had paid 
 too many members money for their votes ; that he had 
 a list of those who had been so purchased ; and that, 
 if he were punished for his behavior, he would expose 
 a majority of that body as having accepted bribes. 
 The excitement was great; the challenge was accept- 
 ed ; he was called before the committee and asked for 
 the list. lie then retracted his charge, and all further 
 proceedings against him for his outrage upon the rules 
 of the House were quietly dropped. 
 
 The corrupting interference of corporations in state 
 politics, such as we have referred to in Pennsylvania 
 and Ohio, has been notorious in other states. The rule
 
 468 The Railways and the Rejpublic. 
 
 of the Central Pacific in California, and the assertion 
 made in Congress that tlie Union Pacific maintains a 
 political organization in Nebraska, and has already or- 
 dained the defeat of Senator Van Wyck for his attacks 
 upon the railway power, during the debates last win- 
 ter, are illustrations that might be ranlti23lied. Some 
 states are so fortunate that either the watchfulness of 
 their voters or the insignificance of their corporations 
 preserves them largely from such corrupting influences ; 
 but in many there have been political scandals fully as 
 disgraceful and dangerous as any of those mentioned. 
 The history of such transactions in New York is wide- 
 ly known, and has been thoroughly treated by other 
 writers, so that a mere reference to it will suffice. It 
 is notorious that the railways of that state have ob- 
 tained legislation to sanction the abuse of stock wa- 
 tering, whenever they wanted it. After the search- 
 ing investigation of the Hepburn committee, the cor- 
 porate power was able to defeat its measure for i-ail- 
 road regulation, and to substitute in its place a commis- 
 sion without power. A striking picture of the meth- 
 ods of the corporations, in dealing with legislation in 
 that state, was furnished by the testimony of Mr. Jay 
 Gould. 
 
 This prominent railway operator has been described 
 by his subsequent fellow-director in the Union Pacific 
 Company, Mr. Charles Francis Adams, as " a man with- 
 out a conception of morality." He and Mr. C. P. Hun- 
 tington have made valuable contributions to the liter- 
 ature of the subject, showing how railway corporations 
 corrupt politics. Mr. Gould's statement, before an in- 
 vestigating committee, of the methods employed to ad- 
 vance the interests of the Erie Railway, can never lose
 
 Corporations in Politics. 469 
 
 its instructive cLaracter. The funds of the corpora- 
 tion ^Ye^e used, by the plunderers controlling it, to elect 
 members of the legislature who would support their 
 schemes. They cared not a whit whether their political 
 tools were Eepublicans or Democrats. All that was 
 needed was that they should be elected ; and so Mr. 
 Gould artlessly says, " We were Republicans in Repub- 
 lican districts, and Democrats in Democratic districts, 
 but always for the Erie Railway." The companion 
 picture furnished by the Huntington letters, published 
 last year, throws no less light on corporate lobbying in 
 Congress. Here, in the confidence of private corre- 
 spondence, we learn from the railway kings how some 
 statesmen serve the corporations, under the pretence of 
 opposing them ; how editorial opinions in leading jour- 
 nals are a good investment for the corruption fund ; 
 how unsuspected lobby agents are set to work, appar- 
 ently without concert, but under secret orders from one 
 head ; how, in short, the unlimited resources of great 
 corporations employ all that is unscrupulous, wily, dis- 
 reputable, and dangerous in politics, to attack members 
 in their weak points, to flatter, bribe, and control them, 
 so that they must support the corporations. Messrs. 
 Huntington and Gould are good witnesses to the dan- 
 ger and corruption of representative institutions, a\ her- 
 ever great corporations bring their unlimited wealth 
 and their conscienceless tactics to bear on politics or 
 lecrislation. 
 
 Instances might be multiplied, in whicli corporate 
 unscrupulousness and legislative greed and weakness 
 have conspired to promote legislation in the interest 
 of the corporations and to tlie detriment of tlie people. 
 For the purj^oses of this work, it is only necessary to
 
 470 The Railways and the Iiej)uhUG. 
 
 point out the extent of this corruption, and the fact 
 that it seems to be associated with the adniiaistration 
 of the greatest and most eminent railway managers. 
 That it has long been at work, and had reached an 
 appalling extent at a comparatively early period, is 
 shown by the testimony of the treasurer of the New 
 York Central Kailroad nearly twenty years ago, be- 
 fore a committee of the Constitutional Conv^ention 
 of the State. He admitted that the amount advanced 
 to the president of the company, for " expenses per- 
 taining to the legislature," was $60,000 dollars dur- 
 ing a single session, and that during the preceding two 
 or three years it had been $205,000; that no records 
 or entries were made of the disbursements ; that the 
 board confirmed the advance after it had been made; 
 and that the item was simply " charged to the treasu- 
 rer's ofiice and remains there." The expenditure of 
 such a sura for such a purpose might well be considered 
 startling enough ; but that it was rivalled or even sur- 
 passed by another corporation of the same state, was 
 shown by the declaration, a fe^v years later, of the com- 
 mittee before which Mr. Gould's testimony, already re- 
 ferred to, was taken, that the revolution in the manage- 
 ment of the Erie Company " laid bare a chapter in the 
 secret history of I'ailroad management such as has not 
 been permitted before." Yet soon after this revela- 
 tion, the failure of either corporations or legislators to 
 lay the lesson to heart was shown by the passage of 
 a bill for " the Fourth Avenue improvement," in New 
 York city, in the interest of the New York Central 
 and Hudson E-iver Railroad, which was secured by 
 such methods that a member of the legislature, from 
 the cit}^, resigned his seat in disgust, and declared, in a
 
 Corporations in Politics. 471 
 
 statement to his constituent?, that ifc was impossible to 
 fight against the corrupt corporate influences. How 
 persistently this power of corruption has been cm- 
 ployed in later years, and with what impunity to its 
 agents, may be seen by recalling what occurred in New 
 Jersey in 1882. A bill to secure to the railroads the 
 control of the entire water-front of Jersey City "was 
 vetoed by the governor. Notwithstanding his expo- 
 sure of the scheme, an attempt was made to pass it over 
 the governor's veto, and the means employed were dis- 
 closed under oath by a member who had been ap- 
 proached. He was asked to solve a mathematical prob- 
 lem, couched in the followinoj suijo-estive terms: "As 
 your vote is to 167, so is 8500 to your answer;"' and 
 when he said that twice the amount miirht make him 
 answer, he was told that $500 was what the other mem- 
 bers were getting, except those who were engaged as 
 attorneys for the bill. Finally, upon advice from his 
 friends, the member accepted an increased offer of ^500, 
 to be left in his room, and $500 to be paid after the 
 passage of the bill. The money was left in his room, 
 the bribery was at once exposed, an investigation was 
 ordered, and the committee reported that the bribery 
 was fully proved and named the guilty agent. It is a 
 significant indication of the power of corruption, over 
 both the making and the execution of the laws, that 
 after the lapse of three years, the agent in question has 
 not been brought to trial, although New Jersey justice 
 is proverbial for its promptness. 
 
 Again, it was asserted in Massachusetts, in 1882, that, 
 in a single day, corrupt efforts to influence members 
 were made by the lobbyists of one railroad corpoi-a- 
 tion against a pending bill, and by those of another in
 
 472 The Railways and the Republic. 
 
 its favor. lu view of such facts, the doubt arises wheth- 
 er it is possible for the railway interest to approach 
 the legislatures for auy actiou, without producing ve- 
 nality and corruption. 
 
 These are a few examples of the effect of corporate 
 interference in politics. The instances of political cor- 
 ruption, which have come to light in the last twenty 
 years, have prompted severe comments on the down- 
 ward tendency of our politics. The Credit Mobilier 
 exposures, the land-grant dishonesty, the "machine 
 rule" in Pennsylvania, the Erie railway corruption, have 
 been represented as proofs of moral degeneracy. But 
 what the indignant public have not generally perceived 
 is, that the secret source of all this dishonesty is in the 
 wealth of the corporations. Not that there are no ras- 
 cals but those paid by the railways. But these irre- 
 sponsible bodies offer the most remunerative employ- 
 ment for political rascality; and thus they have be- 
 come the stronghold and source of nearly all bribery 
 and betrayal of public trusts. "Wherever there is a 
 powerful, disciplined, and unscrupulous " ring" of polit- 
 ical managers in control of legislation, there can nearly 
 always be found, in the background, some great line 
 of railway, whose interests occupy the ring, and whose 
 money rewards it. On the other hand, wherever a great 
 railway controls legislation, or places its representatives 
 in high office, whether in Maryland or New York, Penn- 
 sylvania or California, there will be found the centres 
 of political venality which threaten to reduce our pol- 
 itics to a competition in corruption.^ It is the inevit- 
 able result of the entrance of the railways into politics. 
 Impersonal powers, whose only moral characteristic is 
 greed, will inevitably find political agents without scru-
 
 Corporations in Politics. 473 
 
 pies, to secure their ends. They will naturally ally 
 themselves with the lowest class of politicians." But 
 the lowest class of politicians becomes the most pow- 
 erful, when wielding the unlimited resources of the cor- 
 porations, and acting in concert with their respectable 
 managers. The demoralizing influence of the dishonest 
 class in politics has been the theme of political essay- 
 ists; but they have commonly failed to discern the in- 
 visible ties which unite that class with the kings of 
 commerce, who support it by their money and profit 
 by its disgraceful services. 
 
 The root of the railway power in politics is to be 
 
 *This lias been so forcibly stated by Mr. Charles Francis Adams that 
 an extended quotation is pertinent : 
 
 " There is a natural tendency to coalition between them and tlic low- 
 est strata of political intelligence and morality, for their agents must obey, 
 not question. They exact success and do not cultivate political morality. 
 The lobby is their home, and the lobby thrives as political virtue decays. 
 The ring is their symbol of power, and the ring is the natural enemy of 
 political purity and independence. The existing coalition between the 
 Erie Eailway and the Tammany Ring is a natural one, for the former needs 
 votes, the latter money. This combination now controls the legislature 
 and courts of New York. That it controls also the executive of the state, 
 as well as that of the city, was proved when Governor llofl'man recorded 
 his reasons for signing the infamous Erie director's bill. It is a new 
 power for -which our language contains no name. Wc know wliat aris- 
 tocracy, autocracy, democracy, are ; but we have no word to cxjiress ' gov- 
 ernment by moneyed corporations.' Yet tiie people already instinctive- 
 ly seek protection against it, and look for such protection, significantly 
 enough, not to their own legislatures, but to the single autocratic feat- 
 ure retained in our system of government — the veto by the executive. . . . 
 The next step will be interesting. As the Eric ring represents the com- 
 bination of the corporation and the hired proletariat of a great city; as 
 Vanderljilt cmljodies the autocratic power of Ciesarism introduced into 
 corporate life, and as neither alone can obtain com])lrte control of the 
 government of the state, it perhaps only remains for the coining man to 
 carry the combination of elements one step in advance, and put Cajsarisni 
 at once in control of the corporation and of the proletariat, to bring our 
 vaunted institutions within tlic rule of all historic precedent."
 
 474 Tlie -Railways and the Hepuhlic. 
 
 found in the lobbies wliicli bribe lesrislators, and in 
 the "ward politicians "who control votes for money ; and 
 the ability of those low elements to make themselves 
 felt in our political system lies in the corruption funds 
 which they draw from corporate resources. 
 
 This is the political power which must be overcome, 
 to make commerce independent of the railways, and 
 to purify our politics. Its magnitude and danger can- 
 not be overstated ; but they should arouse the entire 
 nation to tlie task of destroying it. The subject can- 
 not be dismissed without referring again to the weighty 
 words of the writer who first exposed these evils : " Po- 
 litical corruption is the foundation on which corpora- 
 tions always depend for their political powei"." He 
 foretold, with almost prophetic accuracy, the danger of 
 permitting the expansion and consolidation of the rail- 
 ways without check or regulation.* The threatening 
 
 * " Everywhere, and at all times, however, they illustrate the truth of 
 the old maxim of the common law that corporations have no souls. Only 
 in New York has any intimation yet been given of what the future may 
 have in store for us should these great powers become mere tools in the 
 hands of ambitions, reckless men. The system of corporate life and cor- 
 porate power, as applied to industrial development, is yet in its infancy. 
 It tends always to development — always to consolidation — it is ever 
 grasping new powers or insidiously exercising covert influence. Even 
 now the system threatens the central govorunieut," 
 
 " Though the regular process of development may be depended upon, 
 in its ordinary and established course, to purge American society of the 
 worst agents of an exceptionally corrupt time, there is in the history of 
 this Erie corporation one matter in regard to which modern society ev- 
 erywhere is directly interested. For the first time since the creation of 
 these enormous corporate bodies, one of them has shown its power for mis- 
 chief, and has proved itself able to override and tram])le on law, custom, 
 decency, and every restraint known to society, without scruple and, as yet, 
 without check. The belief is common in America that the day is at hand 
 when corporations far greater than Erie — swaying power such as has 
 never in the world's history been trusted in the hands of mere private 
 citizens, controlled by single men like VanderbiU, or by combinations of
 
 Corporations in Politics. 475 
 
 influence, wLicli he exposed in its early stages, Las now 
 attained the strenfrtli of raatiirity, and in the raafrni- 
 tilde of its domination over polities it calls for the 
 union of the whole popular strength against it. Not 
 less for the removal from politics of vast financial re- 
 sources, employed by conscienceless bodies, than for the 
 emancipation of commerce from anomalous combina- 
 tions and monopolies, must the power of the people, 
 which is the source of all legislation, be exerted, to as- 
 sert the supremacy of the public interests and the sub- 
 ordination of the corporations. 
 
 Nothing but the power of the united people can 
 successfully cope with the power of the corporations. 
 Whatever measure of reform is persistently demanded 
 by an enlightened public opinion will be established 
 by law, and eventually upheld by the courts. The 
 first condition of reform, therefore, is a comprehensive 
 and thorough understanding of the subject by the peo- 
 ple. Every man in tlie nation ought to know how 
 public rights are aft'ected by the abuses of the existing 
 system. To know that corporations are powerful and 
 that individuals are weak will not suffice. It should 
 be as familiar to the public mind as the multiplication 
 table, how the monopoly of the railways in transpor- 
 tation enables them to discriminate in rates, to ci'ush 
 out independent trade, to extinguish small merchants, 
 and to dominate great commercial interests; how tlicir 
 combinations to control indii^ies tend to oppress pro- 
 duction and to keep down wages; how they suspend 
 work through indefinite periods for selfish ends; how 
 
 men like Fislc, Gould, and L.anc — after having created a system of quiet 
 but irrepressible corruption, will ultimately succeed in directing govern- 
 ment itself." — C. F. Adams.
 
 476 The Railways and the Hepublic. 
 
 their eflbrts to establish a centralized control over the 
 entire transportation of the land, by a single unauthor- 
 ized and irresponsible agency, has resulted, and may 
 again result, in oppressing the consumer of the great 
 agricultural staples while impoverishing the producer, 
 by imposing artificial burdens upon the interchange of 
 products ; and, finally, how the tendency of their prac- 
 tices, as a system, is to concentrate all the profits and 
 rewards of industry in the hands of a few, while the 
 people at large have little share in the benefits accru- 
 ing from the march of improvement. It should be 
 understood that, while such aggressions are not uni- 
 versal on the i:)art of the railways, yet, at present, the 
 power to commit them is inherent in every corpora- 
 tion Avhich has the exclusive privilege of transporta- 
 tion upon a public highway, and that the temptation 
 to use this power must continue as long as that exclu- 
 sive privilege is maintained. Let the causes of these 
 evils be universally understood, and public opinion will 
 compel legislation to remove them. 
 
 Under a political system whose ultimate power rests 
 with the masses, the demands of the public welfare w^ill 
 ultimately prove superior to all obstructions interposed 
 by corporate wealth. But the struggle will be severe, 
 and public opinion must be aroused to an arduous and 
 long-continued effort, in order to attain thorough and 
 permanent reform. It would be better for the railway 
 interest, as well as for the public at large, if the neces- 
 sary legislation could be secured without bringing the 
 subject into the arena of politics. But the course of 
 the leading corporations, which have intrenched them- 
 selves in the control of legislatures, in the possession 
 of many seats in both branches of Congress, and even
 
 Corporations in Politics. 477 
 
 iu the citadel of justice, the Suj^reme Court of the 
 United States, leaves slight hope that a popular vic- 
 tory can be so easily won. The reform, which shall 
 make free the highways of commerce, can only be fully 
 secured after a long and earnest struggle, wliich shall 
 drive the railway power from the control of legislation, 
 shall raise the executive above all temptation to court 
 the support of corporate wealth, and shall put the ju- 
 diciary beyond the suspicion of bias in its favor. The 
 sooner this struggle begins, the better is the prospect 
 that the end may be peacefully attained by legislation; 
 and the longer it is delayed, the greater is the danger, 
 from the growth, on the one hand, of the railway 
 powei', and on the other of an irresponsible and I'eck- 
 less proletariat. The one thi-eatens the nation with 
 the domination of a privileged class in its great corpo- 
 rations; the other with an outbreak of the destructive 
 and ruinous spirit of revolution. If the railways go 
 on as they have begun ; if they continue to purchase 
 legislators, to count seats in Congress as their property, 
 and to nominate judges to the higher courts; if they 
 continue to warp legislation to the support of railway 
 supremacy; if they continue to erect artificial bariiers 
 to the free operation of great industries, and to con- 
 centrate the profits of commerce by their favors to tlie 
 privileged few ; if they continue to secure tlie enforce- 
 ment of laws which protect their privileges, and to nul- 
 lify those Avhich restrict them ; if tliey delay and ]ire- 
 vent the passage of laws to regulate tliem and restrain 
 their powei", and cozen the pul)lic with deceptive meas- 
 ures — in a word, if all the features wliich now ni.-iik 
 the influence of great corporations in politics are main- 
 tained and perpetuated, in defiance of efforts to restrain
 
 478 The Railways and the liepiiblic. 
 
 them by peaceful means, the result will inevitably be, 
 that one day their injustice and usurpation will be pun- 
 ished by a revolt of the classes they have wronged, be- 
 side which the French Revolution will seem an equit- 
 able and peaceful reform. 
 
 To prevent such a calamity, all lovers of free institu- 
 tions, and of government by constitutional and peaceful 
 methods, should unite their efforts. The stability of 
 republican government, as well as the independence of 
 our commercial institutions, depends upon an early and 
 decisive assertion of the principle that the public wel- 
 fiire shall be paramount to the will of any corporate 
 magnates. Whatever may be the discouragements, and 
 however powerful the influences to be overcome, all 
 honest, independent, and thoughtful citizens of the re- 
 public should unite in resolving that this land shall 
 not be left under the domination of the great railway 
 corporations, but shall be kept true to its original form 
 of government by a free and intelligent people. For 
 this end, no less than for the immediate vindication of 
 the freedom of trade from all the abuses that have 
 been considered in these pages, the public effort should 
 be earnest and unremitting, to assert the supremacy of 
 constitutional principles over corporate power, and to 
 reduce the railways to the function of public servants, 
 instead of leaving them in their present attitude of 
 public masters. A thorough and lasting reform can 
 only be secured by taking away their exclusive privi- 
 leges, and placing their roads on the legal basis of pub- 
 lic use, wliich governs all public highways. The un- 
 restricted independence of trade and manufactures, the 
 legitimate prosperity of the railways themselves, and, 
 finall}^, the supremacy of free institutions and the sta-
 
 Corporations in Politics. 479 
 
 Lility of representative government, are concerned in 
 the earnest and devoted advocacy of such a reform. 
 With these vast interests at stake, all who have the 
 public welfare and true interests of the nation at heart 
 must support, with their utmost strength, the eifort to 
 make commerce free and avert the evils of corporate 
 plutocracy.
 
 INDEX. 
 
 Adams, C. F., change in position of, 
 344, 345; quotations from, on polit- 
 ical influence of corporations, 473, 
 474. 
 
 Agnew, Judge, declares a pooling con- 
 tract an offence, 237. 
 
 Agricultural districts, discriminations 
 betAveen, 40-43. 
 
 Alger vs. Thatcher, decision against 
 contracts in restraint of trade, 235, 
 236. 
 
 Allegheny Portage Railroad, opera- 
 tion of, 443, 444. 
 
 Anthracite-coal combination, discrim- 
 inations under, 46-50; example of 
 pooling, 211-213. example of in- 
 flated capital, 263, 264. 
 
 Apportionment of rnihvay trafllc, il- 
 lustrated by case of Standard Oil 
 Company, 97-100. 
 
 Atkinson, Edward, assertion that wa- 
 tered stock is being eliminated by 
 natural causes, 268. 
 
 Baldwin, Justice, affirmed that rail- 
 ways are public highways, 118, 119; 
 application of principles, 130, 186, 
 137, 387-391. 424-^9. 
 
 Baltimore and Ohio Railroad, dis- 
 criminations on coal, 48, 49, 61 ; re- 
 lations with Standard Oil combi- 
 nation, 76, 77, 83, 85, 88, 105 ; 
 cause of first trunk-line war at C'lii- 
 cago, 200; example of sound capi- 
 talization, 263. 
 
 Baxter, Judge, decisions against dis- 
 criminations, 143-147 ; .severe re- 
 mark on pooling contracts, 245. 
 
 Bcekman r«. Saratoga and Schenec- 
 tady Railroad, 117. 
 
 Bigelow, Judge, adirms right to con- 
 demn exclusive bridge franchises 
 for a street, 434, 435. 
 
 Black, Judge, assertion of, that rail- 
 
 31 
 
 waj-s are public highways, 113; de- 
 cisions on Pennsylvania Supreme 
 Bench, 119, 120; letter on constitu- 
 tional provisions with regard to 
 railways in Pennsylvania. 325. 
 
 Bonaparte vs. Camden and Amboy 
 Railroad, 118; application of, as to 
 prohibitory tolls and monopoly. 
 387-389 ; as to public rights ou 
 highway, 424-429. 
 
 Boston Water Power Compan}- r.i. 
 Boston and Worcester Railroad, 
 decision on condemnation of fran- 
 chises for a railway, 438. 
 
 Braxendale in ir, English decision 
 against discriminations as to a com- 
 peting carrier, 142. 
 
 Brown, Senator, railway theories 
 urged by, 284, 457. 
 
 California railway commission, inef- 
 fectiveness of, 324, 325, 342. 
 
 Capitalization of railways, ]\Ir. Fink's 
 statement concerning, 257; ligures 
 for 1884,257,258; question on it.s 
 genuinenes.s, 258-272; of New York 
 Central, 259. 260; of Erie Railway. 
 260, 261 ; of Pennsylvania Railroad, 
 261-263; of Baltimore and Oiiio 
 Railroad, 263 ; of anthracite coal 
 railroads, 263, 264 ; of PacKie rail 
 roads, 264-266 ; of Western rail- 
 roads, 266-268 ; of recently con 
 slructed railroads, 268-271 ; esti- 
 mate of aggregate ovcr-cnpitaliza 
 tion, 271, 272; Poor's statement of. 
 272; effect of over-capitalization on 
 investments, 272-278; actual prof 
 its of railways on legitimate caj)! 
 taiization, 282, 283; Jiclilioiis capi 
 talizalion supported by combina 
 tion, 283-285. 
 
 Ca.s.'^alt, A. J., testimony as lo din 
 criminations iu favor of StandNnl
 
 482 
 
 Index. 
 
 Oil Company, 84; grants rebate to 
 American Transfer Company on 
 shipments of competitors, 86; ap- 
 pearance before tirst Congressional 
 investigation, 459. 
 
 Central Bridge Company rs. Lowell, 
 condemnation of a toll bridge for a 
 street, 434-486. 
 
 Central Pacific IJailway, special con- 
 tracts on, 03, 180-183 ; cliarging 
 what freight will bear, 63, 177-179; 
 example of inflated capital, 265 ; 
 not restrained by constitutional 
 provisions or commission, 325, 342. 
 
 Charleston «s. Newcastle, etc., Rail- 
 way, English decision against pool- 
 ing contract, 241, 342. 
 
 C'harters of railways, must be for es- 
 tablishment of public highways, 
 117-123 ; subject to regulation of 
 the state, 125-133; to be construed 
 in favor of public rights, 127-130; 
 grant of power to fix tolls does not 
 prevent regulation, 130-133; earlier 
 charters preserved public right to 
 use vehicles on railways, 373, 385- 
 389; later give exclusive privileges 
 to corporations, 389 ; such charters 
 subject to strict construction, 439. 
 
 Chesapeake and Ohio Railroad, route 
 used by independent refiners of pe- 
 troleum, 79. 
 
 Chicago and Northwestern Railway, 
 example of tolls for a true public 
 highway, 398. 
 
 Chicago and Northwestern Railway 
 vs. Illinois, decision on discrimina- 
 tions between grain elevators, 145, 
 146. 
 
 Classification, discriminations in, 28- 
 38; always arbitrary according to 
 Mr. Fink, 89. 
 
 Coal, discriminations on, at Philadel- 
 phia, 46-50, 61, 63; pooling combi- 
 nations on traflBc in, 211-213, 228, 
 229 
 
 Coe & Milsom vs. Louisville and 
 Nashville Railroad. decision against 
 discriminations between stock- 
 yards, 145, 146. 
 
 Coke, discrimination on, 60, 61 ; con- 
 trol of traffic by pooling, 229. 
 
 Columbia Conduit Company, object 
 and organization of, 74, 75 ; readied 
 Pittsburgh refineries, 76 ; forced 
 into sale to Standard Oil Companv, 
 83.. 
 
 Combination, railway policy of, illus- 
 trated by Standard Oil Company, 
 97, 101-103; wars of rates to en- 
 force it, 200-206 ; object, to earn 
 profits on watered stock, 275, 276, 
 381-285 ; produces railway wars, 
 303-305 ; where it is impossible 
 "wars of rates are prevented, 305- 
 307. {%(tQ Fooling.) 
 
 Commissions, for railway regulation ; 
 provisions of Cullom bill, 333-335; 
 theory of, 335, 336; wide variation 
 of powers proposed for, 336, 337; 
 public protection staked on inde- 
 pendence of, 338-340 ; experience 
 with state commissions, 341-350; 
 Georgia, California, and ISfew York 
 commissions, 343 ; Massachusetts 
 commission, 343, 344; New York 
 commission, not opposed to abuses, 
 345, 346; recommends restraint on 
 construction of new roads, 347, 348 ; 
 proved insufficient by experience, 
 
 348, 349; might enforce undue re- 
 straints, 349; railway estimate of, 
 
 349, 350 ; new commission measure 
 this session, 367, 368. 
 
 Common Law, decisions that rail- 
 ways are public highways, 117-123 ; 
 forbidding discrimination.s, 136- 
 148; opposed to pooling contracts, 
 235-245; practical failure of, to re- 
 strain railway abuses, 330-324. 
 
 Commonwealth of Pennsylvania vs. 
 Carlisle, criminal combinations, 
 240. 
 
 Competition, unequal operations of, 
 cause discriminations between lo- 
 calities, 38-41,54; purpose of pool- 
 ing to prevent, 198-201, 206, 222, 
 223; asserted by railway school to 
 work disaster, 253-257 ; prevents 
 profits on fictitious capital, 383-386; 
 its presence or absence the govern- 
 ing element in discriminations, 387, 
 288; natural principles of, 388-390; 
 docs not require services at a loss, 
 390, 391 ; application of, to railway 
 business, 391-393 ; excluded from 
 local traffic and suspended by pool- 
 ing combinations, 393-395; compe- 
 tiUon of capital, parallel lines, and 
 markets, 395-398; increase of rail- 
 way earnings by competitive reduc- 
 tion of rates, 398-301 ; influence of 
 competition on railway business, 
 301, 303; railway wars not compet-
 
 Index. 
 
 483 
 
 itive, o02-30.'5 ; free competition | 
 would prevent ruinous rivalry b)' . 
 making combinations impossible, 
 805-307; free competition prevents 
 discriminations, 307-309 ; its ob- ' 
 struction makes discrimination pos- j 
 sible, 309, 310; legitimate conipeti- ] 
 tiou secures railway prosperity, 
 310, oil; Hadley's view on compe- [ 
 tition, 311, 312; remedy for railway | 
 abuses in free competition, 312-315 ; 
 freedom of, on older forms of the I 
 public highway, 368-370 ; how re- ' 
 strictcd on railways, 371 ; freedom 
 of, in transportation practical in 
 railway operations, 380, 394, 395; 
 restricted in present cases of joint 
 use of tracks b}'' more than one rail- 
 way carrier, 382, 383; free compe- 
 tition on canals made construction 
 of parallel lines unheard of, 419, 
 420. 
 
 Connecting lines, discriminations be- 
 tween, illegal, 142-147 ; practice 
 and bearing of discriminations be- 
 tween, 183^187. 
 
 Constitutional provisions on the pub- 
 lic character of railways, 151, 152; 
 not effectively enforced, 324, 325. 
 
 Continental Sugar Kellning Company 
 o. Chicago and Northwestern Rail- 
 way, injunction against freight di- 
 version, 243. 
 
 Corporations in politics, 449-479. 
 (See Politics.) 
 
 Cullom bill, provisions of, 333-335: 
 effectiveness of, dependent on con- 
 struction, 336-338 ; would aflirm 
 right of Congress to regulate rail- 
 ways, 367 ; new bill reported by 
 Cullom committee, 367, 368. 
 
 Credit Mobilier, example of corpo- 
 rate influence over legislators, 460, 
 461. 
 
 Damages, common-law rule on , f or d is- 
 criminations, 322. 323; triple dam- 
 ages provided in Keagan bill, 357. 
 
 Davy VH. Allen, old Engli.sh deci.siou, 
 on monojioly, 238. 
 
 Dcady, Judge, construction, in ex- 
 press ca.se, 132. 
 
 Delaware, Lackawanna, and West- 
 ern, ptit under ban by the pool, 226; 
 secured injunction against connect- 
 ing roads, 242, 243. 
 
 Denver and New Orleans vs. Atchi- 
 
 son, Topeka, and Santa Fe, case in- 
 volving discrimination between 
 connecting lines, 147; also pooling 
 contracts, 242. 
 
 Denver and Rio Grande Railway, ex- 
 ample of tolls for a free highway, 
 399. 
 
 Devereux, J. II.. argument against 
 competition and stringent remedies 
 propo.sed, 253, 254; his example of 
 inflating capital, 266, 267; proposes 
 publicit}^ of rates under severer pen- 
 alties than the Reagan bill, 355. 
 
 Discriminations, power of railways 
 to inflict depends on proportion of 
 freight charges to cost of the freight, 
 25, 26; produced by external prcss- 
 lu-e, 27, 28; examination of. not ex- 
 haustive, 28 ; on classification of 
 dry-goods, 29, 30; on iron at Pitts- 
 burgh, 30-33, 43-46, 361 ; on dressed 
 beef, 33-36; between Eastern and 
 "Western agricultural products, 40- 
 43; on anthracite coal at Philadel- 
 phia, 46-50 ; between long and 
 short hauls, 50-53 ; causing unnec- 
 essary carriage of freight, 52, 53; 
 due to unequal ofTect of competi- 
 tion, 54, 55; on New York Central 
 and Erie roads, between shippers, 
 56-59; on coke, 60, 61 ; on gas-coal, 
 48, 49, 61, 62: in favor of live-stock 
 "eveners," 63, 64; in favor of 
 Standard Oil Company, 67-106; in 
 favor of largest shipper iihistrated, 
 100, 101 ; ability to make obtained 
 from legislation. 108-1 10; inconsist- 
 ent with character of public higli- 
 way, 135, 136; common-law deci- 
 sions against, 136-148; in favor of 
 connecting line illegal, 141, 142, 
 147 ; between express compaiiicH 
 forbidden, 142, 113; in favor of lar- 
 gest shipper illegal, 143-145 ; be- 
 tween stock-yards and elevators 
 enjoined, 145-147 ; forbidden by 
 state constitutions, 151, 152 ; on 
 long and .sliort hauls di.scnssecl, 
 157-167; in favor of largest ship- 
 ]KT discussed, 173-175; by rebates 
 juid drawbacks, 175, 176; in cliarg- 
 ing what freiglil will bear, 62.63, 
 177-180; by special conlracls to 
 control other freight of Hliippers, 
 62, 180-1H3 ; between connecting 
 lines di.s<;u.s.sed. 1h:{-187; u|)held by 
 most i)owerful pools, 200 214; ro
 
 484 
 
 Index. 
 
 suiting from pools, 236-228; rela- 
 tion of, to presence or absence of 
 competition, 287, 288 ; impossible 
 tinder free competition, 307-309 ; 
 made possible by obstructing com- 
 petition, 309, 310; damages for, un- 
 der common law, 322, 323; provi- 
 sions of Cullom bill against, 333, 
 334, 338; provisions of Reagan bill 
 against, 334, 352-354, 357, 361. 
 862; provisions of New York bill 
 against, 362, 363; in classification, 
 28-38 ; between localities. 38-55, 
 148, 151, 157-167; between individ- 
 
 ■ ual shippers, 55-65, 168-187. 
 
 Double charges on same freight if 
 used for certain purposes, 61. 
 
 Drawbacks, 175-177. (See Rebates 
 and Drawbacks.) 
 
 Dressed beef, discrimination against, 
 33-36. 
 
 Dry -goods, discrimination against, 
 29, 30. 
 
 Eastern farms, depreciation of, under 
 discrimination, 42. 
 
 Eminent domain, power of, must be 
 exerted for public use, 110, 111 ; 
 used to establish public higliways, 
 111 ; essential to construction of 
 railways. 111; cannot be used for 
 railways except as public highways, 
 112, 113; otherwise would be un- 
 constitutional, 117-119 ; can be 
 used to condemn right of way and 
 franchises of one public highway, 
 for another better suited to public 
 interest, 430, 431; authorities in fa- 
 vor of this power, 431-433 ; deci- 
 sions afKrming it, 433^38. 
 
 Emmons, Judge, on exclusive privi- 
 lege of railway transportation as a 
 mode of use, 391, 392, 428. 
 
 Enfield Bridge Company rs. Hartford 
 and New Haven Railroad Compa- 
 ny, condemnation of a bridge fran- 
 chise for a railway, 437. 
 
 Erie Railway, discriminations on, 57; 
 signed South Improvement con- 
 tract, 69; first contract with Stand- 
 ard Oil Company, October 1, 1874, 
 71. 72; contract with Standard Oil 
 Company, August 1,1875.78; aided 
 Standard in Potts fight. 82 ; appor- 
 tionment and rebates of petroleum 
 traffic, 85, 86 ; responsible for Stand- 
 - ard monopoly, 100 ; example of 
 
 over capitalization, 260, 231 ; exam- 
 ple of tolls under free highway sys- 
 tem, 398, 399; Jay Gould's testi- 
 mony on political methods of, 468, 
 409. 
 
 Erie and Northeastern Railroad vs. 
 Casey, on forfeiture of charters, 
 120 ; precedent for a severe remedv, 
 330, 333. 
 
 Eveneris, discrimination in favor of. 
 63, 64; connection with successful 
 pooling, 209. 
 
 Express cases, 131, 132, 142, 143. 
 
 Farming lands, depreciation of in the 
 East, 42. 
 
 Field, Justice, assents to public high- 
 way doctrine, 121 ; dissents from 
 Granger decisions, 126; represents 
 corporate theories on Supreme 
 bench, 454. 
 
 Fiudley, Hon. J. V., discussion of 
 common-law rule for damages, 323. 
 
 Fink, Albert, states that classification 
 is always arbitrar)^ 29 ; view of, 
 that local traffic must pay for the 
 investment in the railway, 161 ; as- 
 sertion of, that pooling is to pre- 
 vent discriminations, 196; says ob- 
 ject of pooling is to establish equi- 
 table and uniform tariffs, 198; de- 
 nies that pooling prevents competi- 
 tion, 199; claims that pools estab- 
 lish through lines of transportation, 
 222-224 ; asserts that railways 
 should be compelled to organize 
 pools, 252 ; statement of railway 
 capital and profits, 257, 258 ; on 
 "ruinous competition," 303, 305, 
 306. 
 
 Forfeiture of charters, decision on, 
 120 ; a possible remedy for abuse 
 of railway powers, 330, 333. 
 
 Franchises, required for ownership of 
 railways, as public highways, 396. 
 
 Free-pipe bill, first proposed in Penn- 
 sylvania Legislature and defeat- 
 ed, 75 ; attempt unsuccessfully re- 
 newed, 88; measure finally passed, 
 in 1883, 95. 
 
 Gas coal, discriminations on, 48, 49, 
 61, 62. 
 
 Georgia Railroad and Banking Com- 
 panj'^ vs. Commissioners, on power 
 of state to regulate and strict con- 
 struction of charter, 132, 133.
 
 Index. 
 
 485 
 
 Georgia, regulation of railways in. 
 by a commission, 13o, 341, 342 : 
 complaint against, 349. 
 
 Gibson, Judge, when combination is 
 criminal, 240. 
 
 Gould, Jay, testimony of, on political 
 methods, 468, 469. 
 
 Grain and flour, rates at Pittsburgh, 
 discriminations on, 50. 
 
 Grain traflBc, example of competition 
 preventing discriminations, 309, 
 310. 
 
 Granger cases, 126, 130, 131. 
 
 Greenleaf, on inalienability of sover- 
 eign powers over railways, 128, 433. 
 
 Grier, Justice, on condemnation of 
 one railway's right of way by an- 
 other, 438. 
 
 Growth of railway powers, 3. 
 
 Ilallett, Judge, decision of, against 
 discriminations between connect- 
 ing lines, 147; decision of, against 
 pooling contracts, 242. 
 
 Hamilton, Adelbert, characterizes 
 pools as conspiracies, 246, 247. 
 
 Hays va. Pennsylvania CJompany, de- 
 cision against discrimination^ in fa- 
 vor of the largest shipper, 143-14ij. 
 
 Ilorr, argument of, in Congress, for 
 lower rales on through than local 
 traffic, 164. 
 
 Huntington, C. P., letters on lobby- 
 ing, 469. 
 
 Illinois Railway Commission, Kanka- 
 kee case argued before, 158; pow- 
 ers and effectiveness of. 342. 
 
 Individual discriminations, secrecy 
 of, 55, 56; New York investigation 
 into, 56-59; evils of, discussed, 108- 
 172; by lower rates to large ship- 
 pers, 173-175; by rebates and draw- 
 backs, 175-177;'l)y charging what 
 the freight will bear. 177-180; by 
 contracts to control other ship- 
 ments, 180-183 ; between connect- 
 ing lines discussed, 183-187. 
 
 Iron, rates on compared wilii grain 
 rates, 30-33; discrimination on. as 
 between localities, 44 ; product at 
 Pittsburgh, 45. 
 
 Kankakee and ]\Iattoon discrimina- 
 tion, 51; discussion of, 153-161. 
 
 Lake Shore Railroad, discrimination 
 
 in favor of Standard Oil Company, 
 94, 95. 
 
 Largest shipper, discrimination in fa- 
 vor of, example of Standard Oil 
 Company, 100, 101; forbidden by 
 common law, 143-145; injustice of, 
 173-175. 
 
 Lawrence, Chief-justice, decision on 
 discrimination between elevators, 
 145, 146. 
 
 Lawson, J. D. , (piotation from, on 
 Pennsylvania Supreme Court, 465. 
 
 Lehigh Valley Railroad, example of 
 tolls for true public highway, 
 398. 
 
 Live-stock and drcssed-becf rates, 33- 
 36; eveners' discriminations, 63, 64; 
 example of pooling, 209; traffic in, 
 shows how discrimination is made 
 possible by suspension of competi- 
 tion, 309, 310. 
 
 Local discriminations, examples of, 
 38-55; due to inequalities of com- 
 petition, 38-41, 54; not forbidden 
 in common-law decisions, 148; lo- 
 cal traffic made to bear greater bur- 
 den of investment in railways, 161. 
 See, also. 
 
 Long haul, charged less than shorter 
 one, 40 ; examples of, 50-53 ; for- 
 bidden by state constitutions, 151; 
 discussion on, in Congress, 157, 
 158; Kankakee and Winona cases, 
 158-162; due to imposing element 
 of interest on capital more upon 
 non-competitive than on competi- 
 tive traffic, 161, 163, 165; llorr'.s ar- 
 gument on, 164; parallel between 
 railway rates and municipal taxa- 
 tion, 165; practice injurious to rail 
 ways and the public. 16(i, 167; jiro 
 visions of Reagan i)ill on, 352-351; 
 IMassachusetls law against. 353 ; 
 Pennsylvania law against, 354. 
 
 Massachusetts, commission for super- 
 vision of railways, 343-345; law pro- 
 hibiting charging more for short 
 haul than I'nr a longer one, 353. 
 
 Mathews, Justice, reixirt coii('<'rning 
 method of ap|»oiiitmeiit, 454. 
 
 .Maximum of rates, legislation on, im- 
 I)racticalile. 328-330. 
 
 M((Jniry, Judge, decision in cxprcHS 
 cases, 131 ; sustains decision against 
 discriminations between coiuiecl- 
 ing lines, 1 17 ; sustaiu.s decision
 
 48G 
 
 Index. 
 
 against pooling contracts, 242 ; on 
 necessity of exclusive privileges of 
 transpoi-tatioa for railway compa- 
 nies, 392-395. 
 
 Messenger vs. Pennsylvania Railroad, 
 decision on special contracts for 
 lower rates than competing ship- 
 pers, 145. 
 
 Mileage, railway, increased growth 
 of, in Illinois and Wisconsin, since 
 Granger decisions, 18. 
 
 Miller, "justice, concurs in Granger 
 decisions, 126; affirms decision in 
 express cases, 131. 
 
 Mitchell vs. Reynolds, English deci- 
 sion against contracts in restraint 
 of trade, 239. 
 
 Morris Run Coal Company vs. Bar- 
 clay Coal Company.decision against 
 contract to restrain competition, 
 237. 
 
 Morton, Judge, contracts to restrain 
 trade against public policy, 239. 
 
 New Castle and Richmond Railroad 
 vs. Peru and Indianapolis Railroad, 
 condemnation of railway right of 
 way for another railway, 436. 
 
 New York Central Railroad, discrim- 
 inations of, 57-59; signs South Im- 
 provement contract, 69; contracts 
 with Standard Oil Company, 71, 72, 
 78; aids Standard Oil Company in 
 Potts fight, 82; apportionment of 
 traffic and rebates to Standard, in 
 1877, 85, 86 ; responsibility for 
 Standard monopoly, 105; example 
 of stock - watering, 259, 260; testi- 
 mony of treasurer on legislative 
 expenses, 470, 471. 
 
 New York Chamber of Commerce 
 on transcontinental rates, 52. 
 
 New York, Chicago, and St. Louis 
 Railway, example of stock-water- 
 ing, 268, 269; example of parallel- 
 ing, 418. 
 
 New Y'ork commission for supervi- 
 sion of railways, 345-348. 
 
 New York legislative investigation 
 on discriminations, 56-59 ; on stock- 
 watering, 259, 260. 
 
 Ohio Legislature defeated measures 
 asked by independent refiners, 93, 
 94; scandal in, 467. 
 
 Olcott vs. Supervisors, railways de- 
 clared a public highway, 121; on 
 
 exclusive privileges as a method of 
 use, 391. 
 
 Pacific railroads,examples of discrim- 
 ination between localities, 52; ex- 
 amples of stock-inflation, 264-266. 
 
 Parallel lines stimulated by poolinsr, 
 230-232; facilitated by stock-wat ear- 
 ing, 275-277; as a relief to discrim- 
 inations and excessive charges, 416- 
 418 ; damage and waste of, 418, 
 419; remedy for, 419-422. 
 
 Parker, Chief-justice, on contracts in 
 restraint of trade, 239; on question 
 if the legislature can alienate the 
 power of eminent domain over rail- 
 ways, 433. 
 
 Pennsylvania Legislature defeated 
 free-pipe bill, 75, 85; passed free- 
 pipe bill, 95 ; subservience of to 
 Pennsylvania Railroad, 463, 464; 
 riot claims scandal, 464, 465; refu- 
 sal to enforce constitution, 465. 
 
 Pennsylvania Railroad, discrimina- 
 tions on coal, 48, 49, 61, 62; signed 
 contract with South Improvement 
 Company, 69; relations with Stand- 
 ard Oil Company, 71 ; prevents lay- 
 ing of Columbia Conduit Compa- 
 ny's pipe -line, 75; opposes free- 
 pipe bill, 75, 85; fight with Stand- 
 ard and defeat in Potts war, 80-82; 
 surrender to latter, 82; correspond- 
 ence on apportionment and re- 
 bates, 84-86 ; responsibility for 
 Standards monopoly, 105; exam- 
 ple of duplicating capitalization, 
 261-263; claim of immunity from 
 constitutional restrictions, 325; ex- 
 ample of tolls required on true 
 public highway, 397; control over 
 Pennsylvania Legislature, 463-466. 
 
 Petroleum, discriminations on, 72, 73, 
 78, 79. 85, 86, 94, 95. 
 
 Philadelphia and Columbia Railroad, 
 operation of, 443, 444. 
 
 Philadelphia, discriminations on coal 
 at, 46-50. 
 
 Pierce vs. Fuller, on contracts in re- 
 straint of trade, 235. 
 
 Pittsburgh, discriminations against, 
 30-33, 43-46, 69-85. 
 
 Politics, corporations in, 449-479: 
 power of corporations in, both an 
 obstacle and incentive to reform, 
 449, 450; impersonal use of wealtb, 
 without restraint of conscience, 450-
 
 Index. 
 
 4S7 
 
 452; methods of controlling politi- 
 cal action, 452-454; corporate in- 
 fluence in national government. 
 454-45G; railway membership of 
 United Slates Senate, 456-459; case 
 of Credit Mobilicr, 460, 461; rail- 
 way intiuence in party organiza- 
 tions, 461, 462; railway control of 
 Pennsylvania politics, 463-466; the 
 Ohio Legislature and the Standard 
 Oil Company. 467 ; Gould and 
 Huntington, 468, 469; briberies in 
 New York, Xew Jersey, and Mas- 
 sachusetts, 470, 471 ; relations of 
 political rings to corporate wealth, 
 473-474; quotations from C. f' 
 Adams, 473, 474; united power of 
 the people requisite to overcome, 
 474-476; threatening aspect of' 
 476-479. 
 Pooling forbidden bv some state con- 
 stitutions. 151. 152; definitions by 
 Vanderbilt, Jewolt, and Fink, 196; 
 character of pooling combinations, 
 196, 197; asserted "not to prevent 
 competition, 198. 199; only success- 
 ful when competition is suspended, 
 199-201 ; purpose of railway wars to 
 enforce pooling, 200-206; success 
 or failure of. varied by external 
 conditions, 207.208; three notably 
 successful pools — the live-stock 
 pool, 209; the Standard Oil coml)i- 
 nation, 209, 210 ; the anthracite 
 coal pool, 211-213; most powerful 
 when associated with discrimina- 
 tions, 213, 214; success in inverse 
 ratio to number of pooling roads, 
 214, 215; object of uniform rates 
 and of higii rates. 215. 216; rates 
 have fallen in spite of jjools, 216, 
 217; effect of to produce violent 
 changes of rates, 218; claim that 
 pools prevent discrimination, 218- 
 220; disproved by exiierience, 220- 
 222 ; claim that they establish 
 through lines, 222-224; anomalous 
 and unwarranted power of coml)i- 
 nations, 224-226; abuses possil)le 
 under them, 226-228, improved 
 service and cheaper rates discour- 
 aged, 229, 230 ; uimecessary rail- 
 road construction stimulated, 230- 
 232, 41H, 419; violence of railway 
 wars increased, 232, .stock manip- 
 ulations facilitated by, 233, 2'M: 
 pooling combinations against puij- 
 
 hc policy, 284 - 238 ; dccision.s 
 against contracts in restraint of 
 trade. 23.5-237; severe lamrua'^e of 
 decisions on, 239. 240; la'ter deci- 
 sions against railway pools, 241- 
 245; dangerous aspect of pooling 
 policy to the railways, 248-250; 
 proposition to enforce pooling con- 
 tracts by law, 252-256; necessary 
 to earn profits on inflated capital 
 275, 276. 281-285; bearing of Cul- 
 lom bill on, 337; prohibited by 
 Keagan bill, 352, 358. (See, also, 
 Coiiibt nation.) 
 Poor, H. v.. statement on profits of 
 railways on legitimate capital 273 
 282, 283. 
 Potts fight, of Pennsylvania Rail- 
 road and Standard Oil Company 
 80-82. ^ * ' 
 
 Property rights as affected by rail- 
 way regulation, 17-20, 316, 317. 
 Public highways, railways estab- 
 lished as. by power of eminent do- 
 main, 110-120; decisions attirmiii"- 
 the principle, 117-123; if not pul> 
 lie highways, railway charters un- 
 constitutional, 117-119: impartial- 
 ity the primary duty of. 135-138; 
 discriminations on. forbidden by 
 common-law decisions, 138-148; 
 constitutional declarations that rail- 
 ways are public highways. 151, 
 princii)le of, furnishes sohition to 
 railway ])roblem, 369-371; charac- 
 ter of, should be restored to the 
 raihvay.s, 372; public right to run 
 trains and conduct transportation 
 on. 371, 372; each class of, retiuires 
 different vehicles and rules of use. 
 393-396; franchises neces.'^ary for 
 ownership of, 396. (See. also, 'li>m- 
 ail/.) 
 
 Railway jninciples, reversal of 20- 
 22, 251-257. 
 
 lifi'iriiu bill, provisions of, 334. 385, 
 35"; strengtJH^ns provisions of com- 
 mon law, and facilitates recourse 
 to the courts, 351, 356. 357; dis- 
 tinction from Cullom bill. 352 -long 
 and short haul. i)rovi.sion of. 3521 
 354; on jjubliriiy of rates, 351-350: 
 penalties jind j)n;liil)iiions, 357, 358; 
 doubt of its permanent elTeclive' 
 ness, 359-361; permits .souk; di,s. 
 criminations, 361, 302; i)riii(i|)al
 
 488 
 
 Index. 
 
 cain from its enactment, 365- 
 367. 
 
 Rebates and drawbacks, practice of, 
 175; arguments on convenience of, 
 175, 176; inadmissibility of, 176, 
 177 ; prohibited by Reagan bill, 334, 
 352, 358. 
 
 Redfield on Railways.autliorities cited 
 by on public -highway doctrine, 
 121-123; on use of eminent domain 
 to take one railway for another 
 better suited to the public use, 431- 
 433. 
 
 Regulation of railways, right of state 
 to exert, 125-135; affirmed in Gran- 
 ger cases, 126, 130, 131; construc- 
 tion of charters, 128, 130-133; prin- 
 ciples and necessity of, 187-193; 
 change of railway theory on, 251- 
 254 ; of interstate commerce in 
 power of Congress, 318-320; by 
 common law insufficient in prac- 
 tice, 320-324; three forms of, pro- 
 posed, 325, 326; by commissions, 
 theory of, 335-340; experience on 
 state commissions, 341-350; plan 
 of, in Reacan bill, 350-302; provi- 
 sions of New York bill, 362, 363; 
 weakness of all regulative meas- 
 ures, 363, 364; affirmation of legis- 
 lative power of, desirable, 365-367: 
 e.xclusive privileges in transporta- 
 tion subject to regulation as a 
 method of use, 390-392, 428. 
 
 Remedy, to be permanent, must re- 
 move the causes, 367; to be attained 
 by restoring character of public 
 highways to railways and making 
 the functions of common carriers 
 free to all, 369-372; practicability 
 in operations of railwa3's, 372-381 ; 
 examples of joint use of railways 
 by two or more carriers, 382, 383, 
 442-445; public right to use of 
 tracks reserved in earlier charters, 
 372, 385, 386; earlier decisions af- 
 firming it, 387 ; exclusive privi- 
 leges a mode of use, according to 
 later deci-sions, 390-395; remedial 
 effects of free competition under 
 this reform, 401-424; right can be 
 enforced under earlier decisions, 
 424-427; later decisions leave mode 
 of use to regulation of legislatures, 
 427-429; rights of way of existing 
 railways can be taken, b}' power of 
 eminent domt;iu, to establish rail- 
 
 ways free to public use, 430-440; 
 measures required to secure this 
 remedy, 440-442; questions as to 
 details, 440-442; example of Penn- 
 sylvania state railways, 442-444; 
 freedom of use of railways, by the 
 public, the es.sential point, 444-446; 
 conservative nature of the remedy, 
 447, 448. 
 
 Richmond, etc.. Railway vs. Louisa 
 Railway, decision on condemna- 
 tion of one railway's right of way 
 for another, 438. 
 
 River transportation, discriminations 
 by railways against, 183, 184, 186. 
 
 Rogers m. Burlington, 122. 
 
 Salt Company t». Guthrie, decision 
 against contract to prevent compe- 
 tition, 230, 237. 
 
 Sanford r?. Catawissa and TTilliams- 
 port Railroad, decision against dis- 
 criminations between express car- 
 riers, 142. 
 
 Scofield, Schurraer, & Teagle, suit of, 
 against Lake Shore Railroad, 94, 
 95; example of common-law rule 
 of direct damages, 322, 323. 
 
 Seaboard pipe-line, 88, 89. 
 
 Sedgwick, Judge, on bonds in restraint 
 of trade, 235. 
 
 Sharpless r.«. Mayor of Philadelphia, 
 decision that railways are public 
 highways, 120. 
 
 Shippers, discriminations between, 
 55-65, 168-187. (See laduidual Din- 
 criminatMns.) 
 
 Short haul charged more than longer. 
 (See Local Discriminations.) 
 
 Shrewsbury and Birmingham Rail- 
 way rs. Northwestern Railwa}^ 
 English decision against pooling 
 contracts, 242. 
 
 Southern Express cases, 131, 132, 142, 
 143, 392. 
 
 South Improvement Company, con- 
 tract with railways, 69, 70. 
 
 South Pennsylvania Railroad, influ- 
 ence in producing a railway war, 
 and sale by Vanderbilt, 202-204; 
 constitutional prohibition involved, 
 204, 205; example of stock-water- 
 ing, 270. 271. 
 
 Standard Oil Compan3^ history of its 
 rise, 67-89; dictation of, to petro- 
 leum trade, 90, 91; growth of its 
 wealth, 91 ; bribery and conspiracy
 
 Index. 
 
 4S9 
 
 against competitors, 92, 93; meas- 
 ures to prevent revival of competi- 
 tion, 96 : pleas in defence of, 97-108 ; 
 responsibility of railways for its mo- 
 nopoly, 10-4-106; its "example of 
 pooling, 209, 210; its senatorial rep- 
 resentatives, 458, 459; its power in 
 the Ohio Legislature, 467. 
 
 Stanton xs. Allen, decision against 
 pooling contract, 230, 237. 
 
 State railways, European example 
 not conclusive, 326, 327 ; subject to 
 political patronage, 327; question- 
 able as a remedy for present evils, 
 327-329 ; example of abuses in 
 Pennsylvania public works, 442- 
 444. 
 
 Stock manipulations facilitated by 
 pooling, 233, 234; and by stock- 
 watering, 277, 278. 
 
 Stock-watering introduced by Fink's 
 statement, 258; examples of, 259- 
 271 ; estimate of aggregate, 271, 
 272; four methods'" of, 273, 274; 
 effects of upon investments, 275- 
 280; remedy for, 280, 281; its bear- 
 ing on commerce, 281-283; fur- 
 nishes provocation and excuse for 
 pooling, 283,284; competition pre- 
 vents earning of profits on watered 
 stock, 284, 285. 
 
 Strong, Justice, aflirmed public high- 
 way doctrine, 121; dissented from 
 Granger decisions, 126 ; decision 
 on Pennsylvania Supreme Bench 
 against discriminations, 140, 141: 
 view on exclusive privilege of 
 transportation on public highway.^, 
 390-392, 428, 429. 
 
 Swayne, Justice, rule of construction 
 on railwa}' charters, 129. 
 
 Talcott ra. Township of Pine Grove, 
 exclusive privilege of transporta- 
 tion a mode of use, 391, 392. 
 
 Tolls, grant of right to fix, construed 
 as subject to regulation by tlie leg- 
 islature, 131, 132; must be stipu- 
 lated, reasonabh', and uniform. 136, 
 137; perversion of grnnt in railway 
 charters, 385, 386; proiiil>itory tolls 
 used to ol)tain exclusive control of 
 transportation. 38G; if tolls arc ])ro- 
 hibitory, charter is uncon.sliluliou- 
 
 al. 118, 387, 388: adjustment of, 
 for railways on which transporta- 
 tion is free to the public, 396^00. 
 
 Transcontinental rates, example of 
 discrimination in, 52. 
 
 Twells ts. Pennsylvania Railroad, de- 
 cision against discriminations in 
 favor of a connecting line, 140, 
 141. 
 
 Vanderbilt, recognized principle of 
 public highway, 113; ikfinilion of 
 pooling, 196 ; characterization of 
 West Shore project, 203; connec- 
 tion with South Pennsylvania proj- 
 ect, 202-204 ; connection with stock- 
 watering, 270. 
 
 Vincent vs. Chicago and Alton Rail- 
 road, decision against discrimina- 
 tions between grain elevators, 145, 
 146. 
 
 Waite, Chief -justice, aflirmed right 
 of regulation in Granger cases, 126. 
 
 Walworth, Chancellor, decided that 
 railways must be public highways, 
 117, 118; application of decision, 
 127, 128, 136, 387, 889, 425. 
 
 Wars of rates, waged to enforce com- 
 bination, 200-206; violence of, in- 
 crea.sed by pooling. 232; stimulated 
 by stoc-k-inllation, 276-278; not nat- 
 ural competition, 302-305; would 
 be impo.ssible if competition is un- 
 restricted, 305-307; injurious to 
 public and railways, 307. 
 
 "Wells, Fargo. & Co. i'». Oregon Rail- 
 way, etc., 132. 
 
 West River Bridge Comj^any r.t. I)ix, 
 condemnation of a bridge franchise 
 for a public higiiway, •i;J3-T36. 
 
 West Shore Railroad, jiosition in 
 railway war, 202, 203; example of 
 stock-watering, 269, 270; example 
 of paralleling, 418. 
 
 White River Turnpik(> Company r». 
 Vermont (Vnlial Hailrond. con- 
 demnation of a turnpike fur a rail- 
 way. 437. 
 
 Winona and Mcmphis.di.scriminalion, 
 51; discussion of, 158-165. 
 
 Woodbury, Justice, exdusiveno.ss of 
 cliarter grants subject lo right of 
 eminent domain, 432-436. 
 
 TlJJi EKO.
 
 ERRATUM. 
 Page 263. Note, line 2, for " >?10,000,000 " read $1,000,000.
 
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